DEAR BOB: I bought my home in 1977 and lived in it until May 1988. Then I moved in with my girlfriend and rented my house until I sold it in July 1990 at a profit of about $85,000. Last week I went to talk to my accountant about rolling over my profit into a more expensive house I plan to buy with my girlfriend. But the accountant says I owe tax on my $85,000 profit, since I did not live in my old house at the time I sold it. Is this true? -- Chris P.

DEAR CHRIS: Yes. Your situation is a classic example of why home sellers should consult their tax advisers before selling their residences.

Internal Revenue Code 1034, the "rollover residence replacement rule," allows home sellers to defer their profit tax when selling their principal residence if they buy a replacement principal residence of equal or greater cost within 24 months before or after the sale.

Your problem is you did not live in the house for about 26 months before the sale. Although there are a few Tax Court decisions allowing home sellers to claim the IRC 1034 tax break if they temporarily rented their home due to adverse local economic conditions that made a sale difficult, I am not aware of any ruling allowing a home seller to defer tax more than two years after moving out.

You could have avoided this difficulty by moving back into the house to make it your principal residence again at the time of the sale. Although that might have been inconvenient, paying an easily avoidable tax on $85,000 profit also is rather burdensome.

DEAR BOB: My wife negotiated an excellent buy on a house that was about to go to foreclosure sale in a few weeks, but we decided not to buy the house after all.

However, my brother and his wife want to take over our purchase contract. The problem is the seller refuses to let us assign the contract. I think the seller realizes he sold too cheap. Is there any way we can force the seller to sell to my brother and his wife if we assign our contract to them? -- Clayton R.

DEAR CLAYTON: Yes. The general rule is most real estate contracts, like all contracts, are assignable unless prohibited by the contract terms or there is a personal service element to the agreement.

An example of a personal service contract would be if the seller agreed to finance the sale by carrying back a second mortgage for you. Since the credit was extended to you on the basis of your income, credit and good looks, it wouldn't be fair to the seller to assign the contract to your brother and his wife who might have low income, poor credit and be ugly. Consult a local real estate attorney for further details.

DEAR BOB: May I give a little advice to all the commercial property owners, like me, who enjoy your column? As a landlord I try to be nice to my tenants, who are mostly small business people, but now I am convinced that is foolish.

One of my tenants is a neighborhood coffee shop renting for $2,200 per month. About a year ago a new owner bought the restaurant and the food quality declined while the prices increased. Business dropped substantially. He got behind in his rent. Last month he filed bankruptcy, owing me about $17,600. Since his business is incorporated and is broke, I just lost $17,600 for being nice and trying to give the tenant time to pay his rent.

My advice? Don't let tenants fall behind in their rent because they will take advantage of you. To make matters worse, this fellow is still operating the coffee shop and not paying the rent. The bankruptcy court says I can't evict him. -- Nick R.

DEAR NICK: Welcome to the real world. Many times I have advised in this column that landlords should not give their tenants a break. If the tenant can't pay the rent this month, he probably won't be able to pay it next month. Every time I let a tenant get behind in rent, they took advantage of me too, so don't feel bad. But please retain an experienced bankruptcy attorney to represent you in the bankruptcy proceeding, so you can quickly get possession of the coffee shop.

DEAR BOB: In May 1991 I will be 55 and become eligible for that $125,000 "old folks" home sale tax exemption you often discuss. But I need to sell my home now.

Is there any way I can do so without forfeiting my right to the $125,000 exemption? I do not plan to buy another house. -- Mavis H.

DEAR MAVIS: Yes. As you probably know, the three "over 55 rule" requirements of Internal Revenue Code 121 are you must be 55 or older on the day you sell your principal residence, have owned and lived in the home any three of the five years before sale, and never have used this tax break before.

Since you need not live in the home on the sale date, if you meet the three-year requirement you can move out now and lease the home with an option to buy after you become 55. To be certain the tenants buy the house, I suggest you obtain the down payment cash now and give the tenants a large rent credit toward the down payment, so they will be sure to exercise the purchase option after May 1991.

DEAR BOB: Some very close friends want to buy their first home. But they don't have quite enough income to qualify for a mortgage, since they are only making a 10 percent down payment and need to get a 90 percent mortgage. They asked us to co-sign on the mortgage. According to their real estate agent, after we help our friends get their mortgage we can quitclaim our interest in the house to them and not have any further liability.

Is this true? -- Jerome C.

DEAR JEROME: Not exactly. When you co-sign a mortgage, most mortgage lenders insist you also hold title to the house along with the other owners. However, the lender cannot stop you from later quitclaiming your interest in the house. But adverse consequences can still happen to you if the residents default on the mortgage.

In the event the residents for whom you co-signed fail to make the payments, you are almost certain to have the default entered on your credit report by the credit bureaus, since you co-signed on the loan.

For your protection, since your friends will have little equity in the house, if you co-sign you should be certain the property alone is security for the loan, so you will have no personal liability. Think carefully about the possible consequences of co-signing and consult a local real estate attorney before you do.

