Federal tax break for low-income individuals to continue

Q: I read several years ago that the capital gains tax is not going to be around much longer. The article stated the tax would be eliminated for the year of 2008. It said the White House and Congress agreed to chop the capital gains tax to zero for only 2008. I have a rental house I need to sell, but if I wait until 2008, will my capital gains tax be eliminated? I am sure other investors would find this information very helpful if there is any truth to this. -- V.L.F.

A: Well, it's true, sort of. As a matter of fact, that particular federal tax break has been extended and is scheduled to apply through 2010. But it can be used only by taxpayers who would otherwise (without that capital gain) be in the lowest tax brackets. Right now, for a single taxpayer, that means less than $31,850 in ordinary income. We don't know, at this point, exactly what income level that will apply to in 2008.

Stick with open market;

be wary of unusual offers

Q: I relocated a year ago and have had my old house on the market the entire time. We have had it listed with two separate agents and followed all of their advice for pricing with no luck. This is putting me in bad shape in the financial department. I looked into some of the "we buy" companies and have an offer from one stating they want to put the title in a trust and make the payments while they try to sell it. Is this a common practice? What should I watch out for? -- via e-mail

A: I have no idea what you've been offered, but my instinct is to stay away from it.

As for "immediate all cash," investors who give you that will have substantial expenses till the place is re-sold -- and they plan to make a profit, else why do it? They pay much less than market value, but it can be useful in some situations.

Stick with the open market. You could sell right now for $2, right? So somewhere between $2 and whatever you've been asking for is a figure that will attract a prompt sale. Drop your price till you find that level.

Grandson should pay

'principal portion' of loan

Q: I loaned my grandson a mortgage to purchase a house upon return from Iraq. The terms were for the interest my money was earning at the time, which was 5.23 percent. I went online and created a loan schedule. He makes the payments as agreed.

My problem is receiving advance money. How should I recalculate the loan balance when he gave an additional amount of $1,000? I expect this to happen again, and I don't want to make any wrong money on my grandson. -- V.I.

A: When your grandson makes an extra payment of $1,000, skip down the schedule to the place where "remaining balance" or "remaining principal" is $1,000 less, and pick up the schedule from that point on. That way he won't be charged interest on the $1,000 he is no longer borrowing.

The problem, of course, is that it's not going to come out even with an exact place on the amortization schedule. Things would be simpler if your grandson paid you the exact figure listed as "principal portion" of the next payment due, or did that for several payments down the schedule. Then you'd know exactly where to skip to.

Finding a good broker

involves usual leg-work

Q: How do you find a good Realtor? -- via e-mail

A: The same way you'd find a good doctor or lawyer. Start by asking friends and co-workers if they've had a good experience with any particular person. If you're looking to sell your home, call three real estate companies that sell in your area (read ads and look at lawn signs) and ask them to send someone over. You won't have any obligation, and you can pick their brains and profit from the information they bring you. Then list the property with the one who inspires the most confidence.

If you're a buyer, you can sometimes find the right person by visiting open houses and answering ads, looking for someone who seems really interested in your quest, is a good listener, offers advice and further service. Or you may seek someone who represents only buyers. Either way, you can retain a buyers' agent who is legally bound to put your interests first.

The word "Realtor," by the way, does not apply to every licensed real estate agent. It's a trademarked word, properly capitalized, and applies only to members of the National Association of Realtors, a trade group. It does tend to slip into the language, though, like Xerox and Coke.

Edith Lank will personally respond to any questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.