Q: I thought condo fees were for the maintenance and repair of homes and grounds, and for lawn care. Our association fees also pay for parties. I think the people who participate in the parties should pay for the parties themselves.
Our condo fees have been raised twice since I moved here six years ago, and they are expected to go up again this coming fiscal year. What can be done to remove the party category from the budget?
A: Condominium fees are set by a board of directors, and in some cases, depending on your legal documents, the budget must be approved by the membership. The fees cover a lot of things, over and above maintenance and repair. They pay for snow removal (where applicable), lawn maintenance, management fees and, of course, legal fees.
In many associations, the budget will include parties, although if liquor is involved the board must consult with their legal counsel as well as their insurance agent.
Since you are concerned about the party item in the budget, I suggest that you volunteer to assist with determining next year's budget. Many associations have budget committees that work with management to draft a budget for consideration by the board and the membership.
If there is no such committee, make a formal request that one be created.
But don't just look at a line item for "parties." Analyze the entire budget and compare it with the expenses over the last few years.
We all know that utility charges (water, gas, electricity) have gone up, but are there any budget line items that can either be eliminated for next year or at least reduced?
Condominium ownership demands that every unit owner take an active role in the affairs of the association, whether serving on the board of directors, or attending board meetings and serving on committees.
If you do not participate, then you should not complain.
Q: If I leave my house to my youngest son and it still has a mortgage on it, will he have to pay capital gains tax?
A: If your son inherits the house after you die, he will get what is known as the stepped-up basis. That's the value of the property on the date of your death. If, for example, it is valued at $300,000, his basis for tax purposes becomes $300,000. If he sells for that amount, he has made no profit and thus pays no tax.
If he sells for $400,000 down the road, and has owned and lived (use and occupancy) in the property for two out of the five years before sale, he can exclude up to $250,000 of his gain (or if he is married and files a joint tax return, up to $500,000).
If, however, he cannot meet the use and occupancy test, then he would have to pay capital gains tax on the profit.