My Sister Gave Me Her Interest in Our House. Will Any Tax Issues Arise?

Q: My sister and I bought a house for cash about six months ago. I spent a good amount of money and time to fix it, now I will be moving in to live in the house. My sister was decided to deed gift me her interest in the house, so now I have clear title in my name only. What tax consequences can this transaction present now or in the future for my sister and I?

A: By "deed gift," I assume she gave you her interest in the property in exchange for "good consideration" - that is, love and affection. In many jurisdictions this means there will be no transfer tax on the title change .

However, federal rules at this time allow us to give up to $12,000 annually to another person. If the gift amount is greater than $12,000, then we enter the wonderful world of unified gift and estate taxes. In addition to the $12,000 per year, you also can give substantially more during your lifetime without a gift or estate tax. However, to get the accounting right, your sister will want to file IRS Form 709 and get advice from a tax professional. By filing this form she will document the gift and likely avoid all federal taxes. She should be certain to keep a copy of the form with her will and living will and she should provide a copy for you.

Q: I live in a small building in a major city. I want to buy an exclusive right to use the roof area over my apartment from the building, which desperately needs the income. For instance, the maintenance fund is low, the interior needs repainting and new carpeting, and the boiler could go any day. Most owners, while they have the equity, don't have the liquid cash. The exclusive roof area would be right over my apartment. Should I make the offer at the risk of possibly alienating my neighbors who might not choose to or cannot make this investment themselves?

A: I don't think the neighbors will object to receiving cash for an unused or under-used asset. However, the issue may be poisoned if you take the approach that the building is run-down and some of the owners need money. Instead, say that you would like to use the area above your apartment, explain exactly what you want to do with the area, provide an idea of how much the value of your unit and other units would increase by speaking with local real estate brokers and then offer a given sum to the building. The building owners can then decide how best to use the money.

Your offer should be contingent on an engineering study to assure that what you propose will not damage the building. Also, your offer must depend on your ability to get all required permits. If the building is a condo and voting rights are assigned on the basis of square footage, you may need the approval of all current owners for your project. Contact a local real estate attorney for details.

Q: I'm interested in becoming a "finder" for real estate companies. Whom do I contact?

A: In real estate, there generally are real estate "salespeople" and "associate brokers," who work under brokers. Salespeople and associate brokers only are allowed to receive compensation from their brokers. Brokers are only allowed to pay compensation to salespeople and associate brokers who work under their authority. Salespeople and associate brokers cannot pay compensation to anyone.

In other words, if you do not have a license and work directly for a broker there is no one who can pay you. Thus for you to get a fee for any work associated with acts of brokerage, you need to get a sales license. For details about classes, speak with brokers and brokerage associations in your community.

Q: We're thinking of selling our home ourselves. Can you recommend Web sites or literature that will give us reliable information.

A: Selling a home today is a complex process, especially in communities where sales have slowed. You are best served by first speaking with local real estate brokers or getting help from a real estate attorney. If you want to do some of the work yourself, then consider a broker who offers a menu of services.

If it was me, I would get the best broker in the area, someone with a strong record of neighborhood sales and lots of signs where I live. As a start, visit open houses, speak with local brokers and find the best person to represent you.

(c) CTW Features

Need real estate advice? Peter G. Miller, author of "The Common Sense Mortgage," would love to hear from you. Send your questions to peter@ctwfeatures.com.