Today TaxMama hears from Amy in Doylestown, Ohio, who says, “My mother wants to sign over her house and property to me as a gift. There are no liens on the house, no mortgages, etc. But what should I expect come next tax season; and also what should she expect?”
That’s so generous of her.
If she does that now, simply have your tax pro file a gift tax return, Form 709 reporting the gift
and taking the estate tax exclusion.
You won’t have any tax consequences. However, there are three other considerations.
1) Odds are, if there is no mortgage, your mother has had that house for a long time.
So, it has a very low basis (tax cost).
If she signs it over to you now, you pick up her basis as yours.
So if you want to sell it, you’ll have a huge capital gain – between the original twenty or thirty thousand cost and today’s fair market value . Though if you’re going to live in it for two years or more, of course, you’d be entitled to exclude $250K, or $500K if you’re married – unless they change the law.
2) On the other hand, if mom keeps the house until her death, the basis (tax cost) jumps to the fair market value on the date she dies. There would be no gain, not even under any new laws, as long as the estate is worth less than $1.5 million – or the current estate tax exclusion amount.
3) be sure to handle the property tax reporting properly for the transfer – most tax collectors
do have a provision for transfers between family members.
IRS Publication 950 will explain how gifts and estates work.
It would be worth your while to sit down with a local tax pro to review both your and your mother’s tax situation before doing something this major.
And, remember, you’ll find answers about lots of information about gifts and other tax issues, free. Where? Where else? At TaxMama.com