SECRET TAX BREAKS IN COMMUNITY ASSOCIATIONS - DISCUSS THIS WITH YOUR ACCOUNTANT

 Thursday, October 3, 2013

If you are selling your home in a community association, have you taken advantage of every possible tax break? Did you include your percentage interest in the many improvements which your association has made over the years?

Let's compare these two situation. You purchased your single family house many years ago for $100,000. Over the years, you have spent $50,000 in improvements and have the bills to document this. This increases your basis for tax purposes to $150,000. You sell the property for $650,000. Your profit (excluding for this discussion sales commissions and settlement costs) is $500,000. Currently, under Federal law, if you are married, file a joint income tax return, and have owned and lived in the house for two out of the five years before sale, you can exclude up to $500,000 of your gain; accordingly, in our example, you will not have to pay any capital gains tax. If you are single - or file a separate tax return - you can exclude up to $250,000 of your profit. The difference - $250,000 - will be taxed. Keep in mind that as of this year, the capital gains tax rate has been increased, and many homeowners will have to pay up to twenty percent of a portion of their gain.

Now let us change this example to the sale of a condominium, cooperative or a house in a homeowner association. Same facts: you bought for $100,000 and sold for $650,000. Since the IRS will consider your profit at $550,000, even if you are eligible for the up-to-$500,000 exclusion of gain, you will have to pay capital gains tax on the $50,000 overage.

However, there are "secret" benefits you probably overlooked - or were not even aware of: the improvements made by your association including the qualifying energy efficiency improvements added to the complex.

According to the Internal Revenue Service "You need to know your basis in your home to determine any gain or loss when you sell it. Your basis in your home is determined by how you got the home.. (IRS Publication 523, entitled "Selling Your Home").

For example, if you bought or built the property, your basis is what it cost you. If it was a gift, your basis is the basis of the person giving you the property. And if you inherited the house, your basis will most likely be the fair market value as of the date of death, called the stepped-up basis.

Let us define some important terms:

·         Gain.Also known as "profit," and the gain on the sale of your home is the amount realized minus the adjusted basis of the home you sold.

·         Amount Realized.This is the selling price of your old home minus your selling expenses. These would include real estate commissions, advertising fees and legal fees incurred exclusively in the selling process.

·         Adjusted Basis.This is your basis in the property increased or decreased by such expenses as settlement fees or the costs of additions and improvements that have been made to your property.

Thus, as can be seen, in order to reduce your gain, (and pay less tax), you want to legitimately increase both your basis and your selling expenses.

Let 's go back to our example. We have agreed that you have made a profit of $550,000 and will have to pay capital gains tax on that additional $50,000.

Your community association has spent a considerable amount of money improving the property. They have added a new roof (or roofs), installed a swimming pool and tot lot, and made other similar improvements.

You own a percentage interest in that association. Generally, (other than for cooperatives) your percentage interest will be found at the end of a legal document known as the "Declaration." The total of everyone's percentage interest in the association should be 100%. In a cooperative, your percentage interest should be reflected on your share certificate or proprietary lease.

Let us assume that the association spent $400,000 in improvements from the time you bought the property, and that your percentage interest is 2.3. If you multiple your percentage interest times the total improvements, you get a figure of $9,200.00, and this amount can -- and should -- be added to your basis as "improvements."

It is surprising to me that many community association owners are not aware of this tax benefit. In most community associations, the records should be available as to the total expenditure for improvements on a year to year basis. Please understand that maintenance and repair items are not added to basis, but capital improvements -- generally items which have a useful life of one year or more -- are indeed legitimate items to be added to basis.

Basis is a concept on which most of us pay little attention. However, as we get older, and become concerned with conserving the majority of our assets, the concept of adjusted basis becomes critical. Each dollar that can legitimately be added to the purchase price (the adjusted basis) generates a savings to the individual community association owner.

