Form 709 and Quit Claim Joint Tenancy

[Rbharosy]

BACKGROUND:

• My brother and I own a property as joint tenants. I signed a quit claim several years ago when the property was worth $100K (using round numbers all through this query).
• Recently, I found out that he never filed the Quit Claim.
• The property's current market value is $600K, however, due to the condition of the property it would probably appraise for about $300K.
• In order to settle the situation, I want to Gift my share of the property to him and file Form 709.

QUESTIONS:

1. Do I use the Market Value or the Appraised Value of the property?
2. Do I need 2 or 3 Appraisals to substantiate the current value of the property OR a single Appraisal will do?
3. Should you file the Form 709 with your Tax Return or anytime in the year? 
4. How do I make sure the Assessor:
   1. Uses the property value in the Form 709.
   2. Modifies the Title to reflect the change.
   3. Do I still have to file a Quit Claim with the Assessor or Form 709 is enough proof.

THANK YOU in advance for your help!

[Anonymous_ · Accepted solution]

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@Rbharosy wrote:
In order to settle the situation, I want to Gift my share of the property to him and file Form 709.

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This involves a legal question as to whether you already gifted the property to your brother several years ago.

Generally, delivery and acceptance of a deed is sufficient to constitute a completed gift. Recording (in most jurisdictions) gives record notice to third parties, but as between the parties to the deed, the transfer of title is effective.

You should seek guidance from local legal counsel.

[Anonymous_]

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@Rbharosy wrote:
Do I use the Market Value or the Appraised Value of the property?

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The fair market value and appraised value should line up (at least roughly). Regardless, you would use the fair market value on the date of the gift for the purposes of Form 709.

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@Rbharosy wrote:
Do I need 2 or 3 Appraisals to substantiate the current value of the property OR a single Appraisal will do?

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One appraisal from a certified real estate appraiser should be sufficient.

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@Rbharosy wrote:
Should you file the Form 709 with your Tax Return or anytime in the year? 

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You do not file Form 709 with your individual income tax return (Form 1040); it is filed separately. Further, you should file Form 709 for the tax year in which the gift was made. Again, seek guidance from local legal counsel.

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@Rbharosy wrote:
How do I make sure the Assessor.......

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The local property assessor should have nothing to do with property value on Form 709 and you would not file Form 709 with the assessor. The deed, however, should be recorded and, again, you should consult with local legal counsel.

[Anonymous_]

@Rbharosy 

You need an appraisal (or some acceptable indication of the fair market value of the property you are gifting) for the purposes of preparing the gift tax return (Form 709). 

[Opus 17]

a. It sounds like you gifted the property several years ago.  The deed is probably enforceable, even if it wasn't filed with the county.  Filing makes deeds public, which is useful for various purposes, but I don't believe filing is required to make the deed enforceable.  See an attorney if you are unsure.  

b. If you made the gift several years ago, you need to file a form 709 for that year.  The form is signed and filed separately, is not attached to your regular tax return, can't be e-filed, and can't be prepared by Turbotax.  The value of the gift is your share of the property's fair market value on the day you signed the deed, not the current value.  Here is the link for past year forms. https://www.irs.gov/forms-pubs/prior-year

c. The fair market value is what a willing buyer will pay a willing seller in an open sale given current market conditions and the condition of the property.  The tax value on county records is rarely an accurate measure of FMV, and an appraisal is only an accurate measure of FMV if the appraisal is performed at the time the value needs to be determined.  If the property is in poor condition, a fair and accurate current appraisal should reflect that. 

d. I think you already made the gift years ago.  Filing form 709 does not make, confer, or validate the gift.  It simply reports the value of the gift to the IRS.  If the gift was made in the past, it was made in the past.

1. Your gift was your portion (1/2 or something else) of the equity in the property at the time the gift was made.  If there was no mortgage outstanding, then your gift was 1/2 the FMV.  If there was a mortgage, then your equity was less than the FMV and you gave half your equity, not half the total value.

2. To establish the FMV on the date of the gift, you can ask a real estate professional for a retroactive valuation based on historical records.  There is no particular requirement for number of appraisals, just that the person doing the valuation must be competent to perform such valuations.

3. Form 709 has the same deadlines as a regular tax return, April 15 (or April 18) of the year after the year in which the gift was made.  However, it is filed separately and is not attached to or included in your regular tax return.

But as said, I think you made the gift years ago.

[Anonymous_]

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@Opus 17 wrote:

The deed is probably enforceable, even if it wasn't filed with the county.  Filing makes deeds public, which is useful for various purposes, but I don't believe filing is required to make the deed enforceable. 

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The deed is enforceable as between the parties and a completed gift only requires delivery and acceptance (and acceptance is presumed if the gift is beneficial to the donee).

As I indicated earlier, recording serves the purpose of giving notice to third parties.

[Rbharosy]

Thank you! This is very helpful. Regards