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• 'Operation Fright Night'

• 'A very, very big surprise'

• 2 Stanislaus County farmers vying for 26th Assembly seat

• Zoo expansion means snow leopards and river otters coming to Micke Grove in 2010

• Regional Roundup

November 20th, 2009

• Acampo woman killed

• Salvation Army Kettle Kickoff

• Advocacy groups sue East Bay Municipal Utility District over Pardee expansion

• Regional Roundup

• Galt plans to help residents with energy-efficient projects

• Stable southeast of Lodi approved

• One year after a heart attack, Lodi's Judy Mims thanks rescuers

• National Guard troops return home in time for the holidays

• Real estate market gets on more solid ground

November 19th, 2009

• Lodi Unified School District board votes to cancel summer school for 2010

• Water surges in Mokelumne River yield more salmon

• Lodi City Council will consider redevelopment next June

• Lodi City Council plans to cap number of taco trucks at 22

• Corrections

• Chase ends in crash

• Operation: Christmas

• Logbook

• Suspect arrested after hiding in fridge

• Galt Joint Union High School Distric hires new superintendent

• Sales tax hike yields dividends: 5 new officers join Galt Police

November 18th, 2009

• Regional Roundup

• Paranormal group conducts second investigation of building

• Congress allocates money for local water projects

• Lodi man finds wife's ashes during police display of stolen property

• Galt City Council rejects study on rent stabilization

• Sarah Palin's book hits the shelves: Locals react

November 17th, 2009

• Clarification

• Lodi Budget and Finance Committee to look into ways to save money on employee benefits

• Regional Roundup

• Decision on summer school expected at tonight's Lodi Unified School District meeting

• Clements gets free water rescue boat

• Redevelopment to be discussed by Lodi City Council again

• Court reinstates death penalty for killer of Lodi grad

• Paying tribute to a Lodian

November 16th, 2009

• Correction

• Public Meetings

• Regional Roundup

• Three members of Lodi-area family fall ill after eating poisonous mushrooms they reportedly found at Lodi Lake

• Sierra Adventure store to close after four years in Downtown Lodi

• Lodi's First Sip event showcases area wineries' latest vintages

• City Council 'triple-dog dared' to ditch cars, use Lodi buses

November 14th, 2009

• Galt school district narrows superintendent search to one

• Regional Roundup

• A first look at 2009 vintages at Lodi's First Sip wine-tasting event

• Watchful neighbor in Lodi helped bust suspected burglars

• Despite budget cuts, some Lodi Unified School District salaries continue to rise

• Despite an increase in homeless students, school districts look to bolster enrollment, raise revenue

• New Galt city manager juggles job, family

November 13th, 2009

• What to expect with new homebuyer tax credit

• Lodi Muslim: Local mosque not involved

• Regional Roundup

• Mayor Larry Hansen points out Lodi's economic progress

• First phase of Lockeford park by 2011?

• Lodi veteran recounts close calls in Vietnam

• Burglary suspects are under arrest

The following stories have received the most reader comments during the last 7 days.

• The country's mess is our fault (155)
• Obama is not a moderate (130)
• Sarah Palin's book hits the shelves: Locals react (67)
• Despite budget cuts, some Lodi Unified School District salaries continue to rise (58)
• Lodi City Council plans to cap number of taco trucks at 22 (48)
• The haves should help the have-nots (30)
• Public health care is a Christian option (26)
• Lodi Flames slim playoff chances vanish in setback to Tracy Bulldogs (25)
• Tokay in, traveling to unbeaten No. 3 Grant for football playoffs (25)
• Nightmares about America's future (23)

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Put extra cash into mutual fund, not mortgage

Best for those with low interest rate, long time horizon

Q: My wife and I enjoy listening to your radio show on Sundays. We are both 65. I work full time and my wife works part time. We'd like to sell our house because it is too big for us now, but we know this is not a good time so we are waiting for the market to improve. In the meantime we're paying an extra $500 a month on our loan. We have a balance of $155,000 and the house was appraised at $240,000 in March of this year.

