Saturday, April 28, 2012
Monday, March 19, 2012
Can I Sell My Parents’ House and Avoid the Capital Gain Tax?
Can I Sell My Parents’ House and Avoid the Capital Gain Tax?
I inherited my parents’ home, which is worth more than my current one. I’m thinking of claiming my parents’ home as my principal place of residence so that I can sell it in two years and not have to pay capital gains. I’m changing my homeowner’s exemption on my tax bill to my parents’ house. What other things do I need to do so that I won’t have to pay capital gains taxes on my parents’ house when I sell it?
Why go to the bother of trying to provide proof of your living in your parents’ home when you could probably sell the house now and pay no or little capital gain tax? When you inherited your parents’ house, you got a step up in its basis. In other words, the fair market value (FMV) of the property on the date of the death of your last parent is its new cost basis. And if it is more beneficial to you, the government says you can select another date to lock in the FMV as long as the date is between the date of death and the nine months afterwards. If the difference between the FMV and the price you sell the house for is not that great, the homeowner’s exemption and principal residence issues are moot. If you sell the house sometime during the nine months following your parent’s death, the price the house sells for essentially is its FMV. Thus, if you use the date of sale as the FMV date, the sale price and basis are the same, meaning there is no capital gain tax.
You could also sell your parents’ home, sell your own house and use the money realized on both to purchase another home and likely pay no capital gains. As long as you’ve lived in your current home for at least two years out of the past five years, it qualifies for the exemption on capital gain tax ($250,000 if you are single, $500,000 if you are married). If you really want to wait two years before selling the house, you will have to physically move into it in order to claim the homeowner’s exemption when you sell it. But I don’t think that would be in your best financial interest.
Rob Seltzer is principal of Robert Seltzer, CPA, PFS, in Beverly Hills. You can reach him at (310) 278-9944. Have a question for a CPA? Ask it here.
In accordance with IRS Circular 230, the information on this website is not intended or written to be used, and cannot be used as or considered a "covered opinion" or other written tax advice and should not be relied upon for the purpose of avoiding tax-related penalties under the Internal Revenue Code; promoting, marketing, or recommending to another party any transaction or tax-related matter(s) addressed herein; for IRS audit, tax dispute or other purposes.
I inherited my parents’ home, which is worth more than my current one. I’m thinking of claiming my parents’ home as my principal place of residence so that I can sell it in two years and not have to pay capital gains. I’m changing my homeowner’s exemption on my tax bill to my parents’ house. What other things do I need to do so that I won’t have to pay capital gains taxes on my parents’ house when I sell it?
Why go to the bother of trying to provide proof of your living in your parents’ home when you could probably sell the house now and pay no or little capital gain tax? When you inherited your parents’ house, you got a step up in its basis. In other words, the fair market value (FMV) of the property on the date of the death of your last parent is its new cost basis. And if it is more beneficial to you, the government says you can select another date to lock in the FMV as long as the date is between the date of death and the nine months afterwards. If the difference between the FMV and the price you sell the house for is not that great, the homeowner’s exemption and principal residence issues are moot. If you sell the house sometime during the nine months following your parent’s death, the price the house sells for essentially is its FMV. Thus, if you use the date of sale as the FMV date, the sale price and basis are the same, meaning there is no capital gain tax.
You could also sell your parents’ home, sell your own house and use the money realized on both to purchase another home and likely pay no capital gains. As long as you’ve lived in your current home for at least two years out of the past five years, it qualifies for the exemption on capital gain tax ($250,000 if you are single, $500,000 if you are married). If you really want to wait two years before selling the house, you will have to physically move into it in order to claim the homeowner’s exemption when you sell it. But I don’t think that would be in your best financial interest.
Rob Seltzer is principal of Robert Seltzer, CPA, PFS, in Beverly Hills. You can reach him at (310) 278-9944. Have a question for a CPA? Ask it here.
In accordance with IRS Circular 230, the information on this website is not intended or written to be used, and cannot be used as or considered a "covered opinion" or other written tax advice and should not be relied upon for the purpose of avoiding tax-related penalties under the Internal Revenue Code; promoting, marketing, or recommending to another party any transaction or tax-related matter(s) addressed herein; for IRS audit, tax dispute or other purposes.
Thursday, December 8, 2011
Wednesday, November 2, 2011
Saturday, October 22, 2011
Thursday, October 6, 2011
Is US Economy Flirting With 'Modern-Day Depression'?
CNBC.com
| 06 Oct 2011 | 03:26 PM ET
While economists have made no secret of their fears that another recession is about to strike, the real danger could be worse
Instead, the country could be headed for a 21st century version of a depression, an economic term that, unlike a recession, defies a standard definition but instead conjures images of soup lines, 25 percent unemployment and a devastated economy.
Instead, the country could be headed for a 21st century version of a depression, an economic term that, unlike a recession, defies a standard definition but instead conjures images of soup lines, 25 percent unemployment and a devastated economy.
A drastic view? Perhaps. But with the US economy facing growth well below expectations two years after a recession, and an increasingly ominous European debt crisis, the superlatives being used to describe conditions are gaining in intensity.
“Here we are today, with a severe recession (2007-09) followed by the weakest recovery on record and now on the precipice of another economic downturn,” David Rosenberg, senior economist and strategist at Gluskin Sheff in Toronto wrote in a special analysis. “This is a modern-day depression, not entirely dissimilar to Japan’s post-bubble experience of the past two decades.”
Rosenberg takes issue with the standard issue of a recession being two consecutive quarters of negative growth, and rather says it measures peaks in sales activity, jobs, industrial production and income growth.
The US already has had something of a lost decade, Rosenberg reasons, citing stock values still around 1998 levels and little net job growth.
This is occurring even despite unprecedented policy measures including a massive monetary easing campaign from the Federal Reserve and about $800 billion in government stimulus.
”Simply put, an economic depression occurs only once it becomes painfully obvious that the markets and the economy are failing to respond to repeated bouts of policy stimulus,” Rosenberg said.
While Rosenberg is certainly out of the consensus in discussing a depression, he is not alone.
Harvard professor and economist Niall Ferguson recently projected a “mild depression” (if there can be such a thing) as have other economists including the noted “Dr. Doom” Nouriel Roubini and HSBC’s Stephen King. The latter two, though, have raised risks of a depression and have not stated, like Rosenberg, that one is actually under way.
Most economists, rather, have confined their predictions to recessions and mild ones at that.
Jan Hatzius at Goldman Sachs recently said there’s a 40 percent chance of recession, but even at that sees “the main downside scenario as a shallow recession followed by a slow recovery.” Similarly, Deutsche Bank economists recently noted that if leaders fail to find satisfactory solutions to the European debt crisis, “the prospects for a moderate dip in GDP will grow.”
Some economists, though, have been doing their utmost to find silver linings that defy recession probabilities. Jeffrey Greenberg at Nomura Securities, for instance, cited a rise in construction spending in August to reason that second-quarter gross domestic product growth would come in at a decidedly nonrecessionary 2.5 percent.
Representing many of the economic voices out there, Citigroup’s Robert V. DiClemente pondered whether the current period should redefine the way recoveries are considered.
“Perhaps we should label this period a convalescence instead of a recovery in recognition of the ongoing attention to saving, deleveraging and balance sheet rebuilding,” DiClemente said in a note. “Flat is the new up and subpar growth has redefined optimism.”
Yet it is some of those very conditions—the slashing of consumer debt (or deleveraging), reticence to spend and general risk aversion—that helps drive Rosenberg’s depression case.
“It will take time and shared burden by lenders, households and future generations of taxpayers before we hit bottom in this credit contraction,” he wrote. “Time is certainly going to be a big part of the solution, and history tells us that the deleveraging cycles last years.”
Indeed, ominous signs abound.
Strategists at Bank of America Merrill Lynch earlier this week published a note with the sub-heading of, “The chart that keeps us up at night.” The particular chart in question tracks the bond yield differences, or spreads, in the European financial credit default swaps market .
The instruments are insurance against debt defaults and the spreads, BofAML says, have gone 0.70 percentage points or so beyond their levels at the 2008 financial crisis apex. The same spread for US financials is only about 0.40 percentage points away from late 2008, while high yield spreads are right at the point they were the day before Lehman Brothers went bankrupt.
