Family transfer of real estate properties

[Mooki]

It is very helpful to me to see the second opinions here. Yes I have been helping my mom because she is my mom. Given that I will always help her, I want to find a way that will yield the best (or least negative) outcome for both me and her.

Her current mortgage is only about $600 a month. My car loan is $1000. With my car loan I already pre-qual for enough to buy a house I want in San Diego. When my car loan goes away and I take over her mortgage, I’m actually having a lower debt. So I assume I will still qualify for the same loan amount here. What am I missing? The GA house is far from under water.

[Coronita]

[quote=Mooki]It is very helpful to me to see the second opinions here. Yes I have been helping my mom because she is my mom. Given that I will always help her, I want to find a way that will yield the best (or least negative) outcome for both me and her.

Her current mortgage is only about $600 a month. My car loan is $1000. With my car loan I already pre-qual for enough to buy a house I want in San Diego. When my car loan goes away and I take over her mortgage, I’m actually having a lower debt. So I assume I will still qualify for the same loan amount here. What am I missing? The GA house is far from under water.[/quote]

Your car loan is $1000/month?
You need to ask yourself also.
*How much you have in savings/cash reserves before/after any RE purchase.
*What do you do, and how stable is your job.

If the property is not underwater, why not sell it and get your mother a rental?

[Coronita]

[quote=Mooki]It is very helpful to me to see the second opinions here. Yes I have been helping my mom because she is my mom. Given that I will always help her, I want to find a way that will yield the best (or least negative) outcome for both me and her.

Her current mortgage is only about $600 a month. My car loan is $1000. With my car loan I already pre-qual for enough to buy a house I want in San Diego. When my car loan goes away and I take over her mortgage, I’m actually having a lower debt. So I assume I will still qualify for the same loan amount here. What am I missing? The GA house is far from under water.[/quote]

Your car loan is $1000/month?
You need to ask yourself also.
*How much you have in savings/cash reserves before/after any RE purchase.
*What do you do, and how stable is your job.

If the property is not underwater, why not sell it and get your mother a rental?

[Coronita]

[quote=Mooki]It is very helpful to me to see the second opinions here. Yes I have been helping my mom because she is my mom. Given that I will always help her, I want to find a way that will yield the best (or least negative) outcome for both me and her.

Her current mortgage is only about $600 a month. My car loan is $1000. With my car loan I already pre-qual for enough to buy a house I want in San Diego. When my car loan goes away and I take over her mortgage, I’m actually having a lower debt. So I assume I will still qualify for the same loan amount here. What am I missing? The GA house is far from under water.[/quote]

Your car loan is $1000/month?
You need to ask yourself also.
*How much you have in savings/cash reserves before/after any RE purchase.
*What do you do, and how stable is your job.

If the property is not underwater, why not sell it and get your mother a rental?

[Coronita]

[quote=Mooki]It is very helpful to me to see the second opinions here. Yes I have been helping my mom because she is my mom. Given that I will always help her, I want to find a way that will yield the best (or least negative) outcome for both me and her.

Her current mortgage is only about $600 a month. My car loan is $1000. With my car loan I already pre-qual for enough to buy a house I want in San Diego. When my car loan goes away and I take over her mortgage, I’m actually having a lower debt. So I assume I will still qualify for the same loan amount here. What am I missing? The GA house is far from under water.[/quote]

Your car loan is $1000/month?
You need to ask yourself also.
*How much you have in savings/cash reserves before/after any RE purchase.
*What do you do, and how stable is your job.

If the property is not underwater, why not sell it and get your mother a rental?

[Coronita]

[quote=Mooki]It is very helpful to me to see the second opinions here. Yes I have been helping my mom because she is my mom. Given that I will always help her, I want to find a way that will yield the best (or least negative) outcome for both me and her.

Her current mortgage is only about $600 a month. My car loan is $1000. With my car loan I already pre-qual for enough to buy a house I want in San Diego. When my car loan goes away and I take over her mortgage, I’m actually having a lower debt. So I assume I will still qualify for the same loan amount here. What am I missing? The GA house is far from under water.[/quote]

Your car loan is $1000/month?
You need to ask yourself also.
*How much you have in savings/cash reserves before/after any RE purchase.
*What do you do, and how stable is your job.

If the property is not underwater, why not sell it and get your mother a rental?

