Single mom seeks loophole in $250K home-sale exemption

DEAR BOB: I am a single mom struggling to make ends meet.Fortunately, I bought my home in 1999 for $315,000. Today, it is worth close to$700,000. I am considering selling and moving to a smaller home in aless-expensive neighborhood, hoping to eliminate the mortgage payments. But Iwas recently dismayed to learn that because I am single I can only exclude$250,000 profit from capital gains taxes, while my friends who have husbandscan exclude $500,000. Is there any way around this limitation? Can I add my sonto the title when he turns 18? Would it be wiser to sell my home without makingcostly cosmetic upgrades such as new carpet and paint? –Cathy J.

DEAR CATHY: Sorry, without a spouse around the house, thereis no easy way to increase your Internal Revenue Code 121 principal residencesale exemption from $250,000 to $500,000.

Purchase Bob Bruss reports online.

But your son need not be 18 to add his name to your title.Minors can hold title; they just cannot convey title.

However, for him to qualify for an additional $250,000 homesale tax exemption, he must own and occupy the home as his principal residenceat least 24 of the 60 months before its sale. If you add him to your title now,please be sure you don’t plan to sell the house before he becomes 18 when hecan convey title.

If he is now 16 or 17 years old, and if he will be 18 orolder when you plan to sell the home, you could add him to the title now so hecan qualify in 24 months for the extra $250,000 principal residence sale taxexemption. Your tax adviser or real estate attorney can give you more details.

As for fixing up your home before sale with new carpet andfresh paint, those are two of the most inexpensive and profitable cosmeticimprovements you can make. Although I advise against making major renovationsbefore sale, such as kitchen remodeling, which usually doesn’t add much netmarket value, cosmetic improvements usually pay off handsomely.


DEAR BOB: What proof do I need to show a property was myprimary residence for three of the last five years so I can take advantage ofthe $250,000 capital gain exemption when I want to sell it? –Rick H.

DEAR RICK: Just in case the Internal Revenue Service auditsyour tax return for the year of your principal residence sale, you should beprepared to prove you owned and occupied it at least 24 of the 60 months beforeits sale (not three of the last five years).

Excellent evidence includes paid utility bills in your name,voter registration, auto license registration, nearby employment, local bankaccounts, driver’s license at the residence address, filing income tax returnsfrom that address, and other indications of principal residence occupancy. Formore details, please consult your tax adviser.


DEAR BOB: My husband insists our home will only sell if wevacate it. This would necessitate having two mortgages until our old homesells. What do Realtors advise? I think our house will show well. –Susan I.

DEAR SUSAN: Your listing agent can best answer thisquestion. He or she can objectively advise if your home will sell for topdollar with your furnishings remaining, or if you should move all your”stuff” out.

If you have lots of old-fashioned furniture, or if the houselooks cluttered, it is best to move out before putting your home on the marketfor sale. Or if the house has smells, such as from cooking, smoking, or pets,it’s best to move out and correct the problems before listing your home forsale.

A vacant house without furniture often makes the rooms lookbigger, especially if they are freshly painted and have new wall-to-wallcarpets or sparkling hardwood floors.

Your listing agent can advise if your home will sell easiestby having it professionally “staged” after you move out. Home buyersare notorious for their lack of imagination. Spending a few hundred, or even afew thousand, dollars on “staging” your home for sale can be a veryprofitable expense.

The new Robert Bruss special report, “Pros and Cons ofFast and Slow House Flipping for Big Profits,” is now available for $5from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at1-800-736-1736 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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