DEAR BOB: My daughter and I will soon be inheriting a rental property from my deceased husband. She will be 18 in four months. How long do we have to sell the property before we are hit with capital gains tax? Can we sell before she is 18? – Bibi K.
DEAR BIBI: If title to the inherited property was in your deceased husband’s name alone, you and your daughter’s new stepped-up basis will be the property’s market value on the date of his death (or alternate date used by his estate).
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Because your daughter is a minor, she can receive title to real estate but she can’t convey title until she is 18 (without a court-appointed guardian). Waiting at least four months to sell the property shouldn’t be a problem.
The only taxable capital gain might occur if the property is sold for a net sales price that exceeds its new stepped-up basis to market on the date of your late husband’s death.
For example, suppose the property was worth $200,000 on the day your husband died. That will be its new stepped-up basis for you and your daughter as co-owners.
If you are fortunate to sell the property for $210,000 net after selling expenses, your taxable capital gain would be only $10,000 (currently taxed at a maximum federal rate of 15 percent). For full details, please consult your tax adviser.
CAN CONDO OWNER’S ASSOCIATION PROHIBIT MULTIPLE OWNERSHIP?
DEAR BOB: Please confirm or deny that our condominium owner’s association cannot legally prohibit an owner from buying as many condo units as he wants. We are updating our CC&Rs (conditions, covenants and conditions) and this is the advice we were given. One owner in our condo complex owns four units and we find this very distressing – Kay Y.
DEAR KAY: You make me feel like a criminal being cross-examined on the witness stand in court. I’m sure you didn’t intend to do so.
If your condo association CC&Rs prohibit one owner from acquiring more than a specific number of units, I don’t see how the homeowner’s association can legally enforce such a prohibition.
In many condo associations, especially when the complex is new, the builder or developer often retains several condos either as investments or because he can’t find buyers.
If your condo association enacts a CC&R prohibition against multiple ownership, it appears to be unenforceable. For details, please consult a local attorney who is experienced with condominium laws.
CAN NEW LOAN SERVICER CHANGE MORTGAGE PAYMENT DUE DATE?
DEAR BOB: My neighbor’s mortgage had her monthly mortgage payment due on the 15th day of each month. Then the loan was sold to another lender who changed the payment due date to the first of each month. Is this legal? – Nathan S.
DEAR NATHAN: A mortgage lender cannot unilaterally change the monthly payment due date on the promissory note without the borrower’s approval. I suspect your neighbor is a bit “confused.”
She was probably paying her old mortgage loan servicer by the 15th day of each month. But her payment was probably due on the first day, with a 15-day grace period (most home loans have a 10- or 15-day grace period).
The new loan servicer informed your neighbor the payment is due on the first. However, if she reads her promissory note, it probably says the payment is due on the first but a late payment fee won’t be charged until after the 10th or 15th day of each month. Some states, by law, have an automatic grace period of 10 or 15 days even if it is not mentioned in the promissory note.
The new Robert Bruss special report, “Pros and Cons of Earning Big Profits from Foreclosures and Bargain Distress Properties,” 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. Questions for this column are welcome at either address.
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