For Sale By Owner

When a property is gifted before death, the recipient takes over the donor's often very low adjusted-cost basis. Also, if the net value exceeds $12,000, the donor must file a federal gift-tax return. But no federal gift tax will be due if the donor has given away less than $1 million in lifetime non-exempt gifts.

However, if the decedent's estate exceeds $2 million, then federal estate tax must be paid by the estate before the heir receives title. Also, in a few states, there might be an inheritance tax if the heir is not a close relative. For details, consult a tax adviser.

DEAR BOB: I own a four-unit apartment building. I want to sell a 75 percent interest and retain 25 percent. If I sell 25 percent each to three investors, can they force a sale of the entire building by a partition lawsuit? Or can any of the four co-owners sell their share without the approval of the other investors? Is it possible to allow the investors to occupy a specific apartment in the building? -- John E.

DEAR JOHN: The situation you describe is known as a tenancy in common (TIC). TICs are widely used to get around local rent control and condominium conversion ordinances.

But the major drawback is there is one mortgage on the entire property. Each TIC co-owner cannot obtain an individual mortgage as can a condominium buyer. Another problem occurs if a co-owner fails to pay his share of the mortgage each month. Then the other owners must pay the deficit or risk losing the property by foreclosure.

Although I don't recommend TICs for owner-occupied apartment buildings, they have been successfully used for investment properties where the investors are not occupants.

Yes, it is usually possible to provide in the TIC documents for the tenants in common to waive their right to force a partition sale of the property. The TIC documentation can specify a TIC can occupy a specific apartment in the building. For details, consult a local real estate lawyer who is experienced with TICs.

DEAR BOB: I bought my home in 1997. There was no homeowners association. A developer bought the vacant lots in the subdivision and formed a homeowners association. Now the developer is applying pressure for everyone to join. There is a private road that seems to have been turned over to the association. Is this legal? We are in the process of selling our home and want the new owner to make the decision to join or not. -- Zuella P.

DEAR ZUELLA: I have never heard of such a situation where the private road is transferred to the homeowners association without a vote by the affected owners or unless the developer controls a majority of the affected vacant lots.

The best you can do is to disclose the situation to your buyer and let him decide whether he wants to join the homeowners association.

DEAR BOB: My son was recently transferred to Hawaii. He is considering buying a condominium in Honolulu. It is on leasehold land. The inventory of available units seems highly limited. We have benefited from your recommendations about Internal Revenue Code 1031 tax-deferred exchanges, living trusts and tax-free cash from home sales, but have never before encountered leasehold land. Your recommendations? -- Bev P.

DEAR BEV: Your smart son is wise to question the purchase of a condo that is on leasehold land. He should carefully investigate the terms of that land lease.