Legal Question in Real Estate Law in California
My parents are granting real property via grant deed. We are deciding whether it should be a sale or gift (i.e. with or withoout consideration). What are the potential tax repurcussions? My parents are not U.S. citizens and do not have file taxes (no SSNs), but I reside in the U.S. and therefore pay Federal and CA state taxes.
2 Answers from Attorneys
Other things being equal, you are better off tax-wise to pay your parents the current fair market value of the property, especially if you may re-sell it pretty soon. Upon your re-selling the property in the future, you will pay capital-gains tax on your "profit" (difference between your cost and your sales price) and this will be higher if your cost was zero. I do also recommend that you consult with a tax advisor in your area who can ask you additional question that might affect the answer to your question, such as what your parents' investment in the property was, and the source of funds you would use to purchase the property from them.
Mr. Whipple is right. You really need to talk to a tax adviser in person about this. 99.9% of the time it is far better to put the property in a trust than for parents to give or even sell property to their children. If you do decide on a transfer, you will need direct professional help in structuring the transaction to avoid a LOT of unnecessary taxes.
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