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Transfer of Property

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cfrausto

Guest
What is the name of your state? California

My question is how to transfer property from parent to child. Should it be a gift, if so what are the ramifications? Should there be a sale of the property for a nominal amount, etc? From this flows the fact that there may be tax implications. I'm not sure where to start.
 


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cfrausto

Guest
My mother owns the condo in California. She is now living with her elderly parents and the condo has been empty for almost a year. Rather than sell the condo she would like to transfer ownership to own of her adult children so that we can rent out the property. She is on disability and is therefore precluded from renting out the property and getting the income herself.

thanks!
 

abezon

Senior Member
If she gifts you with the house, she is ineligible for Medicare for many months. Also, you (& your siblings) take the condo with her basis, which means you won't be able to depreciate very much.

A better way would be for her to sell you the condo at its fair market value (you get a mortgage to pay it), then gift you with $9,376 cash from the sale of the condo each month, which you send to the bank, thus paying off the mortgage in a few years. If her monthly gifting stays under $9377, she stays eligible for medicare. She can exempt up to $250,000 of capital gains since she lived in & owned the condo 2 of the last 5 years, which reduces or eliminates her taxes on the sale. You declare the rent as income and depreciate the condo based on its FMV, which reduces your taxes for the next few years. You & your siblings will have to agree on how to split up the income and expenses. Be sure to get the agreement in writing. Technically, you'll need to file a partnership return & issue K-1's but you can probably get away with just all filing identical Schedule E's.

Mom will have to file a gift tax return every year until the "mortgage" is payed off. Form 706, I think. She won't pay anything, the IRS will just keep track of how much she gifted so they can figure her estate taxes when she passes away.
 
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cfrausto

Guest
Thank you so much for your detailed response. How does this scenario change if she does not have a mortgage on the condo. It is fully paid off.
 

abezon

Senior Member
It doesn't change at all. She just has a larger chunk of cash to give away, so it takes more months for her to do it.
 

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