Did Grandma intend this legacy to grandchildren?

Q. My grandmother passed away and left two houses to threechildren and three grandchildren. The houses are being rented. Wegrandchildren aren't receiving one cent. Should we hire a lawyer?Is this legal?

A. By all means, take your papers to an attorney or accountantto find out where you stand. The income-tax returns of six peoplemight be involved.

Remember that rental real estate does not produce incomeautomatically. Someone is putting in time and effort managing thoseproperties, and would be entitled to compensation before the profit -if any - is divided.

Suppose that those houses have mortgage loans out against them,that one needs a new roof and the tenants in the other leavesuddenly, owing back rent. Then property taxes come due and thereisn't enough cash to meet the bill. Will you be prepared to kick inyour share? It could work either way, you know.

Q. Should we sell our condo in another state where values havedropped?

We bought it in 1990 for $129,000. Now we've moved and we'rerenting it out, which covers our mortgage payment, but not themonthly charges. Currently it would probably sell for about$121,000.

Meanwhile we are renting here. Our thinking is that if we waituntil prices rise out there, it's likely prices will go up here.

Our loan has a balloon due in 1998, so we would have to refinance. Do you think it is wise to sell?

A. Yes. You're losing money every month. And refinancing mightbe difficult because you aren't owner-occupants.

Waiting for the condo to regain original value is just playinggames. If you bite the bullet and take the loss, you can claim it onyour tax return. That wouldn't be true if the place were still yourown residence.

If you don't have the money to make up the difference, see ifthe lender would accept the loss in a "short sale."

Q. In 1980, my father placed his home in his name, my mother'sname, my brother George's name and my name. Both my folks havepassed away.

If George and I were to sell, would we have to pay income tax,and if so what is the basis for the cost of the property? My fatherdid not pay a gift tax, so we actually inherited the property.

A. No, you didn't. You inherited only half that property. Youreceived the first half as a gift.

The sale will be reported to the IRS, and you must account forit on your tax returns. On the half you received as a gift, you tookover your folks' cost basis. On the half you inherited, you receiveda stepped-up basis, valued at the time of your folks' deaths.

Then you need to include money spent on permanent improvementsover the years. If you and George have rented the place out, thereare further complications. Have an accountant sort it all out. Write real estate broker Edith Lank at 240 Hemingway Dr.,Rochester, N.Y. 14620 or her Internet address: lank@sjfc.edu.