topic Re: tenants in common in Get your taxes done using TurboTax

tenants in common

tinam — Sat, 05 Oct 2019 14:52:43 GMT

My three siblings and I were added to my parents deed as tenants in common several years ago and there was a bill of sale of $10 for the property included. My parents had rights to live there and make all decision until their death and then the property became ours. My question is -Is this considered an inheritance or what??? and is there a way to avoid paying a huge capital gains?

Re: tenants in common

Anonymous_ — Sat, 05 Oct 2019 15:27:55 GMT

@tinam wrote:

...My question is -Is this considered an inheritance or what??? and is there a way to avoid paying a huge capital gains?

Yes. Basically, the value of the remainder interest (which will be an "inheritance" of sorts) will be stepped up to its fair market value as of the date of death of the life tenant(s).

Therefore, if the property is sold shortly after death of the life tenants, there should be little, if any, capital gain.

See IRC §2036(a)

Re: tenants in common

tinam — Sat, 05 Oct 2019 17:44:19 GMT

Thank you for that quick response! That was what we were hoping to hear. We were confused because there was a bill of sale included($10) .Was that to avoid gift tax???? We were hoping it would be treated as an inheritance but that bill of sale made us wonder if we had to consider it a second home since none of us lived there which would lead to a capital gain if I understand it correctly.

Re: tenants in common

Anonymous_ — Sat, 05 Oct 2019 17:54:10 GMT

Deeds typically recite nominal consideration, such as a dollar or ten dollars.

However, a gift tax return (Form 709) may have been required to be filed (although most likely no gift tax would be owed) if the value of each share exceeded the annual limitation.

https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes