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Subject:  Re: House transfer: Father to Sons Date:  6/20/2006  4:22 PM
Author:  lorenzo2 Number:  87478 of 127545

The estate planning professional has indicated that when we sell the home in the future, our cost basis will remain what our father paid for the house - which is quite a bit less that what it's worth now. I am not so sure about this and would like to hear what the Fools on this board think.

Listen to the pro. If your dad simply transfers the house to you, then you will indeed assume his very small basis, and you'll owe a bundle in capital gains when you later sell. Moreover, your dad will have to file a gift tax return, since he will have given you and your brother far in excess of the maximum annual gift exclusion of $12K. (He won't necessarily owe any tax, as there's a fairly generous unified estate/gift tax credit. But there may be estate tax consequences down the road, depending on the size of his estate when he dies.)

At least for tax purposes, far better that you and your brother inherit the house. In that case, you *do* get a stepped up basis - the value of the house at your dad's death.

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