NEW TAX LAWS for Investors and AMT changes

This is an email I received this morning from my CPA Mike Grinnan and I asked his permission to post in on my blog for your benefit.. It contains both good and bad new tax laws for investors, first responders, and big changes involving the AMT

-----Original Message-----
From: Mike Grinnan CPA
Sent: Monday, December 31, 2007 10:49 AM
To: Mike Butler
Subject: Tax Changes

2007 Year-End Tax Relief

Dear Mike:

In holding true to their promises, Congress passed and President Bush signed year-end tax relief legislation. Some of this legislation is important to the 2007 tax filing season, beginning in January, while others will have ramifications in the years to come. Below is an outline of the major provisions of two Acts that you should be aware of.

Mortgage Relief

On December 20, President Bush signed into law the Mortgage Forgiveness Debt Relief Act of 2007. The primary focus of the bill is to relieve taxpayers of the requirement that amounts discharged from indebtedness are included in gross income.

The Act excludes from gross income any discharge of indebtedness income by reason of discharge of qualified principal residence indebtedness. Qualified principal residence indebtedness is similar to the definition used to determine whether you can deduct mortgage interest.

However, this provision caps the debt that can be relieved income-free at $2,000,000 (or $1,000,000 in the case of married individuals filing separate returns).

The provision only applies to a taxpayer's principal residence and not a second or vacation home.

Under the provisions of the Act, a taxpayer must reduce their basis in their principal residence (but not below zero) to the extent that amounts are excluded from income as a result of the discharge.

This keeps open the possibility of taxation on any future appreciation of the property. However, the general exclusion rule (up to $500,000 for married couples filing jointly) may alleviate any and all taxes due on the sale.


These rules have retroactive effect as they apply to discharges occurring on or after January 1, 2007. However, the provision is not applicable for discharges on or after January 1, 2010.

The Mortgage Relief Act provides two additional relief provisions for homeowners.
First, the Act extends the deduction for private mortgage insurance, which was set to expire December 31, 2007, to amounts paid or accrued on or before December 31, 2010.

Second, effective for sales beginning in 2008, the Act extends the time a widow/widower has to sell the principal residence and be eligible for the $500,000 exclusion available to joint filers, rather than the $250,000 exclusion generally applicable for unmarried individuals.
To qualify, the sale must occur not later than two years after the date of death of the spouse and the both the widow/widower and the deceased spouse must have met the requirements of exclusion provision immediately before the date of death. Prior to this provision, the sale had to occur in the year of death, so that the widow/widower was eligible to file a joint return to be able to claim up to a $500,000 exclusion.

The Act excludes from gross income for members of a qualified volunteer emergency response organization any qualified state and local tax benefit and qualified payments. A qualified state and local tax benefit is any reduction or rebate of a tax provided by a state or political division thereof on account of services performed as a member of a qualified volunteer emergency response organization.

A qualified payment means any payment provided by a state or political division thereof on account of the performance of services as a member of a qualified volunteer emergency response organization. The dollar amount of a qualified payment cannot exceed $30 multiplied by the number of months during such year the taxpayer performed such services (i.e., maximum of $360 per year).

A qualified volunteer emergency response organization basically covers firefighting and emergency medical services. The exclusion is effective for taxable years beginning after December 31, 2007, and taxable years beginning before January 1, 2011.

To make this bill revenue neutral, Congress included provisions to increase the penalty on partnerships who fail to timely file their return, a comparable provision for S corporations, and an increase in the corporate estimated tax payment due for corporations with assets greater than $1 billion due in July, August, and September 2012.


AMT Relief

On December 26, President Bush signed into law the Tax Increase Prevention Act of 2007, legislation that alleviates an immediate AMT hit on millions of middle-class taxpayers.

