Home sale, complicated transaction

[tonya030]

A taxpayer (daughter) has house put in her name by her mother four years ago.
In 2005 tp sells house for $400.000.00. Asked tp how the transaction was conducted and she advises that her mother simply signed house over to her. (No gift tax, nothing filed at the time etc.)

My spin on this is that the daughter now has to assume the same adjusted cost basis her mother had just before the transaction took place. Thus, the mother had a basis of about $50000.00. (purchased 40 years ago). Daughter basis would be computed on the $50000.00.

I beleive many of these transactions take place with elder parents to avoid several implications. This is not the first time I have heard of attorneys doing just a transfer of title to a son or daughter.

I have a problem, not being an attorney, on how anyone can take a position it was just a transfer and not a gift. But in any event, would like to know if anyone agree's with me on this transaction or another version of same. Whenever I cannot come up with the IRS reg common sense prevails. Just because someone transfers property does not negate the cost basis.

Opinions appreciated

Tonya030

[JG EA]

...her mother simply signed house over to her. (No gift tax, nothing filed at the time etc.)

My spin on this is that the daughter now has to assume the same adjusted cost basis her mother had just before the transaction took place. Thus, the mother had a basis of about $50000.00. (purchased 40 years ago). Daughter basis would be computed on the $50000.00.
I have a problem, not being an attorney, on how anyone can take a position it was just a transfer and not a gift. But in any event, would like to know if anyone agree's with me on this transaction or another version of same. Whenever I cannot come up with the IRS reg common sense prevails. Just because someone transfers property does not negate the cost basis.

Opinions appreciated

Tonya030

If the mother did not retain a life estate and then die before the daughter sold the property then I would agree with you.

Attorney may have been trying to avoid probate only, or may have have had someother purpose in mind. But, if it was a gift (all gifts are transfers from one to another) then the daughter does have the mother's basis.

A side point: Whether or not a gift tax return was filed is usually not the concern of the recipient unless there is a 706 requirement then the IRS can collect the tax from the recipients.

[Bill Tubbs]

More details please...

Did mother retain a life estate in that home? When did mother move out of the home? Is mother still alive?

Bill