TAX ASPECTS

1

• TAX ASPECTS
• OF REAL ESTATE

2
TAXATION

• What is taxation?
• Madison- a necessary evil
• American Revolutiontea bags
• Power to tax is the power to destroy
• Beatles- Taxman

3
Taxation

• Sources of tax revenue
• International, federal, state local
• WOW!
• Death Taxes
• Fees
• Value Added Tax (VAT)
• Unfunded mandates

4
Taxation

• Power to tax
• General Police Power of States
• Federal government
• Art. 1 8. delegated powers
• Art. 1 2 9 restriction
• Amendment XVI (1913) direct/ without
  apportionment

5
Taxation

• State taxation
• Income tax
• Inheritance/estate tax/other
• Property Tax
• Ad Valorem tax
• Local, schools, county
• 85 of local govt revenue
• Assessed value/FMV x millage rate

6
Taxation

• Property tax (cont.)
• Challenges to assessed value
• Fairness issue of gentrification
• Reduction for
• Senior citizen
• Veteran
• Disabled
• Other
• Exempt Property/Contribution

7
Taxation

• Tax v. Fees (issue of deduction)
• Transfer Tax
• Varies by state
• NJ progressive/mansion tax
• PA 2 - split by seller buyer
• Local addition
• Mortgage escrow (negotiate)

8
Taxation

• Transfer Tax
• Nonpayment
• Mortgage default
• Tax lien (1st priority)
• Tax sale
• Tax deed subject to challenge

9
Taxation

• Federal taxation
• Income tax
• Who pays?
• Alternative minimum tax
• Estate, Gift, and Generation skipping transfer
  tax
• Business Entities, Trusts, Estates

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Taxation

• filers
• Top 1
• Top 5
• Top 10
• Bottom 50

• Inc Tax
• 40
• 61
• 71
• 2.9

• AGI
• 23
• 37
• 48

• Tax Inc
• 410,100
• 160,000
• 113,000

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Taxation

• Voters
• 40 paid 0
• 9 0 under Obama
• 11 pay less than 1,000
• 60
• 40 pay 95
• 5 (250,000) pay 60

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Taxation

• Federal Individual Income Tax
• Gross Income
• (certain deductions)
• Adjusted gross income
• (personal exemption, standard deductions/itemized
  deductions)
• Taxable income
• x progressive rates
• Tentative tax
• (credits)
• Tax liability

13
Taxation

• Real Estate specific deductions credits
• Property taxes
• Mortgage interest
• Acquisition indebtedness 1million
• Home equity indebtedness 100,000

14
Taxation

• Depreciation/cost recovery
• First time home buyer credit
• Energy credits
• At risk rules
• Passive activity losses

15
Taxation

• Gains losses
• G AR AB
• L AB AR (sp exp)
• AB Cost Improvements Cost Recovery
• Capitalize v. Expense

16
Taxation

• Exclusions nonrecognition
• 121 - 250,000/500,000
• Prior 1034 rollover w/121
• 1031 like kind exchange
• 1033 involuntary conversion
• Boot

17
Taxation

• Capital gains losses
• Capital asset
• Gains
• Losses
• Short/long-term holding period
• Netting
• Preferential rate for LTCG
• Capital losses
• Recapture
• Installment sales

18
Taxation

• Transfer taxes
• State inheritance/estate
• Federal gift tax
• Federal estate tax
• Federal GSTT
• Basis - 1014/1015
• After tax return