What should you do if you sold your property within the last few years and were not aware of this special tax break? Obtain a breakdown of capital improvements for the last three years from your association's property manager. You may be able to file an amended return, but you must discuss the logistics, the practicality and the legality of an amended return with your own tax advisers. You don't necessarily want to red-flag the IRS by filing that additional return.

Reprinted with the permission of the author

AUTHOR: BENNY L. KASS, REALTY TIMES

A HEADS UP: UNDERSTANDING THE AFFORDABLE CARE ACT

Florida CFO Jeff Atwater and the Dept. of Financial Services are offering webinars regarding information and resources for those with questions about the Affordable Care Act. 

The webinars are for individuals and small businesses. 

A consumer helpline is available at 1-877-693-5236. 

For FAQ’s and webinars dates and times:  http://www.myfloridacfo.com/Division/Consumers/HealthReform.htm#.Uke4DoY7igY

FOR STUDENTS YOU KNOW

With a contest entry deadline of October 11, 2013 at 11:59 pm, judging will begin for a contest designed to engage students of all ages (from kindergarten to high school) to learn more about Florida’s economic history.  The entry can be art, writing or video.  It is part of the YOUR MONEY MATTERS initiative.  This contest is in honor of Florida’s 500^th Anniversary.

Students can be enrolled in any public, private, charter, virtual, home or alternative school for the 2013-2014 school year.  By 12-31-2013, announcements will be made of a total of $2625 awarded to the winning students.  

Find more information at MyFloridaCFO.com/YMM.

This site also features in their games section fun and educational tools to help children save. (http://www.myfloridacfo.com/YMM/Games/Default.aspx) 

POSSIBLE BOCA RATON TAX BREAK FOR VALUE ADDED IMPROVEMENTS IN HOMES DESIGNATED AS HISTORIC

According to the Sun-Sentinel, if the City council approves a new ordinance, owners of designated historic homes would not have to pay city or country taxes for 10 years on any value added improvements. 

Federal funds amounting to $100,000 are being distributed throughout Florida to help preserve historic homes and neighborhoods, and with this ordinance in place, Boca can get some of these funds.

Ten counties and 53 other municipalities have joined this effort, including Delray Beach and Boynton Beach.

Cost of getting a Boca Raton property declared historic by City Council is $1500.  The designation means the city’s Historic Preservation Board will review proposed changes a homeowner wants to make.

If you have a historic home to sell, or would like to purchase one, perhaps I can be of help as a Realtor.

Proposed tax notices were just sent out to Palm Beach County residents.  The Clerk’s office will accept appeals for property tax appraisals through September 16. 

You can challenge market value, classification or an exemption by petitioning the county’s Value Adjustment Board (VAB). Board Members are two county commissioners, one school board member, and two citizen members.  They approve and hire special magistrates to settle disputes. 

The VAB is not affiliated with the Tax Collector or Property Appraiser.  Go to www.mypalmbeachclerk.com and use myVABsystem to file your petition online, schedule hearings and submit supporting materials, or call 561-355-6289 for more information.  Forms can also be submitted in person or by mail.  Filing fee is $15.  To submit in person, go to the Clerk’s Governmental Center or branch locations.  To submit by mail send to 301 North Olive Avenue, Room 203, West Palm Beach FL 33401.

HOW TO TEST A BATTERY

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http://www.youtube.com/watch?v=Y_m6p99l6ME&desktop_uri=%2Fwatch%3Fv%3DY_m6p99l6ME

NEIGHBORHOOD INFORMATION

CHECK OUT NEIGHBORHOOD STATS HERE .

If you would like to subscribe to my biweekly 
HOME ACTIONS NEWSLETTER please email     
marilynfjacobs@gmail.com.  
Many interesting articles for homeowners.

 YEP!!!

Put your car keys beside your bed at night.

Tell your spouse, your children, your neighbors, your parents, your Doctor's office, the check-out girl at the market, everyone you run across. Put your car keys beside your bed at night.

If you hear a noise outside your home or someone trying to get in your house, just press the panic button for your car. The alarm will be set off, and the horn will continue to sound until either you turn it off or the car battery dies.

