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rmcelhenie
Returning Member

What is the capital gains tax effect on my adult daughter if I transfer ownership of my home to her? Does she incur a capital gain?

 
3 Replies
Anonymous
Not applicable

What is the capital gains tax effect on my adult daughter if I transfer ownership of my home to her? Does she incur a capital gain?

a gift is not taxable but you will have to file a gift tax return.  her basis for gain is your basis and you should provide her with it at the time of the gift because after you die it will likely be impossible for her to obtain this number.  you should also consult a financial advisor before making this gift. we can not provide financial advice. 

tagteam
Level 15

What is the capital gains tax effect on my adult daughter if I transfer ownership of my home to her? Does she incur a capital gain?

You daughter will most likely have a capital gain if she sells the home after you transfer it to her outright. If she somehow happens to sell at a loss, the loss will not be deductible (or allowed) since the home is being held for personal use.

 

As the donor (giver) of the home, you will also have to file a Form 709 gift tax return for which you will almost certainly need professional tax return preparation. 

 

I strongly suggest you seek tax, financial, and/or legal guidance in this matter. There are better options than an outright gift of your home to your daughter (such as giving your daughter a remainder interest and retaining a life estate for yourself).

Opus 17
Level 15

What is the capital gains tax effect on my adult daughter if I transfer ownership of my home to her? Does she incur a capital gain?

See an estate planner (attorney).  Tell the attorney what your goal is (avoid probate, etc.) and let the attorney figure out the best way to accomplish that goal.  

 

In the second-worst case scenario, you gift your daughter your cost basis, and she owes full capital gains from your basis when she sells.  Even if she moves into the house down the road, she would not qualify for the full homeowners's capital gains exclusion.

 

In the worst case scenario, you give her the home because you are in poor health and want to avoid probate, then you require long-term care.  Medicaid has a 5-year "lookback" procedure that could require your daughter to sell the home to pay for your medical care, and then pay the full capital gains tax on top of that.

 

There are other ways to structure it that are less catastrophic and even protective, but you need proper estate planning legal advice. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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