Smart Money: Consult an accountant before you sell condo


DEAR BRUCE >> My mortgage is paid off on a condo I've rented since 1991. I purchased it for $42,000 and it's worth $150,000. I was considering selling the property to the tenant over a 5-to-8-year period. Would this help me avoid a giant capital gains hit all at once?

I'm 67 years old and have healthy retirement savings, so minimizing taxes is still important. Do you have any ideas on the best (cheapest) way to set up that kind of sale without having a bank in the middle?

— J.W.

DEAR J.W. >> I would suggest that you talk to an accountant (one who is knowledgeable in real estate) and show him all the records on the transaction. Whether or not you'll have any substantial taxes that must be paid is something the accountant can help determine. If, for example, you put capital improvements into the property, no matter how long ago, these will be deductible against any possible gain.

As to selling the property to a tenant, I can't believe there is any advantage to that over selling it outright and paying the taxes. As to not involving a bank, if the buyer is going to finance it, there has to be a bank or other lender involved somewhere. That really shouldn't be any concern to you.

DEAR BRUCE >> Several years ago, as my parents lost the ability to pay their own bills, we put my name on their checking account, so I could pay the bills for them. Dad has since passed, and Mom lives in an assisted living home in a dementia wing.

There is no inheritance to come from their estate, other than any balance remaining in that checking account, around $50,000. Since my name is officially on the account, when Mom passes, can I claim the balance of the checking account without any inheritance tax penalty? Also, can I gift some of that checking balance to my sister, also without penalty?

— M.D.

DEAR M.D. >> I think you're borrowing a problem that doesn't exist. First of all, with the amount of money there will be in your mother's estate, there will be no tax. Whatever is left in the checking account is hers and yours and the account will pass directly to you. If you choose to give any money to your sister, that's OK too. You can give her up to the limit and there will be nothing to worry about there either. On balance, there is nothing I would change in the way things are going for you.

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