[Coronita]

[quote=joec][quote=bearishgurl][quote=joec]I’ve always wondered, are there gift taxes since the equity is worth over 13k or it’s different for real estate?[/quote]

There is no “gift” here. The equity is unrealized. Sharing title to real property with a family member in the form of a quitclaim deed is not a “gift.”

–This post should not be construed as legal advice and I am not an attorney.-[/quote]

This is still confusing to me since I’m sure giving someone stock (non-sold/unrealized gains) is definitely a gift as well as automobiles, stock options (also unrealized), a collectible collection or pretty much anything else.

Is it simply just real property then? What about investment property or business interest in properties?[/quote]

BG, are you sure this is correct, since it seems like most of the other sources indicate otherwise that quit claim deeds would trigger gifting if the value was greater than $13k?

I mean, this seems like it would be a huge loophole if it weren’t the case. If I were rich, I could buy a $5million property in cash, add my daughter to the deed, and simply quit claim on it, and she gets the home with no estate tax implications??? That doesn’t sound right and I thought there was an IRS pub about this….
Can’t find it right now…But, here was one of many articles that described the same thing http://www.selfgrowth.com/articles/quitclaim_deed_and_mortgage_transfer.html

http://en.allexperts.com/q/Tax-Law-Questions-932/2008/5/quit-claim-deed-2.htm

Now, considering the tax implications of doing a quitclaim, well, if you sign over the deed, you’re the grantor and hence it’s your liability to pay taxes. If you quitclaim property without taking any money in return from your father, the transfer is regarded as a gift and the value of the gift will be the value of the property at the time of the transfer (here the value has appreciated). Now, if the value of the gift does not exceed the annual exclusion limit of $12000 (for 2008) per year per person then the donor (here it’s you) need not pay federal tax on the gift.

However, if the value of the gift exceeds $12000 and you have already given up $1,000,000 in gifts in total till now in your life, you’ll have to pay the federal gift tax. Otherwise you need not have any tax liability as such upon transfer of property. The total gift amount of $1,000,000 is the lifetime exemption for paying federal gift tax.

While the value of the gift at the time of transfer helps you decide whether to pay gift tax, it enables the recipient, your father, to determine if a deduction is available when he sells the property at a loss.

One thing though. I was wrong about preserving prop tax for children. While CA Prop 13 doesn’t say anything about preserving property tax when property is transferred to kids, prop 58 DOES allow one to transfer property from parent to kid without a reassessment, and prop 193 also allows transfers from grandparents to grandkids without a reassessment.

[Coronita]

[quote=joec][quote=bearishgurl][quote=joec]I’ve always wondered, are there gift taxes since the equity is worth over 13k or it’s different for real estate?[/quote]

There is no “gift” here. The equity is unrealized. Sharing title to real property with a family member in the form of a quitclaim deed is not a “gift.”

–This post should not be construed as legal advice and I am not an attorney.-[/quote]

This is still confusing to me since I’m sure giving someone stock (non-sold/unrealized gains) is definitely a gift as well as automobiles, stock options (also unrealized), a collectible collection or pretty much anything else.

Is it simply just real property then? What about investment property or business interest in properties?[/quote]

BG, are you sure this is correct, since it seems like most of the other sources indicate otherwise that quit claim deeds would trigger gifting if the value was greater than $13k?

I mean, this seems like it would be a huge loophole if it weren’t the case. If I were rich, I could buy a $5million property in cash, add my daughter to the deed, and simply quit claim on it, and she gets the home with no estate tax implications??? That doesn’t sound right and I thought there was an IRS pub about this….
Can’t find it right now…But, here was one of many articles that described the same thing http://www.selfgrowth.com/articles/quitclaim_deed_and_mortgage_transfer.html

http://en.allexperts.com/q/Tax-Law-Questions-932/2008/5/quit-claim-deed-2.htm

Now, considering the tax implications of doing a quitclaim, well, if you sign over the deed, you’re the grantor and hence it’s your liability to pay taxes. If you quitclaim property without taking any money in return from your father, the transfer is regarded as a gift and the value of the gift will be the value of the property at the time of the transfer (here the value has appreciated). Now, if the value of the gift does not exceed the annual exclusion limit of $12000 (for 2008) per year per person then the donor (here it’s you) need not pay federal tax on the gift.

However, if the value of the gift exceeds $12000 and you have already given up $1,000,000 in gifts in total till now in your life, you’ll have to pay the federal gift tax. Otherwise you need not have any tax liability as such upon transfer of property. The total gift amount of $1,000,000 is the lifetime exemption for paying federal gift tax.

