DEAR BOB: Many years ago, my mother and her sister bought a rural property together as an investment. It turned out to be a very profitable farm property, which was rented to an adjoining farmer for a share of his annual crop profits. As a result, my mother and her sister received superb annual payments. However, my mother died in July 2003. Since then, her sister claims all the crop profits received from the tenant-farmer go to her. My mother left no will. As the only surviving child of my mother, shouldn’t I be entitled to half of the tenant rent? – Daniel D.
DEAR DANIEL: The answer depends on how your late mother and her sister held title to the property. If it was held in joint tenancy with right of survivorship, then your mother’s sister is the surviving joint tenant who is entitled to full ownership without probate. You then receive nothing.
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However, if they held title as tenants in common, then your mother’s title passes according to her will. Since she left no will, the state law of intestate succession determines who inherits her share of the property.
If you are her closest surviving relative, you probably inherit her share, including entitlement to the tenant farmer’s annual rent payments. For full details, please consult a local real estate or probate attorney.
TRADING DOWN IS NOT A TAX-DEFERRED EXCHANGE
DEAR BOB: For about 18 years, I have owned a rental four-plex. But I recently received an excellent unsolicited purchase offer from an adjoining owner, which I accepted. Having read your articles for many years about tax-deferred exchanges, I want to use my sales proceeds to acquire a rental house, which my sister wants to sell to me. However, my problem is the rental house is worth less than the sales price of my four-plex. I will use the extra cash proceeds to pay off credit card debt and reduce my home mortgage balance. Will this be a tax-deferred exchange for me? – Grace A.
DEAR GRACE: No. Internal Revenue Code 1031 requires tax-deferred exchanges of “like kind” rental or investment property be (1) an up-trade to a qualifying property of greater market value and (2) the up-trader receive no taxable cash or “boot,” such as net mortgage relief. Your situation clearly does not qualify for tax deferral. For full details, please consult your tax adviser.
REALTY AGENT SAYS BROKERAGE FEES ARE HATED BY AGENTS
DEAR BOB: Congratulations to you for exposing the corruption of some real estate brokerages for charging so-called administration fees, typically $200 to $500, to our home sellers and buyers. Fortunately, I work at an independent firm where our broker doesn’t try to extract such junk or garbage fees from our sellers and buyers. But real estate agents in my area hate their brokers who charge these unnecessary fees. However, many of these agents receive such high percentages of the commissions they bring into the office, typically 75 percent to even 90 percent, they hate to leave those firms. I just thought you should know we agents agree with you that brokerage administrative junk fees are a very bad idea – Jerome B.?
DEAR JEROME: We agree. The best recourse is for home sellers and buyers to strongly protest and refuse to pay those unnecessary 100 percent pure-profit junk fees. But many real estate agents will quickly agree to pay these fees for their clients rather than lose a listing or a prospective home buyer.
The new Robert Bruss special report, “Ten Easy Profit Methods for Your Home and Investment Property,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. (643 WORDS).
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