Real Estate Q & A Session Addresses Taxes, Intrusive Condo Boards and Probate Law
The following questions and answers were taken from a Q & A session with Robert J. Bruss, a licensed real estate broker and industry expert who responds to consumer housing inquiries from across the country in a weekly column.
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Q: I own two houses in trust. One is in West Virginia. When my husband moved out of that house, he signed the papers to transfer title to me. I now live there for several months each year, but it is not my permanent residence. I can’t claim a homestead exemption there because I claim a Florida homestead exemption. Can I use the tax-free, $250,000 exemption on the W.V. house if I lived there 24 months in the past five years?
A: I presume by holding title “in trust,” you mean in a revocable living trust. If title to the residences is held in any other kind of trust, such as an irrevocable trust, you’re not eligible for the principal residence sale tax benefits of Internal Revenue Code 121.
For the sale of the West Virginia house to qualify for the primary residence tax exemption up to $250,000, you must have owned and occupied it as your principal residence an “aggregate” 24 of the 60 months before its sale. The 24 months need not be continuous. However, it must truly be your principal residence during your 24-month occupancy time. If audited by the IRS, you must be able to prove residence with items such as a local bank account, car registration, driver’s license, tax returns filed from that address, etc. Especially since you are getting the Florida property tax break, it sounds like the West Virginia house doesn’t qualify for IRC 121 principal residence real estate tax savings.
Q: I recently purchased a condominium. I received the condo association documents, along with an application. Since I own two other condos and never had to fill out any application to purchase one before, this came as a surprise to me. This is not a cooperative apartment. I feel some of the questions are intrusive, regarding my last occupation, income, and net worth. Then it is up to the board whether to accept my application. I feel this is the business of my mortgage lender, not the condo board who are my future neighbors. Should the real estate agent have warned me about this?
A: Yes, the agent should have clearly shown on the MLS (multiple listing service) information that buyers are subject to approval by the condo association board of directors. Like you, I have never encountered a situation like this, but I have heard of a few associations that hold inquisitions of new condo buyers. I would be hesitant to buy into that complex, as it could make the unit very difficult to resell — when a purchase is subject to approval by the board of directors, there doesn’t have to be a reason for rejecting an applicant.
Q: I am inheriting my late mother’s home, which is currently in probate. Is it best to wait for probate to finish to assume title? Are there any tax consequences to claiming title before or after probate is completed?
A: You can’t receive marketable title until the Probate Court approves the title transfer to you. If there are income or estate taxes to be paid for the decedent, those taxes must be paid by the estate before assets can be distributed to heirs. I recommend property owners transfer title to their revocable living trusts so, after their passing, assets can be promptly distributed without probate costs and delays. Presumably your mother died without a living trust or will, so your state’s probate proceedings are required before transfer of ownership occurs.
