Borrowing a down payment from a retirement account is a tricky proposition, especially if the buyer changes jobs.
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Q. Until October, I worked for a company that allowed its workers to borrow against their 401(k) retirement plans to buy their first home. I started a new job and rolled my old 401(k) plan into my new employer's plan, in part because the guy who hired me said the new company also allows such withdrawals, and I want to buy a house soon. Now, I have learned my new employer does not permit withdrawals! Can I reverse the rollover and put the money back in the old plan so I can borrow against it?
A. You could ask the two companies to reverse the rollover, but it wouldn't do you any good. Even if the reversal was allowed, you couldn't borrow against the value of your retirement account because you don't work for the first company anymore.
At this point, you're probably thinking that you should have borrowed the money before you switched jobs. But that wouldn't have helped, either: Federal law requires that loans made against a 401(k) be immediately repaid when a worker leaves the original employer for a different company. The entire amount would have been due and payable shortly after your job change occurred, and you probably wouldn't have had the cash to pay the money back in a lump sum.
Though the federal government permits 401(k) borrowing, employers don't have to permit it. You certainly can lobby your new employer to change its rules. A better plan would be to put yourself on a strict budget and start saving cash. There are home-loan programs available that require a mere 3 percent down payment.
Q. We have a small vacation cabin that we bought years ago for $6,000. It is worth about $30,000 now, and the loan is paid off, but we never use it because our kids are grown. If we donate the cabin to charity, could we take a $30,000 deduction?
A. Yes, you'd be entitled to a $30,000 deduction, assuming that's its correct market value.
People give away vacation homes, raw land or other real estate more often than you might think. Generally, the Internal Revenue Service will grant a deduction for the property's fair market value -- as long as the donor has owned it for at least a year or has inherited it from someone who owned it for more than a year. Of course, the beneficiary of your generous gift must be a bona fide charity. You can't give it to your kids or a friend and then try to write it off.
In a way, giving the property away instead of selling it would provide you with a double tax break: You would avoid paying some hefty capital gains taxes while earning a handsome charitable deduction. Consult a tax pro before making a decision.
Q. My husband left me three years ago, and I do not know where he is. I have not missed the creep until recently, when I decided to put the home we bought in 1995 up for sale. Two different agents have told me that I cannot transfer title to the home to a new buyer because my husband's name is still on the deed, but even a detective I hired cannot find him. What now? Am I stuck here forever because I can't find this jerk?
A. You're definitely not stuck, and your problem isn't as unusual as you might think. Thousands of sales are delayed every year because the sellers cannot find one of the people who is on the deed. The missing person is usually an estranged spouse or unrelated co-investor.
If you knew where your husband was, you could have him sign a quitclaim deed to the home and then sell without any problem. Alas, that's not an option because even the detective you hired couldn't find him.
Your best bet now is to hire a real estate attorney and have the lawyer file a "quiet title" action in court. A hearing will be set for your husband to appear and establish his claim to the property. If he doesn't show, the judge likely will order that the property be sold and that your husband's share of the proceeds be held in a special account until he is either located or declared legally dead. Either way, you'll get to sell and keep at least half the net proceeds.
• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960.
© 2011, Cowles Syndicate Inc.