This tip came from a neighborhood watch coordinator. Next time you come home for the night and you start to put your keys away, think of this: It's a security alarm system that you probably already have and requires no installation. Test it. It will go off from most everywhere inside your house and will keep honking until your battery runs down or until you reset it with the button on the key fob chain. It works if you park in your driveway or garage.

If your car alarm goes off when someone is trying to break into your house, odds are the burglar/rapist won't stick around. After a few seconds, all the neighbors will be looking out their windows to see who is out there and sure enough the criminal won't want that. And remember to carry your keys while walking to your car in a parking lot. The alarm can work the same way there. This is something that should really be shared with everyone. Maybe it could save a life or a sexual abuse crime.

This would also be useful for any emergency, such as a heart attack, where you can't reach a phone. My Mom has suggested to my Dad that he carry his car keys with him in case he falls outside and she doesn't hear him. He can activate the car alarm and then she'll know there's a problem.

This may save a life!

IS THERE A NEW SHADOW INVENTORY COMING?

The shadow inventory (homes in delinquency or foreclosure that will eventually come on the market) keeps shrinking.  But, TRULIA Chief Economist Jed Kolko says that census data just released shows that more shadow inventory may be looming.  2013 2Q vacancy survey shows that 5.6% of all housing units are vacant.  

Are the owners waiting til prices have gone high enough to unload them?  If they come on the market now… how will the market be affected?  Right now, inventory is low so they MIGHT get a quick sale and get rid of the expenses of carrying the property.

CONSUMERS BEWARE AND BE AWARE

The Homeowners’ Policy and Claims Bill of Rights Working Group is a panel developing consumer-protection recommendations that they will offer to the Legislature in next year’s session.

Recently the state levied a $1.26MM fine against the state’s 2^nd largest insurer, Universal Property and Casualty Insurance Company for wrongly denying claims and canceling policies without adequate notice.   Universal has 550,000 policyholders. 

Universal was cited for using credit histories of clients to deny claims, long after the underwriting process should have been completed.  A bill was amended to limit use of credit records to deny coverage to 90 days after policy is written, but the bill failed to pass.

Some Florida consumers had had damages claims denied and coverage canceled because of an old credit report, despite having long-held insurance policies with same company.  Some others face lengthy legal proceedings in which they must participate or risk losing their policies.  Florida Insurance Consumer Advocate Robin Smith Westcott cautioned consumers in the middle of a claim or dispute to refrain from immediately signing contracts with contractors, adjusters and other groups offering aid.  He said, “first, contact your insurance company to get the process started”.

TAX REFORM ENGAGING CONGRESSIONAL LEADERS

Tax Reform is underway on Capitol Hill. The Senate tax-writers have adopted a "Blank Slate" approach that initially eliminates every provision in the tax code, including those that are cherished by homeowners and future homeowners.  The intent is to lower tax rates that in turn will stimulate the economy.
From a website created for the effort: 
"In order to make sure that we end up with a simpler, more efficient and fairer tax code, we believe it is important to start with a "blank slate" -- that is, a tax code without all of the special provisions in the form of exclusions, deductions and credits and other preferences that some refer to as "tax expenditures." This blank slate is not, of course, the end product, nor the end of the discussion....
We plan to operate from an assumption that all special provisions are out unless there is clear evidence that they: (1) help grow the economy, (2) make the tax code fairer, or (3) effectively promote other important policy objectives."

The Democratic and Republican leaders of the Senate Finance Committee recently began a legislative push to simplify the tax code by asking all Senators to make a case for including special tax breaks.Senator Max Baucus, on the left, and Senator Orrin Hatch want to start work on the tax code by clearing it of special breaks, unless those breaks meet specific goals. 

In the House, the committee that works on tax measures is called the Ways and Means Committee and it is headed up by Dave Camp, (R-Mich). This Committee has held many hearings on tax reform and has built "working groups" to arrive at a game plan for tax reform.

