Smart Money: Attorney, accountant should be used in complex land deal

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

Dear Bruce: My grandparents leased a vacation lot in Idaho 35 years ago. My 90-year-old grandmother has given the lease to my brothers and me. We paid to have her name removed, and our names added. I need to know if we are liable for a gift tax or an inheritance tax. The land's value could be between $100,000 and $200,000, depending on the current demand. I was told that it has no value until it is sold. If we sell the lot, will we be liable for taxes? We may purchase this land, if it's affordable. Most of the land in that area is priced out of our reach. J.D., Sun Valley, Idaho

Dear J.D.: First of all, inheritance tax is not an issue since Grandma is alive. Inheritance tax only kicks in after death. If there is value here, you would not be liable for taxes, but Grandma might unless she claimed against her lifetime estate, which should have been done. An accountant should take a look at that issue. The likelihood is that there would be some tax liability, depending upon the basis that was used when the land was transferred from Grandma to you.

This is another case where representation by an appropriate attorney and an accountant would be the proverbial "a stitch in time" that "saves nine." I urge you to get some advice quickly. It would be in your best interest.

Dear Bruce: Recently, my husband picked up and left me while I was at work. He also left me with close to $32,000 in debt, plus taxes from 401(k) account withdrawals and a payment on the truck that he is driving. We had relocated from the East Coast to the West Coast in order for him to be closer to his family.

I had purchased a townhouse three years ago, which is up for sale. No nibbles yet. I have no idea where he is, so I hired a private investigator so I can serve him with divorce papers. I work a full-time job and have found a part-time job on the weekends that earns me $120 per weekend. I have drafted a letter to the creditors, but I have not yet sent it. I feel I should get some relief through a decrease in the interest rates. I cannot make the payments as they are now.

Could you please give me some advice as to whether I am doing the right thing? Have I missed something? I cannot afford to move back to the East Coast, and I have a good government job here. Any help would be appreciated. M.T., Las Vegas

Dear M.T.: The best advice that anyone can give you, given the burden that's been thrust upon you, is to contact an attorney immediately. You mentioned the townhouse. You used the word "I," but is it in your name only or both of your names? If it is in both of your names, you won't be able to sell it without his signature or some court action. In addition, there are some serious tax and legal questions to be resolved, and I wouldn't try to do this alone.

I agree that a divorce is likely in your best interest, but accomplishing this will be a bit more complicated (though not impossible) because of his disappearance. There are also some steps you should take to try to limit your liability, which you may conceivably be responsible for because of the now ongoing marriage. At the risk of being repetitive, please seek counsel, and do it immediately.

Dear Bruce: We are considering selling our home to an immediate member of the family at a considerably reduced price. The house is paid off. The approximate Las Vegas market value is $200,000. We would sell it for $120,000.

In turn, only $80,000 of the $120,000 sale price would be used to purchase a new home. The remaining $40,000 would go toward savings or investments. What are the income-tax ramifications, if any, to the seller and buyer? Does the IRS consider this a gift and do the seller and buyer each report it as such? D. G. e-mail

Dear D.G.: Before you enter into this transaction, I urge you to consult a competent accountant who deals in tax matters. Given the fact that you're selling the home for considerably less than the market price, the IRS may very well consider the difference between true market value and the sale price to be a gift to the recipient. You, the seller, may owe the taxes on the "gift portion" since you are the donor.

It may well be, depending on the size of your estate, that you could increase the base by claiming against your lifetime exemption. In this way, when the family member buying the property sells the house, they, in turn, get to keep more of the potential profits. A couple can claim as much as $500,000 without tax consequences, but those laws may be changed. Before you enter into this transaction, chat with a competent tax adviser. It is so much easier not to make a mistake than to correct one.

Dear Bruce: I believe that you have said in the past that an employer cannot charge an employee for lost or stolen goods and materials on a job. Is this right? Is this a law? D.R., Omaha, Neb.

Dear D.R.: This is a matter of local law. In many states, while you can fire an employee for having a shortage in their cash register, unless it can be proven with the employee tried and convicted of stealing the money they cannot be assessed for the shortage. Fired, yes, but the shortage cannot just be taken out of their paycheck. The same thing would be true for materials or things in the employee's charge.

Dear Bruce: We will be selling a piece of land privately. My husband wants the buyer to suggest a lawyer in the county where the land is located and both buyer and seller go to his office and sign the papers. I am reluctant to do this. What would be the best way to handle this? K.P., via e-mail

Dear K.P.: Your husband is way out in left field. To have the buyer choose the attorney to represent the seller is absurd. One attorney is prohibited from representing both the buyer and the seller. On a rare occasion, such as between mother and child, this will be proper. In this case, there would be a clear conflict.

If there was a problem with the property, for example, a toxic dump a half-mile away, it might not defeat the sale, but both should know this information. When you are selling property, an attorney who only serves your and your husband's interests should represent you.