Scary stuff, even for a firm saying that the chance of a recession remains below 50 percent.
“The experience of 2008 has taught us that once the level of distress in the financial system reaches a certain level, it can become an uncontrollable force, with the potential to push market participants into deleveraging as counterparty exposures are being cut,” the firm said.
“We may not be at that point yet, but we believe we might not be too far away from it, and with the markets behaving the way they have over the past few weeks, we could get there quickly.”
_____________________________________________
Pressure on lenders drastically decreases new foreclosures in New York City
Source: PropertyShark
Just 207 new foreclosures were filed in the third quarter, down 33 percent from the 311 filed in the second quarter, and down 69 percent from the 659 new filings in the third quarter of 2010. About half the new foreclosures were filed on co-ops.
Queens led all boroughs with 82 foreclosures, or 39 percent of the city's foreclosures. However, the number was still 28 percent less than it was last quarter, and 79 percent below the figure recorded in the prior year quarter.
In Manhattan and Brooklyn the quarter-over-quarter decrease was 45 percent, while Bronx saw a 26 percent decline. Staten Island foreclosures remained constant.
However, PropertyShark said the decreases were not necessarily due to an improved market. Instead, they were likely caused by the increased pressure on banks and lenders to pay close attention to the paperwork involved in foreclosure filings, thereby slowing the process.
"We believe the drop is due to increased legal pressure on the banks by the state and federal governments," said PropertyShark founder Matthew Haines. "As we enter a new recession, we expect homeowners to continue to have trouble making payments on mortgages that continue to far exceed the value of the underlying houses."-- Adam Fusfeld
Monday, September 19, 2011
Wealthy communities in NYC, Florida area could fall under Obama tax plan
Wealthy communities in NYC, Florida area could fall under Obama tax plan
September 19, 2011 04:00PM
Above Sutton Place and Oyster Bay, N.Y., below Fort Lauderdale and Bay Harbor Island, Fla.
The data indicates that the New York City area and South Florida were among the top spots for the rich.
According to the analysis conducted by Forbes, four out of the five wealthiest communities in the country were in New York City area or in South Florida based on estimated net worth.
The analysis also looked at other factors such as relative tax burden and charitable giving. On Fisher Island, Key Largo, Boca Grande and Longboat Key, the wealthy don't pay more than 25 percent in taxes.
Many residents in the New York City area also aren't very charitable. Particularly in some rich New Jersey towns, residents give away 2 percent or less of their income, compared to an average of 2.9 percent. The same is true for Tribeca and a part of White Plains.
While in Tribeca, only 17 percent of income comes from investments, reflecting the younger demographic of the neighborhood, according to the analysis, on Fisher Island that number is 85 percent, and in Boca Raton and Key Largo, places where residents have already accumulated their wealth, it's 75 percent or more of income. [Forbes]
Many residents in the New York City area also aren't very charitable. Particularly in some rich New Jersey towns, residents give away 2 percent or less of their income, compared to an average of 2.9 percent. The same is true for Tribeca and a part of White Plains.
While in Tribeca, only 17 percent of income comes from investments, reflecting the younger demographic of the neighborhood, according to the analysis, on Fisher Island that number is 85 percent, and in Boca Raton and Key Largo, places where residents have already accumulated their wealth, it's 75 percent or more of income. [Forbes]
Thursday, September 1, 2011
Mortgage rates reach historic lows
Mortgage rates reach historic lows
September 01, 2011 02:30PM
Mortgage rates are declining further amid continued weak economic and housing data, according to Freddie Mac's Primary Mortgage Market Survey, released today. While the 30-year fixed rate held steady, the five-year adjustable rate mortgage set a new all-time record low having fallen for the eighth consecutive week and now standing at 2.96 percent.
For the second week in a row, the 30-year fixed-rate mortgages averaged 4.22 percent for the week ending today. Last year at this time, the 30-year FRM averaged 4.32 percent.
Fifteen-year fixed-rate mortgages this week averaged 3.39 percent, down from last week when it averaged 3.44 percent. A year ago at this time, the 15-year FRM averaged 3.83 percent.
