| Author |
Message |
Rick S.
Guest
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 Posted:
Sun Oct 16, 2005 8:00 am Post subject:
Quit Claim Deed vs Sale of House to my Grandchild |
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I'm going to sell my house to my grandkid and move on. It is
a fixer upper; Fixed Up same size houses in the area go for
425K. I plan to sell it to her for $340K because she is my
grand kid...
Since it is a fixer upper, will this discount pass the smell
test, or will it cause me or her problems? If her having my
last name is a problem, her fiance, who I trust, coud buy it
in his name and then add her to the title later, if so.
An option suggested was to Quit Claim it to her, and she
will then refinance it and give me the original purchase
price. Won't this negate my $250K home tax exclusion? What
other bombs am I in for if I do this?
Thanks in advance for any input;
Rick
Los Angeles, Ca
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D. Stussy
Guest
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| Posted:
Mon Oct 17, 2005 6:38 am Post subject:
Re: Quit Claim Deed vs Sale of House to my Grandchild |
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Rick S. wrote:
| Quote: | I'm going to sell my house to my grandkid and move on. It is
a fixer upper; Fixed Up same size houses in the area go for
425K. I plan to sell it to her for $340K because she is my
grand kid...
Since it is a fixer upper, will this discount pass the smell
test, or will it cause me or her problems? If her having my
last name is a problem, her fiance, who I trust, coud buy it
in his name and then add her to the title later, if so.
An option suggested was to Quit Claim it to her, and she
will then refinance it and give me the original purchase
price. Won't this negate my $250K home tax exclusion? What
other bombs am I in for if I do this?
Thanks in advance for any input;
Rick
Los Angeles, Ca
|
Careful of quitclaim deeds and the GIFT TAX, especially to
someone who wasn't originally an owner.
The good thing is that as a grandparent-grandchild transfer,
there should be no property tax reassessment. That was
added by proposition a few years ago. I leave it to you to
check if there are any restrictions on qualifying for the
transfer.
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >> |
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joetaxpayer
Guest
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| Posted:
Mon Oct 17, 2005 6:57 am Post subject:
Re: Quit Claim Deed vs Sale of House to my Grandchild |
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|
Rick S. wrote:
| Quote: | I'm going to sell my house to my grandkid and move on. It is
a fixer upper; Fixed Up same size houses in the area go for
425K. I plan to sell it to her for $340K because she is my
grand kid...
Since it is a fixer upper, will this discount pass the smell
test, or will it cause me or her problems? If her having my
last name is a problem, her fiance, who I trust, coud buy it
in his name and then add her to the title later, if so.
An option suggested was to Quit Claim it to her, and she
will then refinance it and give me the original purchase
price. Won't this negate my $250K home tax exclusion? What
other bombs am I in for if I do this?
|
You started by saying the value already fixed up would be
$425K. Can you estimate the cost to bring it up to that
level? First step is to justify a reasonable 'market price'
as is. Is it $375? Prices aren't carved in stone, look at
recent resales for similar condition. You can discount 6%
realtor commission without raising eyebrows. That gets you
down to $352,500. You are permitted to give anyone a $11,000
gift each year with no tax liability. I can use the money.
So $352,500 - $22,000 (her fiance counts, doesn't need to be
a relative) = $330,500. So I'd say you are well within
reason.
Or $340 + $22 = $362. Add commission, $385,100 (I divided by
..94).
Now $385 is only 10% below market of $425. Houses sell
10-15% below asking price all the time. I don't see that
you've even cut this close.
But if you did, let's say sell it for $250, you are
permitted to dip into your $1 million gift-tax exemption and
$1.5 million estate-tax exemption. Next Paragraph is quoted
from an article at Smart Money;
First, offset the amount of the gift by using your $11,000
annual gift-tax exclusion. Remember it's $11,000 per donor.
So if you and your spouse each make a gift to both your
child and his spouse, you can offset $44,000 of the home's
value. Then, as long as the net figure is less than $1
million, you won't owe any current gift tax (unless you made
substantial gifts earlier that used up part of your
exemption).
Quit claiming is effectively 'gifting' the whole thing,
which would eat into your exemptions big time, and give your
granddaughter a zero-basis, ugh! Rick, don't do that, that
is the worst thing you can think of. Who suggested that to
you? Set them straight, please.
Here's a different idea; place the house in an irrevocable
trust and rent it to them at market rates, slight discount
as they agree to all maintenance. This provides you an
income stream at a decent rate of return. When you meet the
creator, you will it to them, and they get the stepped up
basis, i.e. they own it at a cost equal to market value when
you go. (This is great unless you need the lump sum now).
They may like the idea of getting all the growth without
worring about a mortgage.
Just another spin on your situation.
JOE
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >>
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Don Priebe
Guest
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| Posted:
Tue Oct 18, 2005 1:34 pm Post subject:
Re: Quit Claim Deed vs Sale of House to my Grandchild |
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| Quote: | Quit claiming is effectively 'gifting' the whole thing,
which would eat into your exemptions big time, and give your
granddaughter a zero-basis, ugh!
|
I don't think that a quit-claim deed implies gifting at all,
it simply conveys title without any warranties as to the
validity of the previous owner's rights in the property. (At
least here in the East.)
--
Don EA in Upstate NY
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >> |
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Stuart A. Bronstein
Guest
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| Posted:
Wed Oct 19, 2005 8:00 am Post subject:
Re: Quit Claim Deed vs Sale of House to my Grandchild |
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"Don Priebe" <priebe@iname.com> wrote:
| Quote: | Quit claiming is effectively 'gifting' the whole thing,
which would eat into your exemptions big time, and give your
granddaughter a zero-basis, ugh!
I don't think that a quit-claim deed implies gifting at all,
it simply conveys title without any warranties as to the
validity of the previous owner's rights in the property. (At
least here in the East.)
|
A quit claim gives all the rights someone has in a property.
Of course, you can quitclaim a portion. But when you do
you are transferring all rights you have in that portion.
Stu
<< ======================================================= >>
<< The foregoing is intended for educational purposes only >>
<< and does NOT constitute legal OR professional advice. >>
<< >>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org. >>
<< Copyright (2005) - All rights reserved. >>
<< ======================================================= >> |
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