DEAR BOB: My mother died about two years ago. Her will left everything to my sister and me equally. I was living with my mom when she died of cancer, so my sister has allowed me to live in the house if I pay the property taxes and insurance. There is no mortgage. The house is worth around $400,000. Now my sister thinks we should sell the house, but I don’t want to sell, as I am very satisfied with the status quo. Can my sister force me to sell? –Naomi N.
DEAR NAOMI: Yes. As a co-owner, your sister can bring a partition lawsuit to force the sale of the house. In most partition lawsuits, the judge orders the property sold with the sales proceeds divided among the titleholders.
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It is extremely difficult to defend a partition lawsuit unless there are extraordinary circumstances. To save litigation costs, you and your sister could enter into an agreement to sell the property and divide the net proceeds, thus saving court attorney fees.
NO INHERITANCE IF DECEASED SPOUSE DIDN’T HOLD TITLE TO HOME
DEAR BOB: My wife died last year. Under the terms of her will, I inherited all her assets, including the house. I just presumed as the sole heir I would receive a new “stepped-up basis” to market value, as you often discuss. However, when I recently consulted my tax adviser about selling the house, she says that because title to the house was held in my name alone, I didn’t receive any stepped-up basis and am stuck with our low $47,000 purchase price many years ago. Is this true? –Marv W.
DEAR MARV: From your description, your tax adviser appears to be correct. If the title to the home was held in your name alone, when your wife died last year, you didn’t inherit anything so you didn’t receive a new partial or full stepped-up basis to market value. Your tax adviser appears to be correct.
NO TAX-DEFERRED EXCHANGE OF U.S. TO FOREIGN REAL ESTATE
DEAR BOB: Due to a semi-permanent overseas job transfer and big promotion, we decided to sell our apartment building here in the United States at a substantial profit. Our plan was to buy a similar rental building near London. But our tax adviser said we can’t make a tax-deferred exchange of a U.S. rental property for a foreign rental property. If Uncle Sam taxes our overseas earnings, why can’t we make such a tax-deferred exchange? –Richard R.
DEAR RICHARD: I don’t make the tax laws. If I did, everything would be fair and just.
Although I am told it is possible to make an Internal Revenue Code 1031 tax-deferred exchange of a foreign rental or business property for another qualifying foreign property, under current tax law it is not possible to make an IRC 1031 tax-deferred exchange of a U.S. rental property for a qualifying foreign rental property, or vice versa. Your tax adviser appears to be correct.
The new Robert Bruss special report, “How to Obtain the Best Appraisal of Your House or Condo,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.
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