While the value of the gift at the time of transfer helps you decide whether to pay gift tax, it enables the recipient, your father, to determine if a deduction is available when he sells the property at a loss.

One thing though. I was wrong about preserving prop tax for children. While CA Prop 13 doesn’t say anything about preserving property tax when property is transferred to kids, prop 58 DOES allow one to transfer property from parent to kid without a reassessment, and prop 193 also allows transfers from grandparents to grandkids without a reassessment.

[Coronita]

[quote=joec][quote=bearishgurl][quote=joec]I’ve always wondered, are there gift taxes since the equity is worth over 13k or it’s different for real estate?[/quote]

There is no “gift” here. The equity is unrealized. Sharing title to real property with a family member in the form of a quitclaim deed is not a “gift.”

–This post should not be construed as legal advice and I am not an attorney.-[/quote]

This is still confusing to me since I’m sure giving someone stock (non-sold/unrealized gains) is definitely a gift as well as automobiles, stock options (also unrealized), a collectible collection or pretty much anything else.

Is it simply just real property then? What about investment property or business interest in properties?[/quote]

BG, are you sure this is correct, since it seems like most of the other sources indicate otherwise that quit claim deeds would trigger gifting if the value was greater than $13k?

I mean, this seems like it would be a huge loophole if it weren’t the case. If I were rich, I could buy a $5million property in cash, add my daughter to the deed, and simply quit claim on it, and she gets the home with no estate tax implications??? That doesn’t sound right and I thought there was an IRS pub about this….
Can’t find it right now…But, here was one of many articles that described the same thing http://www.selfgrowth.com/articles/quitclaim_deed_and_mortgage_transfer.html

http://en.allexperts.com/q/Tax-Law-Questions-932/2008/5/quit-claim-deed-2.htm

Now, considering the tax implications of doing a quitclaim, well, if you sign over the deed, you’re the grantor and hence it’s your liability to pay taxes. If you quitclaim property without taking any money in return from your father, the transfer is regarded as a gift and the value of the gift will be the value of the property at the time of the transfer (here the value has appreciated). Now, if the value of the gift does not exceed the annual exclusion limit of $12000 (for 2008) per year per person then the donor (here it’s you) need not pay federal tax on the gift.

However, if the value of the gift exceeds $12000 and you have already given up $1,000,000 in gifts in total till now in your life, you’ll have to pay the federal gift tax. Otherwise you need not have any tax liability as such upon transfer of property. The total gift amount of $1,000,000 is the lifetime exemption for paying federal gift tax.

While the value of the gift at the time of transfer helps you decide whether to pay gift tax, it enables the recipient, your father, to determine if a deduction is available when he sells the property at a loss.

One thing though. I was wrong about preserving prop tax for children. While CA Prop 13 doesn’t say anything about preserving property tax when property is transferred to kids, prop 58 DOES allow one to transfer property from parent to kid without a reassessment, and prop 193 also allows transfers from grandparents to grandkids without a reassessment.

[Coronita]

[quote=joec][quote=bearishgurl][quote=joec]I’ve always wondered, are there gift taxes since the equity is worth over 13k or it’s different for real estate?[/quote]

There is no “gift” here. The equity is unrealized. Sharing title to real property with a family member in the form of a quitclaim deed is not a “gift.”

–This post should not be construed as legal advice and I am not an attorney.-[/quote]

This is still confusing to me since I’m sure giving someone stock (non-sold/unrealized gains) is definitely a gift as well as automobiles, stock options (also unrealized), a collectible collection or pretty much anything else.

Is it simply just real property then? What about investment property or business interest in properties?[/quote]

BG, are you sure this is correct, since it seems like most of the other sources indicate otherwise that quit claim deeds would trigger gifting if the value was greater than $13k?

