Home Buying in 98103>Question Details

Sue-Z, Home Buyer in Seattle, WA

A close friend of our family's (non-resident alien in the US) is offering to transfer the deed of his rental in WA state to me as a quick claim deed.

Asked by Sue-Z, Seattle, WA Tue Jun 24, 2014

1. Can a non-resident alien participate in a quick claim deed exchange? I'm not related to the seller, but we have close family ties.

2. What are the tax implications for him and for me, as an American?

3. Will the value of the home be assessed at current value instead of the purchased value decades ago? Or would the quick claim transfer deed over to me at the same price it was 20 years ago?

Thanks

Help the community by answering this question:

Answers

5
For your own safety and protection I recommend you hire a Real Estate Attorney as well as an accountant for the tax issues. Realtors are not experts in either fields.
1 vote Thank Flag Link Mon Jul 14, 2014
Assuming your friend has clear title to the property, I don't see why not.
But why a quit claim? Are there any existing or other encumbrances? I'd order a title report and check it closely. You will assume any loans, liens or defects in the title. If there are any loans, the lender must agree to the transfer or more likely accelerate the balance.
Tax implications depend on the nature of the transfer. My sense is that you will have
to pay taxes on the full value of the property., if you declare it.
But, if it's exchanged by quit claim, not sure how the IRS will know
But I'd be careful.
0 votes Thank Flag Link Mon Jul 14, 2014
Kary,, agree with you, but see pearlyork below.
Excellent analysis.
My old boss used to tell me that he could give me a quitclaim to the Statue of Liberty.
I wouldn't want the White House, too many issues.
Flag Mon Jul 14, 2014
A quit claim would be the normal deed for a transaction where nominal consideration is passed. There's no reason a seller would give any warranties of title.
Flag Mon Jul 14, 2014
Yes, a non-resident alien can dispose of property via a quit (not quick) claim deed. A quit claim deed means the Grantor (the person giving the deed) is conveying his/her interest in the property WITHOUT any warranties as to title. I could give you a quit claim deed to the White House, for instance, but it wouldn't mean you owned it.

So the first issue is: Are you actually getting anything? I would work with a title company to make sure that you actually have good title and no encumbrances, before you invest any money in this transaction or in the house.

The second issue is: What are you getting? Are there mortgages, back taxes owed, city code violations, or other legal issues outstanding?

You don't say if this is a gift or a sale. If a sale, you should use a statutory warranty deed (and title insurance) to be sure you are getting what you're paying for.

If a gift, your friend may owe gift taxes. This potentially affects you because unpaid gift taxes become liens on the property transferred. Non-resident aliens may not have the same gift tax exclusions as everybody else, so gift taxes can kick in at much lower amounts.

The "assessed" value is what the local assessor values the property at for property tax purposes. In Washington, the assessment can change every year, and is unrelated to the "purchased value decades ago."

I think you mean what would the house be valued at for federal gift tax purposes. Check this with your accountant, but I think this is how it works:

It would be valued at current value for calculating the gift tax, but the basis going forward would be what your friend paid for it plus improvements plus any gift tax paid. So if your friend paid $100,000 for the house originally, but it's worth $150,000 when he transfers it to you, for gift tax purposes it's worth $150,000 but you receive it with a basis of $100,000, so if you were to turn around and sell it tomorrow for $150,000, you would also owe capital gains tax on your profit of $50,000.

You need a lawyer.
0 votes Thank Flag Link Mon Jul 14, 2014
I would contact a Real-Estate attorney and review the situation with them.
0 votes Thank Flag Link Tue Jul 8, 2014
First, it's quit claim deed, and I'm not seeing how resident alien status would affect the effectiveness of such a deed. There might be tax withholding issues though.

Second, you really should get proper legal advice on the tax implications issue. There's no way anyone could answer those questions.

Third, assuming you're talking about property in Washington state, the sale should not affect the assessed value for real estate tax purposes, and being a closely related transaction it shouldn't even be evidence of value. If you're talking income tax basis, again I would refer you to a tax practitioner.

Finally, I would suggest you get your own counsel to assess the risks of taking this property. If this was say a meth house or had oil contamination, etc., the property could be a liability rather than an asset. There might be other risks.
1 vote Thank Flag Link Tue Jun 24, 2014
Good comment, as usual, but there really isn't a 'sale'.
Flag Mon Jul 14, 2014
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2014 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer