DEAR BOB: My wife and I bought our home a little over three years ago. According to the listing, it is supposed to be 2,083 square feet. The data was supplied by the realty agent. But the public records, confirmed with the county tax assessor’s office, show the recorded square footage is only 1,889. That’s quite a difference. Do we have good cause for legal recourse and damages because the square footage was misrepresented by the seller and/or realty agent? Should we have the house professionally measured? Should our agent have checked the square footage prior to the sale? – George W.
DEAR GEORGE: You didn’t say where the house is located and what the typical construction or valuation price per square foot is. But 194 “missing” square feet at $100 per square foot is $19,400. That’s not “petty cash.”
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Start with the seller’s and realty agent’s written representation. Did it include a disclaimer (as it should)? If it said something like “Information deemed reliable, but not guaranteed” then you are out of luck. Forget it.
If there was no such statement on your copy of the written evidence you have, your next step is to show you made your purchase offer based on the square footage of the house. This might be difficult to prove.
Just because the public records show only 1,889 square feet, that is not necessarily correct. You should hire a professional appraiser to measure your house. If it has unusual shapes, even two experienced appraisers might measure differently.
Because you waited three years, even if the statute of limitations hasn’t expired where the house is located, don’t get excited about possible lawsuit recovery. Chances of finding a good attorney to take your case on a contingency basis for a small amount ($19,400 in my example) are limited. Unless you have a very strong case, with large potential monetary damages, maybe you should forget it.
HOW LONG DOES $500,000 HOME-SALE EXEMPTION LAST AFTER SPOUSE DIES?
DEAR BOB: Regarding that $500,000 principal residence home sale tax exemption, how long does it last after a spouse dies if both spouses owned and lived in the home two of the last five years? – Norma B.
DEAR NORMA: The surviving spouse has until the end of the tax year of the spouse’s death to claim the Internal Revenue Code 121 principal residence sale tax exemption up to $500,000 for a qualified married couple filing a joint tax return in the year of the death.
But please don’t panic and rush to sell the home. Presuming you are the surviving spouse, if your deceased co-owner spouse willed his share of the house to you, then you have a new “stepped-up basis” on that share (or on the entire property value if it is in a community property state).
In most situations, you need not be concerned about the lost $250,000 exemption if you don’t sell the home by the end of this year. However, if your deceased spouse was not a co-owner on the title, then you should consider selling the home by the end of 2005 because you received no stepped-up basis as you continue to be the sole owner. Full details are available from your tax adviser.
TWO HOMES; ONLY ONE PRINCIPAL RESIDENCE SALE TAX EXEMPTION
DEAR BOB: I own two houses, about 75 miles apart. On weekdays, my wife and I stay in one house. On weekends, we go to the other house. We have been doing this for about two years. If we decide to sell our “weekend house,” can we qualify for that $250,000 or $500,000 tax exemption you often discuss? – Roger F.
DEAR ROGER: No. To qualify for the $250,000 principal residence sale tax exemption (up to $500,000 for a married couple filing a joint tax return), you must have owned and occupied the home at least 24 of the 60 months before its sale as your primary residence.
The house where you spend the weekdays appears to be your principal residence and the other house is your secondary home. Therefore, if you sell that second home, since you can’t meet the principal residence test, then your capital gain will be taxed at the 15 percent federal tax rate (or less), plus the state tax rate. Your tax adviser has full details.
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