Chinese Drywall Developments

Posted on December 21, 2010 by John Weber

To follow up on a series of prior posts, the Internal Revenue Service will now allow taxpayers with defective drywall to deduct the cost of repairs and replacement of damaged appliances in the year in which the loss occurred.  In Revenue Procedure 2010-36, the IRS has, however, imposed certain restrictions which include that the losses are not compensated by insurance or other parties and the taxpayer must itemize their federal returns to claim the deductions (which are allowed only on amounts that exceed $500 and ten percent of the taxpayer’s gross income for the year).

A taxpayer can claim the full tax break, provided they have no pending claims for reimbursement (and do not intend to file for any). For those taxpayers with pending claims, a loss for 75% of the unreimbursed amount can be claimed.

 

In related news, the importers, manufacturers and distributors of Knauff Plasterboard Tianjin drywall have entered into a settlement with over 300 homeowners in four states. The Agreement, approved by a New Orleans federal judge, will cause Knauff and related firms to remove and replace the company’s drywall, the electrical wiring, gas tubing and appliances, as well as paying relocation expenses while the homes are being repaired (which repairs are expected to take several months to complete). The cost of such repairs is estimated to be about $150,000 for a 2,500 square foot home. This settlement (a product of a special committee appointed by a federal judge) is seen as a possible model for the resolution of other pending state and federal lawsuits. 

 

One area to watch going forward, however, is the possibility of additional claims regarding health concerns. The settlement does not preclude future suits concerning potential adverse health effects of the drywall on residents, as the parties agreed to table that issue to resolve the home repair aspects of the lawsuits.

Tags: , , ,

Chinese Drywall Has Damaged Their Homes and Health, Some U.S. Homeowners Claim, but Can They Make the Chinese Manufacturers Pay?

Posted on November 6, 2009 by David Lindner

We have been following the continuing saga of the homeowners affected by Chinese drywall used mainly throughout Florida, Louisiana and Virginia when U.S. supplies ran low. According to affected homeowners, the Chinese drywall emits a gas that causes health problems such as headaches and nosebleeds, erodes metal and electrical fixtures, and leaves a foul rotten egg odor throughout the home. The only known remedy—removing and replacing all the Chinese drywall in the home—is costly and to this point has not been covered by insurance. Unable to sell the property, and unable to live in it, some owners have been forced into temporary housing and bankruptcy, the New York Times reports. 

Homeowners have filed hundreds of lawsuits against the Chinese companies that manufactured the drywall. These lawsuits, however, face a number of significant hurdles. For one thing, much of the drywall is simply stamped “Made in China,” with no indication of the specific manufacturer. Even when the manufacturer is known, many of them have gone out of business or refuse to respond to the lawsuits. China does not enforce civil judgments from U.S. courts and international court is costly and time-consuming. Some lawyers have proposed creative solutions to the problem, such as seizing the ships that transported the drywall to the U.S., but it’s not clear that any court would approve that remedy.   

 

The affected homeowners may have other avenues for a successful resolution outside of the legal process, however. Congress ordered the Consumer Products Safety Commission to conduct a study of the Chinese drywall. That study, while finding that the Chinese drywall had higher levels of sulfur and strontium than U.S. drywall, was unable to make a connection between those higher levels and the health and other problems experienced by U.S. homeowners. Further testing to establish a connection is under way. The chairwoman of the Consumer Products Safety Commission met recently with Chinese officials and discussed the drywall issue with the hope of reaching some agreement to help U.S. homeowners. Whether political pressure results in any substantial relief for U.S. homeowners remains to be seen.

Tags: , , , , ,