Harry Gross: Harry Gross: Ask first, act later

Dear Harry: In August 2010, I sold a piece of land for $35,000. I split the proceeds among my three kids. They each have a lot less income than I do. I am still working at the age of 74, and my salary is very solid. Is there a way for me to avoid paying income taxes on this sale? I have been told that the $35,000 would put me in a higher tax bracket and cost me a lot of bucks. The tax to my kids would obviously cost a lot less. How much gift tax will they have to pay on this deal?

What Harry says: Let's start at the beginning. You should have asked these questions before you made the sales agreement. If you had made a gift of the land before the sale, the gain would have gone to your children, not you. It's too late now. It is only the gain that is taxable (the excess of the proceeds over your cost). As a result, your taxes will not be hit too hard. In addition, the tax on this capital gain will be at 15 percent, not your regular bracket. Gift taxes are on the donor, not the donee. However, there is a $13,000 exclusion for each donee each calendar year. That puts you in a position in which you don't even have to file a return since your gifts were less than $12,000 per donee. Please remember that the time to ask questions is before you undertake similar transactions.

Write Harry Gross c/o the Daily News, 400 N. Broad St., Philadelphia, PA 19130. Harry urges all his readers to give blood: Contact the American Red Cross at 1-800-Red Cross.