Making Lots on the Sale by Edith Lank on Creators.com

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Using Stepped-Up Basis Dear Edith: My deceased mother's house has an offer that my siblings and I have accepted. We believe we each will receive about $20,000 after the realty fees. My question is, do I have to pay income tax on the money, since it is my inheritance? …Read more. How to be a Flipper Hi Edith. I'm intrigued by the idea of flipping a house — buying, fixing up and re-selling at a profit. But I have exactly zero experience and no cash. Not exactly a recipe for success. What's the best way to go about finding a flip-worthy …Read more. Holding a Mortgage Dear Edith: I have someone who has asked me to be their mortgagor, and I was wondering, how does one go about the paperwork? Are there standard forms to be used? How does one file the mortgage lien? Would a real estate attorney be advisable or …Read more. Some Estate Planning Dear Edith: Our parents are in their late 80s. Three years ago, they moved from their home to a rental apartment. I moved in to their house and have been renting it from them. My sister and I will inherit it when our parents pass away, but we are …Read more.

Making Lots on the Sale

Dear Mrs. Lank: I've lived in my house for 32 years and want to sell this year. I am widowed and understand that I will have $250,000 that will not be taxed from the proceeds. Am I required to pay capital gains on a portion of the remaining monies? We purchased the house for $232,000, and recent sales have been around $890,000. — email

Answer: Any profit beyond $250,000 will be subject to capital gains taxes. That's profit, not sale price. You have to understand that your cost basis, which can be subtracted, is a lot more than the original purchase price. It's increased by money spent on permanent improvements over the years — the last new roof, new furnace, fencing, a lot of things. In addition, your cost basis may have changed (for the better) when your husband died.

By all means, consult a CPA or an enrolled agent when you sell. And for further consolation — capital gains tax rates are pretty low right now.

I must say, by the way, that it's a refreshing change to get a question about too much profit on the sale of a house. Takes me back to the old days.

BUYING IN FLORIDA

Hi, Mrs. Lank: My husband and I are seriously considering purchasing a vacation condo in Florida. In trying to learn more about owning real estate in Florida, naturally, I turn to Google. But there's just too much to sort through.

Are you familiar with any resources/websites that offer straightforward information about property ownership in Florida — for instance, what to know about property taxes, insurances, the actual purchase, short sales, hurricanes, bugs and maintenance? We want to have a good understanding of what to expect before we travel down there, begin a house hunt and end up misinformed or ill-informed. — B.

Answer: If you're trying to purchase a short sale property, your best bet is to work with a real estate broker who has experience in dealing with banks, for the process can be complicated and frustrating.

Beyond that, I'll bet there are many readers who could give you all sorts of guidance about buying Florida real estate.

I'll keep your address on file and forward anything and everything that comes in.

KITCHEN OR BEDROOM?

Dear Edith: My wife and I just bought our first home. It's nice, but it needs some TLC. One major issue is the kitchen. It's dated, medium-sized and has terrible cabinets. We thought about removing an adjacent wall to make a larger kitchen/dining room, but that would make our four-bedroom house into a three-bedroom house. In other words, holding the other factors fixed in terms of resale.

Which would have better value: a three-bedroom with a new, larger kitchen or a four-bedroom with a new, medium-sized kitchen? — email

Answer: I know nothing about your area or what your neighbors' houses are like, and that would make a difference. Two-bedroom houses are fairly hard to sell, but beyond that, there's no hard and fast rule.

As you just moved in, you're probably expecting to be there a long time, so you're entitled to make whatever improvements you will enjoy most. It's a bit early to worry about resale value.

You can get guidance, though, from experienced real estate brokers who are familiar with buyer expectations in your area. Just call a few nearby brokerages and ask the managing broker for some free advice.

PARTITION AND BANKRUPTCY

Edith: I own a home with my ex-girlfriend. We're both on the mortgage and the deed. I haven't lived in the house since 2006, when she had me thrown out of my own house on a phony order of protection. She continues to reside in the house, and she filed for Chapter 13 bankruptcy last year after not making payments for 12 months. She promised to sell the house after our last child went off to college, which has happened.

Can I force her to sell the house, or is she protected by Chapter 13 — email

Answer: Do some calculating about how much the property might be worth; how much is owed, including those back payments (and back taxes?); and whether it would be worth the legal expense of a forced sale. Understand that a partition sale (in most areas, a public auction for all-cash buyers) seldom yields full market value.

Then consult a lawyer to see if it's possible under the circumstances, and if so, what it might cost.

Edith Lank will respond personally to any question sent to www.askedith.com.