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If the mother’s transfer of the property takes effect when she (“grantor”) is alive such as joint tenants, she owes the federal gift tax, calculated based on the market value of the transferred property. The children (“grantee”) take over the tax basis of the grantor. For example, if the mother deeds a house that cost $25,000 to her two children, the children’s tax basis is $25,000. If and regardless when the children sell the property for $100,000, they will have a $75,000 capital gain to report on their federal and state tax returns. If the mother’s transfer of property does not take effect until the mother dies such as life estate with disposition power, there is no federal gift tax. Consult accountants with their expertise.
Contact me should you have further questions.
Jonathan Kan, Licensed Title Producer/Notary Public
Aestar Settlements LLC
15881-B Crabbs Branch Way, Rockville, MD 20855
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This column is not legal advice and should not be acted upon without obtaining your own legal counsel.
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