DEAR BOB: Does the IRS approve or disapprove of tax-deferred Starker exchanges? Can a property seller rely on the Starker court decision? Marilyn D., Falls Church.

DEAR MARILYN: It is difficult to figure out IRS policy on Starker "delayed" tax-deferred exchanges. On June 22, 1979, the IRS issued Private Letter Ruling 7938087, which basically approved a Starker-type delayed exchange. A trust arrangement was recommended so the proceeds could be held in trust by a property trader until a second qualifying property could be found to complete the exchange.

Last August, the T. J. Starker decision was announced by the 9th U.S. Circuit Court of Appeals. That ruling approved of Starker's sale of his timberland to Crown-Zellerbach Corp., holding the proceeds in trust, and then acquiring qualifying property to complete the tax-deferred exchange several years later.

But last Nov. 8, the IRS issued Private Letter Ruling 8005049, which suspended its earlier June letter ruling. This latest letter said the IRS is reconsidering its earlier position. It further said, "Such reconsideration may ultimately result in affirmation, revocation or modification of the ruling letter dated June 22, 1979." So be alert for new developments involving Starker exchanges.

DEAR BOB: Recently, you mentioned a new tax-deferred exchange technique called a "Starker exchange." As I understood the article, it is now possible to sell a property, hold the money in trust and later find another property to trade into. I phoned the IRS for more information on this tax-deferral method and the supervisor said he had never heard of it. Where can I get more information? Margaret M., Washington.

DEAR MARGARET: That article on Starker "delayed" exchanges brought more inquiry mail than any other I've ever written. If you are planning a Starker exchange, be sure to consult a real estate attorney to structure the transaction properly so it will qualify for tax deferral.

My report "How to Use Tax-Deferred Exchanges to Pyramid Your Wealth" includes details on Starker "delayed" exchanges. To get a copy, send a $1 check payable to "Newspaperbooks" to The Washington Post, P.O. Box 259, Norwood, N.J. 07648. Please include a long, self-addressed, stamped (15 cents) envelope.

DEAR BOB: I enjoyed your article on the new tax-deferred Starker "delayed" exchanges. While your article mentioned only investment and business real estate trades, can I use this new method to sell my real estate and put the money into a trust for my children? Myron T., Washington.

DEAR MYRON: No. Tax-deferred exchanges only apply to real property, not to personal property. The new Starker exchange technique allows tax-deferral when selling one property (other than your personal residence), holding the sale proceeds in a trust, and then later acquiring other real estate. Your tax advisor or attorney can explain further.

DEAR BOB: Some time ago, you said your favorite creative finance method was the lease-option. I recently contacted a real estate agent about buying a home and she suggested a "lease-purchase plan." Is this different from lease-option? Ginny S., Alexandria.

Dear Ginny: Yes, a lease-purchase means the buyer temporarily leases a home but agrees to purchase it later, presumably when mortgages are more readily available. The tenant-buyer is obligated to complete the purchase. If he doesn't, he loses his deposit and also may incur a penalty.

But a lease-option gives the buyer the option of deciding if he wants to buy the property by the option date. The lease-option is good for both the tenant and the landlord-seller.

Tenant advantages of a lease-option include 1) full or partial credit toward the purchase price for rent paid, 2) opportunity to try the home before buying, 3) no obligation to the landlord-seller if the purchase option isn't exercised, 4) advance knowledge of the sale price and terms and 5) a big incentive to save for the down payment to use to exercise the purchase option.

Lease-option advantages for the seller include 1) practically being assured of a sale, since few people would walk away from a large rent credit toward the purchase price, 2) rental income to pay mortgage and other payments, 3) tax advantages, 4) a well-maintained property since lease-option tenants usually take good care of their homes and 5) no taxes to pay on the sale until the tenant exercises the option.

DEAR BOB: My husband is being transferred overseas on a three-year assignment, so we have sold our home. Can we defer paying tax on our $80,000 profit by buying a more expensive replacement home now and having our son live in it while we are out of the country? Fredrika M., Washington.

DEAR FREDRIKA: The tax-deferral "residence replacement rule" of Internal Revenue Code section 1034 requires the taxpayer to own and occupy both the old and new principal residences. However, the rule doesn't say how long you must occupy the replacement principal residence.

Buying such a home for another person's occupancy won't qualify. But if you can move into the replacement home for a while, that would appear to meet the requirements. Talk it over with your tax advisor. P.S. If you want to buy an overseas replacement home costing more than the sale price of your old home, that home can meet the law's requirements.

DEAR BOB: As a real estate agent, I realize I am not supposed to advise my buyers and sellers on tax matters. But I feel I should suggest tax angles for them to discuss with their tax advisors. Is there any simple way of explaining to home sellers when they should use that tax-deferral rule and when they should use the $100,000 "over 55 rule" tax exemption? Connie V., Alexandria.

DEAR CONNIE: You are correct that real estate agents should not advise their clients on the tax aspects of property transactions. However, good agents must understand the tax benefits of real estate so they can alert their buyers and sellers to special tax breaks.

The order for applying home sale tax benefits is: (1) "residence replacement rule" (2) "over 55 rule" $100,000 tax exemption and (3) installment sale.

If your home seller will be buying a more expensive replacement home and qualifies for the "residence replacement rule" tax deferral, that eliminates the need to search further for a tax avoidance method.

But if the seller doesn't qualify for that rule, then see if the tests of the "over 55 rule" $100,000 tax exemption are met. Basically, these require the seller to be 55 or older on the title transfer date and to have owned and lived in the principal residence any three of the five years before sale. If qualified, the seller can then exempt up to $100,000 of profits from taxation.

If the seller doesn't qualify for these rules, then consider suggesting an installment sale. Installment sales can be used on any type of property, not just principal residences. To qualify for an installment sale, the seller cannot receive over 30 percent of the gross sales price in the year of the sale. For further details, see your tax advisor.

DEAR BOB: Please explain why you say wrap-around mortgages are so profitable for the property seller. It seems to me that a plain old second mortgage is just as good. Joss M., Burke.

DEAR JOSS: A wrap-around mortgage is really a second mortgage. It has second priority in the event of a foreclosure. But it is better than a second mortgage because the lender's yield is higher.

For example, suppose you sell your home for $100,000 and it has an existing $40,000 VA home loan at 8 percent interest. If your buyer makes a $15,000 cash down payment, that leaves a finance gap of 45,000 ($100,000 minus $15,000 minus $40,000). You could take back a $45,000 second mortgage. If it has a 10 percent interest rate, you'll earn $4,500 annual interest.

But an $85,000 ($40,000 plus $45,000) wrap-around mortgage would be more profitable for you even if it has only a 10 percent interest rate. The reason is that in addition to the $4,500 earned on the $45,000 "at risk," you'll earn the 2 percent differential (10 percent minus 8 percent) on the old $40,000 mortgage, which remains undisturbed. Your total earnings now become $5,400 ($4,500 plus $900), which is a total yield of 12 percent on your $45,000 loan. This example shows why wrap-around mortgages are more profitable than second mortgages.