ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, December 16, 1996 TAG: 9612180001
SECTION: MONEY PAGE: 6 EDITION: METRO
COLUMN: Money Matters
SOURCE: MAG POFF
Q: I have a question about a situation involving the capital gain exemption when we sell our house.
My wife and I plan to retire in five years, selling our house and reinvesting the proceeds in a condominium in Florida. Our question has to do with whether it would be best for the house to be solely in my name at the time of sale because my housing history seems a bit more clear-cut than my wife's.
When my first wife and I divorced, I gave up all financial interest in our house. She subsequently sold it and reinvested in another house, but I was not party to that transaction because I had given up any right to the profits. I am presuming, then, that I still have a clean slate in terms of selling our current house and exercising a capital gains exemption if we reinvest the proceeds in another house.
My wife also was divorced. Her first husband bought out her interest in their house. He continues to own that house. She has never exercised an exemption of capital gains either, but it seems as if things might get complicated if he sells that house because she might be held responsible for taxes on the profits. Could she somehow lose her right to an exemption in a situation like that? Would that happen only if he reinvests the profits? Or are we in the clear whichever name appears on our deed?
A: F. Fulton Galer, a certified public accountant and tax specialist with the Roanoke firm of McLeod & Co., said that if you and your wife are joint owners in your home and one if you is older than 55, you will be able to elect, jointly, to exclude up to $125,000 of capital gain resulting from the sale of your principal residence.
The tax law generally provides, he said, that a taxpayer, who is 55 or older, may exclude from gross income up to $125,000 of gain realized on the sale of his house. The taxpayer must have used the residence as his principal home for three of the five years immediately before the sale.
The intent of this law is to permit an older taxpayer to sell his home without being required to pay tax on the realized appreciation or to invest all the proceeds from the old residence into a new residence, he said.
This $125,000 exclusion is a one-time election for the taxpayer. If the taxpayer is married at the time of the sale, his spouse must join in the election, Galer said, regardless of whether he or she owns an interest in the property and regardless of whether they file a joint return.
Galer said marital status is determined on the day of the sale. The one-time feature of this election applies to both husband and wife. In other words, he said, one spouse cannot make the election if the other spouse already has made it, even if that election was made prior to their marriage.
Your letter indicates that neither you nor your wife has previously made the election, Galer said. Therefore, you will be able to elect the $125,000 exclusion, provided : (1) you both consent to the election and (2) at least one of you meets the age, ownership and use requirements.
Q: How do I go about finding a Visa card without an annual fee? I understand there are a lot of them floating around, but I'm not sure how to canvass the banks.
A: Some consumer and financial magazines publish lists of banks that offer credit cards either with low interest rates, which should be used by people who maintain outstanding balances, or with no monthly fees, which are attractive to people who pay off their balances in full every month.
Another source is CardTrak, which publishes a newsletter every month about the credit card industry. The address is P.O. Box 1700, Frederick, Md. 21702. A subscription costs $59 a year or $5 for one issue.
One bank that turns up constantly in both categories is North Carolina's Wachovia. It has one card with a variable rate now at 8.25 percent and another card with no annual fees. The phone number is (800) 842-3262, but you musts have sterling credit to do business with Wachovia.
LENGTH: Medium: 72 linesby CNB