DEAR BOB: When title to a home is held in a living trust, is it important for the mortgage to also be in the name of the living trust? –James C.

DEAR JAMES: No. Only a very few enlightened mortgage lenders allow the living-trust trustee (the property owner) to sign the mortgage papers as trustee of the living trust.

Purchase Bob Bruss reports online.

Instead, most mortgage lenders insist the borrower momentarily take the title out of his or her living trust and put it back into the borrower’s name, so the mortgage or deed of trust can be signed by the homeowner and then recorded. This results in unnecessary recording fees, but many mortgage lenders still refuse to allow living-trust trustees to sign the mortgage documents as a trustee. For more details, please consult a local real estate attorney.


DEAR BOB: My husband and I lived in our home for three years before moving to our current residence. We presently rent out our old house, but we plan to sell it in a year or two to our adult daughter. She is willing to pay us market value. As we wish to claim that $500,000 principal residence sale tax exemption of Internal Revenue Code 121, is it legal to sell to our child and does the IRS impose any extra tax? –Lall R.

DEAR LALL: There are no special tax complications for selling a property to a relative. No law requires you to pay any extra tax for doing so.

However, I am very concerned about your time schedule.

To qualify for the principal residence sale tax exemption up to $500,000 for a qualified married couple filing a joint tax return (up to $250,000 for a single home seller), Internal Revenue Code 121 requires you or your spouse to have owned the home at least 24 of the 60 months before its sale, and both of you to have occupied it as your principal residence for the same time period. If you mess up, you lose this generous tax break. For full details, please consult your tax adviser.


DEAR BOB: I own a loft in a live/work building of 12 units. The building is 6 years old. Due to water leakage from the outside, the homeowner’s association authorized a special assessment to find the cause, fix it, and seek legal remedies against the builder. Can part of this assessment be deducted on my income tax returns? –Peter S.

DEAR PETER: From your description, it appears part of that special assessment qualifies as an “ordinary and necessary business expense” for the portion of your unit that applies to the business area of your work-live loft.

To illustrate, if you use 50 percent of your space for your business, and 50 percent for your personal living area, then you can justify deducting as a business expense 50 percent of the special assessment. For full details, please consult your personal tax adviser.

The new Robert Bruss special report, “How to Earn Your First Profit When Buying Your Home or Investment Property Right,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center


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