DEAR BENNY: Twenty years ago my mother placed my name on the deed to avoid issues when she passed on. Will the IRS treat this as inherited property or consider it investment property? Did I inherit her half of the property? --Theo

DEAR THEO: Why, oh why, do parents do this?

For example, let's say your mother and father bought their house years ago for $20,000 (sounds great but that was a lot of money then). For tax purposes, your parent's tax basis was $10,000 each. Your father died 20 years ago, when the house was worth $40,000. Under a legal concept called the "stepped-up basis," the market value on the date your father died was added to your mother's basis. Thus, her basis would be $30,000 (her original $10,000 plus half of the $40,000).

Did your mother add you to title or are you the sole owner? I did not understand your question. A very strict tax rule is that the basis of the person giving the gift (the donor) becomes the basis of the receiver (the donee). So, if my calculations are correct, if you are on title with your mother, your tax basis for half of the property is $15,000. On the other hand, if you are now the sole owner, your basis is $30,000.

Why is this a problem? Because unless you have lived in the property for two out of the previous five years before it is sold -- in which case you can exclude up to $250,000 of any gain or if you are married and file a joint tax return you can exclude up to $500,000 of gain -- you will have to pay a lot of capital gains tax.

If you are now the sole owner, the IRS looks at the difference between the tax basis and the sales price. Any profit that you make is taxable.

If the property has been rented out, then you may want to consider doing a 1031 (Starker) exchange. You will have to discuss all tax issues with your own accountant.

If your mother is still on title, upon her death you will receive the stepped-up basis for her half. But your half is still, unfortunately, the basis described above.

DEAR BENNY: In a very weak moment, we bought a timeshare, which we have decided we absolutely don't want, realizing they are next to impossible to sell. What happens if we stop paying the yearly maintenance fees and accept the whole experience as a total financial loss? Any other suggestions? --Gail

DEAR GAIL: Unfortunately, you are not alone. Too many people have been lured into buying timeshares by sales pitches from good-looking salespersons offering free room, board and gasoline if you will spend an hour or two listing to the "benefits" of timeshare ownership.

If you stop paying the yearly fees, the timeshare management people may want to start legal action against you, which will impact your credit rating. You should talk with the appropriate management people and see if they have any suggestions. Perhaps they will be willing to take it back at no cost.

You may also want to donate the property to a charitable organization, assuming that they want it.

Get a list of other owners; perhaps someone will be willing to take it off your hands. Perhaps readers have other suggestions, which I would welcome.

DEAR BENNY: I hold a $120,000 promissory note backed by a first deed of trust in Virginia. The borrower paid back $60,000 in principal in 2001, and I subsequently loaned him back $60,000 in 2004. My thinking was this second advance was covered by the recorded deed of trust and if any dispute ever arose, I could produce the cancelled check and refuse to sign the certificate of satisfaction. Opposing counsel says the 2004 advance is not secured by the deed of trust and is a personal, unsecured loan. Is that correct? --Bob

DEAR BOB: There is an old saying that where there are two attorneys there are three opinions. I do not practice law in Virginia, so you should really get a specific opinion from your own attorney -- or at least ask the other lawyer for his or her legal opinion.

Is there any language in your promissory note and deed of trust that would cover the situation? The problem is simple: Creditors of the person who borrowed the money from you are put on notice of your security interest because it is recorded among the land records in the county where the property is located. However, these creditors want to be paid also, and if they can find a "legal loophole" they will exploit it. And while they are on notice of the original loan, they have no way of knowing that you advanced additional moneys -- even though the amount is the same as reflected in the original note and deed of trust.

The issue of future advances -- sometimes referred to as "dragnet clauses" -- is a very complex area of law. State law -- and the specific terms and conditions of your legal documents -- will determine whether the additional moneys are secured.

The courts will also look to the intentions of the parties. Did your borrower intend that the new loan would, in fact, be covered under the original deed of trust?

I must caution you, however, that in a number of jurisdictions, if any one gets a judgment against your borrower (or a contractor files a mechanic's lien) the second advance that you gave would be junior in priority to those new creditors.

DEAR BENNY: I have placed a bid to buy a home with a contingency that I sell my house in order to purchase the new one. The Realtor who showed the house to me said the house may be going into foreclosure, but they did not know when or why it had not gone yet. Can I get out of the offer that I made, even if my house does sell? --Cynthia

DEAR CYNTHIA: Getting out of a real estate sales contract is not easy. A contract is a legal document, binding on the parties who signed it. If your only contingency is based on the sale of your house and if your house does sell, then I am not sure how you can cancel your contract.

You ask if you can get out of your "offer." In order to have a binding contract, there has to be (1) an offer, (2) acceptance of that offer and (3) valuable consideration. Usually, the earnest money deposit is the consideration. So, you are asking to get out of the contract -- not the offer.

Because you have a sales contract, you have what we lawyers call an "equitable interest" in the property. If the house is, in fact, sold at foreclosure and a third party buys the house, that may solve the problem. Other than some super-priority state or federal lien, a foreclosure generally erases all interests that attach to the property after the foreclosing party's deed of trust (the mortgage document) was recorded.

I suggest that you, your real estate agent or your attorney talk with the lender that is foreclosing and find out more details. If you still have any interest in buying the property, you may be able to cut a deal with the lender.

DEAR BENNY: I have worked the REO market as a selling agent. In my state (Georgia), when you purchase a foreclosed property the warranty deed given to the purchaser is "limited." Does the "limited" stay with the warranty deed at the time of the next transfer? --Tom

DEAR TOM: I don't know Georgia law, so my response will have to be general in nature.

Oversimplified, there are three kinds of deeds: general -- which means that I am warranting title to the house going all the way back in history; special -- which means that I warrant that the title is good only from the time I purchased it; and quitclaim -- which states that I convey the title that I have only to you. If I do not have any interest in the property, neither will you. I often joke that I am willing to give you a quitclaim deed to the Washington Monument.

It is my understanding that in some states -- including Georgia -- a limited deed is the same as a special warranty deed.

Let's say that I originally took title by way of a special warranty deed. That does not stop me from conveying the property to you by any of the other forms of title. I probably would not want to give you more benefits than I have, but that's my choice.

So I suspect that unless local custom in your state requires a general warranty deed, when the buyer of the foreclosed property resells he or she would convey only by way of a limited warranty.

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