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The following articles were written by former Probate Judge Merri Rudd.

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More on Homestead Affidavits and Stock Basis

10/03/2002
10:55 AM
Merri Rudd

Editor's note: This column may not be quoted or reproduced in whole or part without express written permission of the author.


Q: Your column of September 5 regarding the affidavit of transfer of title to homestead said, "the value of the home for property taxation purposes cannot exceed $100,000." What does this mean?

Excellent question! I was quoting New Mexico's law. Some people interpret this to mean you can only use the affidavit to transfer houses whose market value is $100,000 or less. Others say it can be used for houses valued at up to $300,000. Here's why: examine your yearly "Notice of Value" from the county assessor. You will see "Full Total Value" and "Net Taxable Value," which is one-third of the "Full Total Value" minus exemptions. The second interpretation allows you to use the affidavit if the home's Net Taxable Value is $100,000 or less, since that is the figure used to calculate property taxes.

I went straight to the source of the law, Ellen Leitzer, attorney and co-director of the Senior Citizens Law Office in Albuquerque. She said, "The law is meant to be used to pass homes valued at up to $300,000. Otherwise, with prices nowadays, it wouldn't apply to very many homes. The intent of the legislation was to help a surviving spouse whose home is of moderate value avoid the necessity of probate." Various title companies and their attorneys agree that this affidavit can be used to transfer more expensive homes if their "Net Taxable Value" does not exceed $100,000. If you use this affidavit, shop around until you find one of those title companies.

Q: Regarding your column of September 19 about stock originally purchased for $50.00 a share that declines to $10.00 a share, you wrote that at the death of the first spouse, this stock would be "stepped down" in value to $10.00 a share. Let's say the surviving spouse sells the stock later for $30.00 a share. This would appear to be a gain of $20.00 a share, although actually it is a loss of $20.00 a share, based on the original purchase price. Something seems very wrong here. B.J., Albuquerque

Alas, you have pointed out one possible unfair result in the voluminous federal Internal Revenue Code (no doubt there are a few others). The lesson is that if couples own community property stocks that have declined in value, they should consider selling the stocks during their lifetimes and claiming a capital loss on their income tax return before one spouse dies. In the alternative, the surviving spouse could hold onto the stock. At his/her death, the stock would then step up (assuming it is still $30 a share or more) to its fair market value at the date of the second spouse's death. Then, if the heirs sold the stock soon after, little or no capital gains tax would be due.


© 2002, Merri Rudd & Albuquerque Journal, All Rights Reserved

Appeared October 3, 2002, Albuquerque Journal, Business Outlook
Reprinted with permission 

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