Quit Claim Deed / Sale Taxes Due

[Clint]

Hello,

Looking for advice from the experts concerning quit claim tax implications (Florida) after a sale of real property. The scenario is as follows:

My father was recently diagnosed with terminal cancer. Within a five week period from the diagnoses he has subsequently passed away. Prior to the event, my father quit claimed his existing property into my name with clear intentions that I was to sell the property upon his death and split the proceeds equally amongst two other siblings. The property is residential with an estimated value of 205K. There is an existing mortage of 98K that must be resolved if a sale takes place. My questions are what type of tax impact would be associated with this type of transaction ( I,e. Capital Gains, Gift tax, Estate Tax, Inheritance Tax) and what type of genarl percentage range are we looking at. Also, are there any alternative situations that may elimate a tax burden. Just trying to gather as much background information prior to approaching a CPA / Real Estatetax attorney, if required.

Respectfully,

Clint

[jainen]

legal issues

When property is transferred in anticipation of death there are a number of legal issues concerning the validity of the transfer. Without knowing details of the estate and the will and the heirs and the creditors, and a few other things, it is not possible to suggest whether or not the transfer is even in your best interest. You need an attorney for this one.

[RLymanC]

Jainen

Assume all is 100% in order. No stepped up basis?????

[Clint]

The transfer was completed six days prior to his death. My Dads brother served as witness and we had a notory public avaialble during the process for third party verification. The deed has been recorded and returned as "Accepted" within the local county court system. My concern is that if I try to sell the property, do the normal real estate capital gains taxes apply, or is this something out of that realm and I will be looking at a gift tax / estate tax situation. Thanks for the help, very difficult trying to figure this one out.

Regards....

[Bees Knees]

Did the quit claim give you 100% ownership, or did it put you on as joint tenant with right of survivorship?

Also, did you assume 100% liability for the mortgage?

[jainen]

100% in order

Even if "all is 100% in order" (an assumption I never make about anything), you still have legal issues that can't be answered without more information. What is the law in the state where your father resided, and was the property in the same state? Is a son exempt from the anticipation of death rules? Did your father have a will? Obviously this transfer disinherited your brothers; are there other potential heirs? Did the transfer leave the estate without assets to pay taxes and other creditors? A quitclaim is a rather imprecise document, as Bees Knees points out, so what exactly was transferred? The short answer is, anything subject to estate tax rules got the stepped up basis. Begging the question. The real answer starts with the fact that state and federal rules don't conform, and spirals out from there.

[Armando Beaujolais]

The short answer is, anything subject to estate tax rules got the stepped up basis.

There are a lot of people smarter than I am about estates, ownership, transfers, etc., so I have nothing but questions.

My initial reaction is "yipes." You have two ways to sell the property with zero tax liability in situations like this. You have the stepped up basis at death, and you have the section 121 exclusion for sale of a principal residence. Could this quit claim deed have just knocked those exclusions out? A gift that carries the donor's adjusted basis, meaning the entire amount of appreciation is taxable?

I don't know. I'm just worried. Did that quit claim deed create a terrible tax consequence?

[Clint]

The transfer did give me 100% ownership and the property is located in the same state (Fl.) where my father and I both reside. Concerning the existing loan, I have just been making the payments. It's only been one month. There is no will and there were no other loans to consider in my fathers name. No credit cards, no vehicle loans. Property taxes are current / paid. No other immediate family except for my two siblings, whom will be honored equally when everthing is finalized. I hope this did not create undue tax burdens, but things were happening very quickly and this is a classic example of not being prepared for an event such as this. I appreciate the information and advice!!!

[jainen]

nobody's likely to make a fuss

I don't know. It seems to me the property is still part of the taxable estate to be distributed with a stepped-up basis to all three heirs. A quitclaim is an odd way to gift property. It is basically hypothetical--"If I happen to have any claim to this property, and I'm not saying that I do or what it might be or if it even exists, but just in case I did have an interest, I let you make the claim instead." I still recommend an attorney, but I'll admit that nobody's likely to make a fuss about any of this, assuming there isn't something or someone else you don't know about.

[Clint]

I greatly appreciate your time and knowledge concerning this situation. I do have a consultation scheduled next week, I will post the results for future reference.

Kind Regards..........

[Snaggletooth]

Professional Help

Clint, you're not going to appreciate this, but your father should have consulted some sort of knowledgeable help from a lawyer/CPA and paid them for their work. For example, he apparently made this transfer without regard for stepped-up basis, and what's going to happen forthcoming.

There's lots of help on this board from persons who have this expertise. But none of them are going to be armed with the facts and circumstances unique to your family's situation. We sincerely wish you well, and hope you emerge from these tragic circumstances in the best way.

Come back and visit us on the board when this is over! Regards, Ron Jordan

[Unregistered]

Frequent Event

My guess is this type of thing happens quite often. As such, I sure hope to see an answer here from one of the experts.