Gift of Deed

[,,,>^..^<,,,]

What is the name of your state? Ct
Curious if there are any implications to being "given" a house, I am aware that in order to avoid capital gains this would have to be my primary residence for 2 yrs. prior to the sale to avoid stepped up cost capital gains tax ,is this correct?
after my Mom passed away in 2005
my 70 y.o Father had decided last year to leave behind his life of 35 yrs. and has subsequently moved out of state and has turned his house over to me to dispose of, I have been having to clean out a lifetime of memories, as well as accumulation of alot of "stuff" , he has told me that he would like to legally sign the house over to me, if I want it, I am considering it, but want to make sure that there are no downfalls to this.
thankyou in advance

[LdiJ]

Originally Posted by ,,,>^..^<,,,

What is the name of your state? Ct
Curious if there are any implications to being "given" a house, I am aware that in order to avoid capital gains this would have to be my primary residence for 2 yrs. prior to the sale to avoid stepped up cost capital gains tax ,is this correct?
after my Mom passed away in 2005
my 70 y.o Father had decided last year to leave behind his life of 35 yrs. and has subsequently moved out of state and has turned his house over to me to dispose of, I have been having to clean out a lifetime of memories, as well as accumulation of alot of "stuff" , he has told me that he would like to legally sign the house over to me, if I want it, I am considering it, but want to make sure that there are no downfalls to this.
thankyou in advance

"Stepped up" basis is not something to be avoided...its something that someone should want to have. Sales price minus selling costs and "basis" equals your capital gain.

You can be gifted the home, and there is no tax consequence to you of the gift (but your father will have to file a gift tax return, and may have to pay gift taxes if he has exceeded his lifetime exclusion of 1 million dollars for gifting).

Here is where it gets tricky though....

If you inherit the house your basis become the fair market value as of the date decedent's death. This generally means that if you sell it within a fairly short amount of time, that there is little to no capital gain, therefore little to no capital gains tax.

If you are gifted the house then your basis is your father's basis. Which is the price he paid for the house originally, plus the cost of improvements. Therefore, if you sell the house quickly its likely that you will have large capital gains, therefore a significant amount of capital gains tax. Of course you can get around that by living in the home for a minimum of two fulls years, which would then entitled you to the 250k exclusion.

[abezon]

Originally Posted by LdiJ

"Stepped up" basis is not something to be avoided...its something that someone should want to have.

More like pursued avidly.

Originally Posted by LdiJ

If you are gifted the house then your basis is your father's basis. Which is the price he paid for the house originally, plus the cost of improvements. Therefore, if you sell the house quickly its likely that you will have large capital gains, therefore a significant amount of capital gains tax. Of course you can get around that by living in the home for a minimum of two fulls years, which would then entitled you to the 250k exclusion.

Did dad own the house with mom? Dad may have received a significant basis step up in 2005. Take the basis info to a tax pro & have him/her figure out dad's revised basis. If it's close to the current FMV, there's no tax reason not to just sign it over to you. If dad's basis is significantly lower than the current FMV (highly likely), it's better for dad to sell the house & gift you cash, or for you to buy the house at FMV. Talk to the tax pro about this too.

At any rate, if dad sells the house, he can exclude up to $250,000 of capital gains (calculated using the stepped up basis). If Dad gifts the house to you, you have to live in it & own it for 2 years before selling or you pay taxes on all the gains. If you inherit the house, your basis gets stepped up to FMV on the date of dad's death & you can sell soon after without paying any taxes.

You could just live in the house & wait to inherit it.

[,,,>^..^<,,,]

How would I know if my dad had house stepped up in 2005?? yes he did own with my mom and when she dies in '05 he had to have her name removed from the deed. please respond

[xylene]

No one ever went broke paying capital gains.

An outside take:

I think you should think of the emotional issues involved.

Dad wants you to have the house now. "Its yours, you deal with all this stuff" Maybe not the easiest gift.

Sift the memories. Try not to let emotions overwhelm you.
Seek a proffessional estate sales person's advice.

Consider selling the home, unless you are Absolutely sure you want to live in it.

[LdiJ]

Originally Posted by ,,,>^..^<,,,

How would I know if my dad had house stepped up in 2005?? yes he did own with my mom and when she dies in '05 he had to have her name removed from the deed. please respond

Then your dad has some stepped up basis on at least 1/2 of the home.

[,,,>^..^<,,,]

You hit the nail on the head, and I appreciate your realization of the issues at hand, this is NOT an easy gift, especially when there are many aspects to it, I have 4 siblings who all live out of state and are all useless, this burden has been put on me the youngest of 5. I have 4 children of my own so my life isn't exactly sedatary. I would only want to live in the house for 2 years to get the sale price without having to pay gains on it. I currnetlyown my own home but have wanted to relocate for a while and have not because I was the only child here for my parents, a year after my mom died (in the house ..fwiw) my dad left ... moves 700 some odd miles away. living with a female family friend who had also lost her spouse recently. they are merely companions. I am happy for them in that they can do this I would never want him to die lonely. but... here I am
not knowing what I should do. he did have me put as power of attorney for the sale of the property but when asked by the atty. where the check should be deposited he much to my surprise said in his bank acct. that has made me scratch my head. I am getting way off the subject , sorry.
let me just thank yo all for responding. I do need to seek pofressional help.. probably all kinds LOL