Full question:
I live in a house that was owned by my grandparents. It is mortgage free and valued just below $1 million. My father owns the title but would like to transfer ownership to me. As the house has been in the family for over 70 years, I have no plans to sell, but would like to know how to avoid major tax implications in the transfer of ownership. Is inheriting, quit claim, or gifting the best option - or something else??
- Category: Real Property
- Subcategory: Sales
- Date:
- State: New York
Answer:
Under Internal Revenue Code § 1014(a), if you inherit property, your basis is the fair market value at the time of the decedent's death. For example, if a home is valued at $100,000 at the time of death, that becomes your basis. If the property is given to you while the owner is alive, you receive a carryover basis, which is the decedent's adjusted basis. In this case, if the original purchase price was $35,000, that would be your basis.
Inherited property generally includes assets received through bequest, inheritance, or certain trusts. Selling inherited property may not incur taxes if sold at its estate value. However, if the property has appreciated, capital gains tax may apply unless it was your primary residence. For investment properties, a 1031 exchange might be an option.
Inheritance taxes apply to the estate's value at death, not to transfers made while the owner is alive. Gift taxes apply to gifts made during the owner's lifetime. Any transfer where fair market value isn't received is considered a gift, which is generally taxable. However, there are exceptions, such as gifts below the annual exclusion limit, tuition or medical payments, gifts to a spouse, or gifts to political organizations.
There are various ways to transfer property, including a life estate deed, trust, or will. The best method depends on the specific circumstances of everyone involved. It's advisable to consult a local attorney or tax professional to review your situation.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.