SO YOU WANNA SELL YOUR HOME AND NOT TAX YOUR CHILDREN?

Dear John: I am an 82-year-old widower living in Queens who is attempting to sell the home that I have lived in for over 50 years. How much tax will I pay on the sale? Can I distribute the proceeds of the sale to my seven children? And will they have to pay tax on the money received? R.O.

Dear R.O.: According to Pat Daly, a certified public accountant and partner with Citrin Cooperman & Co., in Manhattan, “the sale of your house is considered a capital asset and will be taxed at a maximum rate of 15 percent.”

Daly says to figure your gain, subtract the cost of the house from the amount you get in the sale.

But remember to increase the price of the house by the amount of improvement you’ve put into it.

If the IRS ever challenges this, you might have to prove the upgrades were made, with receipts. But usually these aren’t questioned for a house this old.

“In addition, the IRS will allow for an additional $250,000 exemption for single people,” says Daly. So, in other words, you won’t be taxed on the original cost of your house, plus improvement, plus an additional $250,000.

Daly says you can no longer roll over your profits from this house into another one, if that’s what you had in mind.

You might have to get an accountant because the death your wife complicates the accounting – but in a good way.

You’ll have to determine the fair market value of the house in the year your wife died, then divide that amount in half.

You then take half of your wife’s half as an increase in the fair market value.

That increases the amount that is not taxable under the law.

You are allowed to give each kid up to $12,000 tax-free each year, and an equal amount to spouses, grandkids and other relatives.

If that doesn’t wipe you out, you are also permitted under certain circumstances to give higher amounts if you haven’t been giving them gifts in past years.

In total you are allowed to give up to a million dollars tax-free over your lifetime to all your relatives.

If you have any other questions just call Daly at his New York office and he’ll help you out.

Dear John: Since financial stocks seem low, I was searching for ones that either don’t have exposure to sub prime loans and/or are trading well off their highs. What’s your opinion on TD Bank, JPMorgan Chase or Ameritrade? E.D.

Dear E.D.: My good friend Chris Whalen, Managing Director of Institutional Risk Analytics, says TD Bank is stable but a perennial under-performer.

It is also “not a not huge subprime player” but its banking business in the US is mediocre.

JPMorgan Chase has exposure to the entire market – but less subprime than say Citigroup or HSBC Corp. But it has larger business risk, which might be important in the current weak economy. And its derivative exposure “will become more apparent in 2009.”

Whalen says he “doesn’t think Ameritrade is a good pick in a market environment such as this with volumes falling and investors heading for cover.”

Send your questions to Dear John, The N.Y. Post, 1211 Ave. of the Americas, N.Y., N.Y., 10036, or [email protected].