[drevel74]

I live in Dallas and I have a close friend (like a family) who wants to give me her house that is worth $260,000. She is looking into the possibilities of either putting me down as a joint tenant or leaving me the house in her will.

I have two questions to ask:

1. Would I have to pay taxes on the house, once I inherit the house (after her) in her will and if I do, what kind of taxes and what is the range (%) should I expect to pay on a $260,000 house (let's assume the house still is in the same price range)?

2. If she names me as a joint tenant now, would I still have to pay taxes when she is deceased when I am getting the house transferred in my name? Would there be other kind of taxes due at that time?

Her entire estate is less than $1.5 million including the house.

[AtlantaTaxExpert]

1 & 2) YOU will owe NO taxes on the inheritance or gift. Given that the estate is less than $2 million, no estate taxes will be due.

If she puts you as a joint tenant, a gift tax return will be required, but no gift tax will probably be due because she can access the Unified Credit (which is used by the estate to offset any estate taxes on assets up to $2 million) to offset whatever gift tax is calculated.

Any competent tax consultant with a general knowledge of estate taxes can explain this in more detail, but the bottom line is simple:

1) YOU will owe no tax.

2) If she gifts half of the house to you, SHE will owe no gift tax, but will have to file a gift tax return.

3) If you inherit either ALL of the house or half of the house, the estate will probably have to file an estate tax return, but no estate tax will be due.

Texas may have an inheritance tax or a state estate tax, so it would be wise to consult with a local tax consultant to cover that aspect of the tax situation.

[ScottGem]

One note to add here. If you inherit the property your cost basis will be the value at the time your friend dies. If she adds you as an owner, I'm not sure whether the cost basis will be the value at the ime she gifts it to you or her cost basis.

[AtlantaTaxExpert]

When you receive ANY capital asset via a gift, the gift brings its original cost basis.

There is NO stepped-up basis that you get when you inherit a capital asset.

[ScottGem]

Thanks ATE, so there would be a distinct tax advantage to getting it in a will.

[AtlantaTaxExpert]

Oh, absolutely.

In fact, given the $2M estate exemption, it is rarely advantageous tax-wise to gift more than the annual exemption amount (which is currently $12K).