DEAR BOB: I recently sold my house. My wife died three years ago. Her name is still on the deed. How do I get her name off the title and figure my capital gains tax on my income tax returns? –Harold McD.
DEAR HAROLD: Presuming you inherited your late wife’s half of the house, you have a new stepped-up basis as of the date of her death.
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Depending on the details, you might owe little or no capital gains tax. Please consult a local real estate attorney and tax adviser to sort out the details.
SENIOR-CITIZEN REVERSE MORTGAGE AVAILABLE ONLY ON PRIMARY HOME
DEAR BOB: My wife and I own three properties. We rent two and live in the other. I am 68 and she is 61. Can we obtain a reverse mortgage on our home while owning two rental properties? –Robert U.
DEAR ROBERT: The fact you and your wife own two rental properties is irrelevant. The reverse mortgage is secured only by your primary residence. If you wish, you can own 100 rental properties and still obtain a reverse mortgage.
However, you have a slight problem. Your 61-year-old wife is not old enough to obtain a reverse mortgage on your principal residence. She must be at least 62 to qualify.
This problem can be solved by waiting until she becomes 62 before obtaining a reverse mortgage, or, if she is willing, she can remove her name from the title to the home so you can qualify for a reverse mortgage.
This might be a better alternative because at age 68 you can qualify for a larger reverse mortgage than if you wait until she becomes 62. When two co-owners qualify for a reverse mortgage, the entitlement is based on the age of the younger applicant.
A REAL ESTATE BUYOUT IS NOT A TAX-FREE GIFT
DEAR BOB: Twenty years ago my husband’s parents put their home into the names of my husband and his brother. The parents died a few years ago. The house has been vacant since. Now my husband’s brother decided to buy out my husband’s half of the house based on an appraisal. That is acceptable to my husband. For tax purposes, can my husband treat this transaction as a monetary gift with no tax consequences rather than a taxable sale? –Cathy J.
DEAR CATHY: No. The brother is buying out your husband’s half interest in the house. That is not a tax-free gift but rather a taxable sale on which your husband will owe capital gains tax.
Because your husband received a gift of a 50 percent interest in the house 20 years ago, he took over half the probably very low adjusted cost basis of his parents. The tax result will likely be a large capital gains tax.
This situation is another example why it is usually better to inherit property and receive a stepped-up basis than to receive a before-death gift. Your husband should consult his tax adviser.
The new Robert Bruss special report, “Five Easy Ways to Buy Your Home and Investment Property for Nothing Down,” 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 www.BobBruss.com. Questions for this column are welcome at either address.
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