I would deem this a taxable sale by the person giving up title. since there is no cash received the offset would be legal expenses. depending on the nature of the legal services they may or may not be a tax deduction. some might disagree with this conclusion. however, certainly the person receiving the title has compensation. it's not a gift because the transfer was to compensate for free legal services rendered in the past. but now he has additional basis in the house equal to the value transferred. a non-tax issue is will the title transfer affect the mortgage.
