Legal Question in Real Estate Law in California

Re: real estate

There is not gift or estate tax unless the value of the estate or gift is in excess of $2 million. If an aunt does what you say, it is a lifetime gift, and there is a unified estate and gift tax law to prevent the result from being different if the gift is given during the lifetime of the donor.

Re: real estate

No, there is no inheritance tax due, for the simple reason that the nephew didn't inherit the home. It was a gift.

The aunt probably should have filed a gift tax return at the time (or for the year) the gift was made. More than likely, however, not tax was due because of the lifetime exclusion (see Mr. Roth's answer).

Your question doesn't really say whether this is a done deal of something baing asked as a hypothetical for a possible future gift. If the latter, I'd suggest that the nephew and the aunt take into account the capital gains tax as well as the gift and inheritance tax (and the local property tax), and set up a deal whereby the home transfers by inheritance (will or trust), which 99% of the time will produce a smaller overall tax bite. Gifts, going into joint tenancy, etc. during lifetime usually have very unfavorable, and largely avoidable, tax consequences.