DEAR BOB: My husband and I are in the process of selling our primary residence and 21 acres of adjoining land that will probably be developed for houses by the buyer. We know our residence qualifies for the $500,000 principal residence sale tax exemption of Internal Revenue Code 121. But can we subdivide the property so the land portion can qualify for a tax-deferred exchange under Internal Revenue Code 1031? –Erin H.
DEAR ERIN: You don’t need to go through all the hassle of subdividing the property into two parcels. All you need to do is find a tax attorney or tax adviser, probably a CPA, who is familiar with Internal Revenue Procedure 2005-14. You will probably also need to hire an experienced appraiser to allocate the value between the residence and land portion of the sale.
Purchase Bob Bruss reports online.
This tax procedure allows you to claim, in one transaction, both the IRC 121 principal residence sale tax exemption and the IRC 1031 tax-deferred exchange benefits for the vacant land portion of the property.
NO EASY WAY TO GET EX-BOYFRIEND OFF THE HOME TITLE
DEAR BOB: My daughter purchased a house with her boyfriend in July 2005. She put up $17,000 for the down payment. He did not contribute anything. He has now decided that he needs to leave. My daughter worked very hard for that house and wants to keep it. How does she get his name off the deed? –Moya J.
DEAR MOYA: Why in the world would your presumably sane daughter add her boyfriend’s name to the house title when she paid the entire $17,000 down payment? I guess the old saying “Love is blind” is still true.
If your daughter can’t convince the ex-boyfriend to sign a notarized quitclaim deed to be recorded, she should consult a local real estate attorney who will probably advise bringing a quiet title lawsuit to have his name removed from the title.
Unless he contributed to the mortgage payments and other expenses, the judge will probably rule against him and quiet title in your daughter’s name. But this will be a very expensive lesson to learn.
REVERSE MORTGAGE IS BETTER THAN GIVING AWAY YOUR HOME
DEAR BOB: I am 76. Many years ago, I bought my home for $14,000. Today, it is worth close to $1 million. When I die, I want my two children to receive it. To get out of poverty, I would like to give it to them now in return for them paying me. What is the best way? –Warner J.
DEAR WARNER: If you are in good health and want to stay in your home at least five years, a reverse mortgage is ideal for your situation to get out of poverty. Then you can maintain control of your house, including the right to sell it if necessary to pay for your care in an assisted living center or other facility.
With a $1 million house, thanks to a reverse mortgage, you can live like a king without being dependent on your adult children to pay your income every month. When you pass on, you can name them in your will or, better yet, your living trust (to avoid probate costs and delays). Meanwhile, you still own your house and can do with it whatever you wish.
More details are in my special report, “The Whole Truth About Reverse Mortgages for Senior Citizen Homeowners,” 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 www.BobBruss.com. Questions for this column are welcome at either address.
(For more information on Bob Bruss publications, visit his
Real Estate Center).