I mean, this seems like it would be a huge loophole if it weren’t the case. If I were rich, I could buy a $5million property in cash, add my daughter to the deed, and simply quit claim on it, and she gets the home with no estate tax implications??? That doesn’t sound right and I thought there was an IRS pub about this….
Can’t find it right now…But, here was one of many articles that described the same thing http://www.selfgrowth.com/articles/quitclaim_deed_and_mortgage_transfer.html

http://en.allexperts.com/q/Tax-Law-Questions-932/2008/5/quit-claim-deed-2.htm

Now, considering the tax implications of doing a quitclaim, well, if you sign over the deed, you’re the grantor and hence it’s your liability to pay taxes. If you quitclaim property without taking any money in return from your father, the transfer is regarded as a gift and the value of the gift will be the value of the property at the time of the transfer (here the value has appreciated). Now, if the value of the gift does not exceed the annual exclusion limit of $12000 (for 2008) per year per person then the donor (here it’s you) need not pay federal tax on the gift.

However, if the value of the gift exceeds $12000 and you have already given up $1,000,000 in gifts in total till now in your life, you’ll have to pay the federal gift tax. Otherwise you need not have any tax liability as such upon transfer of property. The total gift amount of $1,000,000 is the lifetime exemption for paying federal gift tax.

While the value of the gift at the time of transfer helps you decide whether to pay gift tax, it enables the recipient, your father, to determine if a deduction is available when he sells the property at a loss.

One thing though. I was wrong about preserving prop tax for children. While CA Prop 13 doesn’t say anything about preserving property tax when property is transferred to kids, prop 58 DOES allow one to transfer property from parent to kid without a reassessment, and prop 193 also allows transfers from grandparents to grandkids without a reassessment.

[Coronita]

[quote=joec][quote=bearishgurl][quote=joec]I’ve always wondered, are there gift taxes since the equity is worth over 13k or it’s different for real estate?[/quote]

There is no “gift” here. The equity is unrealized. Sharing title to real property with a family member in the form of a quitclaim deed is not a “gift.”

–This post should not be construed as legal advice and I am not an attorney.-[/quote]

This is still confusing to me since I’m sure giving someone stock (non-sold/unrealized gains) is definitely a gift as well as automobiles, stock options (also unrealized), a collectible collection or pretty much anything else.

Is it simply just real property then? What about investment property or business interest in properties?[/quote]

BG, are you sure this is correct, since it seems like most of the other sources indicate otherwise that quit claim deeds would trigger gifting if the value was greater than $13k?

I mean, this seems like it would be a huge loophole if it weren’t the case. If I were rich, I could buy a $5million property in cash, add my daughter to the deed, and simply quit claim on it, and she gets the home with no estate tax implications??? That doesn’t sound right and I thought there was an IRS pub about this….
Can’t find it right now…But, here was one of many articles that described the same thing http://www.selfgrowth.com/articles/quitclaim_deed_and_mortgage_transfer.html

http://en.allexperts.com/q/Tax-Law-Questions-932/2008/5/quit-claim-deed-2.htm

Now, considering the tax implications of doing a quitclaim, well, if you sign over the deed, you’re the grantor and hence it’s your liability to pay taxes. If you quitclaim property without taking any money in return from your father, the transfer is regarded as a gift and the value of the gift will be the value of the property at the time of the transfer (here the value has appreciated). Now, if the value of the gift does not exceed the annual exclusion limit of $12000 (for 2008) per year per person then the donor (here it’s you) need not pay federal tax on the gift.

However, if the value of the gift exceeds $12000 and you have already given up $1,000,000 in gifts in total till now in your life, you’ll have to pay the federal gift tax. Otherwise you need not have any tax liability as such upon transfer of property. The total gift amount of $1,000,000 is the lifetime exemption for paying federal gift tax.

While the value of the gift at the time of transfer helps you decide whether to pay gift tax, it enables the recipient, your father, to determine if a deduction is available when he sells the property at a loss.

One thing though. I was wrong about preserving prop tax for children. While CA Prop 13 doesn’t say anything about preserving property tax when property is transferred to kids, prop 58 DOES allow one to transfer property from parent to kid without a reassessment, and prop 193 also allows transfers from grandparents to grandkids without a reassessment.

[SK in CV]

Good catch flu.

[quote=flu][quote=joec][quote=bearishgurl][quote=joec]I’ve always wondered, are there gift taxes since the equity is worth over 13k or it’s different for real estate?[/quote]

There is no “gift” here. The equity is unrealized. Sharing title to real property with a family member in the form of a quitclaim deed is not a “gift.”

–This post should not be construed as legal advice and I am not an attorney.-[/quote]

This is still confusing to me since I’m sure giving someone stock (non-sold/unrealized gains) is definitely a gift as well as automobiles, stock options (also unrealized), a collectible collection or pretty much anything else.

