selling house

[garysoldcars]

What is the name of your state? Ca
My Mother quitdeeded her house to my sister and brother in 1997. Now we found her will which said she wanted the house split in 3 ways. The question is if we sell the house for approx $375.000.00 (free and clear) and split it 3 ways at $125,000.00, would I have to pay capitol gains on my share if I am not on title?
Or should I be added to the title before the sale?
Any information would really be appreciated.
Thanks Gary

 

[I AM ALWAYS LIABLE]

What is the name of your state? Ca
My Mother quitdeeded her house to my sister and brother in 1997. Now we found her will which said she wanted the house split in 3 ways. The question is if we sell the house for approx $375.000.00 (free and clear) and split it 3 ways at $125,000.00, would I have to pay capitol gains on my share if I am not on title?
Or should I be added to the title before the sale?
Any information would really be appreciated.
Thanks Gary

My response:

You've got a bigger problem than the taxes. When your Mom "Quit Claim Deeded" the house to your sister, the house no longer belonged to your Mom - - it belongs lock, stock and barrel to your sister. Therefore, that part of her Will is legally invalid.

In other words, you can't give away that which you do not own.

So, in reality, you don't have a tax problem.

IAAL

 

[garysoldcars]

Actually my brother and sister are the owners as joint tenants but they have agreed to split the profit from the sale of the house 3 ways. We would each get one third.
Thanks Gary

 

[I AM ALWAYS LIABLE]

Actually my brother and sister are the owners as joint tenants but they have agreed to split the profit from the sale of the house 3 ways. We would each get one third.
Thanks Gary

My response:

Since the house would not be Probated, because Mom didn't own the house when she died, then any amount you would receive, whether you're on the title or not, would be treated as a capital gain. So, now, this is going to throw you right into the upper tax bracket.

Had this been a Probate matter, you would not have paid very much in the way of taxes, because it would have been an "inheritance", and the inheritance tax is extremely low.

See your tax counselor for specifics of your situation.

Sorry.

IAAL

 

[Snipes5]

Actually, if the house was quitclaimed to the brother and sister, the OP doesn't own it. Therefore when it's sold, the OP will not have a tax issue.

If the brother and sister decide to gift the OP a third of the proceeds, they will have their capital gains to pay, and will also have to file a gift return apiece, unless they each gift him $11,000 per year until they've given him one third.

If they put him on the title, the money is split three ways, but the OP's basis will be one third of the fair market value on the date of the gift.

From the OP's tax standpoint, it's better if they NOT put him on the title, unless of course he doesn't trust them to give him his share, in which case he should be put on the title and just put aside money for the capital gains.

One last option is that they can add him to the title, and all three of them can live there for two years, and THEN sell it. Thereby giving each of them an exclusion of $250,000 and resulting in no capital gains for anyone.

Snipes

 

[abezon]

To recap: if you're on the title, you have to pay capital gains on any profits from sale. If you're not on the title, your siblings pay any taxes & file gift tax returns; you pay nothing.

The profit from the sale will be the selling price - costs of sale - fair market value of the house on the day of your mother's death. Because the house was held in joint tenancy, your siblings get a "full step up in basis". If it hasn't been too long since mom's death, you might even have a capital loss & still get $100,000 cash. If they gift you 1/3 of the house before selling, you get the 1/3 at their basis, which is the FMV at mom's death.

When did mom die?