Landlord losing out on $25,000 tax break
DEAR BOB: I know a person who owns his home and owns anotherresidence he rents to his daughter. But he insists the money he gets from hisdaughter is not rental income. He says it’s just enough to pay the mortgage sohe doesn’t report it on his IRS tax return. But he claims the property taxesand mortgage interest on his personal tax return, Schedule A. Is this correct?–Jose C.
DEAR JOSE: No. Your friend should be reporting the rentalincome on Schedule E of his federal income tax return. This is the same placehe can deduct the applicable mortgage interest, property taxes, insurance,repairs, other expenses and depreciation for the rental house.
Purchase Bob Bruss reports online.
He probably thinks he is cheating the IRS. But he is reallycheating himself because he isn’t claiming the maximum tax benefits from hisrental property. If he has less than $100,000 annual adjusted gross income, hecan deduct up to $25,000 tax loss from his rental property, thus reducing hisincome tax. He should consult his tax adviser.
DON’T SPEND INHERITANCE BEFORE RECEIVING IT
DEAR BOB: According to my parents’ will, each of us fourkids will inherit one-fourth ownership of their primary residence. I am theonly one who has ever expressed any interest in owning the house outright. As Iam the executrix of their estate, what steps do I need to take to ensureeveryone receives a fair price for their one-fourth share? –Joan R.
DEAR JOAN: Please don’t be so hasty. If both your parentsare alive and well, many things can happen before they both die and you foursiblings inherit the house. They can change their wills, or even write you outof the will because wills are revocable.
Or maybe they will sell the house, move to a grass shack inTahiti, and spend your inheritances traveling around the world.
The best thing you can do now is make sure the house titleis held in a revocable living trust so, after the last parent dies, thatparent’s estate won’t have to go through probate court costs and delays. Atthat time, obtain a professional appraisal to establish the home’s stepped-upbasis to market value.
The big living-trust benefit is the successor trustee(presumably you) can distribute the living-trust assets according to the termsof the living trust promptly after any estate debts are paid. Probate courtproceedings usually take a minimum of six months, sometimes years.
A secondary living-trust advantage occurs if one spousebecomes incapacitated, such as by a severe stroke or Alzheimer’s disease. Ifthe other spouse is still alive, he or she can then manage the living-trustassets, including selling them if necessary.
Or, if only one spouse is alive, then you as the successortrustee can make important living-trust decisions, such as selling the house topay for a parent’s care. More details are in my special report, “24 KeyQuestions Answered: Living Trust Secrets Reveal How to Avoid Probate Costs andDelays,” available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com.
NO OBLIGATION TO PAINT NEIGHBOR’S SIDE OF THE FENCE
DEAR BOB: The condo building adjacent to ours has a concreteblock wall on its property that faces our building. The adjacent condo ownersrecently had their side of the wall painted. But our side of the wall remainsdark with mildew and age. We asked them to paint our side of the wall too. Theyrefuse. Do we have any recourse? –Nancy S.
DEAR NANCY: No. There is no law of which I am aware thatrequires a property owner to paint the side of his/her wall that faces theneighbor’s property. If I were in your situation, I would go ahead and paintthe ugly wall the color I prefer.
The new Robert Bruss special report, “The 10 KeyQuestions Smart Home Buyers Ask to Avoid Getting Ripped Off,” is nowavailable for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010, or bycredit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this columnare welcome at either address.
(For more information on Bob Bruss publications, visit his Real Estate Center).
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Copyright 2007 Inman News