Is it simply just real property then? What about investment property or business interest in properties?[/quote]

BG, are you sure this is correct, since it seems like most of the other sources indicate otherwise that quit claim deeds would trigger gifting if the value was greater than $13k?

I mean, this seems like it would be a huge loophole if it weren’t the case. If I were rich, I could buy a $5million property in cash, add my daughter to the deed, and simply quit claim on it, and she gets the home with no estate tax implications??? That doesn’t sound right and I thought there was an IRS pub about this….
Can’t find it right now…But, here was one of many articles that described the same thing http://www.selfgrowth.com/articles/quitclaim_deed_and_mortgage_transfer.html

http://en.allexperts.com/q/Tax-Law-Questions-932/2008/5/quit-claim-deed-2.htm

Now, considering the tax implications of doing a quitclaim, well, if you sign over the deed, you’re the grantor and hence it’s your liability to pay taxes. If you quitclaim property without taking any money in return from your father, the transfer is regarded as a gift and the value of the gift will be the value of the property at the time of the transfer (here the value has appreciated). Now, if the value of the gift does not exceed the annual exclusion limit of $12000 (for 2008) per year per person then the donor (here it’s you) need not pay federal tax on the gift.

However, if the value of the gift exceeds $12000 and you have already given up $1,000,000 in gifts in total till now in your life, you’ll have to pay the federal gift tax. Otherwise you need not have any tax liability as such upon transfer of property. The total gift amount of $1,000,000 is the lifetime exemption for paying federal gift tax.

While the value of the gift at the time of transfer helps you decide whether to pay gift tax, it enables the recipient, your father, to determine if a deduction is available when he sells the property at a loss.

One thing though. I was wrong about preserving prop tax for children. While CA Prop 13 doesn’t say anything about preserving property tax when property is transferred to kids, prop 58 DOES allow one to transfer property from parent to kid without a reassessment, and prop 193 also allows transfers from grandparents to grandkids without a reassessment.[/quote]

A transfer by quit claim deed is absolutely a gift. If the equity is more than $13,000, then it is a reportable gift, and the grantor (the mother) is required to file a gift tax return. If her lifetime gifts are less than the $1,000,000 lifetime exemption, then there will be no tax to pay. It sounds as if that is the case. So there really aren’t any gift tax issues other than possibly the necessity of filing a relatively simple gift tax return.

The tax basis for the grantee is the lower of the grantors cost or current market value plus any gift taxes paid. So if mom paid more than it’s currently worth, the depreciation is still based on the lower current market value, not the higher cost. If she paid less, then the lower basis is used for depreciation purposes.

(I’ve seen the argument made that the taxable gift is the full value of the property since the debt is not legally being transferred. I think it’s a rediculous argment, but I really don’t know if it has ever been litigated. Sounds as if that still wouldn’t make it an issue based on the value of the property.

[SK in CV]

Good catch flu.

[quote=flu][quote=joec][quote=bearishgurl][quote=joec]I’ve always wondered, are there gift taxes since the equity is worth over 13k or it’s different for real estate?[/quote]

There is no “gift” here. The equity is unrealized. Sharing title to real property with a family member in the form of a quitclaim deed is not a “gift.”

–This post should not be construed as legal advice and I am not an attorney.-[/quote]

This is still confusing to me since I’m sure giving someone stock (non-sold/unrealized gains) is definitely a gift as well as automobiles, stock options (also unrealized), a collectible collection or pretty much anything else.

Is it simply just real property then? What about investment property or business interest in properties?[/quote]

BG, are you sure this is correct, since it seems like most of the other sources indicate otherwise that quit claim deeds would trigger gifting if the value was greater than $13k?

I mean, this seems like it would be a huge loophole if it weren’t the case. If I were rich, I could buy a $5million property in cash, add my daughter to the deed, and simply quit claim on it, and she gets the home with no estate tax implications??? That doesn’t sound right and I thought there was an IRS pub about this….
Can’t find it right now…But, here was one of many articles that described the same thing http://www.selfgrowth.com/articles/quitclaim_deed_and_mortgage_transfer.html

http://en.allexperts.com/q/Tax-Law-Questions-932/2008/5/quit-claim-deed-2.htm

Now, considering the tax implications of doing a quitclaim, well, if you sign over the deed, you’re the grantor and hence it’s your liability to pay taxes. If you quitclaim property without taking any money in return from your father, the transfer is regarded as a gift and the value of the gift will be the value of the property at the time of the transfer (here the value has appreciated). Now, if the value of the gift does not exceed the annual exclusion limit of $12000 (for 2008) per year per person then the donor (here it’s you) need not pay federal tax on the gift.

