Title transfers in Texas

**AngelaKaty** · 05-25-2009, 03:23 PM

Hi, a friend of mine who lives in the Houston area is getting a house from his parents. They are moving to another house, and transferring the deed to him. The mortgage is completely paid off already, also. I was told that it would be better for him to pay something for the house, even if it's $20, than to have it just given to him via "love and affection". Is this true, and if so, why?

**Greg** · 05-26-2009, 05:02 AM

Your friend and his parents need to talk to a good tax accountant. There will be federal tax consequences if they just transfer it. There are better ways to do this to avoid paying uncle sam an arm and a leg, such as a living trust.

**kevin@BootStrapLearning** · 05-26-2009, 02:49 PM

Originally Posted by AngelaKaty

Hi, a friend of mine who lives in the Houston area is getting a house from his parents. They are moving to another house, and transferring the deed to him. The mortgage is completely paid off already, also. I was told that it would be better for him to pay something for the house, even if it's $20, than to have it just given to him via "love and affection". Is this true, and if so, why?

Family transfer of assets is well established so there is no reason to have a dollar amount associated with the transfer. The primary tax concerns of such a transfer will come when your friend goes to sell the house. As I understand it, with such gift, he inherits his parents cost basis for that property which would be an issue should he sell it at a price where his 'profit' would put him above the capital gains exclusion limits.

**CC Lifestyle Realty** · 02-24-2012, 12:43 PM

You REALLY need to check with an accountant because the rules have been changing and it is not really simple. There are annual and lifetime gift tax laws with a $5 million limit. You will have to report to the IRS the gift and the difference in consideration and Fair Market Value. Here is an example of the lifetime gift tax.

If the property is worth $500,000 and the owner gifts the property to their daughter with essentially no consideration then it is reported and no tax is paid. However the lifetime limit is dropped by the $500,000. Her parents could only provide her up to $4.5 million more before a tax is applied.

You need a CPA to fully understand everything and not have the IRS on your back. Last year the IRS sought court approval to have a California agency hand over their database outlining property transfer. They wanted to know who was trying to cheat the government and not properly reporting the property transfers and the Fair Market Value.