Assessing Responsibility for Condo Roof Damage

Q: Last year we purchased a condo. Although we noticed water stains on the ceiling, the transfer disclosure statement indicated that the roof was replaced in 1989 and we believed that the stains pre-dated the roof’s replacement. Now we find out that the roof is actually more than 10 years old and is being replaced by the condo association at a cost of $2,500 to each unit. Needless to say, we feel as though we were duped. What recourse do we have? --J.J.B.

A: Clearly, you have a legal problem. Although you could go directly to an attorney, a less costly solution might be to file a complaint in Small Claims Court. Against whom? At the very least you should go after the seller. But our experts suggest that you also name both your real estate agent and that of the seller as respondents because the water stains on the ceiling should have triggered an inquiry from them into the condition of the roof.

You should also determine if the seller, his agent or your agent ever received a copy of the condo association’s statement of reserves, a document that should have indicated whether the group had money set aside for major capital improvements, such as a new roof. These reserve levels are based on the life expectancy of various improvements, they are considered good indications of their ages. If the condo association provided erroneous information, it too could be included in any legal action.

You have other remedies beyond Small Claims Court. If you believe that your agent or the sellers were negligent or acted fraudulently, you could file complaints against them with your local Board of Realtors, the California Assn. of Realtors and the state Department of Real Estate. However, a complaint to either the state or local Realty group will only be considered if the agents in question are members of the Board of Realtors. This group is a voluntary professional association engaged in the self-policing and education of its members.

All real estate agents and brokers are licensed by the state Department of Real Estate. Evidence of fraud or gross negligence in handling a real estate transaction is considered in determining whether to suspend, revoke or limit in some other way the licenses of agents and brokers. To be realistic, you should only complain to the state if you have compelling evidence that your broker or agent has broken the law. Complaints of a lesser nature, including disputes over fees, ethics and other practices, are handled by your local Board of Realtors.

To lodge a complaint against your agent with the state, you must first obtain a complaint form from your local office of the California Department of Real Estate. In Los Angeles, the office is located at 107 S. Broadway, Room 8107, Los Angeles 90012. Other branches in Southern California are located at: 28 Civic Center Plaza, Santa Ana 92701 and 1350 Front St., Room 3064, San Diego 92101. The department also maintains offices in San Francisco, Sacramento and Fresno. California residents unsure of which local office would handle their complaints can write to the department’s statewide headquarters at P. O. Box 187000, Sacramento 95818.

When to Claim a Loss on Premium Bonds

Q: A few years ago I purchased some $1,000 face value Treasury notes at a $1,030 premium. If I hold them to maturity and receive $1,000, may I claim a capital loss of $30 per note? --S.P.

A: When a bond or Treasury note is purchased at a premium, that premium must be amortized over the remaining life of the investment and written off annually against the interest income you receive. If you sell the note before it reaches maturity, any unamortized portion of the premium is considered a capital loss. However, if you hold the bond to maturity, you will have recognized your entire premium and should have nothing left to claim as a loss.

Income Tax Applies to Savings Bond Interest

Q: My husband and I purchased several Series E U.S. Savings Bonds from 1971 through 1978. They were issued in my name or his. He died earlier this year and I was told that if I cashed them in this year, I would not have to pay income taxes on the interest earned on the bonds. Is this true? --B.D.

A: No, it is not true. Perhaps you were thinking that because you and your husband held the savings bonds as community property, they would be given a step-up in value to that of your husband’s death. Although some community property, such as real estate and stocks, are treated to an entire step-up in value when one spouse dies, savings bonds are not.

The Internal Revenue Service considers the accrued, untaxed interest on savings bonds--as well as annuities and installment sale proceeds--to be “income in respect to a decenent” and it is subject to ordinary taxation when the investment matures and pays off.

Although you did not ask about this, you might want to know that you can easily change the ownership of your bonds to just your name. It won’t matter to the government if you change the name or leave your deceased husband’s name on the bonds. But if you want to change the name, ask your local bank for a PDF 4000, a name change request form. You may also get this form by calling the Federal Reserve Bank in Kansas City, Mo. from 6 a.m. to 3 p.m. PDT Monday through Friday at 1-800-333-1010. By calling the same number, you can also get a copy of the government’s savings bond redemption tables, which list the value of bonds purchased over the years.

Property Losses Don’t Count for Deductions

Q: Seven years ago we paid $8,000 for a week of a timeshare condo. It is considered deeded property and we pay property taxes on it. If we can sell it for only $5,000, would we be able to claim a $4,000 loss on our income taxes? --C.M.P.

A: No, losses on personal property, including principal residences and second homes, are not tax deductible.

Carla Lazzareschi cannot answer mail individually but will respond in this column to financial questions of general interest. Please do not telephone. Write to Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, Calif. 90053