There are tax implications for both the donor and recipient when transferring property, even as a gift or after death.
The IRS implements a gift tax that you, the donor, are liable for if you want to gift any property to another party above the value of $15,000.
It is best to check the exact tax implications with your accountant. Our estate planning lawyers may be able to provide some general guidelines for you on this. Also, bear in mind that the recipient of a property transfer may be liable for capital gains tax if they then sell the property.
Usually, capital gains tax is applied when a seller makes a gain on the buying price of the property. If a property is transferred after an inheritance or a gift is made, the new owner has not paid anything for the property – so the capital gains tax situation is more complicated.
In the case of a gift, you would need to find out what the cost of the property to the original owner was. With inheritance, the value of the property at the time of the donor’s death would be estimated.
Often, this is considerably less than the latest selling price, meaning a substantial capital gains bill. Long-term capital gains can be as high as 20 percent of the gain.