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Our mom is 90 1/2 and wants to gift her condo to my sister and I. Her condo has not appreciated in the 3 years she has owned it. My sister wants to upgrade and live in it and pay me the fair market value. Can she do this without gift and/or income taxes to us respectively? The condo is in New York and I am in Arizona and my sister is in New York.


Expert Wray Rives's Answer:

 Transfers of real estate as gifts can be difficult.  First your mom is going to have to pay gift tax on the amount that the FMV exceeds $13,000 for each half of the condo.  She may be able to use some of her liftime gift/inheritance exclusion, but you really should discuss her entire estate situation with a tax professional before doing that.  In addition if she passes away within 3 years of the gift, the value of the condo could still be brought back into her estate.

Your basis in the condo is whatever your mom originally paid for it, so when you sell your half to your sister you have a taxable capital gain.  Assuming your sister pays you 1/2 of the FMV of the condo, and that your mom has owned the property for amount of time the capital gain to you could be substantial.

I would really suggest you talk to a tax professional who specializes in gift and estate tax, before you do this transaction as there are methods to minimize the tax you would have to pay.

Wray Rives, CPA


29 yrs experience

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