How to transfer ownership of real estate between brothers without being taxed?

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How to transfer ownership of real estate between brothers without being taxed?

My husband paid for a property but put it in his brothers name. How do they transfer it to my husband without the brother getting hit for the taxes, paid 45K and its maybe worth 50K now?

Asked on July 25, 2011 New Mexico

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

You are in a pickle here and I would speak someone in your area about the best way to proceed.  You are not going to escape fees of some sort and taxes of some sort at some time, depending on when you decide to transfer the property and how you decide to transfer the property.  A new deed has filing fees.  I think that it may be best for you to seek help from a financial planner on the matter.  Structuring the transfer is going to need someone who is very good at what they do.  Maybe use the property to fund a trust with a separate document relinquishing inheritance rights signed by your brother?  Good luck. 

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

The presumed amount subject to long term capital gains on the property would be $5,000 based upon your question.

One possible way to accomplish a transfer of the property to not pay any income taxes is to have it appraised and then have the brother deed a fractionalized interest each year to your husband in an amount allowed on a yearly basis ($11,000) until the appraised value is reduced. This could take 5 years or so based upon the appraised value.

Another and more direct option is to have the brother record a disclaimer to the property's deed to him stating it was in error and that title should have always been in your husband's name. Potentially the county recorder's office may allow the recording of the disclaimer and accompanying quit claim of the brother to your husband of the property.

The capital gain amount on $5,000 of increase should not be too much in income taxes. Consulting with a tax attorney over your question is suggested.


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