Sale of home-child on title

[abby]

I know that when a child is added to the title of the parent's home for convenience and has not paid any consideration for the ownership, that the entire home is still reportable in the parent's estate and the home will usually then receive a full step up in basis to the child.

Do you think I can thus infer that if the home is then sold before the parent's death that the parent will receive the Sale of Primary Residence exclusion on the entire property if the parent otherwise qualifies? Or does the child have to report their share of the gain?

The client in this instance does help out with household expenses, including insurance and taxes, but this appears to be a support issue more than a house ownership issue.

Also, 100% of the proceeds plus more from the child will be used to resituate the parent.

Thanks in advance for your thoughts.

[Gretel]

Child on title

I am confused who is your client: parent or child. I am also not clear who actually lives in the home: just the parent or the child as well.

If the child doesn't live there it looks more like a life estate and full exclusion goes to parent. I am not sure what happens if child lives there.

[abby]

Clarification

Just the parent lives there and the child is the client

Thanks for your input

[Bees Knees]

The reason they put the child's name on the title is so that at death, the child gets the house without having to go through probate. Plus the child gets full step up of basis for not having contributed anything for his or her interest.

The down side is that if the child is on the title and the house is sold while the parent is still alive, half the proceeds are includable in the child's income since the child does not live there and doesn't qualify for the Section 121 exclusion.

If you want to sell the house before the death of the parent, then quit claim the deed back to the parent so the child's name is no longer on the title when the house is sold. Parent and child can then decide off the record who gets what.

[abby]

thank you, Bees

Quit Claim is an excellent idea in the circumstance

[Unregistered]

Why half?

The down side is that if the child is on the title and the house is sold while the parent is still alive, half the proceeds are includable in the child's income since the child does not live there and doesn't qualify for the Section 121 exclusion.

Why half? just because the child's name is on the deed, could be 1/3 child 1/3 father and 1/3 mother. or some other per cent.