[2taxinfo]

I am inheirting my mothers house in Florida. I want to give the house to my sister. What will be the tax obligations?

[ebaines]

The house passes to you with a cost basis equal to the fair market value as of your mother's date of death. If estate taxes were owed, the executor of the estate takes care of that (not you as the heir). Depending on what state you live in, you may or may not have an inheritance tax bill due to your state.

If you give the house to your sister, and assuming that the FMV for the house exceeds the annual gift tax exclusion amount of $13,000, you must document this gift on a gift tax form 709. You will not owe any gift taxes unless the value of this gift (plus any other previous gifts you may have made in earlier years that exceeded the annual exclusion in effect for that year) exceeds $1 million. However, you should be aware that even if no gift tax is owed now, this gift may have an effect on your estate planning, as the gift amount reduces the amount of your estate that is exempt from estate tax when you die.

The cost basis to her for tax purposes may be either (a) your cost basis, or (b) the fair market value as of the date of the gift - it all depends whether when she sells the home later on if she has a gain or a loss - so be sure she has records of both values. And if you owe gift taxes as described above, the amount you pay also affects the tax basis.