living in parents house

[apzcs]

California
My sister and her family live in my parents house. Recently, my sister and bro-inlaw were added to the mortgage, and title of the house- so it is actually "their" house (all 4 of them). My sister and bro-inlaw fully pay the mortgage, taxes, and all that pertains to the house. My dad is retired and mom will be soon. My sister wants to refinance the house and also have my parents sign over their portion of the house to her. If my parents sign over their portion, will they be subject to gift taxes? Can this be avoided- paying gift tax?
In looking at responses to other questions on the board, I think that my dad wants to keep the house out of his taxable estate at death. I don't think they want my sister to have to pay market value.

 

[loku]

If your sister pays less than market value for your parents share of the house, after subtracting the amount of mortgage debt she assumes for that portion, then there is a gift to that extent.

Assume the market value of the house is $200,000 and the mortgage debt is $100,000. Then the market value of the house, less the mortgage debt would be $100,000. Your parents’ half would be $50,000. If the gift is to your sister and her husband, then $40,000 of the gift is excluded under the annual exclusion (a married couple can give $20,000 per year to each person). That would leave $10,000. That is the amount subject to gift tax. The lifetime exclusion of your parents is currently $1,350,000. The $10,000 gift would be applied against the lifetime exclusion.

 

[apzcs]

thank you for the information, it is quite helpful.