 

Normally Senators are tasked with the need to eliminate tax breaks but Senator Baucus and Senator Hatch thought that it is easier for Senators to come up with their list of deductions and breaks they want SAVED.

Every  $2 trillion in individual tax breaks added back to their "blank slate" would raise tax rates 1.3 to 2.2 percentage points. In other words, Senators must decide between popular tax breaks and low income tax rates.

FINANCIAL PROTECTIONS FOR SERVICEMEMBERS

To protect our military forces with mortgage relief, termination of leases, protection from eviction, a 6% cap on interest rates and the right to reopen any default judgments made during their active duty, in 2003, President Bush signed into law the Servicemembers Civil Relief Act.  This law applied only to obligations that originated before their military service and were still in effect.  “Servicemembers” includes all those on active duty in the military and includes National Guard members called up for active duty for more than 30 days.

All lenders should be immediately notified when you go on active duty, and they must receive a copy of your military orders.  When put on notice, all interest payments must be reduced to 6% and lender must forgive all pre-service debts exceeding the 6% cap.  Your monthly payment must be reduced.  This also applies only to debts that were initiated before active service began.

Leases entered into before active service began can be terminated before expiring, giving landlord 30 days advance notice of termination and rent must be paid up to termination date.  A private life insurance policy cannot lapse, terminate or be forfeited for nonpayment of premiums while insured is on active duty and for one year after duty ends.

 

Garnishments and attachments, requested by military personnel or a court, may be stayed or vacated during active service.  The court can appoint an attorney to represent the interests of a servicemember.

The Supreme Court ruled that the law must be read with “an eye friendly to those who dropped their affairs to answer their country’s call.”

HAPPY NEWS... TRADER JOE'S IS COMING TO BOCA RATON!

The line forms to the right.

For years a popular topic of discussion has been, “I heard Trader Joe’s is coming to town, hooray!”  Now, it is true!  Scheduled to open in both Boca Raton and Palm Beach Gardens in 2014, with cedar covered walls and Hawaiian motifs and art celebrating the neighborhood, we will have our pick of a variety of domestic and imported foods and beverages – they promise: all at honest low prices!  Staff, known as “crew members,” will be easy to spot in their Hawaiian shirts.  Residents will receive by mail Trader Joe’s “Fearless Flyer,” known as a cross between Mad Magazine and Consumer Reports. 

A dozen new items will be added each week to the 1000+ private label items including fresh baked artisan breads, Arabica bean coffees, international  frozen entrees, 100% juices, fresh crop nuts, deli items, vitamins and supplements and basics like milk and eggs.  Vegan, vegetarian, kosher, gluten free, low sodium and fat free products will be included.  Antibiotic meats will include beef, steaks, roast beef, chicken, sliced turkey and ham, bacon and lamb loin chops.

The store specializes in high quality ingredients, great flavors and great prices.  Sometimes when they purchase from manufacturers they will take a brand name product, remove preservatives and artificial colors and ingredients, put their label on it and sell It at a real discount.  Boca location will be 855 South Federal Highway, approximately 12,500 sq ft, and wine and beer will be included for sale.  Palm Beach Gardens PGA Plaza will be the other location. Started in 1958 and thriving.

See you there!

 

FOOD RECALLS

Are you sure the food you are eating is safe? 

The list on the link below provides information gathered from press releases and other public notices about certain recalls of FDA-regulated products.  

• FDA works with industry and our state partners to publish press releases and other public notices about recalls that may potentially present a significant or serious risk to the consumer or user of the product.  Not all recalls have press releases or are posted on this page.
• The posting of information on this page is separate from FDA's recall classification process. The weekly Enforcement Report lists all recalls after they have been classified by FDA.  For more information about FDA’s product recall authority, process and classification guidelines, see FDA 101: Product Recalls.
• For recall notices older than 60 days, see the Recall and Safety Alerts Archive.

