A: No. Your situation is an involuntary conversion which is covered by Internal Revenue Code 1033 that gives you up to two years after the tax year of the loss event to replace with another similar use property of equal or greater value.

That means if you buy a replacement principal residence costing at least $142,000 then you won't owe any tax on your involuntary conversion profit. However, if the replacement home costs less, then you will owe a partial profit tax. In addition to buying a qualifying residence, I suggest you also get a new tax adviser.

Q: Last year I spent about $20,000 fixing up my home with a new roof, a new 50-gallon water heater, new copper plumbing, painting and a family room addition. Since I plan to sell my home in 1993, can I add these costs to my purchase price when calculating my sale profit?

A: The question you are really asking is what is the difference between a home repair, which is a personal expense that has no income tax significance, and the cost of a capital improvement which should be added to your home's adjusted cost basis.

A capital improvement extends the useful life of the property or increases its market value. But a repair expense merely restores the property to its proper condition.

The new roof extends the useful life of your home, as do the new copper plumbing and family room addition. Their costs are capital improvements which should be added to your home's adjusted cost basis. The expense of painting is always a repair. However, the cost of the water heater is arguably just a repair if it replaced another 50-gallon water heater. However, if it replaced a smaller 30-gallon or 40-gallon water heater, then it is a capital improvement. For further details, please consult your tax adviser.

Q: Last week when I came home from work a black Mercedes was parked in front of my house. At first I thought nothing of it, but about 15 minutes later my doorbell rang. It was a lady who politely introduced herself as a local realtor. She said on Saturday she was going to show several homes to prospective buyers who wanted to buy in my neighborhood and wondered if I might be interested in selling and at what price.

To make the story short, I agreed to let her show my house. Her clients made a purchase offer, but it was far below the price I want, so I didn't make any counteroffer. I haven't heard from the realtor since. Do you think this was some sort of listing scam?

A: No. I think that was a very creative realtor who was desperate for homes to show her prospective buyers who want to purchase in a desirable neighborhood where not many homes are listed for sale.

However, the realtor should have followed up with a thank-you note for your courtesy in allowing your home to be shown, although it was not listed for sale. Also, she should have asked if you would like to list your home for sale with her brokerage firm. That is a unique way to get listings, but the realtor didn't follow through to maximize her opportunity.

Q: I just listed my home for sale. The realtor asked me to contact my mortgage company to find out if the mortgage can be assumed by the buyer, subject to credit approval. It has an 8.5 percent interest rate.

When I contacted the lender I was told our loan is now owned by Fannie Mae, whoever she is, and the loan cannot be assumed by a qualified buyer. I would think it would be good for both the lender and the buyer to assume this mortgage. Why can't my mortgage be assumed by the buyer?

A: Fannie Mae is the Federal National Mortgage Association, the nation's largest buyer of home loans in the secondary mortgage market. But it has dozens of rigid rules, such as the one you encountered which prohibits loan assumptions no matter how advantageous to lender and borrower.

However, your buyer probably won't want to assume your existing mortgage because new home loans can be obtained at much lower interest rates today.

Q: Several times in the last year you told readers whose mortgage balance exceeds the market value of their home how to deed their property to the lender who refuses to accept a deed in lieu of foreclosure. I work in the loan service department of a major nationwide lender, and hardly a day goes by without our receiving several recorded deeds like you suggest. We also receive keys in the mail from borrowers who can't sell their homes but can't afford the payments. Although we are aggressive in foreclosing and going after borrowers for deficiencies when we can, your "dirty trick" suggestion of deeding the house to us stops us from getting a deficiency judgment. Please stop telling borrowers how to do that. Thank you.

A: Instead of being cooperative with borrowers, many mortgage lenders intimidate and are rude to borrowers. Thankfully, most of these bad loan servicers have gone broke so they got what they deserved. However, I continue to get letters from borrowers who can't sell their homes because the mortgage balance is higher than the market value. What would YOU suggest they do?

Many lenders blindly refuse to accept deeds in lieu of foreclosure. As you know, after a title search to be certain there are no junior liens, which the lender would have to pay, there is no valid reason a lender should not accept a deed in lieu of foreclosure. For the lender, a deed in lieu is far cheaper than foreclosure. Such a deed solves problems for both lender and borrower.

When a lender unjustifiably refuses to accept a deed in lieu of foreclosure, I have suggested the borrower play a dirty trick on the

lender by paying the fees to record a deed to the lender. When a lender receives the recorded deed, most will keep it because refusing to do so means the lender has to deed the property back to the borrower. Any lender who does that isn't very smart unless there are junior liens on the property. I suggest you revise your thinking.

(Copyright 1992, Tribune Media Services Inc.)

Bob Bruss' column appears Sundays in the Home/Real Estate section. Letters and comments should be sent to Bob Bruss, Seattle Times Newsroom, P.O. Box 70, Seattle, WA 98111.