To do this, the Act increases the alternative minimum tax exemption amount for 2007 to:

(1) $66,250 for a married individual filing a joint return, or a surviving spouse;

(2) $44,350 for an unmarried individual who is not a surviving spouse; and

(3) $33,125 to married individuals filing separate returns. Without a patch, the 2007 exemption amounts would have been $45,000 for joint filers, $33,750 for single filers, and $22,500 to separate return filers.

Given the lateness of the enactment, the IRS has stated that early return filers will see a delay in getting their refunds.

In conjunction with the AMT relief, above, the Act amends the tax code by extending to taxable years beginning in 2007 the limitation on the nonrefundable personal credits that may be used to offset a taxpayer's alternative minimum tax liability.

These credits include the dependent care credit, the Hope and Lifetime Learning credits, and the D.C. first-time homebuyers credit.

The AMT patch passed Congress without any offsets to pay for the revenue loss. This is what primarily delayed the legislation until late December. Congress has vowed to pay for this break during the next congressional session.

Sincerely,

Mike Grinnan CPA

J. Michael Grinnan, CPA,
CITPMemberMcCauley, Nicolas & Company, LLC
702 North Shore Drive, Suite 500
Jeffersonville, IN 47130-3104
Phone (812) 288-6621
Fax (812) 288-2885
E-mail Mike_Grinnan@mnccpa.com

The following warning is required by the IRS whenever tax advice is given. If this communication contains no direct or indirect tax advice, the warning is not applicableAs a result of perceived abuses, the Treasury has recently instituted Regulations for practice before the IRS. These Circular 230 regulations require all attorneys and accountants to provide extensive disclosure when providing certain written tax communications to clients. In order to comply with our obligations under these Regulations, we would like to inform you that since this document does not contain all such disclosures, you may not rely on any tax advice contained in this document to avoid tax penalties. CONFIDENTIALITY NOTICE: This message and any attached documents are intended for the use of the individual or entity to which it is addressed and may contain information that is privileged, confidential, and exempt from disclosure under applicable law. If the reader of this message is not the intended recipient, you are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please notify us immediately by telephone at 1-812-288-6621, and delete this document and any attachments from your system.

Keep On Cranking It!
Have a Great and Succe$$ful Day!

Mike Butler
Wealth Building 24-7 LLC
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5M Passive Income Generator Is Launched

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The 5M Passive Income Generator has been designed to benefit real estate investor groups, associations, builders, apartments, developers, mini-storage, mobile home parks, commercial investors, lenders, real etate agents and brokers and many more.

Just like You Tube, Google, My Space and Face Book, the 5M Passive Income Generator will be old news this time next year. This is a ground floor opportunity to jump on this brand new, state of the art passive income generator for groups and associations.

As a two term past president of my local KREIA group and a board member for well over 10 years, I can feel the pain group leaders experience in operating and leading a group. Leaders are constently focused on revenue, income, member benefits, and member retention. In a perfect world, all group leaders would love to do this without creating an extra job for themselves or another group leader.

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check out the short clip above for all the details and click here for more info.

End Of Year Tips For Investors

Tis the Season for Investors to take action Now to increase profits with minimal effort and just a tad bit of planning. Sure, you will be expecting your 1099s and 1098s and W2s, but this is simply going through the motions. Schedule an appointment, a meeting with yourself to PLAN for your investing business.

Remember, the old famous saying "Failing to Plan,... is Planning to Fail" was announced by me weekly during my real estate business meeting with my staff.

TIP 1: Turn on the 10 for 12 Program on all of your investment properties where you enjoy the huge benefit of seller financing. In a nutshell, you simply send a holiday card and ask your "lender" to take advantage of your one time special offer. Imagine a loan with a monthly payment of $500, this equals $6,000 per year. You offer $5,000 NOW in exchange for no payments next year. Thus, the 10 (payments) for 12 program.. Don't laugh, it works most of the time. Sure, not every seller financed deal will participate, but I PROMISE you nobody will participate if you never ask. TIP 1A, "Hard Money Lenders" as homie says, "don't play that"

TIP 2: GOALS, review them from last year..... did you have goals involving last year. This is short and simple. Super successful People, not just investors, CREATE GOALS... write them down, enter them on a time line on your personal calendar... google calendar is an excellent tool for investors for setting goals....

