My mother put my name on her house deed before her death. After she passed I sold the house. Do I owe any Capital Gains tax?

Forum|Forum|7 years ago
June 5, 2019
20 replies
125 views

My mother added my name to the deed in 2010 and then passed in 2014, I sold the house in 2016.

MichaelL1

Level 15

If she deeded the house to you in 2010, then it was considered a gift to you in 2010.

Your basis in the home would be the price she paid for the house, plus improvements she made, or the Fair Market Value (FMV), whichever is lower.

This can be a huge difference. Then the house would need to be shown as a sale of 2nd residence and would be subject to capital gain tax.

EDITED 3/5/2017

If the house actually passed to you on death, then the value of the house for tax purposes is date of death. So you get a stepped up basis, which most of the time will significantly reduce the gain you may have on the sale. This is a major difference in most cases.

Here is the response to a somewhat similar answer a few days ago, that may be helpful.

https://ttlc.intuit.com/questions/3747223

lancer2Author

Level 2

I'm not sure if you could say she deeded her house to me in 2010. what she did was added my name and my sister's to the deed so we could take possession at the time of her death without going through probate, which is what happened. later my sister removed her name from the deed, after I paid her 22k, and I then sold the house, for which I never received a 1099-S (don't know if that makes any difference). Does any of this change the answer above?

Pa8

Level 2

I, and my husband were placed on my mother's condominium Deed in January 2001. My mother died in March 2006. We are selling the condominium (closing on December 20, 2021). Do we have to pay any inheritance or any other kind of Federal/State taxes?

Anonymous_

Level 15

@Pa8

You should consult with local legal counsel.

See https://www.avvo.com/probate-lawyer.html

There is a distinct possibility that your mother (impliedly) retained a life estate granting you and your husband a remainder interest in the condominium, which might give you a better outcome than an outright gift in fee simple absolute.

See https://www.law.cornell.edu/uscode/text/26/2036

Carl

Level 11

My mother put my name on her house deed before her death.

Lots of possibilities with that statement.

If she "added" your name to the deed along with hers, then you are 50% owner of the house. Your cost basis of your 50% is whatever your mother originally paid for the house, plus 50% of the cost of any property improvements done to the house before she deeded it to you.

At the time of her passing you would then inherit her 50%, meaning you get an increase in basis of "only" her 50%.

If your mother deeded the entire property to you (thus taking her name off the deed and replacing it with your name) then you have not inherited anything upon her passing. your cost basis is whatever your mother originally paid for the property, plus the cost of any property improvements done prior to her replacing her name on the deed, with yours.

In both cases above, a gift tax return most likely needed to be filed in the same tax year as the deed was changed. (IRS Form 709).

If you don't know how deeding was done, or if a gift tax return was "in fact" filed or not, then you should seek professional help for dealing with this. Especially if your state also taxes personal income.

Either way things are, if you sold the property at a gain, you will most definitely have a taxable gain, since the home was never your primary residence during the last 5 years you had any degree of ownership in the property.