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Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.Your mother would need to report the gift but as long as she has not already met her lifetime limit ($5mil) she woudl not owe tax. She would need to file Form 709.
The children would retain your mother's basis.
This mean that should they sell, they would pay tax at that time on any gain. The gain would be the difference in basis and sale price.
Because they retain the mother's basis, they stand to have a large gain when they sale providing they do not use the home as their main residence
In short, reporting by the mother in year of gift but nothing for the children to do untill they sale.
The mother would use her lifetime exclusion so no tax to pay in the year of gift for her.
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