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Second opinion] I am an only child and my mom is single - If…

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Second opinion] I am...

Second opinion] I am an only child and my mom is single - If she were to quitclaim deed her house to me, I'm assuming I would take on her cost basis in the house. If that is the case, I fairly confident that her cost basis is actually more than the house is worth. Assuming I would then "own" the house at her above market cost basis, could I then convert the property to a rental/investment property, keep the house for a year (or another specific time amount) and show the loss on my taxes after I sold it for a loss?

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

If this is a viable option I would want to know if I would incur any income/inheritance tax by taking ownership of the house. The house is only worth approximately $185k, so I'm good in regards ***** ***** $5m total gifting and she has never gifted me any assets or cash in the past.

Submitted: 7 months ago.Category: Finance
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12/13/2017
Financial Professional: Lev, Tax Preparer replied 7 months ago
Lev
Lev, Tax Preparer
Category: Finance
Satisfied Customers: 33,108
Experience: Personal Investment, Tax Preparation
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If she were to quitclaim deed her house to me, I'm assuming I would take on her cost basis in the house.

That is correct in most situations but not always.

As the property will be gifted to you - I assume - we need to follow rules on gifted property - which states - the donor's basis is the LESSER of (1) donee's basis And (2) FMV - fair market value of the property at the time of gifting.

So if the property appreciated in value - you woudl be correct and your basis will be your mother's basis.

If that is the case, I fairly confident that her cost basis is actually more than the house is worth. Assuming I would then "own" the house at her above market cost basis, could I then convert the property to a rental/investment property, keep the house for a year (or another specific time amount) and show the loss on my taxes after I sold it for a loss?

That is exactly the case I mentioned above - if her basis is less than the market value - YOUR basis as a donee will be the lesser of these - and that will be the FMV of the property.

You will not be able to realize a loss for tax purposes in such approach...

Moreover - when the property is converted from personal to rental use - the lesser of the basis and FMV is used for depreciation and capital loss purposes.

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Financial Professional: Lev, Tax Preparer replied 7 months ago

If this is a viable option I would want to know if I would incur any income/inheritance tax by taking ownership of the house.

There is no inheritance and no inheritance tax as you mother is still alive.

Gift is not taxable income for you from income tax prospective - and will NOT be reported on your tax return.

Your mother as a donor will be required to file a gift tax return - because the value is above the annual allowance $14,000.

But she will NOT pay any gift taxes as long as her lifetime limit - which is $5,490,000 in 2017 - is not reached.

Sorry if you expected differently.

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