Discussion:Inheriting Mother's House

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Discussion Forum Index --> Tax Questions --> Inheriting Mother's House


Rossi3839 (talk|edits) said:

7 March 2006
I have a client's mother who added her two daughters to the title of her house via a quick claim deed in 1997. No gift tax return was filed in 1997 for this transaction. In 2005 the mother put the house for sale. She received an offer but died just prior to the closing. Do the daughters get the full stepped up basis for the house at the date of death and therefore no capital gains? Or do they only get to step up one-third of the house (the mother's share) since they were put on the title in 1997? Thank You!

C123 (talk|edits) said:

7 March 2006
The gift was completed in 1997, therefore the step-up is 1/3 of the house only.

Riley2 (talk|edits) said:

8 March 2006
The answer to your question depends on how title was held at the date of death and whether Mom was living in the house at the date of death.

If title was held mother and daughters as joint tenants with right of surviviorship, then the "consideration furnished test" applies. Under the consideration furnished test, the step up will be 100% if the daughters furnished none of the consideration for the purchase of the property. See Sec. 2040(a).

If the title was held by daughters only, then the property would get a 100% step up if the Mother had the right to live in the house on the date of her death (or actually lived in the house on the date of death). See Sec. 2036(a).

Jklawman (talk|edits) said:

8 March 2006
There is no such deed as a QUICK Claim Deed. There is, however, a QUIT Claim Deed (as opposed to a Warranty Deed).

Rossi3839 (talk|edits) said:

8 March 2006
Thanks to all for your answers. Riley, where can I get a copy of the book for the sections that you are quoting? Thanks, Frank

JR1 (talk|edits) said:

8 March 2006
Agree with Riley, generally adding someone to title isn't a gift at all, and is disregarded at the time of sale or death. You get the full step up, in my opinion.

Tdoyle (talk|edits) said:

8 March 2006
Rossi:

Riley2 is quoting the Internal Revenue Code which is available here on TaxAlmanac. Simply go to the Main Page, select Code in the white bar near the top, and drill down into Subtitle B - Estate and Gift Taxes, and then select the sections that he referred to. For example, select the page named Sec. 2036. Transfers with retained life estate and then go to section (a) on that page.

- Tim Doyle, TaxAlmanac Moderator 12:54, 8 March 2006 (CST)

Rossi3839 (talk|edits) said:

8 March 2006
Thanks JR1 and Tim.

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