How did the FDA know to recall these products? People got sick!  Use this link each week to see the report.  Two popular local grocery outlets have products on this week’s list that were recalled.

http://www.fda.gov/Safety/Recalls/default.htm

BE SMART SCAM WORKSHOP MAY 10TH, 1 PM at SOUTH COUNTY CIVIC CENTER, DELRAY BEACH

 

Florida CFO Jeff Atwater presents a free workshop for seniors, their families and caregivers.  The program is part of Operation S.A.F.E. (Stop Adult Financial Exploitation), On Guard for Seniors initiative. 

The Be Scam Smart workshop will be held on Friday, May 10^th from 1 pm to 2:30 pm at the South County Civic Center, 16700 Jog Road, Delray Beach.  Discussions will include:

·        The Psychology of a Scam

·        How to Spot Fraudulent Behavior

·        Common Scams that Target Seniors

·        How to Fight Identity Theft

·        Resources to Keep You Safe

Click to register.  For more information, call 850-413-2854. 

DRONES FOR GOOD COMMERCIAL USAGE

The Federal Aviation Administration may open the nation’s airspace to drone photography of real estate properties.  Other countries are allowing this method.  A drone, says Wikipedia, is and unmanned aerial vehicle (UAV) without a human pilot on board.  A computer can control it or a remote control from another vehicle.  FAA rules are expected to be finalized by 2015 and Congress instructed FAA to open drone use to the nation’s airspace for commercial use and permit issuing.  The results can be less expensive than aerial photography.  Issues may come up about invasion of privacy.

FLORIDA REALTORS ASSOCIATION SAYS THAT FORECLOSURES EQUAL ABOUT 7% OF THE CURRENT RESALE MARKET.

A foreclosure freeze slowed the number of defaults initiated against borrowers between October and December 2010 due to the “robo-signer” issues.  In the second half of 2010 the legality of thousands of bank repossessions slowed foreclosure efforts. Between 2007 and 2013 almost 365,000 notices of default were filed against Southeast Florida borrowers, overwhelming the state court system.

In 1Q/2013, foreclosure repossession totals, since the 2007 start of the real estate crash, surpassed 200,000 in southeast Florida (Palm Beach, Broward and Miami-Dade), according to Condo Vultures.  From January to March of this year, an analysis based of Clerk of the Court records showed nearly 9200 properties were repossessed, or state courts were used to force foreclosure sales.  That is about 100 properties per calendar day.

In 1Q/2013 foreclosures have decreased 10% on a year-over-year basis – 1Q/2012 had nearly 10,200 repossessions.  Nearly 1250 bank-owned condo and townhouse units are on the resale market as of April 14, 2013 at about $84/ per sq ft.  About 1400 units are now short sales at a median asking price of about $83/per sq ft.  This information comes from the Southeast Florida MLXchange.

UPDATE: Foreclosure Filings Spiked By 34% In South Florida Region In Q1 2103

Nearly 13,700 foreclosure actions were filed in the tricounty South Florida region of Miami-Dade, Broward and Palm Beach in the first quarter of 2013, representing a 34 percent increase in notices of default initiated on a year-over-year basis compared to the same January through March period in 2012, according to a new report from CondoVultures.com.

FORECLOSURE LEGISLATION UNDER DISCUSSION IN TALLAHASSEE

Lawmakers and consumer advocates are currently seeking to change Florida’s status as one of the few states in the country that is still seeing an increase in foreclosure activity. There are multiple proposals currently floating around in the Florida legislature that have people on all ends of the issue debating.

“Fair Foreclosure Act”

House Bill 87, also known as the “Fair Foreclosure Act,” is currently moving through committees in the House. Supporters of the bill argue that the bill protects borrowers by requiring banks and lenders to prove they own a mortgage before filing any action towards foreclosure. If passed, the bill would also allow third-party lien holders, such as condo or homeowner associations, to push foreclosures through a faster process rather than through the usual court proceeding with the lender. Borrowers would then be allowed 20 days to provide defense against the foreclosure action. After a final judgment in foreclosure is reached, the bill would give banks and lenders one year instead of the present five years to go after borrowers for losses from a foreclosure.

