If the part of the home used for business is within the same dwelling unit as the residential part of the home, the taxpayer is treated as having used the entire home as a principal residence for the home gain exclusion rules. No allocation of basis and amount realized from the sale is required. However, the taxpayer must recognize gain to the extent of depreciation deductions allowed or allowable after May 6, 1997. -- S.W.D., Enrolled Agent

Answer: Oh dear, I was still thinking of old rules that no longer apply. Many thanks for setting me straight.

Realtor Out Of Line

Hi Edith, My boyfriend and I recently purchased a house together. We both have signed the contract. However, I am wondering, is it necessary for us to create another contract with a lawyer stating that if our relationship dissolves we will split the sale of the house 50-50 and move out? Our Realtor says this is not necessary because we are both on the contract. What do you think? -- S.

Answer: I think your Realtor is out of line. It takes more guts than I would have, ever, to tell anyone they don't need a lawyer.

As it happens, you should indeed talk with an attorney, together. Yes, each will own half the house. But so what? Suppose you split, one needs money and the other doesn't agree to sell? Or one buys out the other; how would you arrive at a fair price?

And even without a breakup: What if one of you can't make your share of payments? Needs to move in an elderly relative? Is transferred out of state?

Doesn't agree the place needs a new roof?

Your attorney will probably think of even more unpleasant possibilities. That's what lawyers are for. Discuss now exactly what you'd both want and what would be fair, then have your attorney reduce it to writing in a binding agreement.