DEAR BOB: I am trying to figure out how to make my home down payment tax deductible as an interest deduction. The house I want to buy requires a cash down payment of about $30,000, which I want to label prepaid interest on the second mortgage the seller will be carrying back for me. But the seller, a retired accountant, says I can't do that. Is he correct? -- Reuben H.

DEAR REUBEN: No. If you want to buy a home for nothing down and $30,000 of prepaid interest, you can do that if the seller agrees. However, you cannot deduct more than the current year's earned interest on your tax return for this year. The balance will be carried forward to future tax years. But the seller will have to declare the $30,000 interest received as ordinary taxable income. I suggest consulting your own tax adviser for further details.

DEAR BOB: We are in the process of buying a brand-new house. The builder promised to include professional landscaping, but he just threw out a little grass seed and the job is hardly professionally done. I obtained an estimate from a licensed landscape contractor who says a minimal landscape job would cost at least $3,000. But the builder refuses to do any further work. We are reluctant to accept the house in its current condition, but the builder says he has another buyer. What should we do? -- Myron A.

DEAR MYRON: Consult a real estate attorney. You say the builder "promised to include professional landscaping." If you have that promise in writing, then there is no question you are entitled to receive it. But enforcing an oral promise may be very difficult, if not impossible.

The promised landscaping should have been part of the written purchase contract. If it was, then your attorney may recommend a specific performance lawsuit to force the builder to deliver what was promised. To make certain the home is not sold to another buyer, your attorney might record a "lis pendens" to cloud the title. Another alternative is to go ahead with the purchase and then sue the builder for the landscaping cost.

DEAR BOB: My husband works for that major computer company whose initials stand for I've Been Moved. Every two or three years he gets promoted, but always to a different city where we buy a bigger home. His next move in a few months should be for a longer term, perhaps five years. We are thinking we should make a large down payment, perhaps 50 percent of the home's purchase price, so our mortgage payment will be smaller. But we have this nagging thought that in a few years my husband might be promoted again.

Do you think we should make a large down payment? -- Bonnie L.

DEAR BONNIE: No. My constant advice is to obtain the largest available mortgage and make the smallest possible cash down payment. In your "upwardly mobile" situation, it is not wise to tie up much cash in a home because you may have difficulty getting that equity out if you have to sell.

I realize your husband's employer has a relocation program to help with that problem, but another advantage of a big mortgage is you will maximize your income tax deductions for itemized interest. If you make a large down payment and later realize your mistake, you can only deduct interest on your acquisition mortgage plus up to a $100,000 home equity loan. Consult your tax adviser for further details on the tax benefits of a big mortgage.

DEAR BOB: I am tired of paying income taxes with nothing to show for them, so I want to buy a house. The first house I offered to buy turned out to be a disaster because the real estate agent failed to disclose all the defects, which my father, a building contractor, discovered. Thankfully, I made my offer contingent upon my approval of his inspection report, which I disapproved. I got my $5,000 deposit back.

Then I offered to buy a home being sold by a do-it-yourself seller with no real estate agent involved. Again, I made my written offer contingent on an inspection, but the house passed my father's checkup pretty well. However, the seller told me the old mortgage was assumable.

It turned out to have a due-on-sale clause and the lender wants to raise the interest rate from 8 percent to 10 percent. Since I based my offer on an 8 percent mortgage, I want either the purchase price reduced or to cancel the sale and get my $5,000 deposit refunded.

What should I do? -- Sandy R.

DEAR SANDY: Consult a real estate attorney. The do-it-yourself seller misrepresented the mortgage, thus affecting the market value of the house. An assumable low-interest rate mortgage makes the home much more valuable than if you have to pay the current higher market interest rates.

By misrepresenting the mortgage, the seller breached the contract and is liable to you for damages. At the very least, you should be able to get your $5,000 earnest money deposit refunded.

Your situation shows why it can be so difficult to buy homes direct from the seller without the benefit of a real estate agent. If you had used the services of an agent, your earnest money deposit would have been held beyond the seller's control and might have been easier to obtain when the seller's misrepresentation became apparent.

DEAR BOB: We sold our home last year and the buyer took over our FHA assumable mortgage. I wrote to the lender for our insurance refund, but have not received any reply.

How can I get my insurance money back? -- Ted R.

DEAR TED: Sorry, you can't. The only time an FHA borrower is entitled to a refund of part of the MMI (mutual mortgage insurance) fee, which the borrower paid, occurs when the FHA loan is paid off in full by that borrower. Since you did not pay off the FHA mortgage, you are not entitled to any refund.

But I must hasten to add, for borrowers who paid off their FHA mortgages in full, but did not obtain refunds of their MMI premiums, they can write to U.S. Department of Housing and Urban Development, Distributive Shares Branch, Room 2239, 451 Seventh St. SW, Washington, D.C. 20401. The phone is 202-755-5616 for a refund application form.

DEAR BOB: About six months ago I was notified by an attorney that I received some real estate from my late uncle. I recently phoned the attorney several times and got the runaround.

Since I live over 1,000 miles away, it is not possible for me to check the probate court file to learn what is happening.