"Weaker economic data reports eased upward pressure on mortgage rates this week and kept them at or near all-time record lows," said Frank Nothaft, vice president and chief economist for Freddie Mac. "The economy grew at a slower rate of 1 percent in the second quarter than was originally reported due to a smaller increase in inventories and fewer exports. In addition, consumer confidence in August fell to the lowest reading since April 2009, according to the Conference Board." -- Katherine Clarke
Wednesday, August 31, 2011
Top Reasons to Own a Home
by Carla Hill
There's good reason that over half of all Americans are homeowners. Social and financial benefits are key factors when it comes to deciding to buy. Homeownership allows people to grow wealth slowly over time, to hold assets that build equity, and to bring stability into chaotic lives.
Despite these facts, homeownership rates have taken a hits since the recession in 2009. Falling home prices along with reduced access to credit has kept many would-be buyers from entering the market. According to Morgan Stanley, the current homeownership rate is around 59.2%. This is lowest rate since the Census Bureau began tracking in 1965. Has this reduction been a fear-based one?
The top benefits of homeownership haven't changed, even in the face of a down economy. Here are the top five:
1. Savings: Be sure to check out the calculator at the end of this article. You'll find that long-term homeownership is still a way to get big savings.
2. Tax Breaks: They're not on the chopping block just yet. Many homeowners are still able to take the mortgage interest deduction (MID) each year, along with great rebates and credits associated with upgrades made to your home.
3. Equity: When you pay a landlord, it's money down the drain. When you pay on a mortgage, you are paying towards owning a piece of something. You may still owe $100,000, but perhaps the home is worth $200,000. This means you have $100,000 worth of equity you've built up over time.Despite these facts, homeownership rates have taken a hits since the recession in 2009. Falling home prices along with reduced access to credit has kept many would-be buyers from entering the market. According to Morgan Stanley, the current homeownership rate is around 59.2%. This is lowest rate since the Census Bureau began tracking in 1965. Has this reduction been a fear-based one?
The top benefits of homeownership haven't changed, even in the face of a down economy. Here are the top five:
1. Savings: Be sure to check out the calculator at the end of this article. You'll find that long-term homeownership is still a way to get big savings.
2. Tax Breaks: They're not on the chopping block just yet. Many homeowners are still able to take the mortgage interest deduction (MID) each year, along with great rebates and credits associated with upgrades made to your home.
4. Budgeting: Unless you live in a rent-controlled apartment (and not many do), then each lease renewal could mean a jump in prices. A fixed-rate mortgage, however, means your monthly payment is the same amount for the life of the loan. A $1,000 a month payment on a 30-year mortgage is that same now as it will be in 30 years!
5. Security: When you own, it's yours. You can paint, improve, and decorate. The trees and flowers are yours to enjoy -- for a lifetime if you wish. Most homeowners are in neighborhoods with other homeowners, meaning more time to build relationships and friendships. Recent studies have also shown that homeowners rank themselves as healthier than their renter counterparts.
Should you rent or buy? For a strictly financial evaluation, be sure to check out The New York Times' Interactive calculator to crunch the numbers. This advanced calculator takes into account everything from yearly costs to selling costs and broker fees.
Experts have recommended for years that if you're planning on staying put for 5+ years, buying becomes an increasingly better deal. You have time to recoup any extra expenses found in closing costs and are now making an investment in your future through home price appreciation. Once your mortgage is paid off, you'll have a real asset. That brings real stability.
Home affordability is at near record highs. Now is a good time to run the numbers and see if buying makes good financial sense. If it does, then you're in store for a wealth of benefits that only homeowners can experience.
5. Security: When you own, it's yours. You can paint, improve, and decorate. The trees and flowers are yours to enjoy -- for a lifetime if you wish. Most homeowners are in neighborhoods with other homeowners, meaning more time to build relationships and friendships. Recent studies have also shown that homeowners rank themselves as healthier than their renter counterparts.
Should you rent or buy? For a strictly financial evaluation, be sure to check out The New York Times' Interactive calculator to crunch the numbers. This advanced calculator takes into account everything from yearly costs to selling costs and broker fees.
Experts have recommended for years that if you're planning on staying put for 5+ years, buying becomes an increasingly better deal. You have time to recoup any extra expenses found in closing costs and are now making an investment in your future through home price appreciation. Once your mortgage is paid off, you'll have a real asset. That brings real stability.
