Reversal of quit claim deed

[chgobetty]

Case: In 1995, an elderly parent (73 yrs.) transfers his/her home via a quit claim deed to the adult child (40). Now they want to reverse it for fear of huge capital gains taxes, per their CPA. The home has been paid for prior to the deed. The parent has and still lives in the home. No other changes have been made.

Question: Can they reverse the deed without any tax or legal implications? Can they use the same lawyer who processed the deed initially? What's the safest and most legal means?

 

[HomeGuru]

<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by chgobetty:
Case: In 1995, an elderly parent (73 yrs.) transfers his/her home via a quit claim deed to the adult child (40). Now they want to reverse it for fear of huge capital gains taxes, per their CPA. The home has been paid for prior to the deed. The parent has and still lives in the home. No other changes have been made.

Question: Can they reverse the deed without any tax or legal implications? Can they use the same lawyer who processed the deed initially? What's the safest and most legal means?<HR></BLOCKQUOTE>

Yor question is rather complex so you should consult with a tax attorney on this matter. Generally a deed can not be reversed the way that you are talking about.

 

[Tracey]

Yes, they can quit claim it back to dad. However, they need to understand that dad can then sell it & take the once in a lifetime $265k capital gains exclusion & doesn't have to leave it to them. Furthermore, reversing the deed will probably be construed as a gift by the IRS, reducing your unified lifetime exclusion & requiring you to file a gift tax declaration. How about gifting the house back to dad (he gets it with his original basis), then buying it for FMV, allowing dad to exclude the capital gains from his income. Then, dad forgives the mortgage in his will. I'm sure the IRS has made this illegal, but you get the idea. Tell your accountant to get creative.

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This is not legal advice and you are not my client. Double check everything with your own attorney and your state's laws. [email protected] - please include some facts so I know who you are!