DEAR BOB: My home of 30 years has become too large for me tomaintain. I would like to purchase a two-family duplex so I can have somerental income for my retirement years. I have been told it is possible to avoidthe huge tax on the sale of my home by purchasing a building of equal value.But if I pay the sale tax, I cannot afford to buy a duplex. I am a senior citizenand need to supplement my income. Please clear this up for me –Natalie M.
DEAR NATALIE: If you are a single principal-residenceseller, you qualify for up to $250,000 tax-free capital gains. Internal RevenueCode 121 requires you to have owned and occupied your principal residence atleast 24 of the 60 months before its sale. If you are married and your spousealso meets the 24-month occupancy test, then you qualify for up to $500,000tax-free principal-residence sale profits.
Purchase Bob Bruss reports online.
But your plan to buy a duplex with the sales proceeds isirrelevant.
If you own your home free and clear, or nearly so, have youthought about a reverse mortgage to provide lifetime tax-free income so you canremain in your home? A reverse mortgage can solve your cash-flow problem.Details are in my special report, “The Whole Truth About Reverse Mortgagesfor Senior Citizen Homeowners,” available for $5 from Robert Bruss, 251Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instantInternet delivery at www.BobBruss.com.
ADDING DAUGHTER AND SPOUSE TO TITLE WAS A BIG MISTAKE
DEAR BOB: A few years ago, we bought a vacation home andadded our daughter and son-in-law to the title so they could claim part of themortgage interest and property taxes they paid. Since then, the vacation homehas greatly appreciated in market value. Guess what? They are now getting adivorce. The son-in-law (who we still like very much) claims a one-fourthinterest in the vacation home. Is this legal? –Ron R.
DEAR RON: Yes. If he is a one-fourth owner of the vacationhome, he remains a one-fourth owner until the divorce is final and the assetsare divided between the two ex-spouses.
Unless you needed your daughter and her husband on thetitle to obtain mortgage financing at the time of purchase, now I’m sure yourealize it was a major mistake to add them to your title. At this time, thereis no way to undo that situation. In the divorce settlement, the ex-husbandwill somehow be compensated for his one-fourth interest in your vacation home.
STEPPED-UP BASIS APPLIES TO INHERITED PROPERTY
DEAR BOB: Until I started reading your educational columns,I had never heard about “stepped-up basis.” Does this mean, forexample, after my dad dies I will inherit his house at its current value and ifI sell it the next day I won’t owe any capital gain tax? –Nancy H.
DEAR NANCY: Presuming your dad leaves his house to you inhis will or his living trust, you will then receive it with a new stepped-upadjusted cost basis of its market value on the date of his death. For fulldetails, please consult your tax adviser.
The new Robert Bruss special report, “Probate PropertyProfit Secrets Revealed,” is now available for $5 from Robert Bruss, 251Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instantInternet delivery at www.BobBruss.com.Questions for this column are welcome at either address.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
Copyright 2006 Inman News