Can woman in assisted-living center claim home-sale tax break?

Son gives wrong advice about residency requirement
By: Robert J. Bruss: Inman News
DEAR BOB: I am 84 and in excellent mental health. Everyone says I'm "sharp as a tack." But my body is declining. For the last two and a half years I have lived in a beautiful assisted-living center. Thankfully, my son insisted I move here (practically dragging me) and I am very happy with the superb care I receive. The only problem is my house. When I moved out, my son rented it to a lovely young couple. Their rent pays most of my bills. They visit me every month or so to beg to be allowed to buy my house. Last month, they brought their brand-new baby girl to visit, too. But my son says if I sell my house to them, I will have a huge capital gain tax to pay. He says because I no longer live in the house, I cannot qualify for that $250,000 home-sale tax exemption you often discuss. Is that true? – Naomi R.

DEAR NAOMI: No. Your son sounds like a wonderful person. But he is mistaken about Internal Revenue Code 121, which entitles you to a principal-residence-sale tax exemption up to $250,000 (up to $500,000 for a married couple filing jointly).

To qualify, you must have owned and occupied your principal residence any 24 of the 60 months before its sale. You appear to qualify.

The property need not be your principal residence at the time of its sale. You can rent it to tenants for up to three years after moving out and still qualify, as explained above.

But you better get busy to complete the home sale while you still qualify for the $250,000 tax exemption. For details, please consult your tax adviser.

RECOMMENDED BOOKS FOR REAL ESTATE AGENTS

DEAR BOB: I will soon be leaving my current job to become a real estate agent. Some time ago, you highly recommended a book for new real estate salespersons. But I failed to write down the title. What book should I read? – Nicholas H.

DEAR NICHOLAS: There are several excellent books for real estate sales agents I reviewed within the last year.

They are "Double Your Income in Real Estate Sales, Third Edition" by Danielle Kennedy; "Success as a Real Estate Agent" by Marilyn Sullivan; "The Millionaire Real Estate Agent" by Gary Keller; and "Real Estate Agent's Field Guide" by Bridget McCrea. All are available in stock or by special order at local bookstores, public libraries, and www.amazon.com.

LIFE ESTATE IN A HOME ISN'T WORTH MUCH

DEAR BOB: My late husband left me a life estate in one of our two homes. My estate attorney seems unsure how a life estate should be valued. Any information will be appreciated – Elaine C.

DEAR ELAINE: I don't understand why you need to value your life estate in the home. Most life estates aren't worth very much. The reason is, when you die, your life estate terminates.

To be blunt, if you get hit by a truck while crossing the street, your life estate ends and becomes worthless.

If you want to sell your life estate, buyers are virtually nonexistent unless they can also buy the interest of the remainderman who receives full ownership of the house after you die.

Years ago, I received a letter from a Texas homeowner whose neighbor held a life estate. She offered to sell that life estate to the neighboring letter writer. I advised him not to pay very much and to take out a life insurance policy on the life estate tenant.

Life estates aren't worth very much, except to a life tenant like you who can enjoy the property as long as you want to live in it. For more details, please consult a local real estate attorney.

WHAT IF BUYER BULLDOZES PROPERTY BEFORE SALE CLOSES?

DEAR BOB: My father died five years ago, leaving 72 acres to his five daughters. For the past three years we have been working with a realty agent to sell the property. Last March we signed a sales contract for $190,000. The buyer discovered a thin strip running through the property belongs to the power company. Then we had to reduce the price by $7,500. Next, he wanted a $1,000 reduction for a defective septic system. But the buyer's wife is the real estate agent handling the sale and she let him start bulldozing the property. Our lawyer says no matter how outraged we are we shouldn't do anything to mess up the closing. We are five sisters without a lot of money. What should we do about the buyer occupying and bulldozing our property before the closing? – Pat M.

DEAR PAT: You have a smart lawyer. If you file a lawsuit against the buyer or the real estate agent for damages, it will be difficult to prove any loss. And you won't get rid of that property and receive your money.

I suggest you get the sale closed. After the closing and you have your money, you might want to file a complaint about that real estate agent with the state real estate commissioner for violation of her fiduciary duty to you.

CAN LANDLORD INVADE PROPERTY FOR LANDSCAPE WORK?

DEAR BOB: I rent a house in a quiet neighborhood. My landlord decided to replace some landscaping. She has been coming over, unannounced, by herself or with landscapers. My family uses the yard for kids to play. I am upset our privacy is being invaded for beautification we did not request. While we're paying rent for the house, doesn't our space include our yard? We're moving out in two months when our lease expires. Can we stop our landlord from further landscaping? – Zoenda McI.

DEAR ZOENDA: Yes. When you and the landlord signed the lease, as the tenant you became entitled to exclusive possession of the rented house and its yard. The landlord is entitled to inspect the property without advance notice only in the event of an emergency, such as a fire or a broken water pipe.

Otherwise, the landlord must give you at least 24-hour advance inspection notice. However, if the landlord's frequent inspections of the grounds are unreasonable, you do not have to consent.

When the landlord shows up unannounced, your appropriate remedy is to refuse admittance and phone the police to report a trespasser if the landlord enters your rented premises without permission since you don't want any landscaping work. For further details, please consult a local real estate attorney.

CAN LANDLORD FORCE TENANTS TO MOVE OUT EARLY?

DEAR BOB: We have tenants living in our house. Their lease ends on Oct. 1. But we are moving back to the area and would like to live in our home as of Aug. 1. Since it's my house, can I give my tenants notice to move out as of August 1? – Claudia S.

DEAR CLAUDIA: No. You must wait until the tenant's lease expires on Oct. 1. However, you could politely ask the tenants if they would like to move out early.

If that doesn't work, you can "encourage" them to move out early, perhaps by payment of $1,000 or $2,000 cash moving money.

WHAT RECOURSE IF NEIGHBOR CAUSES LATE-NIGHT NOISE?

DEAR BOB: When my husband and I bought the lot where we built our home, we asked the developer what was going to be built in back of our house. He said he didn't know. It turns out a Wal-Mart store was built adjacent to our home. We are living in a nightmare. All night long there are noisy trucks delivering to Wal-Mart. It is almost impossible to get a good night's sleep. I've talked to the city mayor, city attorney, planning manager, etc., but they refuse to help us. What can we do? – Darolyn B.

DEAR DAROLYN: The situation you describe is legally a private nuisance because it only affects you and perhaps a few neighbors.

If you can prove the loud late night noise would disturb normal persons, you may have a cause of action against Wal-Mart and the shopping center property owner for damages. Your situation is much like a neighbor's barking dog that howls all night, disturbing your sleep.

Fortunately, you have "deep pocket" defendants such as Wal-Mart and the shopping-center owner. Please consult a local real estate attorney for details about a private nuisance lawsuit.

The new Robert Bruss special report, "The Whole Truth About Senior Citizen Homeowner Reverse Mortgages," is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com. Questions for this column are welcome at either address.