C.A.R. beat three seperate legislative proposals that would have established costly point-of-sale mandates.

There are lots of questions as to who qualifies for the extended tax credit. The website
www.federalhousingtaxcredit.com has some of the best information.

- Janis Stone – DRE# 00517072

Los Angeles Times – If ever there was a great time buy a first home, it’s now.  Interest rates and housing prices are low, and the federal government is giving money to buyers in the form of an $8,000 tax credit.

To read the full story, please click here.

We are issuing an urgent plea for everyone to contact members of Congress immediately to urge them to extend the First Time Home Buyer Tax Credit to help keep the economy recovering. Some 1.2 million households have used the $8,000 tax credit since it was enacted earlier this year as part of the economic stimulus package. Without congressional action, the credit will expire on December 1. Since it takes 45-60 days to get to closing, if not longer, households have little time remaining to take advantage of the credit. That’s not good for markets. “Uncertainty about the future of the credit will dampen consumer demand,” says Charles McMillan, president of NAR. “The only way we can assure that the progress we’ve made can continue is to extend the credit and to do that now.”

You will need to contact your representative depending on your location. The best resource we have found for finding contact information on members of congress is here.

- Janis Stone
DRE #00517072

First American Exchange recently sent us a great tax saving tip of turning the home you own outright into a rental property if you are so inclined. Here’s what they say:

“…Did you know that you can avoid paying tax on more than $500,000 of gain on your home? Many people are aware of the advantages of Internal Revenue Code Section 121, which allows a married couple to exclude up to $500,000 of gain on the sale of their personal residence ($250,000 for a single taxpayer). Although this amount of gain is generous in most areas of the country, in California and a few other states, many people expect to receive more than $500,000 of profit when they sell their home…

“… (For example) John and Mary Smith have lived in their home for twenty years. They acquired it for $100,000 and it is now worth $1 million, so if sold, they would have $900,000 of gain. If they sell it without converting it to a rental, they would be able to exclude $500,000 of gain but would have to pay state and federal capital gains tax on the additional $400,000 of gain.

“John and Mary Smith decide, however, to convert their property to a rental. After renting it for a year or two, they sell it for $1 million. Since they used the home as their personal residence at least two of the past five years, they are able to exclude $500,000 of the gain. They can then use the remaining funds to acquire replacement investment property and defer paying tax on the balance of the gain.

“In order to completely defer the remaining gain, the traditional rule is that the investor must acquire property with a fair market value equal to or greater than the relinquished property, and must invest all of the equity from the relinquished property into the replacement property. When gain has been excluded under Section 121, the amount of value and equity required is reduced by the amount of gain that was excluded…”First American publishes its own newsletter and is free to subscribe.

- Mick Orton

On September 22, 2006, the governor signed AB 2962. This new law amends Revenue and Taxation Code Sections 18662 and 18668, making changes to real estate withholding requirements for all transactions closing on or after January 1, 2007.

Previously it was required that 3 and 1/3 percent of the sales price be withheld from the proceeds of a real estate transaction for non-resident sellers. Now these sellers may choose between the original withholding method or an alternate method where only the capital gains rate is applied to the estimated gain. Instead of waiting until the end of the year to file and get money back, the seller just fills out the necessary forms and submits them to the title company before the close of escrow.

We encourage any seller to consult with their accountant or competent tax professional to determine the best choice for them.

More about this new law may be read here.

- Mick Orton

Diane Kennedy is the author of the Rich Dad book, “Loopholes of the Rich: How the Rich Legally Make More Money and Pay Less Tax”, has a website dedicated to the ever changing tax laws and how to take advantage of them.

Here is an excerpt from her latest e-mail newsletter.

“Here are the top 3 tax mistakes that I’ve seen over the years. In each case the mistake can be traced back to a failure to understand a crucial element of investing.

1. Failure to understand what TYPE of real estate investor you are. Are you a dealer, developer, professional or investor?
2. Failure to understand WHEN you bought or sold a property. With creative real estate financing and investing this can be tricky, and not as straightforward as you think.
3. Failure to MAXIMIZE the tax benefits of real estate. The loopholes are out there – but if you don’t use them, or use the wrong type of structure to hold your assets, you can lose out on perhaps the most powerful real estate benefit of all – the tax savings!

Understanding what you’re doing (and why it matters) is the subject of this week’s What’s Hot.”

- Diane kennedy