DEAR BOB: A friend of mine was given a quit claim deed to a property. How valid is this deed? Stan A., Colorado.
DEAR STAN: A quit deed conveys only whatever title the grantor held in the property. It can be a full, free simple title or nothing at all. Quit deeds can be just as good as warranty or grant deed but the grantor makes no representations as to validity.
The party receiving a quit claim deed should record it. Recordation gives notice of the gurantee's interest in the property. If good title was conveyed by a quit claim deed, properly recorded, the property can't be sold without the grantee's signature. Of course, foreclosure of a valid lien, such as a mechanic's or tax lien, would be an exception.
DEAR BOB: In 1971 I bought a triplex. In February of 1976 I traded my $17,000 equity in it for a six-unit apartment house. Then last April my job was transferred to Atlanta. So I sold the six miles for a $6,700 net profit plus about a $7,000 profit on the triplex. Is my total profit a long or short-term capital gain or both? Mel V., Illinois
DEAR MEL: It's a long-term capital gain even though you owed the six units only about three months. In a tax-deferred trade like yours, the holding period for the six units is considered an extention of your initial holding period beginning in 1971. Show your 1971 acquisition date when reporting the transaction on your 1976 tax returns. It's clearly over the six-month minimum long term capital gain holding period. By the way, in 1977 the minimum long term capital gain holding period increases to nine months and in 1978 to a year.
DEAR BOB: I hear that home mortgage interest rates have come down a little in the past few months. Since my wife and I want to buy a larger home, should we wait for interest rates to drop more? Paul J., Virginia.
DEAR PAUL: Interest rates for conventional, prime single family home mortgages have dropped to as low as 8.5 and 8.75 percent and to 8 per cent for FHA and GI mortgages. Some experts say rates may drop another 0.25 per cent in the next few months. But the prices of new and resale homes continue to go up rapidly. Even if you save slightly on the mortgage interest rate, the home you buy will cost you more if you wait to buy. In many areas home values are going up 1 to 2 per cent month.
DEAR BOB: We called three real estate agents about listing our house for sale and they told us a lot about house prices in our area. But all three insisted on knowing how much we originally paid. I got rather mad because I feel our potential profit wasn't their business. My wife said I shouldn't be so touchy. Does the agent have to know this fact? Ralph T., Colorado.
DEAR RALPH: You profit is none of your agent's business. He or she is your marketing manager to sell the house, not your business or tax advisor. Of course, many real estate agents can determind your cost by checking the tax stamps on your recorded deed. But their time would be better spent selling your house and worrying less about your profit.
The reason agents want to know your profit is so they'll know how much room you have to negotiate on the price when an offer is recieved. But the market determines your home's value, based on recent sales of similiar homes in your area. Whether you make a large or small profit is only your business (and that of the IRS).
DEAR BOB: Last fall we started renting three rooms in our 11-room house to college students. The extra income helps pay our increase property taxes. Each student pays us $75 a month. On our 1976 income tax returns, how do we report this income? Also, can we deduct our cost for fixing up those rooms, such as painting and new furniture? What about our costs for electricity and heating? Harry B., Pennsylvania.
DEAR HARRY: Use IRS Schedule E, or a separate income and expense statement, to report your rentals. You can deduct maintenance cost, such as painting the tenants' rooms. But your cost for the furniture must be depreciated over its useful life. You can also depreciate the rental rooms too. In addition, deduct a proportionate share of expenses, such as heat, water, insurance, electricity, and maintenance for the house. Your tax advisor can set up your depreciation schedule which should shelter all or most of the rental income from tax.
Robert Bruss us a realty broker and attorney. His address Box 6710, San Francisco, Calif. 94101.