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If we choose to gift an apartment of ours to a child, can they gift it back to us in a few years without them and us having to owe any tax for any reason? If so, how much time is the minimum that the child needs to hold onto the apartment in order that the IRS would consider it a legal gift and it would be legal to gift it back to us without any tax needing to be paid by either of us?

We live in another country and the apartment is outside the U.S. We wish to gift the apartment to the child so we can purchase a second apartment without having to pay a purchase tax where we live. If one owns an apartment, they must pay a purchase tax on the additional one. If they gift it to a child, they do not. This was advised to us by our lawyer in the country where we live, we just want to do it in a legal way with the IRS as well as we file a 1040 annually.

I was told by a U.S. accountant that we can gift the apartment to our child since it's well under the $11million life-time gift limit.

So does it matter when/how long an apartment is gifted to a child to cause any tax liability by the IRS? Can the child gift it back the next day? Or it doesn't matter?

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    To the IRS it's not a gift if you expect it to be given back.
    – Hart CO
    Commented Jul 3, 2022 at 14:52
  • If I fill out a form 709, is it not a gift? That is my question. How would they know if it's a gift or not? Do they look at the span of time when it was gifted to a child and when it was gifted back?
    – Mr Monee
    Commented Jul 3, 2022 at 14:56
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    Typically a scheme to misclassify transactions as gifts in order to avoid taxes is considered tax fraud. In your case I'm not sure the IRS would ultimately care because you're doing it to avoid tax in another country and I don't think it would have any impact on your tax burden in the US.
    – Hart CO
    Commented Jul 3, 2022 at 15:08
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    @MrMonee yes, they would. As Hart CO said - it is a fraud. You're asking whether a law enforcement agency would just "look the other way" when you commit a fraud - they would not, that's literally their job to enforce the law.
    – littleadv
    Commented Jul 3, 2022 at 15:52
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    If your lawyer says it’s ok, but you’re asking random strangers on the Internet whether it’s really alright, then you must know that it really is tax fraud.
    – RonJohn
    Commented Jul 4, 2022 at 7:38

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If so, how much time is the minimum that the child needs to hold onto the apartment in order that the IRS would consider it a legal gift and it would be legal to gift it back to us without any tax needing to be paid by either of us?

Gift is only a gift if you expect nothing in return. If there are strings attached (like an agreement to gift it back), then it is no longer a gift.

When the child gifts it back to you they too would need to report it to the IRS (or if the child is a foreign person - you would need to). Gifting the same property back and forth will raise questions.

Even if you owe no gift tax, you've had committed a fraud by filing a gift tax return for something that was not a gift. It's a criminal offense.

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  • @MrMonee irs.gov/businesses/small-businesses-self-employed/gift-tax The IRS explicitly states that it’s not a gift if you expect your child to give it back.
    – RonJohn
    Commented Jul 4, 2022 at 7:42
  • I read what RonJohn posted and then re-read what littleadv wrote. I take back my statements. I accept what was written in all the comments and answer.
    – Mr Monee
    Commented Jul 4, 2022 at 8:08

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