However, if the value of the gift exceeds $12000 and you have already given up $1,000,000 in gifts in total till now in your life, you’ll have to pay the federal gift tax. Otherwise you need not have any tax liability as such upon transfer of property. The total gift amount of $1,000,000 is the lifetime exemption for paying federal gift tax.

While the value of the gift at the time of transfer helps you decide whether to pay gift tax, it enables the recipient, your father, to determine if a deduction is available when he sells the property at a loss.

One thing though. I was wrong about preserving prop tax for children. While CA Prop 13 doesn’t say anything about preserving property tax when property is transferred to kids, prop 58 DOES allow one to transfer property from parent to kid without a reassessment, and prop 193 also allows transfers from grandparents to grandkids without a reassessment.[/quote]

A transfer by quit claim deed is absolutely a gift. If the equity is more than $13,000, then it is a reportable gift, and the grantor (the mother) is required to file a gift tax return. If her lifetime gifts are less than the $1,000,000 lifetime exemption, then there will be no tax to pay. It sounds as if that is the case. So there really aren’t any gift tax issues other than possibly the necessity of filing a relatively simple gift tax return.

The tax basis for the grantee is the lower of the grantors cost or current market value plus any gift taxes paid. So if mom paid more than it’s currently worth, the depreciation is still based on the lower current market value, not the higher cost. If she paid less, then the lower basis is used for depreciation purposes.

(I’ve seen the argument made that the taxable gift is the full value of the property since the debt is not legally being transferred. I think it’s a rediculous argment, but I really don’t know if it has ever been litigated. Sounds as if that still wouldn’t make it an issue based on the value of the property.

[SK in CV]

Good catch flu.

[quote=flu][quote=joec][quote=bearishgurl][quote=joec]I’ve always wondered, are there gift taxes since the equity is worth over 13k or it’s different for real estate?[/quote]

There is no “gift” here. The equity is unrealized. Sharing title to real property with a family member in the form of a quitclaim deed is not a “gift.”

–This post should not be construed as legal advice and I am not an attorney.-[/quote]

This is still confusing to me since I’m sure giving someone stock (non-sold/unrealized gains) is definitely a gift as well as automobiles, stock options (also unrealized), a collectible collection or pretty much anything else.

Is it simply just real property then? What about investment property or business interest in properties?[/quote]

BG, are you sure this is correct, since it seems like most of the other sources indicate otherwise that quit claim deeds would trigger gifting if the value was greater than $13k?

I mean, this seems like it would be a huge loophole if it weren’t the case. If I were rich, I could buy a $5million property in cash, add my daughter to the deed, and simply quit claim on it, and she gets the home with no estate tax implications??? That doesn’t sound right and I thought there was an IRS pub about this….
Can’t find it right now…But, here was one of many articles that described the same thing http://www.selfgrowth.com/articles/quitclaim_deed_and_mortgage_transfer.html

http://en.allexperts.com/q/Tax-Law-Questions-932/2008/5/quit-claim-deed-2.htm

Now, considering the tax implications of doing a quitclaim, well, if you sign over the deed, you’re the grantor and hence it’s your liability to pay taxes. If you quitclaim property without taking any money in return from your father, the transfer is regarded as a gift and the value of the gift will be the value of the property at the time of the transfer (here the value has appreciated). Now, if the value of the gift does not exceed the annual exclusion limit of $12000 (for 2008) per year per person then the donor (here it’s you) need not pay federal tax on the gift.

However, if the value of the gift exceeds $12000 and you have already given up $1,000,000 in gifts in total till now in your life, you’ll have to pay the federal gift tax. Otherwise you need not have any tax liability as such upon transfer of property. The total gift amount of $1,000,000 is the lifetime exemption for paying federal gift tax.

While the value of the gift at the time of transfer helps you decide whether to pay gift tax, it enables the recipient, your father, to determine if a deduction is available when he sells the property at a loss.

