When breaking 'house rules' is OK

Condo manager says temporary parking space is not a violation

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Sep. 25, 2012

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My suggestion: Talk with a mortgage lender in your area; if that lender does not handle this type of loan, I suspect it will be able to provide you with a referral.

You will have to meet with a financial counselor before the loan can be finalized. This is to make sure that you fully understand and appreciate the terms and conditions (and consequences) of such a mortgage.

DEAR BENNY: I just inherited a house that is in a trust. How do I get the property out of the trust? --Harry

DEAR HARRY: If this is a "revocable living trust," by its terms it should end on the death of the person who created the trust, typically call the "settlor" or the "grantor." The assets of the trust are then administered by a successor trustee.

You have to carefully read the terms and conditions of the trust document. Some trust documents may contain restrictions on removing the property from the trust. If you are the successor trustee, and you are satisfied that there are no such restrictions, then all you really have to do is prepare a new deed conveying the property from you (as successor trustee) to yourself and have the deed recorded among land records where the property is located.

I do recommend, however, that you consult with your legal and financial advisers before taking any action.

DEAR BENNY: In a recent column a reader had obtained an investment property by way of a Starker exchange and after renting for several years moved into the house and now claims the property as his personal residence. Part of the answer you gave to the reader was not factually accurate:

"You have now abandoned the investment. The bad news is that you cannot take advantage of the up-to-$250,000 exclusion of gain (or if you are married and file taxes jointly up to $500,000) for any property that you exchanged.

"So while you may be able to claim the exclusion on your principal home (assuming you owned and used it for two out of the five years before sale), you will have to pay capital gains on the portion of the property that was exchanged."

The Internal Revenue Service will not automatically challenge an investor who converts investment property acquired in an exchange to a primary residence to take advantage of the up-to-$500,000 exclusion of gain. In order to qualify for safe harbor treatment, the investor must maintain the property as an investment for a minimum of 24 months. Once that period has passed, a taxpayer is free to convert the property to a primary residence. If the investor satisfies the five-year use and occupancy requirement, he qualifies for the exclusion.

If the investment property was acquired prior to Jan. 1, 2009, the investor would qualify for 100 percent of the exclusion, according to the Housing Assistance Tax Act of 2008.

I hope that this information is helpful. --Neil.

DEAR NEIL: Many thanks. I appreciate when readers call attention to errors that may occur once in a while.

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.

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