Taxes on an addition built by parents

[Glen Maynard]

My mother is an Alzheimer's sufferer and my father can no longer care for her himself. He wants to move down to Texas to live with me and my wife for help and support caring for her.

I own 5.5 acres outside of city limits and the county I live in does not have deed restrictions as to what I do on my property, building-wise. Me, my wife, and parents discussed them building a small house on my land, but we decided it would be too cumbersome if we ever wanted to sell the property. I would have two separate domiciles to sell.

Instead, my dad is financing a $140,000 addition to my home for he and my mother to live in. My daughter-in-law works for a title company and she says that she believes that besides the increase in property value creating a hike in property and school tax, there will be an additional tax liability.

She says the county and federal tax authorities will look at this addition to my house as a gift and hit us with a gift tax. It is not a gift. My parents are building this addition to my house to live in, for however much longer they have to live (hopefully a long time).

I need to know if I will incur any additional tax liability besides an increase in property tax, which we have already factored in and my father will be paying the increase.

Any advice or information anyone might have would be most appreciated.

Thanks.

get an accountant or tax specialist to help you structure this so that you don't pay taxes on this--there are many ways it could be structured depending on your finances--the cost should be a few hundred dollars or so and would be well worth it