Expert: John Kirk, CPA Date: 7/31/2008 Subject: tax consequences of transferring house as gift or sell to sister
Question What would be a win-win tax situation for party involve. I own a house that is
still has mortgage loan ( 500k), bought house for 819k, house now worth
900K. I want to transfer title of deed to my sister. Mortgage loan would be
change to her name. What is tax consequence for me. Of course, house will
be reappraise and sister is subject to increase property tax, but she plans to
sell house in 4 years. What is tax consequences for sister. OR should I just
sell the house to her as fair market value to avoid high capital gain taxes
when she sells home?
Answer The tax consequences depend on you and your sister's tax bracket, and whether you have a taxable estate. The best thing to do if you have lived in the house for two years out of the last 5 years, is to sell the house to her at the current market rate. You get to exclude $500,000 of gain if married ($250,000 if single).
If you sell to her and she also is married and lives in the house for two years, she gets the exclusion of $500,000 as well.
