DEAR BOB: I recently purchased a condo with only myself on title. How can I get my fiancee on the title to enable her to take advantage of the tax deductions? If she pays half the mortgage, I feel this is only fair. Will check stubs for half the payment suffice? Or will I have to claim the full amount and reimburse her at tax time? – Christian L.
DEAR CHRISTIAN: Let me get the facts straight. You bought a condo in your name alone. But your fiancee is making half the mortgage payments.
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Are you, and/or she, both living in the condo? How far away is the wedding date?
The answers determine your tax status for deductions.
If this is a rental condo and neither of you live in it, only you can deduct the investment mortgage interest, property taxes, condo fees, insurance, etc. because only your name is on the title. Your fiancee would be a fool to pay half the expenses in such a situation.
Presuming you have a super-smart fiancee, I presume you are living in the condo and she also either lives there or there are plans to do so after the wedding. If you are not yet married and her name is not on the title, she is not entitled to any tax deductions she pays for your condo. The reason is she has no legal obligation to pay those expenses.
To entitle your fiancee to her half of the tax deductions for the condo mortgage interest and property taxes she pays, she must be on the title. You can sign a quit claim deed to her for a 50 percent interest and record that deed to accomplish this requirement.
After you are married, presuming you file a joint income-tax return, if she pays half the mortgage and property tax payments, her half of the payments become tax-deductible even if her name is not on the title. For full details, please consult your tax adviser.
NO MINIMUM OWNERSHIP TIME FOR TAX-DEFERRED EXHANGE
DEAR BOB: If I sell an investment property I have owned for less than a year, can I take advantage of tax rule 1031 and trade-up to another higher value property without paying capital gains tax on my profit? – Shawne R.
DEAR SHAWNE: Yes. Next question please.
Internal Revenue Code 1031 has no minimum ownership time for a property to be traded up into another qualifying investment or business property of equal or greater cost and equity. However, if you take out any “boot,” such as cash or net mortgage relief from the trade up, that amount will be taxable.
Theoretically, you can make a tax-deferred trade up in both equity and market value every day because IRC 1031 specifies no minimum holding time. As far as the tax law is concerned, a tax-deferred exchange is a continuous investment. For details, please consult your tax adviser.
UNDISCLOSED LAWSUIT IS A MAJOR PROBLEM FOR CONDO BUYER
DEAR BOB: We bought a condo on July 30, 2004. About three weeks later, we learned the condo association is involved in a lawsuit that was never disclosed to us before purchase. The CC&Rs (conditions, covenants and restrictions) and condo association meeting minutes were not delivered to us until Sept. 23. We now know the condo seller, his partner and the listing agent all knew about the lawsuit, which was filed by one of the sellers who is also on the association board of directors. We are uncertain what the lawsuit is about. Do we have any recourse? – Christina S.
DEAR CHRISTINA: Your situation shows why it is so important for condo buyers before purchase to obtain copies of the CC&Rs and at least the last six months’ condo association meeting minutes. Then read them!
Have you thought of asking the seller and the listing agent what the lawsuit is about? Maybe it is about something that won’t affect your condo’s market value.
At the very least, the lawsuit should have been disclosed to you in writing by both the seller and the listing real estate agent because it is a material fact affecting market value. For full details, please consult a local real estate attorney who is familiar with condominium law.
The new Robert Bruss special report, “Robert’s Realty Rules: How to Avoid the 10 Worst Home Seller Mistakes,” is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or by Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
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