Title transfer to brother without paying gift taxes and capitl gain?

Question

My brother owns two houses. He lives in one and paying mortgage. The second house is paid off which my mom and I live. My question is how can he transfer the ownershipd of the second house to me without having to pay for gift taxes and capital gain taxes?

Answer 1

He won't have to pay capital gains taxes, but you will if you ever sell it.  Your basis for the capital gains will be whatever his basis is, plus any improvements you add after the transfer.

If the value of the house is over $12,000, he'll have to file a gift tax return, but probably won't owe any gift tax.

Answer 2

If the value of the home is greater than $12,000 there's no way that he can avoid filing a Gift Tax return if he gives it to you.  He probably won't owe any Gift Tax because of the $1,000,000 lifetime exclusion but he will have to file.

Selling it to you for $25 as another poster suggests will only reduce the value of the gift by $25.  The remaining equity is a gift and the Gift Tax return must be filed.

He won't owe any capital gains taxes when he gives it to you, but you may well owe them when you sell it.

If he gives you the home, you will receive his pass-through basis in the home, i.e. whatever he paid for it plus any improvements that he's made.  That gets adjusted for any Gift Tax he pays though as noted above there probably won't be any.  When you sell the home, your gain will be the difference between your basis and the net proceeds from the sale.  Your basis is the pass-through basis as noted earlier plus any improvements that you make.  

You may have to pay capital gains tax when you sell.  If you own and live in it for 2 of the 5 years immediately prior to the sale you can exclude up to $250k of gain from tax if Single or $500k if Married Filing Jointly.  Anything above that will be fully taxable, as will the entire gain if you don't qualify for the exclusion.  Note that the time you have been living in it up to the date that he gives it to you does NOT count towards the 2 year requirement to avoid the tax on the gain.  You must both own AND live it it for at elast 2 full years to qualify for the exclusion.

Answer 3

Have him do a quit claim deed on it to you in consideration of $25