Gifting a house or money: the return almost nobody knows to file

Treasury defines a gift as the free and voluntary transfer of an asset during life, and sets as a general rule that if you are a resident of Puerto Rico and made a gift, you must file a Gift Tax Return. The gift release has its own name: a Relevo is a Lien Cancellation Certification issued by the Treasury Department with respect to property acquired by gift, and it is necessary to record a property in the beneficiary’s name and to carry out other procedures, including sale or refinancing of the assets. To obtain it you must file the return together with the required documents. Since 10 December 2018, all filing, extension requests and payments related to the Gift Tax Return and the Lien Certification request go through SURI.

Every person, resident or nonresident of Puerto Rico, who in any calendar year makes any gift in excess of ten thousand dollars must file the return. A resident donor includes the market value of any property transferred by gift to another person, wherever located, and is entitled to a $10,000 exclusion per donatario. A nonresident donor includes the market value of any property located in Puerto Rico transferred by gift to another person, with the same $10,000 exclusion per donatario, and if the amount gifted exceeds $10,000 must pay the corresponding tax on the excess. As to deadlines: if the gift was made before 1 April 2011, the return had to be filed no later than 15 April of the year following the gift. If the gift was made from 1 April 2011, it is due no later than 31 January of the year following the calendar year of the gift if the donor files, or no later than 28 February of the following year if the donatario files.

• Having made, in a calendar year, a gift in excess of $10,000; the $10,000 exclusion applies per donatario.Verified against the official source
• Filing no later than 31 January of the following year if the donor files, or 28 February if the donatario files, for gifts from 1 April 2011.Verified against the official source
• That the donor is current on filing income tax returns; if they had no duty in the last five years, complete Form SC 2781.Verified against the official source
• Completing Schedule C for each person receiving the gift, on Form SC 2788 A.Verified against the official source

• A $25 Internal Revenue voucher.
• Copy of the deed of gift, if applicable.
• A CRIM certification showing the reported properties owe no property taxes as of the filing date; requested under the cadastre number.
• An Internal Revenue Collections certification that the donor owes no other taxes: income tax, excise taxes, sales tax and others.
• If the donor was not a Puerto Rico resident on the date of the gift: a copy of the appraisal report with the property’s value on that date.
• If the donor was a Puerto Rico resident and a US Armed Forces veteran: a copy of Form DD-214.
• If the donor has no social security number: a Social Security Administration certification to that effect.

1. 1

   Step 1: Count per person, not per total

   The rule almost everyone applies wrong: the $10,000 exclusion is per donatario. A resident donor includes in the return the market value of any property transferred by gift to another person, wherever located, and is entitled to a $10,000 exclusion for each person receiving. So what triggers the obligation is not how much you gave away in total, but how much you gave each person.

2. 2

   Step 2: Check who will file, because it changes the date

   For gifts made from 1 April 2011, the return is due no later than 31 January of the year following the calendar year of the gift if the donor files it, or no later than 28 February of the following year if the donatario files it. That is four weeks of difference for the same gift, depending on which side signs. For gifts before 1 April 2011, the deadline was 15 April of the following year.

3. 3

   Step 3: Use the right form and fill a Schedule C for each recipient

   For gifts made from 1 April 2011, the form is SC 2788 A, Gift Tax Return. Treasury stresses that Schedule C must be completed for each person receiving the gift. If you gifted to three people, that is three Schedule Cs.

4. 4

   Step 4: Get the no-debt certifications

   The CRIM one must show that the properties reported in the return owe no property taxes as of the gift return’s filing date, and it is requested under the property’s cadastre number. The Internal Revenue Collections one must state that the donor owes no other taxes, such as income tax, excise taxes, sales tax and others. These are the two that take longest.

5. 5

   Step 5: Catch up if the donor owes returns

   It is an indispensable requirement that the donor be current on filing income tax returns. If the donor had no duty to file during the last five years, they must complete Form SC 2781, Certification of Reasons Why One Is Not Legally Required to File the Individual Income Tax Return.

6. 6

   Step 6: Gather the rest of the papers

   A $25 Internal Revenue voucher. A copy of the deed of gift, if applicable. If the donor was not a Puerto Rico resident on the date of the gift, a copy of the appraisal report reflecting the property’s value on the date the gift was made. If the donor was a Puerto Rico resident and a US Armed Forces veteran, a copy of Form DD-214. And if the donor has no social security number, a Social Security Administration certification to that effect.

7. 7

   Step 7: If you cannot make it, there is an extension

   The Secretary may grant a three-month extension to file the return, and where the taxpayer is outside Puerto Rico it may be granted for a longer period not exceeding six months. It is requested with Form SC 2777, the same one used for the estate tax return: Application for Extension to File the Estate and Gift Tax Return.

8. 8

   Step 8: If you gifted property, the release is what is needed

   A Relevo is a Lien Cancellation Certification issued by Treasury for property acquired by gift, and it is necessary to record a property in the beneficiary’s name and to carry out other procedures, including sale or refinancing of the assets. To obtain it you must file the Gift Tax Return with the required documents attached. Without that paper, the house you gifted your child cannot be recorded in their name or sold.

9. 9

   Step 9: If you need another copy of the release

   It is requested with Form SC 2907, Request for Copy of Return, Estate and Gift Release, accompanied by a $5 Internal Revenue stamp. This request is submitted at the Treasury Department’s Taxpayer Service Offices in Bayamón, Caguas, Ponce, Mayagüez and San Juan.

10. 10

    Step 10: And if you must amend

    The return may be amended when, after the original is filed, it turns out information was omitted or the data differ: you complete it again, tick the Amended Return box, attach a $25 Internal Revenue voucher and include an explanatory letter with the reasons. If amending to increase the property’s value, you must submit a copy of the appraisal report with the real value as of the date of the gift and a clarifying deed. If it is to add real property, you must submit a CRIM certification showing it is current on taxes.

SURI, since 10 December 2018, for all filing, extensions and payments. Also at the Treasury Department’s Taxpayer Service Offices. By mail: Departamento de Hacienda, Sección de Herencia y Donaciones, P.O. Box 9022503, San Juan, Puerto Rico 00902-2503. For a copy of the release, with form SC 2907 and a $5 stamp, at the Taxpayer Service Offices in Bayamón, Caguas, Ponce, Mayagüez and San Juan.

• Believing the $10,000 is an annual total: the exclusion is per person receiving the gift.
• Using the wrong date: 31 January if the donor files, 28 February if the donatario does.
• Gifting property and not obtaining the release, then discovering it when selling or refinancing.
• Not completing a Schedule C for each person who received a gift.
• Forgetting the CRIM certification under the gifted property’s cadastre number.
• Not bringing the donor’s income tax filings up to date, or not completing SC 2781 when there was no duty.
• As a nonresident donor, not including the appraisal report with the value as of the gift date.

These are the government pages this guide is based on.

• Departamento de Hacienda de Puerto Rico

  Hacienda

  hacienda.pr.gov

• Process for filing the Gift Tax Return

  hacienda

  hacienda.pr.gov

• Documents to submit with the return

  hacienda

  hacienda.pr.gov

• Gift Lien Cancellation Certification (Relevo)

  hacienda

  hacienda.pr.gov