I have purchased my mothers condo by doing a quit claim deed. This was used as rental property by my daughter & I now want to sell it to her. Can I quit claim this to her without gettin in trouble with the IRS.
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That being said - you can quit claim the property to your daughter. If she pays you fair market value, it is a sale and you must report regular income or capital gains, depending on how long you have owned the property. If she pays you less than fair market value, or nothing at all, you have made a gift. There is an annual exemption from gift tax of $12,000 per person - no gift tax return is necessary here. There is a lifetime exemption from gift tax of ... it's a moving target. This year it's $3.5 million, in 2010 it is scheduled to be unlimited, in 2011 it is scheduled to be $1 million, all eating into the total amount you can give in gifts during life and at death. This is all subject to change since Washington is talking about tax increases, and estate taxes are on the agenda.
You should talk to your CPA about this, or your estate planning attorney, to determine the best approach. However, the bottom line is YES, the IRS wants to know if you make a non-exempt gift to your daughter.
