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posted: 6/9/2012 4:50 AM

Siblings unlikely to owe tax on sale of mother's home

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Q. 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?

A. The IRS says that for inherited property, your cost basis is the value at the time of death. That's known as a "stepped-up" basis. Unless your share brings more than it was worth when your mother died, you shouldn't owe the feds any tax on it.

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Q. We accepted an offer from a buyer on the purchase of our house and have signed the purchase agreement. We just received the payoff quotes from our first mortgage lender and the second lender, and they were more than we thought they'd be. We are going to be about $1,500 short to cover both lenders and the selling fees. We applied for an unsecured personal loan but were denied because our credit is poor from our unemployment last year. What do we do? Do we have any options?

A. When the seller is that short of cash to close, often the real estate brokers involved can arrange something. Have you asked them for help? In addition, you may want to talk with someone at a nonprofit credit-counseling agency. You can find the name of a local agency at www.NFCC.org.

Q. In a recent article, you wrote the age to be eligible for a reverse mortgage is 65. I thought it was 62. Please verify. Enjoy your column.

A. You're right. The minimum age for eligibility is 62, and I simply had a senior moment while I was typing. Or whatever one calls typing these days -- I was keyboarding?

Q. I closed on my home in September 2011. Due to new circumstances, I may have to sell it next year. What are all of the ramifications for selling after not owning/occupying it for a certain length of time?

A. It's not clear what you're concerned about, but let's discuss income taxes. Even in a healthy local real estate market, it can be difficult to make enough on an early sale to cover the legal and other expenses of buying and selling. If you do have a loss on the sale of your own home, it won't be considered deductible by the IRS.

If you have a profit, on the other hand, it's taxable as a capital gain. Only if your sale closed after September 2013 would you qualify for the homesellers' exclusion, with tax-free profit.

Q. My wife and I have been preapproved for an FHA loan. Our real estate agent says our loan will not cover a double-wide mobile home with land we wanted to buy. But then she sent us to view a double-wide with a garage and an acre of land and stated that our loan would cover that. When I asked her why this one was covered, she stated she wasn't sure.

I am confused and would really appreciate any information as to what our loan will and won't cover. We look forward to owning our own home as soon as possible and really need information on FHA loans.

A. For starters, mortgages can be placed only on real property. A manufactured mobile home is classified as personal property unless it is permanently attached to land you own outright, paying your own property taxes. Perhaps that first one wouldn't qualify.

In addition, the FHA has its own requirements. If public water is available, for instance, it must be hooked up, and the building cannot have been moved from its original location. For a list of other requirements, search "FHA minimum property standards" on the Internet.

Q. About eight years ago, I was prequalified for a mortgage, as I was looking to buy a house. At that time, I was asked to provide a down payment/deposit toward the mortgage. It was a couple hundred dollars (around $250). Long story short, after looking, I never bought a house, as I moved in with family and expect to live here long term. Is there any recourse to get that money back? I do know that the person I gave the money to no longer works for that mortgage company.

A. Good try, no cigars. Your $250 was a nonrefundable application fee, and I'll bet you signed something agreeing to that. The money helped pay for the time and effort the lender spent investigating whether you would be a good risk.

• Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (include a stamped return envelope), or readers may email her through askedith.com.

2012, Creators Syndicate Inc.

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