Looking for advice w/ CA cap gains tax & title-note issue w/ home

[Samantha A.]

Looking for advice… my husband & I having been living in his parent’s investment property in California since they purchased the home in 2013 for Ryan. Ryan & I have paid “rent” every month to his parents. His parents however do not, nor ever, have claimed a “gain “or income from the property - as the total "rent" we pay each month goes toward satisfying the mortgage and tax requirements and are the ones solely responsible for the home and its upkeep.

This past January Ryan’s parents officially “gifted” the property to Ryan, quitclaiming the title in his name only, removing their names from the deed. His parents still technically hold the note though.

Since January, Ryan & I have been remodeling the home and are looking to put it on the market next month for sale. We understand there is a capital gains hit we will take, both federal and state (as the property is in California), but are not sure how this will effect our taxes or his parents, or both.

We are also concerned we may have overlooked other issues that could effect our use of maximizing the proceeds from the sale of the home. Ryan’s parents are not looking to take any of the monies from the sale and it is their intention for us to keep all proceeds to use toward our first real-estate investing pursuits. Obviously we are very grateful for his parents trust in us and the gift they’ve given us two lowly musicians to start our new investing careers :-)

Once the home is sold, we will be moving to Minnesota where Ryan’s family is from and are looking to do flips and acquire some rentals.

So...other than capital gains taxes, are there any others issues we should be aware of?

Thank you kindly,

Sammy