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Here's a question for someone a little more familiar with real estate law than I am. Background My parents owned two parcels of land that they had a mortgage balance of about $20,000 on in 1997, and they had fallen on somewhat hard times to the point where they were no longer able to make the payments. I had the money set aside to pay off the mortgage, and after discussing it with my parents I agreed to pay it off the mortgage on the condition that I be given ownership of the parcels with my parents, using joint tenancy with full rights to survivorship. One of the parcels has a house on it that I was living in and still do, and I didn't want to create an issue with my siblings having any claim to my house when my parents passed away. My parents quit claim to myself and themselves. In late 2008 my father quit claim to me and in November 2009 my mother quit claim to me on both parcels. In December 2009 my parents were audited on their tax returns for 2006 and 2007 and the IRS disallowed all deductions and credits (Its in tax court right now so I'm not going to get into any more details). This resulted in a federal tax lien for around $400,000 being filed against my parents. The current situation I applied for a farm operating loan with the USDA in November 2009 and was set to close around the end of December, when the title company did the title search the underwriting felt that the quit claim deeds my parents executed were not valid because, even though they both quit claim on the properties the underwriter felt that the title on the property was tenancy in entirety, which to my understanding would have been true if they were the sole owners, however, since I had ownership since 2007 as well I felt the title was joint tenancy. I looked for some case law but wasn't able to find anything that related specifically to my situation. I'm really just looking for case law or something I can show the underwriter that shows the lien does not attach to the property.
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Feb 15, 2010 02:10
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entris posted:Well, if your parents originally owned the property as tenants by the entirety, then the only way for you to get an interest would be for both of them to jointly execute a deed transferring an interest to you. If that first quit claim deed was invalid, or it didn't have both of them on the deed, then they didn't break the tenancy by the entirety. It was on the second deeds that they quit claim only to me individually. entris posted:Edit: There may be an issue of a "voluntary" or "fraudulent" conveyance. Your parents transferred the property to you after 2006 and 2007, when they allegedly underpaid their federal taxes. If it looks like your parents purposefully transferred the property to you because they thought they might get caught for tax underpayment, then that transfer might be disregarded in your jurisdiction. I'm a little hazy on this part of the law, so take this with a big grain of salt, but between 2006 and 2009, it looks like your parents underpaid their taxes, transferred a big chunk of property to you, and then got audited and penalized by the IRS. "Voluntary" and "fraudulent" conveyances are used by debtors to try and get assets outside the reach of creditors, which is what the IRS has become. I'm not saying your parents did this, but the timing certainly raises a red flag. If a court in your jurisdiction concludes that your parents were trying to use the quit claim deeds to prevent the property from falling into the hands of creditors, the transfers can be voided. There is not really an issue of voluntary or fraudulent conveyance, because the transfer was done before any assessment of underpayment was made. The liens list the date of assessment as 12/17/2009, and since I did pay money for the property, my interest predates the assessment. It could look as though it was transferred fraudulently, however the transfers were conducted before any audit even began. I guess the big issue right now is if the deed in 2007 really changed the title from tenancy in entirety to joint tenancy or not.
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Feb 15, 2010 05:12
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Solomon Grundy posted:Yikes - I wouldn't dismiss the prospect of the IRS attempting to unwind the transaction as a fraudulent transfer. Federal tax liens are nasty business. I'm not dismissing it out of hand, however, the IRS thing isn't set in stone, as I said, it's in tax court right now, and I'm pretty certain the court will at least order the change of venue that my parents filed during the audit to stand, which the examining officer chose to ignore.
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Feb 15, 2010 15:45
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Dru posted:Three things that may assist you or may not: 2.) I even took steps to ensure any beneficiaries of my parents estate would not interfere with the property (which is farmland that I farm), so I convinced my siblings to sign a notarized agreement giving me exclusive right to use (e.g. farm) the property for 99 years, disavowing any right to the proceeds or to interfere with me. 3.) The 2007 deed had both my parents as signatories. I am speaking with an attorney on Wednesday about this to get a professional opinion, so I'll let you know what he thinks then too.
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Feb 16, 2010 02:41
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