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Q: Tax assessments wirth quick claim deeds? ( Answered,   1 Comment )
Subject: Tax assessments wirth quick claim deeds?
Category: Family and Home > Families
Asked by: aliba-ga
List Price: $25.00
Posted: 20 May 2005 09:50 PDT
Expires: 19 Jun 2005 09:50 PDT
Question ID: 523748
My mother owns property in Delaware,,a house and a cottage on 5 acres,
I would like to know any tax implications should she quick claim it to
myself and my sister? I know that once I own it, it can be considered
a rental and all expenses deducted, are their any tax issues,
especially with the transfer?
Subject: Re: Tax assessments wirth quick claim deeds?
Answered By: wonko-ga on 02 Jun 2005 00:27 PDT
The property would potentially be a taxable gift.  Your mother would
have to file Form 709 and may owe gift tax.  In at least some
counties, a real estate excise tax would be owed.  Furthermore, the
property value could be reassessed, potentially increasing the
property taxes.  Finally, if there is a mortgage on the property, quit
claiming it could cause the mortgage to become immediately due in full
unless the mortage holder has approved the transfer of ownership.



"The quitclaim deed to your son would be a taxable gift for federal
estate tax purposes because you would exceed the $11,000 in total
gifts you are allowed to give him in a year without triggering federal
gift taxes. That means you would have to file the Form 709 (due April
15 of the following year). However you will have no actual tax to pay
unless you or your spouse have already given more than $1 million in
taxable gifts over your lifetime. There could be state gift taxes due,
though, if you live in one of the few states that have a gift tax.

More significantly, perhaps, that transfer would disqualify you from
claiming the home mortgage interest and real estate tax deductions on
your federal income tax return because you would no longer own the
property. In addition, your mortgage loan agreements almost certainly
provide that any transfer of the property without the lender?s
approval is a default of the mortgage. That would allow the lender to
accelerate the mortgage (call the entire loan due immediately) and, if
you didn?t pay, the lender could foreclose. To get the lender?s
approval for the transfer, at the very least the lender will want your
son to be liable on the mortgage?and that means he?d need to qualify
for loan approval on his own. Finally, the transfer could cause the
local tax assessor to revalue the property, with the result that your
property tax goes up."

"Personal Taxes" by Tax Counsel, FindLaw (May 30, 2005)

"DEAR BOB: My parents and I bought a house together as equal partners
and the mortgage has all three names on it. In about five years, the
mortgage will be paid in full. My parents and I are thinking of
changing the deed into my name alone. Can this be done before the
mortgage is paid off? How do we do it? -- Nancy K.

DEAR NANCY: Yes, the title transfer can be done easily. Your parents
can sign and record a quit claim deed to you. The result will be you
are the sole owner.

However, depending on the equity transferred, if it is more than
$11,000 per donor, they must file a federal gift tax return. No gift
tax will be due if their lifetime gifts of more than $11,000 per donee
per year, which do not require a gift tax return, do not total more
than $1 million.

They should consult a tax adviser about their equity gift to you
regarding any tax liability."

"Real Estate Mailbag" By Robert J. Bruss, Washington Post (November 6,

"Real estate excise taxes must also be paid for certain transfers.
Within 30 days after property is transferred, a Real Estate Excise Tax
affidavit must be filed with the county auditor. The affidavit must
include the sale price, if any, and must be signed and filed even if
there was no money paid for the transfer, and even if no excise tax is
assessed. The Auditor will determine if any excise tax is due. For
more information, or to get an affidavit form, call the auditor of the
county where the property is located."

"Quit Claim Deeds and Life Estates" by Northwest Justice Project,
Washington LawHelp (2003)

Request for Answer Clarification by aliba-ga on 02 Jun 2005 08:26 PDT
What defines a taxable gift?

no mortgage on the property,,so would there have to be a 

Clarification of Answer by wonko-ga on 05 Jun 2005 10:03 PDT
Gift tax:  see "When does a gift become taxable" FreeAdvice

In many jurisdictions, a transfer of property between unmarried
individuals triggers a reassessment of property tax.  Such a
reassessment could cause the property tax payment to increase if
market values have increased in the area.

"Real Property Transfers Between Domestic Partners"


Subject: Re: Tax assessments wirth quick claim deeds?
From: wordsmth-ga on 13 Jun 2005 13:25 PDT
It's not clear from your question what the purpose of the transfer
would be. However, you might look into a trust--either an estate-type
trust or a land trust. The two are somewhat different, but--depending
on your needs and those of your mother--one or the other might work.
For example, with a land trust, your mother could create the trust
with her named as the beneficiary. Then you could be added as a
co-beneficiary. Ownership in the property technically would pass from
your mother to a trustee. But that would not trigger a due-on-sale
clause or result in a taxable event since she wouldn't be selling the
property. (People are allowed to move property into their own trusts
without it triggering those events.) The land trust itself is
considered personal property, even though it's holding real estate. At
some point, she can transfer her beneficial interest in the trust to
you. You would own the trust; the trustee would own the property.
Check with a lawyer who specializes in trusts for details.

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