What should I do to learn when I will receive title to the house? -- Len R.

DEAR LEN: Write a certified letter, return receipt requested, to the attorney handling the estate asking for an accounting as to what is happening regarding the house you inherited. Many things can occur during the probate of an estate, such as the need to sell the deceased's assets to pay debts and taxes, so the probate can take many months.

Since attorneys handling the probate of an estate are extremely well compensated, there is no excuse for an attorney not replying to you within a reasonable time, such as two weeks. If you encounter further difficulty and do not hear from the attorney, for assistance I suggest you contact the discipline committee of the state bar association where the attorney is located.

DEAR BOB: My elderly neighbor holds a life estate to her house. When she dies, it goes to a charity. She is about 70, in excellent health and wants to move to Florida, but she needs some cash. She offered to sell me her house, subject to her life estate, for $50,000. If it were not for the life estate, it would be worth at least $200,000.

Do you think I should buy? -- Horth W.

DEAR HORTH: No. As you know a life estate ends when the life tenant dies. Sometimes it terminates when the life tenant vacates the property, so it is important to read the terms of the life estate. But paying $50,000 for a life estate of a 70-year-old woman does not sound like a good deal.

Although you would control who rents the house next to yours, when that lady dies then you lose the right to control that house. Perhaps a token payment, such as $5,000, would be more appropriate, considering the very high risk for you. For more details, consult your attorney.

DEAR BOB: Last year I sold my home for a profit of about $182,000. My tax preparer filled out IRS form 2119 where I used my "over 55 rule" $125,000 tax exemption. But she said I owe tax on $57,000 of remaining profit. I recall some time ago you explained there is a way I can avoid tax on this $57,000 remainder of my home sale profit. Please clarify. -- Corla W.

DEAR CORLA: Your question is often asked. Yes, it is possible to combine the "over 55 rule" $125,000 home sale tax exemption of Internal Revenue Code 121 with the "rollover residence replacement rule" of Internal Revenue Code 1034 which is available to home sellers of any age to shelter more than $125,000 of home sale profit from taxes.

Although you didn't give the net (adjusted) sales price of your home after you paid selling expenses, such as the real estate sales commission, let me guess it was $240,000. Presuming you qualified for the "over 55 rule," subtracting the $125,000 exemption leaves a "revised adjusted sales price" of $115,000. You said $57,000 of your profit remains potentially taxable, so subtracting $57,000 from $115,000 means your adjusted cost basis is $58,000.

If you don't use the rollover residence replacement rule of IRC 1034 and buy a principal residence replacement costing at least $115,000 in this example within 24 months before or after the sale, you will owe tax on $57,000 of your sale profit. Go out and buy a home costing at least the amount of your revised adjusted sale price if you want to defer tax on your home sale profit over $125,000. Ask your tax adviser for further details.

DEAR BOB: Several months ago you said a lease-option can be used to sell virtually any home. Well, you're wrong. Our $295,000 home has been for sale over seven months. I showed your article to our real estate agent. She had never heard of a lease-option, but agreed to give it a try. So she advertised a lease-option and ran your suggested headline "$50,000 Moves You In."

That is the amount of down payment we need to give us enough cash to buy another house. She ran that ad for two weekends and no offers. Maybe lease-options work in your town, but they don't work here. -- Rolf W.

DEAR ROLF: You got greedy. Asking for $50,000 upfront option money on a lease-option for a $295,000 house is outrageous. A total of $5,000 to $10,000 would have been appropriate. Then you would have received several offers. A $50,000 option consideration would be appropriate for a $1 million home, not a $295,000 house.

If you must have $50,000 cash, forget a lease-option. But perhaps you can refinance your mortgage with an assumable adjustable-rate mortgage loan, so you can buy your move-up house. Then you can offer your old home on a lease-option, properly structured.

Next weekend ask your agent to run a classified want ad under both "houses for rent" and "houses for sale" such as "$5,000 MOVES YOU IN. $1,500 rent, 50 percent rent credit toward down payment. (Describe the home.) Open Sunday 1-5 p.m." The realty agent should be prepared to accept perhaps $1,000 of her commission now and the balance when the buyer exercises the purchase option.

DEAR BOB: I was recently divorced and am considering selling my home, renting a luxury apartment or condominium and investing in some beautiful, cheap land in Oregon where I will build my retirement home in about 15 years. Is there any way I can avoid tax on my home sale profit by doing this? Do you think it is a good idea? -- Sarah O.

DEAR SARAH: I realize a divorce is not pleasant, but please don't make any irrational decisions, as you appear to be doing. If you got the house in the divorce and you sell it now, you will probably have a substantial tax to pay unless you buy a replacement principal residence of equal or greater cost within 24 months before or after the sale.

Purchase of vacant land will not qualify to defer your profit tax. More important, vacant land is one of the worst investments you can make because it doesn't produce income, costs money to maintain and may be very difficult to sell at any price. No wonder that Oregon land is so cheap.

Readers with questions should write Robert J. Bruss directly at P.O. Box 280038, San Francisco, Calif. 94128.