How do I treat property transferred through quit claim?

[kathy-vaccaro]

My mother, husband and I shared ownership of a rental property.  The property was vacant throughout 2018 as my husband and I made repairs.  My mother filed a quit claim in September 2018 to exit the arrangement.  The County shows the transfer as a sale valued at $40K, or 1/3 of the mortgage balance.  The deed shows transfer for $10 and other valuable consideration".  Do I need to reflect any or all of this in my 2018 filing?  Can I consider forgiveness of any money she owes for upkeep and repair?

[TomD8 · Accepted solution]

There is a gift tax implication for your mother, but not for you.  

The IRS requires that a gift tax return be filed if the home being quitclaim-deeded to one's children exceeds the annual gift tax exemption amount of $15,000.  File all gift tax returns using IRS Form 709.  The giver must file the gift tax return.  There will be no actual gift tax due because there is a lifetime gift/estate tax exemption of $11.4 million, but a return must be filed for gifts that exceed the annual exemption amount.

Forgiveness of amounts owed is a personal decision.

https://www.irs.gov/pub/irs-pdf/f709.pdf