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What are the tax implications of quit claim deed?

Posted on: 28th Dec, 2005 09:16 am
What are the tax implications of a Quit Claim? Who pays the property tax?

Thank you.
Thanks. I look forward to the steps.

Just to clarify. I own the house free and clear. Bought it new 15 years ago for $70,000. Current market value is around $229,000. To help a family member out I will sell it for $162,000 the current assessed value. I hope I'm not setting my self up for any tax issues from local or state. I will pay excise tax on the sales price of $162,000. Do I have to tell the IRS anything when doing my 2006 taxes?

When doing the sale to a family member do I do a Quit Claim Deed or a Statutory Warranty Deed? I will carry the contract and they will pay a portion down and I will charge 5% interest. I assume I will have to report the interest yearly. Even thought in a sense I'm selling the house cheap and was hoping the interest could be part of the sale and meet the under $250,000 2 for 5 exemption, but I'm not sure if that is okay or not. So maybe I better report the interest earned when carrying the contract.

Please adivse, I'm trying to figure out the best and safest way to handle the matter. Thanks so much.
Posted on: 03rd Apr, 2006 06:32 pm
To me that looks clear. You will have to pay excise tax on the sale price of the property and regarding informing the IRS anything or not, I would advice you to consult an attorney. He may be the best person you may be looking for at this point of time.

Zeal_Deal
Posted on: 03rd Apr, 2006 07:20 pm
Hi,

The type of deed that you use depends upon the buyer and the seller as the deal is within the family. You may use a quit claim deed, a statutory warranty deed or a general warranty deed. However, a general warranty deed gives the most assurance to title for the buyer or the grantee.

Now as far as tax on capital gain is concerned, you are allowed to exclude $250,000 of the gain from the taxable income provided the house was in your name for two of the past five years when you plan to sell. This satisfies your situation as you already said.

For FSBO, the first step is to advertise your property in a proper manner. You may get it listed in the local newspaper, with real estate agents and in the online websites offering such services.

You must have a clear idea of the prevailing market price of similar houses in your area so that your sale price offer becomes realistic and don't scare the buyers, specially since it's within your family.

The most important part however is the information that you provide on your property. It's the seller's responsibility to disclose all the information on the property to the buyer.

For that you should the legal description and tax information on your property. You must provide the property disclosure form. This form can be obtained from a real estate licensee or from the real estate commission office in your state.

You must have and provide the information on mortgage pay-off which you may get from your lender, public records to find out whether any liens like federal income tax or any legal actions are pending on the property. Also, you need to the information on homeowner's insurance.

The different forms that need to be used in the sale include disclosure forms and state specific forms and contracts. You may consult a real estate lawyer for the requirements.

Hope this information helps you.

Regards,
Blue
Posted on: 04th Apr, 2006 01:14 pm
Hello AKC
I own a house for my dad he make all payments and lives in it. My question is the loans isin my name and he wants me to Quick Claim the deed to so he can borrow some money from a friend. will that transfer the loan to his friend.
Posted on: 05th Apr, 2006 06:47 am
hi,

it’s good to see that you care about your father.

through quit claim deed only the interest in the title of ownership gets transferred. if you want to transfer the loan as well then you will have to undergo a process called novation.

thanks,
jerry
Posted on: 05th Apr, 2006 06:58 am
I will also suggest you to get help from an attorney as your father is looking to borrow some money from his friend. So it will wise to have to all the legal papers in place.

Zeal_Deal
Posted on: 05th Apr, 2006 07:06 am
Hi,

I co-signed a mortgage loan with my sister to help her purchase a home. I am submitting a quit claim deed to transfer all my interest in the home to her. Will this mortgage continue to be a part of my credit upon the completion of the quit claim deed?
Posted on: 08th Apr, 2006 02:36 pm
Hi Johnny

Quit claim deed is no doubt a good option but it has some limitations too. It is very important for you to understand the true meaning of this deed.

The person who has signed the promissory note in mortgage, he is solely responsible for the mortgage repayment. The best way to get rid off the mortgage, make it refinanced with new owner taking the responsibility of paying off the loan after the present owner has repaid the existing mortgage.

Thanks
Posted on: 08th Apr, 2006 10:55 pm
my mother in law has a home that she owes 113000 on mortgage and 23000on chapter 13 making her monthly home pymt 2000.oo she can not afford this any longer she wants to quit claim deed to her son to become owner so he can refinace her total dept 136000 and get a lower total monthly payment for her under my husband her son same last name then he wants to use the equity in house (valued at 30000) to purchase his 2 family home is this possible
Posted on: 14th Apr, 2006 10:38 am
Hi Ronnie,

A quit claim deed will not transfer the mortgage and your mother-in-law will still be responsible for it.

To transfer the mortgage it is to be refinanced in your husband's name.

Blue
Posted on: 14th Apr, 2006 11:04 am
Hi Ronnie,

Refinance is possible to transfer her debts to your husband. Quit claim as mentioned by Blue is a separate thing and can be used to transfer the interest in the house and not the loan.

In order to refinance and quit claim you must consult an attorney before doing this as there are some procedures involved in refinancing while in chapter 13.

James
Posted on: 14th Apr, 2006 11:18 am
WE BOUGHT A HOUSE UNDER MY AUNTS NAME A YEAR AGO . I HAVE NO WAY OF SHOWING THAT I'VE BEEN PAYING FOR IT.ONLY THAT I PUT THE HOUSE ON MY TAX RETURN.WILL THAT SHOW THAT I PAID FOR THAT PROPERTY FOR THAT YEAR.OR DO I NEED TO GET A QUIT CLAIM FROM HER.AND IF SO.WILL I HAVE TO PAY MORE TAXES BESIDES THE ONES I HAVE ALREADY PAID FOR LIKE PROPERTY TAXES
AND OTHER TAXES FOR BUYING THE PROPERTY.

THANKS.
PATY.
Posted on: 14th Apr, 2006 10:31 pm
Hi,

You must be having the payment receipts. And tax return documents are good proofs of your payments. So I dont think you need to do quit claim deed unless you want a share in the property interest.

Thanks,
Jerry
Posted on: 14th Apr, 2006 11:00 pm
Can you tell me how it would work if I use a Quit Claim to purchase a property that is headed for foreclosure?

The seller cannot pay the mortgage so I was going to have him sign a Quit Claim, then I would pay the mortgage company the amount due to keep it from going into foreclosure, then I would sell the home for Fair Market Value, hopefully profiting about $20-30,000.

Is this the best way to purchase and immediately re-sell the property?

What are the tax implications?

Thank you for your advice !!!
Posted on: 19th Apr, 2006 04:08 am
Hi,

You can purchase the property only through a title deed and not the quit claim deed. This is because with a quit claim deed, you can only get a share in the property interest. And, as far as I know, the seller needs to talk to the lender regarding your assuming the mortgage. All depends on how quickly you can sign the title deed.

Regarding tax implications, you will have to pay the property taxes once you get the ownership rights of the property.

Thanks,

Caron.
Posted on: 19th Apr, 2006 04:20 am
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