Expert: Dick Dennis - 12/13/2007

Question
Hello Mr. Dennis,
My husband and I will be purchasing my Mom's house and also the home next to her. I live in VA and my Mom stays in Tennessee and I carry my Mom on my income tax as a dependent so I will be buying this home as a primary residence for my dependent. My husband and I have been paying her mortgage for the last 17 years and we are at the end almost and basically want to purchase the home for the appraised value and pay off ours and my mom's few debts, do a some home repairs and also purchase a small piece of property right next to my Moms house that can not be used by the owner due to the size of the lot. We are getting a quick deed to the property as well. My mom lives in one of the houses and leases the other one out to a family friend at a loss. The home she lives in has all of the mortgages attached to it and the other one has no mortgage at all. How would we begin as for as pursuing the purchase of this property as I will remain in VA and my Mom will be living in the home as long as she lives? Thank you in advance for any advice that you may provide.


Answer
First thing YOU MUST DO before you do anything else is to consult with a CPA or Tax expert to make sure what you are planning to do is correct and will not raise some eyebrows at the IRS.

Just because you have been paying your mother's mortgage for the past 17 years doesn't mean that she is your dependent as far as the IRS is concerned. DO NOT accept a quit-claim deed from ANYONE without getting title insurance. How do you know they don't have some liens on that property for which you will become responsible, Brenda, by accepting that quit-claim deed?

Also, consult with a REAL ESTATE attorney to make sure you put this together properly, for example, put any properties into a living trust. That way you don't have to buy your mother's house or you could make a loan ON THE house if you need to pay off some bills. Yes, all this will cost you some money, but I got news for you: you better hope the IRS does not audit you because you may be owing them some money now.

If you attempt to do all this on your own, you are stepping into a big hole. Get that real estate attorney and tax expert working for you right away. I do wish you well.

Dick Dennis