Q: Is transferring a home between parent and child exempt from the due-on-sale clause if it has 5 rooms, but is a duplex?
My mom owns a home in California with two mortgages and she wants to transfer it to me. The house is a duplex. She resides on one side with three bedrooms and the renters live on the other side with two bedrooms. She collects rental income and has been reporting it on her schedule E tax filing for several years now.
A: No, the transfer from a parent to a child is not exempt from the due-on-sale clause in the deed of trust. Depending on the reasons for this transfer, your mother can still make this transfer by transfering title to both of you as joint tenants. This may have gift tax consequences. Or, your mother can transfer the property to a trust where she is the beneficiary and you are the heir. There is an exemption from reassessment between parent and child for property tax purposes, but it is limited to $1M lifetime.
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