Surviving spouse sells home, hits capital gains roadblock

DEAR BOB: I recently sold my house. My wife died three yearsago. Her name is still on the deed. How do I get her name off the title andfigure my capital gains tax on my income tax returns? –Harold McD.

DEAR HAROLD: Presuming you inherited your late wife’s halfof the house, you have a new stepped-up basis as of the date of her death.

Purchase Bob Bruss reports online.

Depending on the details, you might owe little or no capitalgains tax. Please consult a local real estate attorney and tax adviser to sortout the details.


DEAR BOB: My wife and I own three properties. We rent twoand live in the other. I am 68 and she is 61. Can we obtain a reverse mortgageon our home while owning two rental properties? –Robert U.

DEAR ROBERT: The fact you and your wife own two rentalproperties is irrelevant. The reverse mortgage is secured only by your primaryresidence. If you wish, you can own 100 rental properties and still obtain areverse mortgage.

However, you have a slight problem. Your 61-year-old wife isnot old enough to obtain a reverse mortgage on your principal residence. Shemust be at least 62 to qualify.

This problem can be solved by waiting until she becomes 62before obtaining a reverse mortgage, or, if she is willing, she can remove hername from the title to the home so you can qualify for a reverse mortgage.

This might be a better alternative because at age 68 you canqualify for a larger reverse mortgage than if you wait until she becomes 62.When two co-owners qualify for a reverse mortgage, the entitlement is based onthe age of the younger applicant.


DEAR BOB: Twenty years ago my husband’s parents put theirhome into the names of my husband and his brother. The parents died a few yearsago. The house has been vacant since. Now my husband’s brother decided to buyout my husband’s half of the house based on an appraisal. That is acceptable tomy husband. For tax purposes, can my husband treat this transaction as amonetary gift with no tax consequences rather than a taxable sale? –Cathy J.

DEAR CATHY: No. The brother is buying out your husband’shalf interest in the house. That is not a tax-free gift but rather a taxablesale on which your husband will owe capital gains tax.

Because your husband received a gift of a 50 percent interestin the house 20 years ago, he took over half the probably very low adjustedcost basis of his parents. The tax result will likely be a large capital gainstax.

This situation is another example why it is usually betterto inherit property and receive a stepped-up basis than to receive abefore-death gift. Your husband should consult his tax adviser.

The new Robert Bruss special report, “Five Easy Ways toBuy Your Home and Investment Property for Nothing Down,” is now availablefor $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit cardat 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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