Legal Question in Tax Law in California

Re: quit claim

Your tax basis in the house will be the same as your mother's so no income taxes will be saved when the house is sold. $250,000 of gain would be excluded if the seller owns and lives in the house for at least 2 of the 5 years immediately preceding the sale.

If your mother makes a gift to you she would have to file a gift tax return.It is unlikely that taxes will have to be paid now- but it will use up some of her lifetime exemption and thus might have adverse consequences in the future.

Also note that if you inherit the property rather than get it by gift your tax basis is the value as of the date your mother died-rather than the cost- sothat more capital gains taxes would typiclly be saved if the property were inherited rather than gifted toyou.

This is a complicated area and you should get legal advise before doing anything as there are many factors to consider.

Please contact me if I can be of assistance

Lew Wiener

Re: quit claim

No she could not just quitclaim the deed to you without major tax consequences. Putting your brother on the deed was probably a taxable gift as well. Since we are talking about a million dollars, this is a substantial issue. There are ways around this, depending on if your Mom is a US citizen. Any of those techniques would either require a CPA or an attorney who practices estate and tax law. The CPA if she wants to make an outright gift and use her lifetime gift tax exemption towards that gift (most likely uses up her estate tax exemption). An attorney if she wants to do something more complicated that leaves a larger estate tax credit at her death. If this is the only thing of any consequence in her estate, then the first option might be better (although there is potential capital gains issues with transfering it now). If her estate is much larger then the house, you need to see a specialist attorney. Feel free to contact us if we can be of service.