Inheriting vs gifting a house?

Question

Hello all,

Correct me if I'm wrong. My mom has a house I believe worth around $300k. It was purchased 20+ years ago for $110k. She is tired of it and wants to have me take over it.

I believe that since it would be a gift (and a substantial one) I would pay the taxes on the value over $12k (so I guess on $288k). Is that correct?

Also if I were to sell it (I wouldn't though) I would pay either short-term (less than a year) or long-term (more than a year) capital gains tax. I think I read that since it would be a gift and I sell that gift, I would pay capital gains tax on the profit from her original price of $110k. Is that correct?

If it had been an inheritance that I sold, I would have been taxed on the profit based on the current market value of $300k?

What would be the best way to take over the house? I would later see about taking equity out of it to purchase multi-family properties.

Rob Beland · Answer

You are asking a lot of questions with a lot of variables and BP is not really the proper forum to get the answers you are looking for. You haven't really provided enough information for anybody to form a proper response. To simplify things for you, there are a couple of issues to consider. If the property is gifted to you, your basis will be the amount that your mother paid for the house. If you were to inherit the house, your basis would be "stepped up" and would be the value of the house as of the date of your mother's death.

There are scenarios that you can avoid some taxes, for instance, if your mother gifted you the house and you were to live in in it for at least two years, you would avoid paying capital gains taxes up to allowable limits (married vs. single).

You have too many variables but to summarize your original questions, you are correct. You pay a lot more taxes as a gift vs. an inheritance.

Inheriting vs gifting a house?

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