HB 87 has generated the most discussion of all proposed measures. Critics claim that the legislature seems more concerned with processing foreclosures as fast as they can and less concerned about protecting the well-being and rights of homeowners. They also say that 20 days is not enough time for homeowners to seek out attorneys and provide reasonable foreclosure defenses. On the contrary, supporters claim Florida’s judicial-foreclosure process is too drawn out, creating misery among those involved. Supporters say accelerating the process would also be beneficial for the future of Florida’s real estate, as homes in foreclosure limbo are sometimes eyesores that push surrounding property values down.

Senate Bill (SB) 1666

Senate Bill 1666 would allow retired justices or judges to consent to temporary duty to help go through the backlog of foreclosure cases in Florida. The legislation would also allow second publication of the notice of sale of a home to be published on a publicly accessible website of the clerk of court in lieu of being published in any other form of media.  This changes the requirement that a second notice of pending foreclosure occur in a print newspaper advertisement, a move some say is unfair to low income homeowners who could only find out about a potential foreclosure sale through a print newspaper notice.

House Bill (HB) 1777

HB 1777 would establish a homeowner bill of rights, like a similar measure enacted in California early this year, in the event of late mortgage payments. California’s law is meant to protect homeowners from predatory lenders and further regulate lending practices. California has already seen a steady decrease in the amount of foreclosure filings since it went into effect on January 1, CNNMoney reports.

Senate Bills 1236, 1226, 371 and 1228

Four bills, proposed and sponsored by Senator Darren Soto (D-Orlando), seek to remedy homeowners’ distress. SB 1226 and 371 would mandate that lenders can only file a deficiency judgment one year after a final foreclosure judgment, and would only have two years to collect outstanding debt. Presently, collectors are legally allowed to contact borrowers about debts for up to two decades. SB 1236, also known as the “Mortgage Principal Reduction Act,” would require the Florida Housing Finance Corporation to apply for $100 million of the federal government’s Hardest-Hit Program in order to begin a mortgage principal reduction program for Florida residents with properties are in foreclosure. Soto’s final proposed bill, the “Short Sale Debt Relief Act,” would make deficiency judgments unenforceable on a short sale if the original debt was 20 percent or greater than fair market value.

Based on all of the proposals presented, Floridians will likely see changes to the foreclosure process soon.  Everyone who has an opinion on what needs to be done most likely wants to see more improvement in the housing market.

Sarah Parr is a Florida writer who blogs about Florida foreclosure issues.

THE OPERATIVE WORD IS "TRANSPARENCY"

State governments contract for goods and services amounting to tens of billions of dollars, and offer subsidies to encourage economic development, grants and other spending issues. To insure that the funds are well spent, accountability and public scrutiny are required.

Right now all 50 states provide state spending information on the internet, and for all except CA and VT the info is searchable. “Transparency 20” refers to meeting the standards.

Take a look at TRANSPARENCY FLORIDA, and see how our state spends its money. The U.S. Public Interest Research Group gave Florida an A- grade for the Transparency Florida website, and ranked it third in the US for state government transparency. You may want to subscribe to Florida’s CFO Jeff Atwater’s weekly DOLLARS AND SENSE newsletter to keep apprised of what is happening in our state.

SHADES OF FLASH GORDON...

Watch and listen to how drones work....

http://www.youtube.com/watch?v=QdpcSpLHu-8

EVER WONDERED HOW THE INTERNET WORKS?

 

http://www.wimp.com/internetworks/

FINDING AN UNPAID PENSION

You, or someone you know, may be owed a pension. Below are options for searching PBGC's list of pensions that have been earned, but are unclaimed.
PLEASE NOTE: The lists you can search here do not include all people for whom PBGC is holding pensions or information about their pensions. It includes only those people whom PBGC has not yet been able to contact directly.
Search here for unclaimed pensions by the participant's or beneficiary's last name, the name of the company that provided the pension, or the state of the company's location.

Search by Name - either exact match or contains, Company or State.

http://search.pbgc.gov/mp/mp.aspx