Home affordability is at near record highs. Now is a good time to run the numbers and see if buying makes good financial sense. If it does, then you're in store for a wealth of benefits that only homeowners can experience.
Tuesday, August 30, 2011
High-profile Brooklyn landlords fight landmarking of downtown skyscrapers
High-profile Brooklyn landlords fight landmarking of downtown skyscrapers
August 29, 2011 09:00AM
Brooklyn Municipal Building and SL Green CEO Marc Holliday
"It makes little sense to move forward on a designation that will impede Downtown Brooklyn's ability to attract high-quality … retail tenants," opponents said in a letter to Landmarks Preservation Commission Chairman Robert Tierney earlier this month.
"This is crushing us," said Jordan Barowitz, who lives in a building at 75 Livingstone Street, the only residential tower within the proposal, but also works for the Durst Organization. "It would put a tremendous burden on people who own property in district -- and in the end what are we saving?"
The district would include Brooklyn's Borough Hall, the 14-story Temple Bar Building on Court Street, the 35-story Montague-Court Building at 16 Court Street and the Municipal Building. [Brooklyn Paper]
Saturday, August 27, 2011
Brooklyn sees 60 percent jump in million-dollar home sales
Brooklyn sees 60 percent jump in million-dollar home sales
August 24, 2011 12:30PM
Chris Thomas, executive vice president at Brown Harris Stevens, and a map of BrooklynThere were 223 high-end residential property sales in Brooklyn in the second quarter of 2011, the highest number in three years, according to recent analysis by PropertyShark.com cited by Crain's. High-end sales are defined as those over $1 million.
Sales of million-dollar-and-up properties jumped a jaw-dropping 60 percent from the period in 2010 and outpaced the previous record set in the third quarter of 2008. Condo purchases accounted for 123 of the deals, more than double the tally in the same quarter of 2010, Crain's said. Around 25 percent of the sales were in new developments.
The surge in sales does not necessarily indicate that Brooklyn's residential market is thriving, experts said, as a lot of the logged sales actually went into contract earlier in the year.
"The early part of the new year was one of the strongest because there were not a lot of townhouses available," said Chris Thomas, executive vice president at Brown Harris Stevens. "The ones that were available tended to have a number of bidders, which drove prices up."
Most of the $1 million-plus sales took place in Williamsburg, with Park Slope coming in second.
Property Shark's data aligned with previous reports by the Corocran Group, Prudential Douglas Elliman and MNS, all of which suggested that the Brooklyn Market was being significantly buoyed by new development. [Crain's]
Sales of million-dollar-and-up properties jumped a jaw-dropping 60 percent from the period in 2010 and outpaced the previous record set in the third quarter of 2008. Condo purchases accounted for 123 of the deals, more than double the tally in the same quarter of 2010, Crain's said. Around 25 percent of the sales were in new developments.
The surge in sales does not necessarily indicate that Brooklyn's residential market is thriving, experts said, as a lot of the logged sales actually went into contract earlier in the year.
"The early part of the new year was one of the strongest because there were not a lot of townhouses available," said Chris Thomas, executive vice president at Brown Harris Stevens. "The ones that were available tended to have a number of bidders, which drove prices up."
Most of the $1 million-plus sales took place in Williamsburg, with Park Slope coming in second.
Property Shark's data aligned with previous reports by the Corocran Group, Prudential Douglas Elliman and MNS, all of which suggested that the Brooklyn Market was being significantly buoyed by new development. [Crain's]
Navy Yard development held back by property transfer
Navy Yard development held back by property transfer
August 26, 2011 09:00AM
Admirals RowBrooklyn Navy Yard's Admirals Row, the proposed six-acre site of a supermarket, retail and industrial facility, is moving through the city's approval process, but one vital detail remains unresolved -- the purchase of the land from the federal government.
According to the Wall Street Journal, the Brooklyn Navy Yard Development Corporation, which manages the yard, had an arrangement with the feds to buy the land for just $1, but the government in now seeking market rate for the site, which is currently home to run-down historic 19th-century homes for military officers.
The city owns most of the Navy Yard, but Admirals Row belongs to the Army National Guard.
