My mother put my name on her house deed before her death. After she passed I sold the house. Do I owe any Capital Gains tax?

[lancer2]

My mother added my name to the deed in 2010 and then passed in 2014, I sold the house in 2016.

[MichaelL1]

If she deeded the house to you in 2010, then it was considered a gift to you in 2010.  

Your basis in the home would be the price she paid for the house, plus improvements she made, or the Fair Market Value (FMV), whichever is lower.

This can be a huge difference.  Then the house would need to be shown as a sale of 2nd residence and would be subject to capital gain tax.  

EDITED 3/5/2017

If the house actually passed to you on death, then the value of the house for tax purposes is date of death.  So you get a stepped up basis, which most of the time will significantly reduce the gain you may have on the sale.  This is a major difference in most cases.  

Here is the response to a somewhat similar answer a few days ago, that may be helpful.

https://ttlc.intuit.com/questions/3747223

[lancer2]

I'm not sure if you could say she deeded her house to me in 2010. what she did was added my name and my sister's to the deed so we could take possession at the time of her death without going through probate, which is what happened. later my sister removed her name from the deed, after I paid her 22k, and I then sold the house, for which I never received a 1099-S (don't know if that makes any difference). Does any of this change the answer above?

[MichaelL1]

I added a section below the EDITED 3/5/2017 that should held and YES, it changes the answer.  Your cost would be what you paid your sister plus the value at your share of the house on date of death, plus improvements made by you prior to sale.

[taxseason1958]

Could you please state why you edited the original answer and where it states full step up in basis at time of death ie FMV?

[Opus 17]

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@taxseason1958 wrote:

Could you please state why you edited the original answer and where it states full step up in basis at time of death ie FMV?

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The situation is complex, and the topic you are posting to is probably a lot older than 2019—the date is likely the date it was migrated to the new board software, not the date of the question and answer.

The described situation is unclear because the original poster never provided certain key information.  The tax consequences of this kind of transaction depend on exactly how it occurred, and there isn't enough information to give an authoritative answer.  Not every question on this board has an accurate or useful answer, unfortunately. 

Example 1.  Mother gifts the home to the children "in fee simple."  Each child owns half the home free and clear.  Sister sells her half-interest to her brother for $22K.  Brother sells the home.  Brother's cost basis is the same as the mother's cost basis at the time of the gift, and brother owes capital gains tax on the entire gain.  (Brother probably does not get a cost basis adjustment for "buying" half the house from his sister, unless $22K represented half the true fair market value at the time.)

Example 2.  Mother modifies the deed to include the siblings as "joint tenants with right of survivorship."  Because the children have no actual ownership rights as long as the mother is alive, the IRS considers they inherited the home and received a stepped-up cost basis (half the stepped up basis each).  The sister then sold her half-interest for $22K.  The brother's cost basis is at least equal to his basis (half the stepped-up value) plus the $22K he paid his sister.  Depending on how you treat the transfer of ownership from sister to brother, it might also include a "gift of equity" which would carry with it the sister's cost basis--which would also be half the stepped-up value.  So the brother's basis might be the full stepped up value.  

It would also change things considerably if the brother lived in the home as his main home for at least 2 years before selling it.

The issue of the brother paying the sister $22K for her half also complicates things considerably.  It would have been easier for the brother and sister to sell the home while co-owning, and split the proceeds.  To really answer this particular situation, you would need to research the exact language and form of the deeds used when the mother transferred some kind of ownership interest to her children and when the sister transferred her interest to the brother 

[taxseason1958]

My question is not as complex as those you stated in your reply. here is my particular circumstance:

Parents purchase home in 1963 parents divorce in 1970 Mother gets home in divorce and son moves in with her in 1984  to care for her and Mother adds son to deed in 1984. Deed is titled as Joint with Right of Survivorship, no "Life Estate" indicated on deed when the son is added.   Mother passes in 2013 and home passes to the son and he subsequently sells home in 2020. Need to determine the adjusted basis for reporting gain on sale of residence in 2020 to determine if son has a gain in excess of $250,000 exclusion.  thank you,

[Opus 17]

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@taxseason1958 wrote:

My question is not as complex as those you stated in your reply. here is my particular circumstance:

