Widow can suggest Realtor to children when planning inheritance

Q: Advice to a widow leaving a house to multiple children is to choose a real estate agent in advance. If the family members are from out of town, they might not be able to easily identify the best agent to help get the best value for the property. There are agents who specialize in probate sales. — G. H., Realtor

A: Good advice. All my kids are out of town, even out of the country. I have suggested an agent they may want to use.

Home seller tax break

Q: My husband is being transferred out of the state, and we will be moving. We had no trouble selling our house at a profit even though we’ve only owned it a year and a half, because real estate is hot here and we bought it at a bargain and fixed it up.

We will be renting it from the new owners till we leave. Now, I found we should have owned it at least two years so our profit is not taxed. But if we rent it back from the buyers for six more months, can we qualify to not pay tax on the profit? — S. G., askedith.com

A: You’re asking about the home sellers special tax treatment, which allows tax-free gain of up to $250,000 if you owned and occupied your main residence for at least two of the five years before you sold it. In fact, for a couple filing jointly, you could have up to $500,000 tax-free profit.

You can’t tack on rental time to make up the required two years. All is not lost, though. You could take a portion of your gain free of capital gains tax if your move is required for a new job more than 50 miles away. You owned and occupied the house for three-quarters of that two years, so you would claim the exemption from income taxes on three-quarters of your profit. The remainder will qualify for long-term capital gains rates. The IRS applies the same rules if you need to move because of changes in your situation. Qualifying possibilities include divorce, the death of a spouse or giving birth to twins or triplets.