Posted on: 05th Jan, 2010 05:00 pm
To whom it may concern,
I have a situation with a property owned free and clear by my mother-in-law. She purchased the home 19 years ago,paid in cash, for around $249,000 and the current market value is around $450,000. She has not lived at the home for some time, however my wife and I have. She would like to give the home to my wife and myself so that we may sell it and use the proceeds to purchase a larger house in the same market (Studio City, CA). We are not sure the best way to proceed or what pitfalls there may be, capital gains issues etc. Or would it be advisable for the 3 of us to sell the current house and buy the new one together, whereby my wife and I would make the mortgage payments?
Please advise,
Scott
[size=9:290acc60ed][color=Red:290acc60ed][E-mail address deleted as per forum rules. Thanks.][/color:290acc60ed][/size:290acc60ed]
I have a situation with a property owned free and clear by my mother-in-law. She purchased the home 19 years ago,paid in cash, for around $249,000 and the current market value is around $450,000. She has not lived at the home for some time, however my wife and I have. She would like to give the home to my wife and myself so that we may sell it and use the proceeds to purchase a larger house in the same market (Studio City, CA). We are not sure the best way to proceed or what pitfalls there may be, capital gains issues etc. Or would it be advisable for the 3 of us to sell the current house and buy the new one together, whereby my wife and I would make the mortgage payments?
Please advise,
Scott
[size=9:290acc60ed][color=Red:290acc60ed][E-mail address deleted as per forum rules. Thanks.][/color:290acc60ed][/size:290acc60ed]
Hi good4sound!
Welcome to forums!
Once your mother-in-law transfers the property to you, she would become responsible for the gift taxes. After getting the ownership of the property to you, if you sell off the property, you would be responsible for the capital gains taxes. In my opinion, it would be better if she sells off the property and pays off the capital gains taxes depending upon the profit she makes from the sale. Then you can use the sale proceeds to buy a new property in your name and take a mortgage on it.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
Once your mother-in-law transfers the property to you, she would become responsible for the gift taxes. After getting the ownership of the property to you, if you sell off the property, you would be responsible for the capital gains taxes. In my opinion, it would be better if she sells off the property and pays off the capital gains taxes depending upon the profit she makes from the sale. Then you can use the sale proceeds to buy a new property in your name and take a mortgage on it.
Feel free to ask if you've further queries.
Sussane
Sussane,
Thanks for your reply. We are actually trying to avoid the capital gains taxes, and were hoping we could since my wife has lived in the house for the past 18 years and we would immediately roll the sale proceeds into another house. Not sure if this is possible. Also, my mother-in-law would be responsible for the gift taxes, as you said, but it is well below the $1,000,000 lifetime limit, so the gift tax filing would only be a formality, and no tax would actually be due from what I understand...
You mentioned my mother-in-law transferring the property to us but I am not sure how to go about doing that.
Any other advice is so appreciated to help fill in the blanks before we proceed.
Scott
Thanks for your reply. We are actually trying to avoid the capital gains taxes, and were hoping we could since my wife has lived in the house for the past 18 years and we would immediately roll the sale proceeds into another house. Not sure if this is possible. Also, my mother-in-law would be responsible for the gift taxes, as you said, but it is well below the $1,000,000 lifetime limit, so the gift tax filing would only be a formality, and no tax would actually be due from what I understand...
You mentioned my mother-in-law transferring the property to us but I am not sure how to go about doing that.
Any other advice is so appreciated to help fill in the blanks before we proceed.
Scott
Hi good4sound,
If the value of the property transfer is well below the lifetime gift limit, then she won't be responsible for any gift taxes. Your mother in law will be able to transfer the property to you with the help of a quit claim deed. Once she signs the deed, you'll have to notarize and record the deed at the county recorder's office.
Thanks
If the value of the property transfer is well below the lifetime gift limit, then she won't be responsible for any gift taxes. Your mother in law will be able to transfer the property to you with the help of a quit claim deed. Once she signs the deed, you'll have to notarize and record the deed at the county recorder's office.
Thanks