Transferring home title between family members

[Ryan Cybulski]

Hello all! I’m new to BP so I hope I’m following the proper protocol in posting my topic. I couldn’t find a forum category specific to it and since I am technically ‘starting out’ I thought this might be a good place to give it a shot.  So allow me to try and make this as succinct as possible. 

About 12 years ago I had the opportunity to buy my childhood home from my mother for a great price on a sort of mother/son handshake deal.  I quickly sold my current home at the time and used the profits to jump on the opportunity. However, my mom kept the property in her name for all these years because she had a mother’s intuition about my ex-wife (she voiced other reasons as why to me at the time... lol) which turned out to be accurate. 

So fast forward to present day, I still live in the home with my lovely fiancé and two wonderful daughters. Over the years I’ve invested a lot of money and sweat equity into the home, as I am a residential contractor by trade.  The house is completely paid off and I’d like to use the equity I have in it to begin my investing career.  And so here I am looking for all of your expert opinions on what is the most cost effective and time effective manner in which switch the property from my mother’s name to mine.  I’ve spoken to a few people here and there but I’d like to get some concrete answers here in writing so I can better study and understand the process. 

Thanks in advance for all your help!

- Ryan Cybulski (Phila, Pa)

[Basit Siddiqi]

Here are some questions you need to ask if your mother sells you the property for $1
1) How does she report the transaction on her tax return? The IRS usually scrutinizes transactions between family members that are not done at an arm's length transaction.
2) You will need to go through a title company and also pay a state transfer Tax. I think PA makes you pay a transfer tax based on FMV and not the selling price.
3) If you decide to sell the property later on - Will you be required to report gain based on selling price minus $1?

I personally like the gifting alternative. Your mother is entitled to a certain amount of lifetime gifting. Depending on her net worth and past gifting - she may be able to gift you the house by only paying transfer taxes and potentially a state gift tax.