Q. We purchased a condo last year. We're older now and thought it was time to get rid of all the work with our big house.
Now there's this thing called association fees we didn't know about when we purchased. The only service they provide is snow removal (poor job), grass trim and trash removal. Is there a way to cancel this association and make our own arrangements? Should we discuss this with the bank people or what?
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We feel this association deal is just extra money in their pockets. We are worried about how much they will charge in the future. They tell us the whole area needs landscape, etc. We didn't purchase the whole area -- only our unit. We don't want to put out for all these costs.
A. It's too bad no one explained to you how a condominium organization works. It's also too bad you didn't read all those documents at closing before you signed them. Better take a look at them now.
You didn't buy only your own unit. You are also part owners of the whole development. When you bought in, you received a deed to your unit and also to a certain percentage of the lawns, sidewalks, roofs, pool or whatever. You signed an agreement to pay your share of expenses for those items, and you must abide by that promise. All those papers you received at closing should give you a better understanding of the legal and financial situation of your organization.
Your development is run by a homeowners' association. Try to stop thinking of it as "their pockets." It's more like "our pockets." If you don't like the way things are being run, you can become active in the association, attend meetings, run for office, and become part of the decision-making process.
Q. My brother and I bought a commercial building in 1975 for $23,000. We have used it for our business for 37 years. If we sell this property for, say, $400,000, how much capital gains tax would we owe?
A. Figuring your capital gains tax will be a lot more complicated than you may think. I assume your past tax returns have long since written off the original cost of the building (but not the land under it) as a depreciation expense. That must be recaptured, and you'll also take into account improvements you've made over the years. Then your tax bracket makes a difference, as does your brother's.
As you've had a business for the past 37 years, I assume you've used your own tax professional, and that's the person to answer your question.
Q. The 2010 tax credit ($8,000) for first-time homebuyers requires that you live there at least three years to avoid paying it back. I heard this is only true if a profit is made upon selling the home, and the amount of payback is based on the amount of profit.
A. You heard right. If you lose money on the sale of your house, the IRS does not add to your troubles. They -- and the rest of us taxpayers -- want payback only of any profit you may make, and never more than the $8,000.
Q. I bought my home years ago for $100,000 with $20,000 down. The bank doesn't pay my taxes and insurance; I get the bills myself. I've never missed a payment, and last month for the first time, I added up all my payments, and they total more than $80,000. When I called the bank, somebody there told me I still have more years to pay. I don't see how this can be. Doesn't the bank owe me something saying my mortgage is paid off? I am very disturbed. I know you always say to see a lawyer, but I had a lawyer way back when I bought, and I think I was misled. He has since died anyhow. What can I do about this mess?
A. It sounds as if things are going just as they should with your mortgage schedule. Where you got confused was in assuming that the whole of those payments went to pay down your mortgage debt. Why would anyone lend you that money and wait years to get it back unless there was something in it for them? Yes, the bank collects part of the debt every month, but it also collects some interest, which is like rent you owe for the use of its money. Part of every payment went to cover a month's interest due on the remaining debt you hadn't yet repaid.
The bank should send you statements, perhaps monthly and certainly at year's end, showing just how much interest you paid on your mortgage. If you itemize deductions, that can be claimed on your income tax return every year.
• Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (include a stamped return envelope), or readers may email her through askedith.com.
© 2012, Creators Syndicate Inc.