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Quit Claim Deed and Taxes

Posted on: 23rd Feb, 2007 06:09 am
hi - i'm wondering if my sister pays me for part of my house and we use a quit claim deed to transfer partial ownership. do i owe taxes on the money she gives me. there is a mortgage on the property and there is a rental unit on one floor. thank you.
Hi,
"Do I owe taxes on the money she gives me."
Before you quit claim part of the house contact the lender to know if it would be allowed or not as there would be a change in the title ownership. If the lender allows it then you need to calculate if the amount you receive from your sister is less than the actual value of that part of the house. If you are receiving a lesser amount then the transfer will be considered as a gift and you may have to pay gift taxes.

You will not have to pay gift taxes as long the value of the gift does not cross the exemption limit. Gifts up to $12,000 are exempted and you only have to file gift tax return using Form 709.

If the value is greater than this exemption limit then it will be considered as part of your lifetime gift exemption limit of $1 million. But you will not have to pay any gift tax if the $1 million limit has not been crossed.

David
Posted on: 23rd Feb, 2007 10:17 am
"There is a mortgage on the property and there is a rental unit on one floor. Thank you."
The lender can very well ask for the mortgage to be paid off as there will be a change in the ownership. So before you proceed with the transfer it is necessary to inform the lender about it. If you do not inform and proceed with the property transfer and later on lender comes to know about it, he will probably ask for the loan to be paid off in full.
Posted on: 23rd Feb, 2007 02:45 pm
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