Condo Losses: Residence vs. Rental
Q. I bought a condo several years ago for my principal residence. I want to sell it, but it has lost about 15% of its value since the purchase. May I convert the condo to a rental and declare the lost value as a tax deduction? I know losses on principal residences are not tax-deductible.-- M.L.B .
A. Yes, you may convert your condo to a rental, but it won’t do you any good. Why? Because the tax basis of your condo will be its value as of the date of conversion or its original basis at purchase--whichever is lower. So if your condo has already declined in value, that fact would have to be recognized in an appraisal conducted at the time you convert it. A decline before the conversion could not be written off as an investment loss.
If you think the condo will continue to depreciate, however, converting it to a rental now might make sense. In that case, the longer you hold it as a rental before selling it and taking this investment loss, the better. Our experts recommend at least six months, preferably a full year or more.
U.S. Securities Can Be Ordered by Mail
Q. How can I buy U.S. Treasury bonds?
D.D .
A. With interest rates creeping up, investor interest in Treasury securities has been rekindled. Treasury bonds can be purchased through several outlets. Banks and brokers routinely sell them, but they will probably charge a sales fee, as much as $25 per bond. You may also buy bonds directly from the U.S. government, which does not charge a fee.
Bonds are available in $1,000 increments (up to a maximum of $5 million) from the Federal Reserve System or any of its branches. Bond maturities range from two years to 30 years.
Treasury bills, or T-bills as they are usually called, are sold in three-, six- and 12-month maturities and are available in $1,000 increments--from a minimum of $10,000 to a maximum of $1 million.
The interest rates paid on the bills are set at auction every Monday. You may buy Treasury bonds directly from the Fed at 950 S. Grand Ave. in Downtown Los Angeles. You may also buy them by mail by writing the Bureau of the Public Debt, Washington, D.C. 20239. Personal checks are accepted.
To order T-bills by mail, you must send a cashier’s check made out to the Federal Reserve Bank. For Southern California residents, the address is P.O. Box 2077, Terminal Annex, Los Angeles, CA 90051.
Certified mail is recommended to ensure that the order arrives at least one day before the auction.
You will be best served if you already have an account with the Federal Reserve Bank. You can start one by writing the bank at the above post office box and asking for the New Account Request form. Complete and return it, and you will soon receive notice that your account has been opened.
To participate in an auction, write the bank and state the type of security you want to buy. Include your account number and the appropriate type of check.
To purchase Treasury bills, which carry maturities of up to 12 months, you must send a cashier’s check.
For Treasury bonds, which carry maturities of two to 10 years, you may send a personal check.
As you may know, Treasury bills are sold at discount, with the discount rate correlated to the interest rate the bill carries. Buyers should send checks for the full amount of the bills they want to purchase. Reimbursements for the discount are returned to the buyer soon afterward.
First-time buyers generally get the discount reimbursements by mail. For all subsequent purchases, the checks are deposited directly into a bank account designated by the buyer.
For more information, call the Fed’s recorded information line: (213) 624-7398.
One final note: Interest paid on U.S. Treasury securities is exempt from state and local income taxes.
Stock Researcher Can Help Trace Old Shares
Q. How may I find out if the companies in which I hold some stock are still operating? --S.C .
A. First, consult the Standard & Poor’s Stock Guide, which contains pertinent information on about half of all publicly held securities in the United States.
You might find this guide in the reference section of your local public library. It should also be part of the permanent collection of every brokerage house. The S&P; guide will tell you on which exchange your stock is traded. But be warned that it covers only a fraction of U.S. publicly held companies.
If your company isn’t named in the guide, your next step should be to consult the “pink sheets” published by the National Quotations Bureau.
This listing--it used to be printed on pink paper--covers about 15,000 publicly traded companies and gives the names of the brokerage houses handling their stocks. While a local brokerage branch office might not have a copy of this listing, its regional trading center certainly will.
Can you get a broker to look it up for you? Perhaps, but brokers are in the business of making trades for their customers, not doing research for the public. Of course, brokers are always happy to oblige a potential customer.
If your company isn’t in the pink sheets, you have only a few choices left. You can retain a stock research company to find out what became of the company whose certificate you hold--did it merge with another company? go bankrupt? cease operating?
If you decide to proceed with the research, try contacting Prudential American Securities in Pasadena. At $40 for each company search, this company offers the least expensive stock research service of any we know. Send a copy of the stock certificate along with a check for $40 to 921 E. Green St., Pasadena, CA 91106.
