Quit Claim Deed

[Californiamm]

In California, May 2007, my parents gifted their house to me and one of my sisters with a quit Claim deed. My dad passed in June 2007 and my Mom passed in December 2009. The deed had never been recorded. Our attorney sent the deed to the county clerk via regular mail. The clerk's office said they never received it. Thus the original paperwork was lost. The clerk would not record a copy of the deed. They said, by law, they could only record an original. Our attorney sued the county clerk to record a copy of the deed. Our attorney worked it out with the County attorney and a judge ordered the county clerk to record a copy of the deed. The copy of the quit claim deed was recorded in November 2010. My parents paid $29,000 for the house in 1958. The house was valued at $440,000 when the quit claim deed was executed in May 2007. The house was valued at $340,000 when the quit claim deed was finally recorded in November 2010. We would like to sell the house to our brother for $310,000. We consulted a tax attorney who told us that since the deed was not recorded until after my parents had passed, we shouldn't have to pay any taxes on the sale to my brother as along as the sale price is the same or below the value of the house when the deed was recorded. After we sell the house, we intend to divide any proceeds equally amongst the four siblings. I am trying to get additional guidance to confirm what the tax attorney told us.

We didn't originally expect to have to go through the probate proces since the value of the estate was less than the threshhold required to go through probate when we thought the house had been gifted to us before my parents died. If the tax attorney is correct and the house is now considered an inheritance instead of a gift, I assume we would now have to go through the probate process?

Thanks for any insight you can give.What is the name of your state (only U.S. law)?

 

[justalayman]

If the tax attorney is correct and the house is now considered an inheritance instead of a gift, I assume we would now have to go through the probate process?

I would suppose so but I do not believe he is correct.

Transfer is construed to be upon delivery and acceptance of the deed by the grantee.

If a deed is not valid if the grantor dies before the deed is recorded, don't you think the court would have objected to the recording of the deed? Your entire argument to allow a copy to be recorded was premised on the fact the grantors were now deceased and not able to issue another deed?

 

[davew128]

My parents paid $29,000 for the house in 1958. The house was valued at $440,000 when the quit claim deed was executed in May 2007. The house was valued at $340,000 when the quit claim deed was finally recorded in November 2010. We would like to sell the house to our brother for $310,000. We consulted a tax attorney who told us that since the deed was not recorded until after my parents had passed, we shouldn't have to pay any taxes on the sale to my brother as along as the sale price is the same or below the value of the house when the deed was recorded.

And what is your tax attorney's rationale that this is now inherited rather than gifted property? Without researching the matter I can tell you what the IRS's position on it would be. Unless there is case law that says otherwise, the quit claim was executed in 2007, and as long as all parties acted as if ownership had transferred accordingly, the gift was COMPLETED in 2007. That means you have taxable gain on the sale of the property. The question that remains is, although the deed was finally recorded in 2010, for all intents and purposes when did ownership actually change?