[WSBARP] QCD and REET question-another one

Mon Apr 18 10:47:51 PDT 2022

You need to watch out about refinancing.  Look at the Supplemental REETA when it comes to gifts.  If you refinance a gift within a certain amount of time after the gift, it will be considered as sale.

Jeff Davis

W. Jeff Davis

BELL & DAVIS PLLC
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From: wsbarp-bounces at lists.wsbarppt.com <wsbarp-bounces at lists.wsbarppt.com> On Behalf Of Kaitlyn Jackson
Sent: Monday, April 18, 2022 10:39 AM
To: WSBA Real Property Listserv <wsbarp at lists.wsbarppt.com>
Subject: Re: [WSBARP] QCD and REET question-another one

I'm not 100% sure but here is what I think makes the most sense: 

1. QCD SIL onto the title with clients "for love and affection" and then;

2. SIL refinances the property and removes clients off title while they gift the equity for love and affection (equity is value of property - outstanding mortgage amount). 

Some excise tax will be owed on the consideration for the transfer (I believe this would be the value of the outstanding mortgage being refinanced) while the equity is non-taxable as it is a gift. 

Would love to hear other thoughts. 

Kaitlyn

On Mon, Feb 7, 2022 at 10:20 AM Athena Dickerson <athena at detsparlaw.com <mailto:athena at detsparlaw.com> > wrote:

Hi list serve mates:

Wondering if anyone has any suggestions on how best to structure the following to avoid/minimize REET and other implications

Long story short, my clients saved their sister-in-law’s house from foreclosure about 10 years back.   Because of where the bank was in the process, etc they couldn’t just cosign or loan her money, so they bought the property with a PSA, have a modest mortgage on the property, and have let SIL live there for the last 10 years.    So, my client and her husband are the only ones on title and the mortgage is in their name only.  For the last 10 years, that my clients have owned the property SIL has been paying what she can, sometimes it’s enough to cover the mortgage, sometimes not.  Now SIL is back on her feet and my clients want to facilitate getting the property back in her name.   The lender wants to quit claim SIL back on (which would put my married clients and SIL on title) and then after that (transaction 1) refi the property (with only SIL, removing my clients from the mortgage) and simultaneously quit claim my client and her husband off (escrow will handle this last part, Transaction 2).   In other cases, I have used the clearing title exception to REET but in this case that doesn’t fit the facts.  I am trying to avoid excise tax as much as I can or getting audited.   The property has appreciated by quite a bit FYI.

Trying to decide how to structure the first transaction that makes the most sense- the QCD adding SIL on and accompanying REETA.  It seems each exemption I want to use, at least in part, doesn’t quite fit right.    Thoughts?  I know at some point there will likely be some tax implications but wondering how to best structure this, at least the first part.

Athena Makratzakis Dickerson

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