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The Honolulu Advertiser
Posted on: Thursday, June 1, 2006

Quit-claim deed spurs tax query

By Greg Wiles
Advertiser Columnist


Got a money matter that's bugging you? We can try to answer it in the newspaper. Reach Akamai Money columnist Greg Wiles at 525-8088 or gwiles@honoluluadvertiser.com.

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Q. My parents signed a quit-claim deed adding me and my three siblings to the title of their home in 1994. They lived in the house until the last of my parents passed away in November 2004. We sold the house in March 2006.

To figure out our taxes, which date must we use? The date the estate was created, the date my parents passed away or when the house and cottage was built? Also, how do we get a fair market value of the home?

A. First, just a little background: a quit-claim deed is used to change the title to your property to add or remove someone.

As for what date to use to compute capital gains on the house, Xin Hong Yu, a Hono-lulu CPA, said you should use the date your last surviving parent passed away.

She said you and your siblings should have obtained a home appraisal at that time. But since it doesn't appear that you had one done, you should ask an appraiser to give their best estimate of the property's worth at the time. She said this will help show the Internal Revenue Service that you made an attempt to get the proper value.

You should check with a financial adviser or accountant to see if there are any special situations that apply in your case.

You also might look at IRS Publication 551, pertaining to the cost basis of assets. It includes information on how to value for tax purposes property that's inherited as well as property received as a gift.

Q: I retired as a flight attendant from Aloha Airlines in December. The company said it will make a distribution from my retirement account if I want it. But it said I can't roll it over into another retirement account of my choosing until it completes some accounting work. Is there any law setting a deadline on this?

A: Apparently not. Eric Smith, a spokesman for the Internal Revenue Service in Washington, said he wasn't aware of a statute on this.

"There isn't something that says if you leave employment it must be distributed to you within a certain amount of time," Smith said.

He suggested to double-check a summary of the plan to see if there are rules on this. It's within your rights to request a copy of the plan if you can't find yours.

Retirement plan members also are entitled to receive copies of plan annual reports.

You'll want to check with the plan administrator, who may or may not charge you for a copy.

The U.S. Department of Labor also has copies of these available for the cost of copying them.

Do you have a question about personal finance, taxes or other money matters? Reach Akamai Money columnist Greg Wiles at 525-8088 or gwiles@honoluluadvertiser.com