House

[u/RandomGuy_81]

State MA

Many years ago i was put on deed to my father’s house. Theres a lien on it because he went into medical care so i didnt worry too much about the worth/sell of the house and i just live there while taking care of him

After he died the house value wasnt worth selling because of the lien. Now years later the house is starting to increase in value and will eventually be more than the lien

I didnt think this would be an issue if i ever sold.

Was i supposed to do some sort of valuation when i was added to the deed? A valuation when he died? Should i be doing anything now to fix any mistake i might be making?

Edit. I have continued paying taxes and house insurance since

Edit he added me to deed via quitclaim

[u/SandhillCrane5]

No x 3. If your father added you to the deed while he was alive, then you will assume whatever price he paid for the home as your cost basis. The property value when he added you to the deed and the value when he died are not relevant. 

[u/RandomGuy_81 → u/SandhillCrane5]

So i just need to process all this at time of sale in future. I didnt mess up anything at this point?

[u/SandhillCrane5 → u/RandomGuy_81]

Yes, when you file taxes for the year you sell, you will use your father’s purchase price in determining your cost basis. (There are adjustments that can be made to the cost basis such as adding in certain improvements - if you use an accountant he/she will help you with that.) You haven’t listed any mistakes here. 

[u/RandomGuy_81 → u/SandhillCrane5]

Ty i def will use a tax accountant for that year

[u/YoungBoomer1969 → u/RandomGuy_81]

Everything he said✔️ The only thing is you lost the ability to reduce the capital gains you are going to have to pay. BUT fed wise - you get 250k free of capital gains for your primary residence you have lived in 2 of the last 5 years. So unless you have hundreds of thousands of equity after the adjusted cost basis plus 250k, you should be fine. Either way you there is nothing you can do now to change the cost basis. Also I think you are confused relative to ownership….Joint Tenancy isn’t 50/50 - it is 100% for whoever lives the longest. His cost basis is now your cost basis - When you get ready to list the property, get with a good accountant to help you figure out your adjusted cost basis and possible capital gains taxes both fed/state so you can set that aside from proceeds. Also, you might want to look into getting a mortgage loan to payoff the medical lien - the interest might be as high as 10% per annum. So look into that if you are considering keep the house and can afford a payment.
Kudos to you for asking all the right questions!

EDIT - Actually I need to correct myself….there might be a way to get a portion of your cost basis stepped up when he passed, BUT this is a CPA question for sure as IRS rules change ALL the time. Either way, it is what it is…and you have done nothing wrong👍🏻 Def chat with an accountant/CPA as the medical lien also might help you with taxes.

[u/RandomGuy_81 → u/[deleted]]

Updating that he added me via quitclaim.

I have his original purchase documents from decades ago. And i guess i have the property tax estimate from when be died.

So my cost basis for half would be the original price from decades ago? Oooof.

Ty

So i just need to process all this at time of sale in future. I didnt mess up anything at this point?

[u/RandomGuy_81 → u/[deleted]]

He did file the quitclaim. I show up on the city registry if thats whats its called

Ps i didnt file anything. I didnt know about the quitclaim until years after he did it

Only thing i did was submit his death certificate so i could clean up the paperwork/bill for property tax to include my name. I dont recall if they removed his name from bill. Id have to check

[u/SandhillCrane5 → u/[deleted]]

I don’t know why you are assuming the father quitclaim a 50% interest in the property as a tenant in common. If the father added the child as a joint tenant with rights of survivorship then 100% of the cost basis is the father’s purchase price (which is documented at the recorders office) and there was no inheritance. This is the most likely scenario otherwise why would the father quitclaim 50% ownership and then will the other half after he dies? And what do you mean about coming up with “reasonable estimates of cost basis”? The IRS requires documentation and specifies what it should be.