I searched the questions, but didn't see this particular situation. We own a rental duplex that we lived in 1 unit and then in 1990 converted entire duplex to a rental. For the last six years our son has rented 1 unit at FMV. My husband is 70 and no longer wants to hassel with owning a rental. We wanted to gift it to our son instead of selling it and paying the taxes. We have a mortgage of $215k that our credit union says we can refinance and add our son to the loan and the title. Then in a couple years he could then refinance and take our names off of title and loan. Our son is not concerned with getting the house at our basis, which is now zero after being depreciated out from the purchase price of $39k, as he will be living in one unit as owner occupied. House is now appraised at $517k. So my question is this: If we do this, does us gifting son the house, (or would it be half the house on form 709, then the other half when we are off the loan and title) trigger any type of taxable event for us since there is a mortgage? We would rather do this than just waiting for him to inherit it.
