Tax Ramifications of Quitclaim Deed

[Mona Russo]

Hi Everyone.

My 78-year-old mother owns a rental house in Texas.  She is tired of being a landlord, and she wants to quitclaim the property to me.  If she quitclaims her interest to me, is that a taxable event for either her or me?  Will she have to pay capital gains or a gift tax?  There is a mortgage balance of $70,000, and it's worth about $160,000.  Thanks in advance!

[Ashish Acharya]

Originally posted by @Mona Russo:

Hi Everyone.

My 78-year-old mother owns a rental house in Texas.  She is tired of being a landlord, and she wants to quitclaim the property to me.  If she quitclaims her interest to me, is that a taxable event for either her or me?  Will she have to pay capital gains or a gift tax?  There is a mortgage balance of $70,000, and it's worth about $160,000.  Thanks in advance!

It is not a taxable event. It is considered a gift. She will not pay any gift tax if she has not used her 22M gift tax exemption. She needs to file a gift tax return, but there will be no tax. 

Also, I would suggest not QC as you will get her basis in the house and when you sell it, you will have a huge cap gain. Rather, you should wait to inherit it, you will get a stepped-up basis then and no cap gain if you sell it right away. You basically wipe out tax on the appreciation up to the point when you inherited it and you also get higher depreciable basis ( almost doubled with current numbers) 

Just manage her property for her now do not QC.