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No. of Recommendations: 5
She already has problems. The transfers to the son would be considered gifts and she should have been filing gift tax returns. Her son does not live in the property and therefore can not obtain the primary residence exclusion or since it is no income property and is a sale to a relative can not take a loss. Transfering it back to a family member at below market value is going to again trigger gift tax issues.

California bases it property tax on selling price. If the sale was to an unrelated buyer then the initial value of the property for property tax is set by the purchase price.

Within California some transfers to children can be exempt from property tax reassessment. The same exemption does not apply for transfers from child to parent. Trying to randoming set a below market value with a transfer between related owners is at best problematic and very unlikely to be successful, but it is the least of her problem if she is planning on selling the property.

Your initial response is correct. She needs to see a tax professional quickly. Given the historical problems, she might want to consider a tax lawyer where there is protection that her statements can not be used against her.

Debra
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