Tax due on transfer from sibling to sibling

Dear Mr. Azrael:

Is there a relatively easy way to transfer ownership of property from one sibling to another? Also, are there any tax implications for either sibling in this transfer? Christine Beauregard Pasadena

Dear Ms. Beauregard:

The state of Maryland and local counties impose taxes on the transfer of real property. The state transfer tax is one-half percent of the purchase price. The state also imposes a recordation tax. The rate varies among counties but typically is 0.5 percent to 0.7 percent of the purchase price.

Baltimore and most counties also impose a transfer tax, which adds 1 percent to 1.5 percent of the consideration to the cost of transferring property.

If real estate sells for $100,000 in Baltimore County, transfer and recordation taxes of $2,500 (2.5 percent) might have to be paid at the time the deed of conveyance is recorded.

Where there is no consideration paid for the conveyance, transfer and recordation, taxes are payable on the full cash value of the property as determined for real estate tax purposes.

State and local laws provide numerous exemptions from transfer and recordation taxes. For transfers among relatives, the following "no consideration" deeds are exempt from transfer tax and, under most county laws, are exempt from recordation taxl:

Transfers to a spouse or former spouse.

Transfers to a son, daughter, stepson or stepdaughter.

Transfers to a parent or stepparent.

Transfers to a son-in-law, daughter-in-law, stepson-in-law or stepdaughter-in law

Transfers to a parent-in-law or stepparent-in-law.

Transfers to a grandchild or step-grandchild.

As you can see, transfers of real property to siblings do not benefit from an exemption. Consequently, even though there is no monetary consideration for the conveyance, transfer and recordation taxes would be imposed on the full cash value of the property for real estate assessment purposes.

I have seen tax-exempt transfers to siblings when a parent is living. For instance, a son transfers real estate to his parent (a tax-exempt conveyance). The parent, in a separate deed, transfers the property to a daughter (also a tax-exempt transaction). There is no guarantee, however, that the county recorder of deeds will not try to assess transfer and recordation on this two-step transaction on grounds that it is a taxable transfer among siblings.

Transfers of real estate from one sibling to another generally are not taxable for federal or state income tax purposes unless consideration is paid.

A no-consideration conveyance constitutes a gift. If the value of the gift exceeds $11,000, a gift tax return should be filed by the donor. Such a gift could have estate and gift tax consequences, particularly if the donor's estate exceeds $1 million. Your tax adviser should be consulted if you are planning to give away property of substantial value.