One thing though. I was wrong about preserving prop tax for children. While CA Prop 13 doesn’t say anything about preserving property tax when property is transferred to kids, prop 58 DOES allow one to transfer property from parent to kid without a reassessment, and prop 193 also allows transfers from grandparents to grandkids without a reassessment.[/quote]

A transfer by quit claim deed is absolutely a gift. If the equity is more than $13,000, then it is a reportable gift, and the grantor (the mother) is required to file a gift tax return. If her lifetime gifts are less than the $1,000,000 lifetime exemption, then there will be no tax to pay. It sounds as if that is the case. So there really aren’t any gift tax issues other than possibly the necessity of filing a relatively simple gift tax return.

The tax basis for the grantee is the lower of the grantors cost or current market value plus any gift taxes paid. So if mom paid more than it’s currently worth, the depreciation is still based on the lower current market value, not the higher cost. If she paid less, then the lower basis is used for depreciation purposes.

(I’ve seen the argument made that the taxable gift is the full value of the property since the debt is not legally being transferred. I think it’s a rediculous argment, but I really don’t know if it has ever been litigated. Sounds as if that still wouldn’t make it an issue based on the value of the property.

[SK in CV]

Good catch flu.

[quote=flu][quote=joec][quote=bearishgurl][quote=joec]I’ve always wondered, are there gift taxes since the equity is worth over 13k or it’s different for real estate?[/quote]

There is no “gift” here. The equity is unrealized. Sharing title to real property with a family member in the form of a quitclaim deed is not a “gift.”

–This post should not be construed as legal advice and I am not an attorney.-[/quote]

This is still confusing to me since I’m sure giving someone stock (non-sold/unrealized gains) is definitely a gift as well as automobiles, stock options (also unrealized), a collectible collection or pretty much anything else.

Is it simply just real property then? What about investment property or business interest in properties?[/quote]

BG, are you sure this is correct, since it seems like most of the other sources indicate otherwise that quit claim deeds would trigger gifting if the value was greater than $13k?

I mean, this seems like it would be a huge loophole if it weren’t the case. If I were rich, I could buy a $5million property in cash, add my daughter to the deed, and simply quit claim on it, and she gets the home with no estate tax implications??? That doesn’t sound right and I thought there was an IRS pub about this….
Can’t find it right now…But, here was one of many articles that described the same thing http://www.selfgrowth.com/articles/quitclaim_deed_and_mortgage_transfer.html

http://en.allexperts.com/q/Tax-Law-Questions-932/2008/5/quit-claim-deed-2.htm

Now, considering the tax implications of doing a quitclaim, well, if you sign over the deed, you’re the grantor and hence it’s your liability to pay taxes. If you quitclaim property without taking any money in return from your father, the transfer is regarded as a gift and the value of the gift will be the value of the property at the time of the transfer (here the value has appreciated). Now, if the value of the gift does not exceed the annual exclusion limit of $12000 (for 2008) per year per person then the donor (here it’s you) need not pay federal tax on the gift.

However, if the value of the gift exceeds $12000 and you have already given up $1,000,000 in gifts in total till now in your life, you’ll have to pay the federal gift tax. Otherwise you need not have any tax liability as such upon transfer of property. The total gift amount of $1,000,000 is the lifetime exemption for paying federal gift tax.

While the value of the gift at the time of transfer helps you decide whether to pay gift tax, it enables the recipient, your father, to determine if a deduction is available when he sells the property at a loss.

One thing though. I was wrong about preserving prop tax for children. While CA Prop 13 doesn’t say anything about preserving property tax when property is transferred to kids, prop 58 DOES allow one to transfer property from parent to kid without a reassessment, and prop 193 also allows transfers from grandparents to grandkids without a reassessment.[/quote]

A transfer by quit claim deed is absolutely a gift. If the equity is more than $13,000, then it is a reportable gift, and the grantor (the mother) is required to file a gift tax return. If her lifetime gifts are less than the $1,000,000 lifetime exemption, then there will be no tax to pay. It sounds as if that is the case. So there really aren’t any gift tax issues other than possibly the necessity of filing a relatively simple gift tax return.

The tax basis for the grantee is the lower of the grantors cost or current market value plus any gift taxes paid. So if mom paid more than it’s currently worth, the depreciation is still based on the lower current market value, not the higher cost. If she paid less, then the lower basis is used for depreciation purposes.

(I’ve seen the argument made that the taxable gift is the full value of the property since the debt is not legally being transferred. I think it’s a rediculous argment, but I really don’t know if it has ever been litigated. Sounds as if that still wouldn’t make it an issue based on the value of the property.

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