Etienne
Guest
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 Posted:
Wed Nov 17, 2004 5:30 am Post subject:
Quitclaim, gift tax calculation. Mortgage liability deductio |
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I would like to have some input about the following
situation (have split up a long story in separate
questions):
Joint tenants A, B, C and D quitclaim their interest in a
property to C and D. Effectively this means that A and B
quitclaim to C and D (A and B are removed from the title).
The reason for quitclaim is a refinancing. The new mortgage
has only tenants C and D on the deed of trust. According to
the title company, A and B either need to quitclaim, or be
added to the mortgage.
So after everything is done, both the mortgage and the title
are only in the names of C and D, as joint tenants.
I understand that this will be considered a gift from A and
B of their portion to C and D by the IRS. Actually, on the
quitclaim deed, someone (title company?) had scribbled
(after notarized signing):
"This is a bonafide gift, grantor received nothing in return"
How is the value of the gift determined for A and B?
Their cost base: $200,000
FMV: $400,000
Mortgage balance: $175,000
1. Am I correct that for both A and B the value of the gift
is 25% of $400,000 minus 25% of $175,000 = $56,250?
2. Is it correct to deduct 25% of the mortgage, while each
tenant is joint and several liable? The potential liability
of which each tenant is released is the full $175,000....
3. Do any other (income?) taxes come into play because of
any gain?
Thanks,
Etienne
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Etienne
Guest
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| Posted:
Mon Nov 22, 2004 5:31 am Post subject:
Re: Quitclaim, gift tax calculation. Mortgage liability dedu |
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"MTW" <mtwingcpa@yahoo.com> wrote:
| Quote: | Etienne wrote:
The reason for quitclaim is a refinancing. The new mortgage
has only tenants C and D on the deed of trust. According to
the title company, A and B either need to quitclaim, or be
added to the mortgage.
Question: Does this mean that A and B will no longer have
any ownership interest in the property whatsoever? Or do
they still retain some right to (say) be cut in on the
eventual gain on sale and/or to get their money back at some
point ???
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Right now, based on the quitclaim deed, they would no longer
have any ownership whatsoever. Agreements could be arranged
however if it makes things easier for taxes.
-Etienne
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