Adjusted Cost Basis

Transferred how? Into their names as individuals, or via a trust? It might make a difference.

Mr Stussy - thanks for your follow-up, to my inquiry.

I am not sure how the property transfer was executed (Quit Claim??). In 1980 my parents were advised to "transfer" the family house title to their 5 children; should either Mom or Dad ever need extended care. For sure, at the time of Dad's death in 2011, the 5 children were all listed as equal owners.

I assume that the initial cost basis is the date (1980) of title transfer to the children, plus any subsequent capital improvements. How to account for the 2011 sale price, with that $40k gift to my brother is an unknown.

If they were advised to transfer their property by quitclaim, joint tenancy or anything other than a trust, the advice was likely bad, and the person who gave the advice sued for malpractice.

True if transferred by quitclaim or warranty deed. If it had been transferred by trust, on the other hand, the basis would have been the value on the date of Dad's death.

There should be no gift tax consequences. Each person has the right to make gifts to any other individual(s) in the sum of up to $13,000 without having to file a gift tax return. So you don't need to account for anything.

I can only assume you read the first paragraph quickly. Shouldn't the cost basis be the *parents'* original cost basis plus subsequent capital improvements and not the value on the date of transfer?

Ira Smilovitz Leonia, NJ

Agreed, Stu, but with much respect to lawyers who know what they're doing, many step into areas they really don't understand. My parents owned half the (4 unit) family home. They transferred ownership to my sister, at the advice of the family attorney. The house has been in the family since the '40s, and never transferred on death. Grandparents gave to their kids including my father, and my parents to my sister. Basis never got stepped up. When it gets sold, she and the other grandkids will be clueless.

Yes, thanks, you're right. It was a case of type first, think later.

___ Stu

Yes, I've even seen lawyers screw up some estate planning. It looks easy, but it's harder than it looks if you don't know what you're doing.

On the advice of the family attorney? That guy should be strung up by his thumbs. Even using joint tenancy would be better than that!

Can she reduce the damage by living in it for two years? ___ Stu

Mom and sis each occupy one apartment (of the 4). It works like a condo, but the ownership is undivided interest. So yes, when mom goes, and there's the sale, sis will have lived in her apartment most of her life. (FWIW - building worth about $800K, so 1/2 is my sister's, worth 400K. A proper inheritance would have stepped up near the peak on my dad's death in '98, or could step up when mom goes. Now, I'm guessing she'll have to deal with nearly $200K in a cap gain as house was bout for near nothing. $4K for entire building in the 40's.

(Don - forgive me for thread hijack. Just hope others can learn from these messes, or at least get lawyers like Stu who actually know what they practice.)

cost basis be the *parents'* original cost basis plus subsequent capital improvements and not the value on the date of transfer?

Basis: ...Plus any gift tax previously paid on the transfer.