DEAR BOB: I am an avid reader, but have never seen you write about an even exchange of properties. My son and I both own rental houses. Both houses are of equal value, paid for, with no mortgage on either one. No cash will be involved in the transaction. I want to exchange my house for his rental house so my wife and I can then move into it; it is a one-floor house, whereas our current home has two stories. For health reasons, I need to live in a one-story house. If we make this trade, will there be any Internal Revenue Service complications? –Justin D.

DEAR JUSTIN: There is no problem with an even exchange of one rental house or another rental house such as you contemplate under Internal Revenue Code 1031. However, because you are “related parties,” if either of you sells the property acquired in the tax-deferred exchange within 24 months after acquisition, your sale profit will be taxed back to the original owner.

Purchase Bob Bruss reports online.

Also, you should continue renting the house you acquire in the trade for at least six to 12 months, thus showing rental investment intent. After that, you can convert it into your personal residence by moving in. For full details, please consult your tax adviser.


DEAR BOB: My wife and I bought our home about two years ago. On the mortgage papers, I am the only person on the hook, but both our names are on the title. We are living together normally, but I was thinking I would like the house title to be in my name alone. I didn’t talk to my wife about this. How can I change the title to have my name alone on the house? –Guy G.

DEAR GUY: You can’t. To remove your wife’s name from the home’s recorded title, she will have to sign a quitclaim deed to you. If you want to keep peace at home, I suggest you drop that idea.


DEAR BOB: A few weeks ago you had a letter from a couple who asked if they should pay off their 5.5 percent interest-rate mortgage with a lump sum of cash they received. I agree with your advice not to pay off that desirable mortgage, but for different reasons. You are correct that, presuming they have taxable income, their after-tax interest rate is only about 3.5 percent. However, they will have taxable interest or other income from their cash sitting in a bank or mutual fund. More important, if they pay off the mortgage but unexpectedly need cash, they can borrow on their home equity. But that isn’t always easy, especially for retirees living on a limited income or if they are in poor health when the money is needed. However, you neglected the priceless “psychic benefit” of not having to make a mortgage payment each month. –Bennett W.

DEAR BENNETT: Thank you for agreeing with me not to prepay a low interest rate mortgage, but for different reasons.

The new Robert Bruss special report, “Pros and Cons of Fast and Slow House Flipping for Big Profits,” 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 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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