Transfer of ownership -- Help!

4 Replies

Hi BP community! 

I'm new to real estate investing and could use some help.   I'm working on rehabbing a duplex that was once my grandmother's house (deceased) so that I can rent it out.  It's been sitting vacant for a number of years, long story.  The house is in my father's name since my grandmother's death and he is willing to transfer it to me since I will be financing the rehab and managing the property going forward.   There is no mortgage on the house so I plan to fix it up, get it rented, get it appraised and take out a loan on the house to fund future deals.  Since I'm planning to take out a loan, I would need to technically own the house.   I've read up on gifting and other strategies but it gets complicated and there are many tax implications.  

Anyone have any experience with a similar situation or could point me in the direction for further research?


Thanks so much for the help!

@Brad Spuhler

If your dad gifts the property to you, he will need to file a gift tax return. Assuming he hasn’t used up his lifetime wealth transfer tax exemption (11.4M), then no gift tax will be owed - a gift tax return still needs to be filed.

Got it.  Thanks @Lance Lvovsky

Seems like it’s pretty straightforward, file a quitclaim deed to transfer ownership and have my dad file the gift tax return, definitely hasn’t used up the lifetime exemption so should be ok.  Thanks! 

Originally posted by @Brad Spuhler :

Got it.  Thanks @Lance Lvovsky

Seems like it’s pretty straightforward, file a quitclaim deed to transfer ownership and have my dad file the gift tax return, definitely hasn’t used up the lifetime exemption so should be ok.  Thanks! 

If you want higher depreciation and eventually want to save money on taxes, you should avoid  gifting in this situation. 

Your dad's basis will carry over to you if he inherited the property (or your grandmother's basis if this was a gift to your father as well). 

Your father's or grandmother's basis will be lower as the market has come up. You should wait to inherit the property as you will get step up basis and you will wipe out the entire cap gain that you might owe. 

You can lease the property from your dad and sublease the property yourself if you want to manage. That is one advantage of the family transaction, you can mold it as you want. Yes, your dad needs to get the financing and get the cash-out. Then, he can gift you or loan you the money from cash out. This way, you avoid entire cap gain tax. If the appreciation is 100k and your cap gain rate is 15%, you just saved 15k with the strategy. 

Super helpful @Ashish Acharya!  

The only thing that I would also need to consider that I didn't mention originally, is that I have much better credit than my father so that may impact the ability for him to get the loan.  Either way, I have a much better understanding of the consequences and implications now.  Thanks so much!