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Updated about 5 years ago on . Most recent reply

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Question on Tax Implication in Property Transfer

Posted

Hey Guys,

I had a question that I was hoping that someone can answer. My brother and I have a townhome together as an investment property (in Tampa, FL). My brother wants out of the property. I do not want to sell. My fiance agreed to take his half of the ownership of the property. So as it stands now, my brother and I are 50%/50% owners and mortgage holders on the property. We want it switched to where I retain 50% and my fiance will flip with my brother and retain the other 50% ownership of the property, releasing my brother from the title/ownership and mortgage. However, after talking to the bank, the only way this could occur is through refinancing with closing costs ranging from $4500-$7000. Which would not be profitable in investment terms. So we reached a compromise, where my brother wants the initial $18,000 he invested in the property and my fiance and I will pay that to him and pay off the current 100K in mortgage and then he will do a quit claim deed to transfer the title over to me and my fiance.
   My question is as follows, will there be any tax hits with this type of transaction? As it is not technically a " sale of a property" (or is this still considered a sale?) will my fiance or myself get hit with any unforeseen taxes, fees or penalties if we do it this way? I don't know if this would be considered a "gift". As I am already 50% owner, I do not believe it will affect me (correct me if I am wrong) but what about my fiance who will essentially gain a property in this way. The lifetime gift tax exemption is $11.58 million, as I understand. The annual gift tax exclusion is $15,000. 

Thanks!

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