Transfer Title/ Deed Property in Los Angeles - Tax basis

4 Replies

Hey everyone! My wife and I are looking to buy a live-in flip property (off-market) from her deceased grandfather's trust. While I was speaking with a mortgage broker about rates, he mentioned that since we were related we could have home deeded to us to keep grandpa's tax basis. Does anyone know if we can keep the original tax basis if the family/trust were to deed us the house? Does this work if the house is in a trust?  Would we be able to cash out refinance the property once it was deeded to us to pay the trust? What are the general tax implications to this if we were to go through with it? 

Thanks for all of your help! I love this BP community!

Hi David... definitely need a tax person to answer that question.  Not 100% certain from a mortgage perspective, but if the trust deeds to property to you, the question would be whether it can be quit-claimed or grant deeded to you.  I would first start with a title rep to ask that question.  Regardless of what the mortgage broker says, its a potential title issue in the future if done wrong.  I just emailed my title rep with the question, i'll let you know what he says.  I use an attorney/CPA called mark kohler KKOS.  He's both CPA and attorney, most importantly is an investor as well.  He's expensive to chat to, but one of his guys in the office will be able to advise.

Originally posted by @David Featherstone :

Hey everyone! My wife and I are looking to buy a live-in flip property (off-market) from her deceased grandfather's trust. While I was speaking with a mortgage broker about rates, he mentioned that since we were related we could have home deeded to us to keep grandpa's tax basis. Does anyone know if we can keep the original tax basis if the family/trust were to deed us the house? Does this work if the house is in a trust?  Would we be able to cash out refinance the property once it was deeded to us to pay the trust? What are the general tax implications to this if we were to go through with it? 

Thanks for all of your help! I love this BP community!

Hi David. I'm a local investor. I know a solid CPA who deals with a lot of real estate issues, and could probably answer this for you in a consultation. He helps me with things also. Happy to send contact information if useful. 

 

Originally posted by @David Featherstone :

Hey everyone! My wife and I are looking to buy a live-in flip property (off-market) from her deceased grandfather's trust. While I was speaking with a mortgage broker about rates, he mentioned that since we were related we could have home deeded to us to keep grandpa's tax basis. Does anyone know if we can keep the original tax basis if the family/trust were to deed us the house? Does this work if the house is in a trust?  Would we be able to cash out refinance the property once it was deeded to us to pay the trust? What are the general tax implications to this if we were to go through with it? 

Thanks for all of your help! I love this BP community!

This cannot be answered without knowing more detail on the trust. We first need to know if the trust got the step-up basis. Depending what was the purpose of the trust and how it was created, the trust might not even have the step-up basis at the death.  

 

If you are not inheriting the property and just buying from the trust, your basis is what you would pay at the purchase plus few adjustments. 

IF not step-up basis, I highly doubt that trustee of the trust is going to sell the asset from this trust because of the high trust tax brackets.

Again, these are general assumptions. We need so many more questions answered to help you.