Q: We own two houses, for which we meet the 24-out-of-last-60-month ownership and occupancy requirement. One house is now listed for sale. When it sells, we would like to move into the other house and sell it within the next several months. If we sell one house in 2006 and the other house in 2007, can we claim the tax exemptions on both houses?

Bonnie H.

Fernley, Nev.

A: No. But it sounds like you understand the Internal Revenue Code quite well. To qualify for the principal-residence sale tax exemption up to $250,000 (up to $500,000 for a married couple filing a joint tax return) you must own and occupy the home at least 24 of the last 60 months before its sale.

However, this tax exemption can be used only once every 24 months. When you sell one qualified house in 2006, then you can’t use the exemption again for at least two years.

Q: My 82-year-old mother owns her modest home, which is probably worth about $100,000. Title is in her name alone. I have shown her your articles about the benefits of holding title in a revocable living trust to avoid probate and in case she gets Alzheimer’s disease or a has severe stroke.

But she is very stubborn and thinks that because she has a small estate, worth less than $600,000, she doesn’t need a living trust or even a will. I am her only heir. Is there any other way to avoid probate when she dies?

Maurice H.

Salinas

A: A few states have probate court exemptions for small estates, but your mother doesn’t appear to qualify. I don’t know where the $600,000 amount came from, but there is no probate exemption for estates below that amount.

The two primary ways to avoid probate of estates are to hold real estate title in a joint tenancy with right of survivorship, or to hold title in a revocable living trust.

Especially because your mother doesn’t have a written will, after she dies, probate court proceedings will be required to distribute the estate according to the state law where she lives. At a minimum, probate court proceedings take six months, often much longer.

Q: I am considering buying a manufactured home on a quarter-acre parcel in a retirement community. These homes are very nice and much less expensive than comparable houses nearby. The big drawback, which my wife dislikes, is that they are located on leased land, and there is no option to purchase the lot. But the land lease extends for 49 years. I like the adjoining golf course, nearby shopping and low cost. Is the leased land a serious problem?

Henry R.

Punta Gorda, Fla.

A: Yes. Listen to your smart wife. Just as you are questioning the advisability of buying a manufactured home on leased land, you can be sure when you are ready to sell, buyers will also hesitate.

Presuming you can obtain a mortgage (some lenders refuse to lend on manufactured homes located on leased land), as the lease gets closer to its 49th year, your manufactured home will become worth less and less. After the 49th year, its ownership will revert to the landowner.

You and your wife probably won’t be around in 49 years, but your heirs won’t have much to inherit if only a few years remain on the land lease when you pass on. Other than the lower purchase price, nearby shopping and golf course advantages, I see lots of disadvantages to that situation.

Q: I am a single mom, with one son, planning to buy my first home in June. I am a schoolteacher claiming two withholding exemptions on my W-4. But my real estate agent told me I could increase my exemptions to increase my take-home pay to help me make the mortgage payments (which will be about $300 per month more than I now pay in rent). How soon before I buy in June should I do this?

Ms. B.Y.

Omaha, Neb.

A.: I suggest you wait to change your withholding exemptions until after you file your 2006 income tax returns. Then you will have a better idea of your income tax situation.

You can probably increase your exemptions (thus lowering the amount of income tax withheld from each paycheck) by one or two to help compensate for your mortgage payment beginning in June.

Q: My mother and I owned a house together as joint tenants with right of survivorship. She died about eight years ago, but her name is still on the title. Will that prevent me from selling the house?

Craig S.

Novato

A: Temporarily, yes. In most states, when one joint tenant with right of survivorship dies, all that is required to clear the title is for the surviving joint tenant to record a certified copy of the death certificate and an affidavit of survivorship.

This should be taken care of as soon as possible after a joint tenant’s death. Until you clear the title, you can’t convey marketable title. For details, please check with the local recorder of deeds where the property is located.

The new Robert Bruss special report, “How to Buy Fixer-Upper Houses with Little or No Cash for Fun and Fortune,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at (800) 736-1736 or at www.BobBruss.com. Questions for this column are welcome at either address.

Source:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/12/03/REGLNMM3KO1.DTL