DEAR BENNY: We own a cabin on a private lake. It’s governed by an advisory committee (AC) working under our local county’s board of supervisors. On paper, we are clearly allowed a private boat dock. However, because the AC provided deceptive documentation, recent shoreline owners have been stymied at every turn in acquiring a private dock.
During a public AC monthly meeting, a previous committee member had bragged about dismantling and removing a number of older docks, with only two remaining. When information about the delaying tactics became public, half of the board either resigned or was voted out.
Now the newest AC chairman wants to ‘put the dock issue’ to a community poll. Can such an important and long-standing right be ‘polled’ (voted) away now? Private docks had existed on this lake for decades prior to this advisory committee’s creation in 1993. Developers had marketed this lakeside community, with private docks in place, back in the ’60s. There are aerial photographs and memorandums to prove this.
The current boat dock policy, written in 2003, allows us to lease the ‘water surface rights’ under our dock for a set yearly fee. Yet, they refuse to actually allow us this opportunity – and now seemingly want to take this opportunity away in yet another fashion. – Donna
DEAR DONNA: I can provide a general response, but you really need to consult a local attorney. If there are a number of unhappy owners, you should all get together so you can have a strong legal defense fund.
You have advised me there is no community association, and that the board of supervisors (BOS) makes the final decisions. That’s a local government agency, and I am sure there are rules as to how that agency operates.
It may very well be that what the BOS “giveth,” it can also take it away. Your attorney should review all relevant documents about the boat docks, so as to make a decision whether the BOS has the legal right to impose any restrictions.
Have you gone down the political avenue? Have you talked with your elected officials – both at the local as well as the state level? Have you given stories to your local media – newspapers and television stations? In my experience, the white light of publicity on elected officials will turn them around.
RESPONSE FROM A READER: There is a possibility that the person who received the home as a gift from his 80-year-old grandmother could get a step up in basis.
There have been several cases or revenue rulings interpreting Section 2036 of the Internal Revenue Code to include a gifted home in the estate of the donor when the donor has either expressly or impliedly retained a life estate in the transferred property. It does not matter whether or not an estate tax is due. If the property is includable in the estate of the decedent for federal estate tax purposes, the property would be eligible for a stepped up basis.
The circumstances that might be the basis for inclusion could include: (a) the donor continuing to live in the gifted residence without paying adequate rent; or (b) the donor paying the real estate taxes and other home ownership expenses.
Considering the difference between the donor’s basis and the fair market value at the death of the donor, the donee should consult with an attorney or CPA knowledgeable in federal estate tax matters to determine if his case meets the criteria for inclusion under Section 2036. – Robert
DEAR ROBERT: The issue in my column dealt with the stepped-up basis. Oversimplified, on the death of a property owner, the person who inherits it gets the value of the house on the date of death. Even though the deceased had a very low tax basis, it is stepped up on death. I wrote that if the grandmother had died and THEN the house would have been inherited, she would get the stepped-up basis. But in my example, she took the property when the grandmother was alive and I consider that a gift, and thus the basis is the grandmother’s.
But Robert has suggested that there may be a way to get that higher basis anyway, and suggested – to which I completely concur – that taxpayers consult a competent tax attorney or CPA for specific advice.
Benny Kass is a practicing attorney in Washington, D.C. and in Maryland. He is not providing specific legal or financial advice to any reader. He wants readers to e-mail him, but cannot guarantee a personal response. He can be reached at: firstname.lastname@example.org.