Marriage easiest path to full real estate tax break

DEAR BOB: My partner has owned his house for 22 years. Ihave lived in the same house for 12 years. We plan to sell the house next year.Are we eligible for the $500,000 principal-residence-sale tax exemption?–Ronald S.

DEAR RONALD: If your name is not on the deed, for federalincome tax purposes you are not a co-owner entitled to the $250,000 exemptionthat a principal-residence owner can claim thanks to Internal Revenue Code 121.Of course, that’s presuming the owner has owned and occupied the principalresidence at least 24 of the last 60 months before sale.

Purchase Bob Bruss reports online.

A qualified married couple filing a joint tax return in theyear of home sale can qualify for up to $500,000 tax-free principal-residencesale profits, but only one spouse’s name need be on the title. However, thereis no similar exemption for partners who are not married unless both names areon the title. For full details, please consult your tax adviser.


DEAR BOB: My stepmother has a life estate in the house whereshe and my late father lived together. After his death, his will provided alife estate for her. When she passes on, I am to receive the house. But she isletting the house run down badly. Each year I have to remind her to pay theproperty taxes. Last year the taxes fell in arrears and the property was almostlost at a tax sale before she reluctantly paid. She has plenty of money butfeels it is a waste to spend money on the house that I will receive when shedies. Do I have any recourse to end this nonsense that has been going on foryears? –Ben S.

DEAR BEN: The terms of the life estate control your rights.You are the “remainderman.” All you can do is be sure the life tenantpays the property taxes, insurance and mortgage interest so the property is notlost by default.

Your one legal ground to terminate the life estate otherthan for nonpayment of those expenses is to prove your stepmother is committing”waste.” That means she is not maintaining the house.

However, proving “waste” is extremely difficult sodon’t expect a judge to order the life estate forfeited for waste unless thehouse becomes extremely run-down.


DEAR BOB: I own a condo that I rent to a mentally retardednephew at a very low rent. He receives disability income SSI checks and is ableto live alone. But he is not able to hold a job. Because the rent is so low, Iunderstand I cannot claim the normal rental property tax deductions such asdepreciation. Do I still have to report the low rent I receive? –Laura R.

DEAR LAURA: Yes. Rental income must be reported on ScheduleE of your income tax returns. When you file your income tax returns, you shouldlist all the applicable expenses such as for repairs, insurance, mortgageinterest, property taxes and depreciation.

However, because of the very low rent, you can’t claim anyloss deduction against your other ordinary taxable income. But the unused taxloss can be “suspended” for use in a future tax year. For details,please consult your tax adviser.

The new Robert Bruss special report, “How to BuyFixer-Upper Houses with Little or No Cash for Fun and Fortune,” is nowavailable for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or bycredit card at 1-800-736-1736 or instant Internet delivery at Questions for this columnare welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center

Copyright 2006 Inman News

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