Washington Update – 1031 Under Attack

Written by instructor Patty Flowers. Patty Flowers is AVP for Investment Property Exchange Services (IPX1031®) and a Certified Exchange Specialist®. See her website

 

Patty Flowers

Patty Flowers

1031 Exchanges have been an integral part of real estate’s recovery. Now the government is proposing to eliminate all 1031 Exchange activity.

For decades, real estate investors, business owners and Fortune 500 companies have used 1031 Exchanges to defer the payment of capital gains tax and depreciation recapture tax associated with the sale of their investment properties. 1031 Exchanges also allow taxpayers to maintain or diversify their portfolios and increase their purchasing power. Any investment property or property held for productive use in a trade or business, ranging from vacant land to shopping centers, can be exchanged. The taxpayer must simply purchase new qualifying real estate and follow some basic rules to complete a tax deferred 1031 Exchange.

Even though 1031 Exchanges have long been recognized as a major factor in encouraging real estate sales, as part of tax reform in separate Discussion Drafts, the House of Representatives, Senate and the President’s Budget Office have all proposed eliminating or sharply curtailing the benefits of Section 1031:

  1. House Ways & Means Committee Chairman Dave Camp released a Discussion Draft of his Comprehensive Tax Reform Proposal on February 25, 2014. The Camp Proposal would repeal Code Section 1031 for like-kind exchanges occurring after 2014.
  2. Senate Finance Committee Chairman Max Baucus’ tax reform Discussion Draft includes a proposal to repeal Section 1031 in its entirety. The proposed repeal would apply to exchanges made in taxable years beginning after December 31, 2014.
  3. President Obama’s 2015 Budget proposal also contains significant changes to IRS Code 1031. The President’s proposal does not eliminate 1031 Exchanges, but limits the amount that can be deferred to $1 million per taxpayer per year.

The elimination of 1031 Exchanges will result in a sharp decrease in real estate transactions. Due to its severe impact on all areas of the real estate community and how this could potentially affect you, IPX1031® will keep you up to date on these proposals. Simply send an email to info@ipx1031.com to be added to the “Washington Update” list.

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Beware Of Zombie Property Titles

Article from Your Realty Insider.

 

HHouseWith the economic downturn, anyone dealing in real estate quickly became familiar with previously little-known terms such as foreclosure and short sale. Now that the housing market is picking back up and people are moving on, a new term is coming to light – zombie titles.

The Zombie Title
This is when a home has been vacated because the owners defaulted on their loan and their bank started the foreclosure process. However, for some reason or another the bank never completed the foreclosure and sold the home. So, when the city starts fining someone for the overgrown grass and dilapidated structure, the homeowner who thought they were finished with the property gets the bill.

A Home That Keeps Haunting
Homeowners think they don’t own the property any longer and therefore try to move on by rebuilding their credit score and finding a new place to live. It can be a rude awakening to find out that not only do they still own a home they could have been living in, but also its long vacancy has caused it to fall into disrepair.

It’s Spooking The Neighborhood
These vacant homes can decrease the value of a neighborhood. If the bank or the unsuspecting homeowner are neither one taking care of the property, then it can become overgrown and an eyesore on the block. It becomes a problem with no solution because the owner won’t want to invest any money in fixing up the property when the bank could come back with the foreclosure at any time.

Nail Shut The Foreclosure Coffin
Homeowners who have foreclosed on a home should double check that their bank actually followed through to closing on a sale. They could contact their lender or check public property records just to make sure. Otherwise, they could be haunted by their housing nightmare all over again. Don’t let the zombie title of a past property haunt your future! Check with your bank to make sure you’re free and clear of your foreclosure. If you’d like more information on zombie titles or have other questions about local real estate, please contact your trusted real estate professional.

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Salem, Mass. Contractor Faces Penalty for Violating Lead Renovation Rule at Kittery, Maine Site

From the EPA Newsroom:

James J. Welch & Co., Inc., based in Salem, Mass., faces a penalty of $28,125 for allegedly violating a requirement designed to protect children from exposure to lead-based paint during painting and other renovation activities.

The alleged violations occurred during a renovation project at the former Frisbee School in Kittery, Maine, at which JJ Welch was the primary contractor. The Kittery site was, at the time of the renovation, a child-occupied facility subject to EPA’s Renovation, Repair and Painting (RRP) Rule.

The violation was brought to EPA’s attention via an anonymous tip, after which EPA and Maine Dept. of Environmental Protection performed an inspection of the site in Feb. 2012. Based on the inspection, EPA determined that JJ Welch did not ensure that a company hired as a subcontractor to replace windows at the school complied with the required work practice requirements of the RRP Rule, including failure to assign a certified renovator to the work site; failure to cover ground with plastic sheeting; and failure to contain waste from the renovation activity.

EPA’s RRP Rule is designed to prevent exposure to lead-based paint and/or lead-based paint hazards. The rule requires individuals performing renovations for compensation at most pre-1978 housing and child-occupied facilities to be properly trained. There are certification and training requirements for individual renovators and firms performing renovations to ensure that safe work practices are followed during renovations. The rule became effective on April 22, 2010 and allows for the assessment of penalties that may reach up to a maximum of $37,500 per violation per day.

Infants and young children are especially vulnerable to lead paint exposure, which can cause developmental impairment, reading and learning disabilities, impaired hearing, reduced attention span, hyperactivity and behavioral problems. Adults with high lead levels can suffer difficulties during pregnancy, high blood pressure, nerve disorders, memory problems and muscle and joint pain.

More information:

– Lead paint RRP Rule (http://www.epa.gov/lead/rrp/index.html)

– Why lead is a health hazard (http://www.epa.gov/lead/learn-about-lead.html)

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Are you EPA Lead Certified? If not, Arthur Gary School of Real Estate offers two EPA Lead Renovation Certification courses this September!

-September 17, 2013 – 8:00am to 5:00pm – Ramada Inn, Bangor, ME

-September 30, 2013 – 8:00am to 5:00pm – Arthur Gary School of RE, Westbrook, ME

-Program fee: $195.00

For more information, please click here to see our website