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atten: loku

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teekee_13

Guest
I live in California, my parents would like to transer the title of their home to me. I was wondering what the tax implications were and what legal documents were necessary to complete this transaction. Also, are their any pros and/or cons to transferring the title as opposed to inheriting it.

The value of the house is approx. $500K. It was purchased by my parents in 1980 for $120K. We all reside in the house. I am over 21 and am employed.

Thanks!
 


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loku

Guest
If your parents gift the house to you, they would have to file a gift tax return. $22,000 of the $500,000 would be excluded under the annual exclusion from gift tax. The remaining $478,000 would reduce your parent’s lifetime exclusion from estate and gift tax. Currently, each of them is entitled to a lifetime exclusion of $1,000,000. Therefore, their combined lifetime exclusion of $2,000,000 would be reduced by $478,000. There is a possible tax advantage to you in inheriting the house, rather than in receiving it as a gift: if you inherit the house, you basis for any gain or loss on its sale is the fair market value of the house at the date of the death. If you receive the house as a gift, as opposed to inheriting it, your basis, in this case would be the same as your parent’s basis. That would mean you could have to pay tax on a gain from the sale of the house.

If they do not have over $2,000,000 in property, including the house, there is no problem. If they do have more than that, I suggest you hire an attorney, familiar with estate planning, to plan the transaction.
 

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