Jewish World Review May 1, 2000 / 26 Nissan, 5760
Can primary residence be rented out?
DEAR BRUCE: When we were transferred to another city, we attempted to sell our home but had absolutely no luck. We had double payments for three months. Finally, in desperation, we had to lease our previous home with the option to purchase. At the end of the year, the tenants did purchase.
The question is, even though we leased it, this was our primary home, so will we have to pay taxes on the sale? -- L.E. Reno, Nev.
DEAR L.E.: My understanding is that if you were actively trying to sell a house and you rented it only because of financial pressure, then you are entitled to the exclusion that you are allowed -- if this was your principle residence for the last two to five years.
DEAR BRUCE: I paid a credit-card bill with a check for $61. Shortly afterward, I received some overdraft notices from my bank, which I knew were mistakes. As it turned out, the check for $61 was honored at the bank for $601. My bank finally recognized the mistake and contacted the credit-card company. I was reimbursed and letters were given to each of the people whose checks had bounced, letting them know that the mistake was not mine.
This is the kind of thing that can happen. People think banks don't make mistakes, but everyone makes mistakes -- including credit-card companies and banks. Please warn your readers. -- C.H., Marysville, Kan.
DEAR C.H.: You are absolutely right. Everyone makes mistakes, and everyone's pencils come with erasers. When an institution declares, "We never make a mistake," you know they are vulnerable.
DEAR BRUCE: We are in the process of selling my husband's family farm residence, not the farm. His mother is living in an assisted-living home. We want to know how to be sure that he gets all of the money, as he is her only heir. What is the best way to handle this transaction? -- G.H., Shelbyville, Ind.
DEAR G.H.: If possible, a better idea would be to keep the entire property in his mother's name until she passes away. That way, the value would be stepped up to its current value. If you have her sell the house now, she would be eligible for the exemption on the primary residence, but this would not cover the remainder of the farm land, which may have appreciated materially since it was acquired.
It would be far better to pass it along in a will than to sell it
Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).
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