DEAR BOB: I live in a wonderful but older condo complex of 78 units. It was a garden apartment development built around 1965 that was later converted to condos in 1980. The board of directors recently voted to replace our old single-pane windows with double-pane, super-duper energy-efficient windows. I agree that’s a good idea. But they levied a $4,000 special assessment on each condo owner without any vote of the members. When I inquired, I was told no vote is required because if the cost of new windows is taken from our reserve account, we will then be in a dangerous financial situation. Many of my fellow owners and I say the purpose of our reserves is to pay for major replacements like this. Can the directors levy a $4,000 assessment on each condo owner without a member vote when we have plenty of money in the reserves? – Grace A.
DEAR GRACE: Without reading your condo CC&Rs (covenants, conditions and restrictions) and by-laws, I can’t give you a legal answer if a vote of the members is required. Each condo association has different CC&Rs and by-laws.
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However, I must commend your condo board of directors for maintaining substantial reserves, which, you say, are adequate to pay for the window replacements. Having at least $4,000 per unit in reserves is superb.
But the directors should have considered the financial situation of the homeowner’s association members. If many of the members can’t afford to pay a $4,000 special assessment, provisions should be made to spread out the assessment payments for members who apply.
$250,000 HOME-SALE EXEMPTION USABLE ONLY EVERY 24 MONTHS
DEAR BOB: I own two residences. One is a condo where I spend the winter months. I spend the summers in my other residence. I am 78 and a widower. I have decided I want to live full-time in my condo residence where I spend the winters. My summer home meets the ownership and occupancy two-out-of-last-five-years tax law tests. If I sell it now, can I sell my other home in spring 2005 so I can then move to an assisted living facility? – Norman W.
DEAR NORMAN: No. Internal Revenue Code 121 can only be used once every 24 months, even if you meet its two-out-of-last-five-years principal residence ownership and occupancy tests.
If you sell your “summer home” in 2004, you must wait at least 24 months until 2006 to sell your other home if you want to claim the $250,000 for its sale. Please consult your tax adviser for full details.
NO TAX DEDUCTIONS IF YOU DON’T CHARGE MARKET RENT
DEAR BOB: I recently rented my condo, where I lived before I married three months ago, to my mentally retarded older brother. He works as a supermarket “bag boy.” We are so proud that he has held a steady job for the last 14 years. However, he is financially unable to pay the full market rent for the condo. So he pays me $500 per month rent although comparable condos in the complex rent for about $1,200 per month. In this situation, can I claim condo rental deductions, such as the monthly condo fee, mortgage interest, property taxes, landlord’s insurance, depreciation and repairs? – Stephanie H.
DEAR STEPHANIE: Congratulations to you and your brother. Unfortunately, the IRS isn’t so appreciative of your effort to help your brother.
You are required to report the $500 per month rent received on Schedule E. That is also where you can deduct the mortgage interest and property taxes paid. But the other expenses you list are not supposed to be deducted when a below-market rent is charged to a relative. For more details, please consult your tax adviser.
The new Robert Bruss special report, “Secrets of Buying Your Home or Investment Property for Nothing Down,” are available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
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