House Gift via Deed Gift

[zo1279]

My parents are going through a divorce...the only asset is a 2 family house of which my father and mother own 50% in total and the other 50% is owned by my aunt/uncle. So, my father wants to sell the house immediately as the mortgage is paid off and the house is worth about $500k but his portion will be 50% which is $250k. My mother however wants him (and he has agreed) to give a piece of the proceeds to myself and my sister...but the problem is that she doesn't trust that he will give it to us via his word and lawyers have said the best guaranteed way to do this is to put myself and my sister onto the deed. My father paid off my mother years ago but he did not take her off the deed so that is the problem...but she wants no money just to have our interests met. So basically the question is if our names were to be put on the deed and then sold...would I recognize any tax on the sale of the home...I am getting different answers and would like some advice. Also, is there any other way to do this transaction???? Thanks sooo much for any advice!!!

 

[seniorjudge]

Q: Also, is there any other way to do this transaction?

A: YOU must hire YOUR lawyer to protect YOUR interest and you must also hire a tax CPA.

 

[LdiJ]

My parents are going through a divorce...the only asset is a 2 family house of which my father and mother own 50% in total and the other 50% is owned by my aunt/uncle. So, my father wants to sell the house immediately as the mortgage is paid off and the house is worth about $500k but his portion will be 50% which is $250k. My mother however wants him (and he has agreed) to give a piece of the proceeds to myself and my sister...but the problem is that she doesn't trust that he will give it to us via his word and lawyers have said the best guaranteed way to do this is to put myself and my sister onto the deed. My father paid off my mother years ago but he did not take her off the deed so that is the problem...but she wants no money just to have our interests met. So basically the question is if our names were to be put on the deed and then sold...would I recognize any tax on the sale of the home...I am getting different answers and would like some advice. Also, is there any other way to do this transaction???? Thanks sooo much for any advice!!!

If he puts you on the house it will be a gift. Therefore your basis would be the proportional share of his basis. So yes, you would be subject to capital gains tax. Sales proceeds minus basis minus selling costs = capital gain.

Your father will have a 250k capital gain exclusion if the house has been his primary home for two of the last 5 years. Since his half is worth 250k, then its pretty much guaranteed that he would owe no capital gains tax. If it has not been his home for 2 of the last 5 years then he would also pay capital gains tax on the gain.

However, if he gives you money after the house is sold, then its a pure gift, with no capital gains tax to you. However if he gives you more than 12k each he would have to file a gift tax return, but would owe no actual gift tax unless he had always exceed his lifetime exclusion of 1 million, for gifting.

So, taxwise, if the house has been his primary home, its better if he gives you money after the fact.