Our current income is more than $200,000 per year, and we are well set for retirement even considering the hit our retirement 403(b) and 457 accounts have taken lately. Would we be better off investing the $500 per month in something other than equity in our house considering the condition of the housing market?

A: The nice thing about being financially stable in a tough market is that it gives you the opportunity to do a little stretching when it comes to your investments.

As long as your interest rate is low on your mortgage (and if not, check out interest rates because while they're historically low, they may get even lower before the year is out), you might as well keep your loan and invest the extra $500 elsewhere.

I would suggest that you open up a brokerage account and add your $500/month to a super-low-cost index fund of some sort. I do believe that now could be an excellent time to buy index mutual funds and hold them long term, especially since you're not risking cash that you actually need to live.

You should know, however, that some investment advisors are cautioning people that are close to retirement to keep their money in a safe investment that will not fluctuate with the market.

Q: I have a situation that seems to be complicated, especially as I try to explain it to my tax and financial advisors. I can't believe I'm the first one in a situation like this.

My grandfather (my mother's father), upon being admitted to a convalescent home, put my mother (his daughter) on the deed in joint tenancy with him. He owned the home free and clear at the time. His original purchase price on the home was a mere $15,000.

He has since passed away, leaving my mother as owner of the entire property. A year and a half later after his passing, my mother quitclaimed the property to me. I have recently sold the property for $225,000.

I need to know what my cash basis of the house is so that I can determine if I'm selling at a gain or loss. When my mom transferred the home to me a year and a half ago, the fair market value was about $385,000.

I am not sure whether I should use the fair market value of the property at the time of my grandfather's death or the date the property transferred to me in calculating the cost basis.

Please help, as I am holding up the closing trying to figure out what tax documents to fill out. I appreciate any information you can provide on this situation.

A: Your situation is a bit complicated, but it's not unfathomable.

When your grandfather added your mother to the deed, he gave her half the house. Her cost basis was whatever he paid for the property (in this case $15,000) plus any structural or capital improvements made. Let's assume he added another $5,000 to the property while he lived there. The cost basis for her share became $10,000, or half of $20,000.

When he died, the fair market value of the property was $385,000. She inherited his half at $192,500. Remember, she got her half at $10,000.

When she quitclaimed the property to you, you received her half at a $10,000 basis, and the inherited half at $192,500. (The total value of her gift to you is $202,500, but we'll come back to that number in a moment.)

You have now sold the property for $225,000. The profit on the share of the house your mother was given is $102,500 ($112,500 - $10,000 = $102,500). The loss on the inherited half is about $80,000 ($192,500 - $112,500 = $80,000). You would subtract half of any costs of sale or cost of improvements that you've made to the property from whatever profit you have from your mother's half.

Unless you lived there for two out of the last five years as your primary residence (as the owner of the property), you would owe long-term federal capital gains tax on the $102,500 plus applicable state tax. At 15 percent, you'd pay $15,375 plus any applicable state tax. Unfortunately, you would not be able to deduct the loss on the inherited half of the home.

But there are also gift tax considerations. Anyone can give away to individuals up to $1 million in a lifetime. You can give away $12,000 in 2008 (rising to $13,000 per person in 2009) to any number of people without deducting from your lifetime gift exemption. But your mother gave you a house, which was roughly valued at $202,500 (her cost basis of $10,000 plus the inherited half's cost basis at $192,000). She should find out what, if any, forms she needs to file with the IRS.

This is a great example of why someone should leave real estate in their estate to their heirs instead of putting them on the deed. If your mother had inherited the property from her dad, she would have received it at the fair market value the day he died, which you've said was $385,000. If your mother had sold the property that same day, she would owe no taxes on it.

Just to be sure I had the details right, I ran your question by two tax professionals, Chet Burgess, an enrolled agent who owns Brookwood Tax Service in Atlanta, and Julianna Clementi-Ryan, a vice president with Nationwide 1031 Exchange, a 1031 exchange company. They concurred with my answer to you, but you should consult with your own knowledgeable tax professional, because there may be extenuating circumstances or other facts you might have failed to include in your e-mail.

For more information on this topic (and I've written about it frequently online), and other similar questions I've answered, please visit ThinkGlink.com.

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

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