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I NEED ANSWERS

A client received this infomation from his tax attorney but they are not always correct so your comments would be more then appreciated. This is the scope

My clients mate past away in January according to the attorney he said that last December a new law came in to affect that will allow you to take up to $500,000 exclusion of gain if you sell the house within two years from the date that my clients mate past away. A short review -before if you filed a joint tax return and lived in the house two years out of the five years you could exclude the $500,000. But up until December according to this attorney you could only take the full $500,000 exclusion only if you sold the property within the same year the person died.

Can anybody help me out here is this correct?

Posted by Antoinette Galindo CRS,GRI,SRES,e-PRO on 08/10/2008 07:32 PM

Comments (6)

This post has been included in California Information

6 Comments on I NEED ANSWERS

AUG

2008

Antoinette, Good question. I've have not come across this situation yet. I'm glad you brought it up sense it is something we may need to address. Looking forward to hearing the answer.

You are correct - it used to be that if your spouse died, you had until the end of that calendar year to sell the home and still claim the $500,000 exclusion of profit. It has been extended to either 12 or 24 months after the date of death (I'm not sure which it is).

However, if they don't sell right away, they may qualify to inherit the spouse's half of the home on a stepped-up basis (the value of the spouse's 1/2 of the home is stepped up from the original purchase price to the value on the date of death).

I am concerned that you mention your client's "mate" and not husband or wife. I believe marital status and the way title was held - particularly in California - can have an affect on the answers here.

Pam

Thank you so much for your comment-tomorrow I'm going to be calling my tax attorney to see what he has to say.

Don,

I'm sorry for not being more clear these people were husband and wife.

AUG

2008

Antoinette - benny Kass had a Q&A column today that covers this exact issue:

http://www.inman.com/buyers-sellers/columnists/bennykass/homeowners-feel-title-office-should-pay-mistake

There are two questions in the above link about this issue. Hope this helps!

I have read the Inman report, so it look like we have two years to sell to claim the $500,000. I thoight in California at least though that when a spouse died the remaining person got the stepped up value of the property as at the time of death, so that when they finally do sell the gain will only be if it has gone up in value since the spouses death to present?

Rita - California is a community property state, so there are some differences in California than in other states. I believe in California, it will depend upon how the spouses hold title (whether or not they hold title as the home being community property).

By the way - I used to be with Alain Pinel in Walnut Creek. Great, great company!

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