HELP!!! Expenses incurred after disposal of Rental Real Estate

I sold a rental property in 2004 to another party. After the sale (during 2006) I was taken to court about some unpaid water bills for the property. It turns out that that a seperate water billing account (other then the one I was paying on) existed for this property. To make a long story short, the purchaser (to whom I sold the property) sued me for the balance of this water bill. As a result of the court case, I was ordered to pay the full amount of the past due water bill. I also recieved a judgement against the person I originally bought the property as they had not paid the outstanding water bill (as required) at the closing of my purchase of the property. My question is simple....Can I deduct the net amount I have to pay. (Amount I paid LESS the amount of the judgement I received) If so, where do I report this??