Enter property rental business with appropriate guidance

Dear J.M.: Tax matters are of such very specific detail that I’m reluctant to give absolutes. In this case, it’s generally true that rental property profits and losses, assuming that the property is in your name, can be taken on your personal tax return. When you enter into a business environment, and that’s what rental property is, it is essential to outline your moves to an accountant, who can guide you through the labyrinth of tax rules and regulations. While I know it’s tempting to do these things based on information from a magazine or newspaper article, it is certainly not the wisest course of action.

Dear Bruce: About 20 years ago, we bought a membership in a lot 500 miles away for $6,000.

The annual dues are $290 and the property taxes $11. The lot has a land value of $3,000.

We contacted a local real estate agent regarding selling. He was not interested. We asked the resort if we could gift it to them. They said “no” and that if we didn’t pay our dues they would transfer our account over to collections.

If we don’t pay property taxes, the county will sell the land. It takes several years for this to happen. We are in our 60s and want to clean up this mess. Please help. – A.B., via e-mail

Dear A.B.: In your letter, you say that the lot has a value of $3,000, but I think what you mean is that the lot is assessed by the county at $3,000. It clearly has little or no real value. This is demonstrated by the fact that the real estate agent cannot find a market.

The promoters know that there is no value and they would prefer to have the dues paid to them. I’m reluctant to suggest this, but you really need an attorney to review the contracts that you signed and get an assessment of the situation. The resort managers can threaten collections, but whether it would actually pay for them to do that is another story. As you point out, you could allow the property to be foreclosed upon by the county, but until that action takes place you will continue to be responsible for not only the taxes but also the annual dues. Unfortunately, memberships in these deals generally do not work out well.

Dear Bruce: If my brother and sister own a house that used to be our mom’s and sell it, after all the taxes and other issues are settled, can they make a gift of the money to the rest of us? If so, how much a year? – M.S., Henderson, Nev.

Dear M.S.: Your brother and sister can each give $11,000 per year to anyone they choose without a taxable event.

If you and your husband are to be beneficiaries of these gifts, $44,000 can change hands each year. Your brother gives $11,000 to you and $11,000 to your wife. Your sister can give the same amount to each of you.

This can be repeated every year without any tax consequences.

Dear Bruce: You recently advised a 56-year-old not to buy a home. I am 46 and single with a daughter in college (who I no longer support).

I make $47,200 a year and have about $15,000 in credit card debt, which I plan to pay off in the next two years.

I invest in my company’s 401(k) with 6 percent matching but that is only $11,000 at this point. I also have college loans totaling about $13,000. I do have $3,000 in savings for emergencies.

I live in a college town and I think buying a house would be a good long-term investment, if not for me then for my daughter, as a rental property or to sell to put me in a nursing home. I know that a condo is another option, but I love animals and I currently have a 66-pound dog that needs a backyard.

I am also going to need the tax write-off. When would it be too late to buy? – Reader in Oklahoma

Dear Reader: The advice that I gave to the 56-year-old was quite different given the circumstances. You are a decade younger and would like to plan for what would appear to be a fairly long future.

I would not consider your investment for anyone other than yourself. If there is something for your daughter when the time comes, then that’s fine, but that is not a consideration at the present time.

You mentioned that she lives in a college town. Have you considered buying a property where you could rent either apartments or rooms to college students? While this is in effect a part-time job, your total cost of housing could quite easily be covered and perhaps even generate a small profit that could be used to retire your mortgage more quickly.

As to your debts, I would do my best to reduce the credit card debt first and then the student loans.

I share your love of animals, and the reality is that if you are going to be an animal owner, particularly of a big dog such as you own, your rental options are somewhat limited.

Bruce Williams is a national radio talk show host and syndicated columnist.