Answer Happy

Frank is 65 years old and has three
children. Frank wants to help his children financially
and prefers to help them now rather than when he is
dead. Frank is considering making a substantial gift to
each child, approximately $300,000 to
each. Frank owns the following assets that he would
consider gifting:
- Rental property worth $300,000 that generates $30,000 of
rental income each year. Frank's income tax basis in the
property is $50,000.
- Rental property worth $250,000 that generates $20,000 of
rental income each year. Frank's income tax basis in the
property is $200,000.
- Rental property worth $350,000 that generates
$40,000 of rental income each year. Frank's income
tax basis in the property is $100,000.
- Cash in bank account of $200,000
Frank has retirement income of $100,000 per year in addition to
the rental income he receives. Frank lives a fairly modest
lifestyle and is generally concerned with being financially
independent and not getting himself into a situation where he
cannot support himself.
Frank has come to you for advice about which assets he should
consider gifting to the kids. He would like to know the tax
consequences of any proposed gifts. His goal is to treat the
kids equally. Please propose a gifting strategy to Frank
and explain the tax consequences of the proposed gifts.
Also discuss any other issues you think are relevant to Frank's
situation.