"We are still in negotiations with the city," said Chris Gardner, a spokesman with the Army Corp of Engineers. "We don't have any specific end date."
If it progresses as planned, the development of Admirals Row would be the latest in a large expansion underway at the Navy Yard, fuelled by more than $200 million in basic infrastructure investments from the Bloomberg administration, including a recent $15 million commitment to build space for green manufacturers.
Earlier this year, Rep. Nydia Velazquez wrote a letter to Army Secretary John McHugh, urging his office to push the transfer forward.
"Given the rapidly worsening state of the buildings, we now ask that the property be immediately transferred to the city," she wrote in the letter, which was also signed by Sens. Chuck Schumer and Kirsten Gillibrand and Rep. Edolphus Towns. [WSJ]
According to the Wall Street Journal, the Brooklyn Navy Yard Development Corporation, which manages the yard, had an arrangement with the feds to buy the land for just $1, but the government in now seeking market rate for the site, which is currently home to run-down historic 19th-century homes for military officers.
The city owns most of the Navy Yard, but Admirals Row belongs to the Army National Guard.
"We are still in negotiations with the city," said Chris Gardner, a spokesman with the Army Corp of Engineers. "We don't have any specific end date."
If it progresses as planned, the development of Admirals Row would be the latest in a large expansion underway at the Navy Yard, fuelled by more than $200 million in basic infrastructure investments from the Bloomberg administration, including a recent $15 million commitment to build space for green manufacturers.
Earlier this year, Rep. Nydia Velazquez wrote a letter to Army Secretary John McHugh, urging his office to push the transfer forward.
"Given the rapidly worsening state of the buildings, we now ask that the property be immediately transferred to the city," she wrote in the letter, which was also signed by Sens. Chuck Schumer and Kirsten Gillibrand and Rep. Edolphus Towns. [WSJ]
Sag Harbor condo project could return from the dead
Sag Harbor condo project could return from the dead
August 26, 2011 12:30PM
Bulova Watchcase FactoryA Sag Harbor luxury condominium project approved after two years of deliberation in 2008, but then subject to lawsuits over the approval and the global recession, is showing signs of life, the Sag Harbor Express reported.
Cape Advisors, the developers of a planned $100 million, 65-unit luxury apartment building at the old Bulova Watchcase Factory at Church and Division streets, along with seven adjacent townhouses that contain 16 units total, a pool, a recreation center and underground parking, met with the Sag Harbor Village Planning Board this week to push the project forward.
Founder Craig Wood said that construction could begin as early as the fall if the board were willing to modify the terms of its initial approval, including adjusting the schedule for the promised $2.5 million payment to a housing trust in lieu of including affordable housing in the project. He said that would be critical to Cape Advisors' attempt to land a construction loan. Wood also wanted to change agreements regarding crossing guards near the project and the second letter of credit following the initial bond.
Wood urged the board to act quickly, as the developers lost two financiers during the two-year approval period before 2008. According to the Express, the village planning board is also keen on seeing the project come to fruition. [Sag Harbor Express]
Tuesday, August 16, 2011
Buying is now cheaper than renting in most U.S. cities
August 16, 2011 09:30AM
Purchasing a home is now cheaper than renting in most U.S. cities, thanks to drops in home prices, rock-bottom interest rates and increased demand for rental properties, CNN reported.
Buying made more economic sense than renting in 74 percent of the country's 50 largest cities in July, according to data from Trulia.com, with renting winning out in only 12 percent of cities, including New York. In the remaining 14 percent of cities, the costs of buying and renting were similar.
"It's a personal decision, of course. But if you have a steady job and you are planning to stay for seven years or more and have enough cash to put 20 percent down and enough left over for seven or eight months of expenses, you're better off buying in most places," said Daisy Kong, a spokesperson for Trulia.com.
At one end, Las Vegas was most obviously a buyer's market in July, with prices having plunged 59 percent from their 2006 peak. The median price of a two-bedroom property was $60,000.
New York remains quite clearly a renter's market despite the average asking rent hitting $2,980 per month, the highest of all the U.S. markets. To buy a two-bedroom home in New York costs an average of $1.3 million. [CNN]
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