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Papa10
Returning Member

Basis of home sold

Home originally purchased and deeded to my Dad in 1949. In Nov. 1980 before Dad's passing in 1981 he quitclaimed for $1 the house to my Mother (only her name on deed at that point). With Mom's health declining my brother and I were added to the deed on her house via quitclaim in Nov. 2016. With Mom living with with me and not seeing a likely return to her home we sold her house in Dec. 2019. The sale proceeds were equally split between the three of us. I'm looking for some clarity on the progression of the basis. This was Mom's primary residence but not mine or my brother's. Mom would qualify for a partial exclusion based upon these life changes due to her health. Another wrinkle for my consideration is that there is a possibility that I may sell my home my home within the next two years.

3 Replies
ReginaM
Expert Alumni

Basis of home sold

There are gift tax implications, though, to giving someone at least partial ownership in your home, especially your adult children. The Internal Revenue Service scrutinizes transactions involving parents, their homes, and quitclaim deeds of those homes to their children.

 

The IRS requires that a gift tax return be filed if the home being quitclaim deeded to your children exceeds the annual gift tax exemption amount. File all gift tax returns using IRS Form 709. You can also make as many gifts of $15,000 or less as you'd like and no Form 709 need be filed, but you can't give more than $15,000 to any one person in a year without also filing a Form 709 for the applicable tax year.

 

Your basis in the house, is the fair market value of the house when it was given to you (split of course between your siblings).  There are a lot of variables for this transaction, please review IRS Publication 523 for more information on the Sale of your home and the available exclusions.  

 

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Papa10
Returning Member

Basis of home sold

Is the gift tax and the fair market value both relative to Nov. 2016 when us sons were added to the deed? 

 

Is the fair market value determined from the original purchase price with adjustments including improvements or is the value derived from an average of comparable home sales at that time? Is the tax valuation of any relevance in determining a basis?

 

thank you!

KrisD15
Expert Alumni

Basis of home sold

Fair Market Value is what an average buyer would pay for the property on that day. 

HOWEVER, unless you are sure, I highly recommend you speak with a real estate attorney. There are different kinds of titles and they are subject to the laws of that state. If you used a "Life Estate Deed" that is usually treated as inherited and valued on the date the parents pass. 

(BUT then again, if they paid gift tax, it sounds like it was "gifted" to you at that time) 

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