Parents purchase home in 1963 parents divorce in 1970 Mother gets home in divorce and son moves in with her in 1984  to care for her and Mother adds son to deed in 1984. Deed is titled as Joint with Right of Survivorship, no "Life Estate" indicated on deed when the son is added.   Mother passes in 2013 and home passes to the son and he subsequently sells home in 2020. Need to determine the adjusted basis for reporting gain on sale of residence in 2020 to determine if son has a gain in excess of $250,000 exclusion.  thank you,

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The general rule is that if the son did not contribute to the purchase price, the son received a stepped-up basis equal to the FMV on the date his mother died in 2013.  The son's basis would be further increased by any improvements made to the home after 2013.  This could be affected by any quirks in the laws of your state, and I am not an attorney, so if you want an definitive opinion, you should ask a professional in your state. 

See page 10 here https://www.irs.gov/pub/irs-pdf/p551.pdf

[Pa8]

I, and my husband were placed on my mother's condominium Deed in January 2001. My mother died in March 2006. We are selling the condominium (closing on December 20, 2021). Do we have to pay any inheritance  or any other kind of Federal/State taxes?

[Carl]

My mother put my name on her house deed before her death.

Lots of possibilities with that statement.

If she "added" your name to the deed along with hers, then you are 50% owner of the house. Your cost basis of your 50% is whatever your mother originally paid for the house, plus 50% of the cost of any property improvements done to the house before she deeded it to you.

At the time of her passing you would then inherit her 50%, meaning you get an increase in basis of "only" her 50%.

If your mother deeded the entire property to you (thus taking her name off the deed and replacing it with your name) then you have not inherited anything upon her passing. your cost basis is whatever your mother originally paid for the property, plus the cost of any property improvements done prior to her replacing her name on the deed, with yours.

In both cases above, a gift tax return most likely needed to be filed in the same tax year as the deed was changed. (IRS Form 709).

If you don't know how deeding was done, or if a gift tax return was "in fact" filed or not, then you should seek professional help for dealing with this. Especially if your state also taxes personal income.

Either way things are, if you sold the property at a gain, you will most definitely have a taxable gain, since the home was never your primary residence during the last 5 years you had any degree of ownership in the property.

[tagteam]

@Pa8 

You should consult with local legal counsel.

See https://www.avvo.com/probate-lawyer.html

There is a distinct possibility that your mother (impliedly) retained a life estate granting you and your husband a remainder interest in the condominium, which might give you a better outcome than an outright gift in fee simple absolute.

See https://www.law.cornell.edu/uscode/text/26/2036

[Opus 17]

@Pa8 

You haven’t mentioned whether you lived in the home as your main home, or whether you have used it as a second home, or have rented it out.  As mentioned by the other experts, you would also need to know the exact wording used when you were added to the deed.

You do not owe an inheritance tax. However, you owe capital gains tax if you sell the property for more than your adjusted cost basis.  If you have lived in the home as your main home for at least two of the past five years, you can exclude up to $500,000 of the capital gains from taxation if you and your spouse file a joint return.  If you did not live in the home as your main home, you will owe tax on the entire capital gain. Calculating the amount of the capital gains will require knowledge of your adjusted cost basis, the exact wording when you were added to the deed, any business or rental use of the property, and the cost of any permanent improvements such as a new furnace or new roof.  Calculating your cost basis may also require knowledge of your mothers original purchase price, and the fair market value of the property on the date your father died and on the date your mother died.

[Critter-3]

I also concur ... use local tax assistance for this return so you get it right  or upgrade to one of the LIVE options on the ONLINE program.  

[Pa8]

My mother, who was the sole owner of the condominium after the death of my father, had no will or estate. She wanted to pass  ownership of the condominium to me and my husband upon her death. to avoid probate  delays and costs, she placed our names to the deed. We never lived in the condominium. We just rent it. The warding in the Deed is: "convey and Warrant to (her name), (my name) and (my husband's name) as joint tenets with full rights of survivor-ship, and not as tenets in common.

[tagteam]

@Pa8 

You should still consult with local legal counsel and/or a local tax professional.

The JTWROS wording (joint tenants with rights of survivorship) in the granting clause of the deed makes it less likely that an implied life estate would result. 

Seek professional guidance in your jurisdiction.