KASS: Document apartment before and after

DEAR BENNY: My son recently moved out of an apartment he rented for slightly longer than a year. At the end of the lease, the landlord allowed him to continue on a month-to-month basis. My son told him he would only stay one extra month and then move out.

His deposit was $3,000, but the landlord returned only $1,500. This is his reasoning: removal of bolts from the ceiling, repair of the ceiling, patching and painting, carpet cleaning, cleaning of cabinets and appliances, replacement of mirrored closet doors (they were removed but not broken), and removal of garbage from garage. Finally, no 30-days written notice as required by the lease.

This apartment was in excellent condition. There was only normal wear and tear, which I thought was not allowed to be charged to the renter. Even with minor holes in the ceiling and patching, the repairs would not come to much more than $200.  This landlord did not return the $1,500 until more than 30 days after the end of the lease.

We can contact an attorney, but would like advice on whether this is the right course of action. Thanks for your input. – Regina

DEAR REGINA: Your son is out $1,500; it may cost him that much – or more – to hire an attorney. Landlords know this, and often an unscrupulous landlord will take advantage of the fact that the tenant will not spend the time or the money to challenge the withholding.

Did your son meet with the landlord when the inspection took place? Does your son have pictures – or other evidence such as cleaning bills – that can disprove the landlord’s claims?

There is one item on your list that is of concern, namely that your son did not give the required 30-day notice that he was leaving the apartment. That alone may support the landlord’s withholding of the $1,500.

Your son can take the landlord to the local small claims court in your area, and he does not need an attorney in that court. Sometimes, landlords will refund the balance of the security deposit rather than spend time – and money – in the courts.

In the future, however, your son should take pictures of the apartment at the beginning of the lease, and also at the end of the lease. Furthermore, if problems arise during the lease term, let the landlord know immediately, and keep a record of the complaint; email will work.

DEAR BENNY: Enjoy your column! I have a question that might be of interest to many. I think I know the answer, but I’ll ask anyway: If selling a home at a loss, why can’t the loss be deducted from our personal income taxes? We are selling our occupied home of 10 years and will incur a substantial loss, based on market conditions, timing and a continually declining market in our state.

Fortunately, we can afford this – or will have to! When we sold a previous home, we made a good profit, but had to pay a hefty capital gains tax.

So why is the profit taxable and the loss not deductible? If it is in the tax code, that is an injustice. – Rob

DEAR ROB: You are right. That’s one of the many injustices in the world of taxation. Yes, the tax code provides significant benefits if you have made a profit but none if you have a loss on your personal (main) home.

As you know, if you have owned and used your home for two out of the five years before it is sold, you and your spouse can exclude up to $500,000 of gain (or up to $250,000 if you file a single tax return). That law was enacted in 1997. Prior to that, there was another tax benefit called the “roll-over,” whereby you did not pay any tax on the sale of your house but the profit was “rolled over” into the new house.

And investors get good tax breaks also. You can defer capital gains by doing a Starker (section 1031) exchange; you can depreciate the property yearly, although you may have to recapture that money when you sell.

The bottom line: While homeowners cannot deduct their tax loss, they can deduct the real estate taxes and the mortgage interest they pay. Tenants complain this is also unjust, since they cannot take advantage of any tax breaks.

Every four years, politicians running for public office promise to enact major tax returns. Just look at what both the Republican and Democratic candidates are talking about today.

But Congress has to act, and we all know how ineffective that branch of government has been over the last many years. I doubt there will be changes.

Benny Kass is a practicing attorney in Washington, D.C. and in Maryland. He is not providing specific legal or financial advice to any reader. He wants readers to e-mail him, but cannot guarantee a personal response. He can be reached at: [email protected].