What's the best way to pass title to my mother's house during her lifetime?
My mom is dying and wants me to buy her house. Can she just quitclaim it to me? What are the tax ramifications in Florida?
Expert Answer
If your mother quitclaims the house to you, she will be making a taxable gift to you of the fair market value of the house. She will need to file a gift tax return to report that gift by April 15 of the following year. No tax will be due most likely, though, because the law allows her to give up to $1 million during her lifetime without paying additional gift tax.
More importantly for you, though, is that your tax basis in the house, should you decide to sell it, will be her tax basis. In other words, if she bought the house for $10,000 in 1963 and you can sell it for $300,000 in 2008, you’ll have a large amount in capital gains taxes to pay after that sale.
If you inherit the house from your mother after she dies, you’ll get a new tax basis in the property equal to the house’s value at her death, erasing all of the capital gains. If you buy it from her, at the fair market value, your tax basis will be what you paid for it, but the IRS would consider any discount a gift from you to her, and that will reduce your basis.
It might be worth your time and money to seek the advice of a real estate lawyer or estate planner in Florida for any property tax issues a quitclaim deed could create.