DEAR BOB: I own two houses in trust. One is in WestVirginia. When my husband moved out of that house, he signed the papers totransfer title to me. I now live there for several months each year, but it isnot my permanent residence. I cannot claim a homestead exemption there becauseI claim a Florida homestead. Can I use the tax-free $250,000 exemption on theWest Virginia house if I lived there 24 months during the past five years?–Elinor T.
DEAR ELINOR: I presume by holding title “intrust,” you mean in a revocable living trust. If title to the residencesis held in any other type of trust, such as an irrevocable trust, you are noteligible for the principal residence sale tax benefits of Internal Revenue Code121.
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For the sale of the West Virginia house to qualify for theInternal Revenue Code 121 principal residence sale tax exemption up to $250,000(up to $500,000 if your spouse also qualifies and you file a joint tax return),you must have owned and occupied it as your principal residence an”aggregate” 24 of the 60 months before its sale. The 24 months neednot be continuous.
However, it must truly be your principal residence duringyour 24-month occupancy time. If audited by the Internal Revenue Service, youmust be able to prove principal residence indications such as a local bankaccount, car registration, driver’s license, voter registration, employment,and filing income tax returns from that address.
From your description, especially since you have a Floridahomestead, it sounds like the West Virginia house doesn’t qualify for IRC 121principal residence sale tax savings benefits. For more details, please consultyour tax adviser.
CAN CONDO DIRECTORS HOLD AN INQUISITION OF NEW BUYERS?
DEAR BOB: I recently purchased a condominium. I received thecondo association documents, along with an application to fill out. I wasshocked as I own two other condos and was never asked to fill out anyapplication to purchase a condo. This is not a cooperative apartment. I feelsome of the questions are intrusive, such as what is or was your lastoccupation, household income, and your net worth? Then it is up to the condoboard of directors to accept or deny my application. I presented my financialdata to the mortgage company, but I do not feel this is the business of thecondo board who are my future neighbors. Shouldn’t the real estate agent havewarned me about this? –Shirley B.
DEAR SHIRLEY: Yes, the real estate agent should have clearlyshown on the MLS (multiple listing service) information that buyers are subjectto approval by the condo association board of directors.
Like you, I have never encountered a situation like this.But I have heard there are a few condo associations that hold such inquisitionsof new condo buyers.
Frankly, I wouldn’t want to buy a condo in that complexbecause it could make the condo very difficult to resell in the future.
A major reason why cooperative apartments can be so hard tosell, and why they sell for less than comparable condominiums, is most co-oppurchases are subject to approval by the board of directors, which doesn’t haveto give any reason for rejecting a buyer applicant.
MUST HEIR WAIT TO TAKE TITLE UNTIL PROBATE IS COMPLETED?
DEAR BOB: I am inheriting my late mother’s home. It iscurrently in probate. Is it best to wait for probate to finish to take title?Are there any tax consequences to taking title before or after probate iscompleted? –Lorraine T.
DEAR LORRAINE: You can’t receive marketable title until theProbate Court approves the title transfer to you. If there are income or estatetaxes to be paid for the decedent, those taxes must be paid by the estate beforeestate assets can be distributed to the heirs.
However, the probate estate need not be closed beforeproperty titles can be transferred. Title to the home can be transferred to youby the Probate Court although the estate might remain open for further proceedingson other estate matters. Some estates remain open for many years.
Now you know why I recommend property owners transfer titleto their revocable living trusts so, after their demise, the assets can bepromptly distributed without probate costs and delays. Presumably your motherdied without a living trust or a will so probate proceedings were required. Forfull details, please consult a probate attorney.
The new Robert Bruss special report, “How to Sell YourHouse or Condo for Top Dollar With or Without a Real Estate Agent,” 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
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Copyright 2006 Inman News