Short to the point example: Suppose I made a goal to buy 6 properties next year. Doing the math and breaking this huge goal into baby steps... this means I would have to one house every other month... or 1/2 house every month..... take this information and enter it as a reminder on your calendar. Many online calendars are free... AOL, Google. Yahoo, and many others... set it up as a birthday, a task, a reminder and these calendars will send an automatic email to you, and a message to your cell phone. You have boatloads of free tools at your fingertips to keep you motivated, to keep your fuse lit and much more.

NEVER Go To The Bank Again to Buy An Investment Property!

This Video Has Got People Curious...

This video has got people curious...

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*********************************************

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Take care.
Mike Butler

PS - I'm not sure how long this video will be up so make sure you visit it today:
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Rental Application for Tenant (Part 1)

TURNING IN THE APPLICATION: this is a very critical part of the process. Remember, you handed them an application and instructed them in a calm voice to fill out the application completely. If you have an office, make a copy of their valid photo ID. If you are doing this at the house, use a digital camera and photograph the applicant and their valid photo ID. Many people are victims of identity theft and you do not want to get a trash bag posing as a responsible person. When the application is handed back to you, quickly review the top section to make sure you can read their name, date of birth, social security number, and the phone numbers to contact them.

SKIP EVERYTHING ELSE & FLIP IT OVER, MAKE SURE THEY SIGNED IT.
Before parting ways with the applicant, we have encouraged a new aggressive approach to prevent the loss good applicants. In the past, we heard the phrase “beware of the applicant waiving cash, odds are, the cash they are waving under your nose belongs to their current landlord.” All landlords have worked up applications, called the applicant to let them know they are approved only to discover they have already rented another unit

Use My Rental Application now

What is a Short Sale? (The Short Answer)

Question: "Mike, What is a “SHORT SALE?”

ANSWER: This is the simple part. A “Short Sale” is simply a term used by investors, real estate agents, and lenders where a lender agrees to accept an amount less than the total owed by the borrower. PERIOD.

There’s not enough room in this article to cover all the bases; however here are some ground rules and some tips.

• Your Seller MUST be in agreement with it and you must use common sense… The lender usually does NOT want your seller to get a nickel if they are discounting the pay off on their loan. (make sure your purchase and sale agreement or contract states your seller gets zero)

• Many lenders simply “service” loans for other lenders. You might be banging your head against a wall.

• Many loans are “government backed.” FHA, VA, Fannie Mae, and Freddie Mac… if the lender can simply turn it back it and get all or most of their money… what is their motivation to discount it a penny. Don’t waste your time on government backed loans. The lender doesn’t care because they can just cash out after the foreclosure process. (This is exactly how HUD properties are created.)

• Short Sale process is a time eating, slow, painful strategy to acquire investment properties. Do not rely on short sale success to buy your groceries and pay your electric bill.

• MOST of the time, there is a LIST of things to do and documents that must be received by the lender before you can play the Short Sale game. Here’s the frustration. Each lender can make up their own set of rules and procedures.

He who has the CASH makes the rules.

Education is Cheaper than the School of Hard Knocks

ALWAYS use an Expert Real Estate Attorney for Your Closings!

NEVER do Kitchen Table Closings!



Keep Cranking It 24-7!
Mike Butler

http://www.mikebutler.com

Red Flags of Fraud

“Red Flags Of Fraud”
Including The “F” Word!
Mike Butler

News Headline in both newspaper and TV, in Louisville, KY
Home Fraudulently Sold – Twice!
By Jessie Halladay, The Courier-Journal

Couple knew little until arrest of three…..
Here’s the scoop. Back in the late 90’s, money was very loose. If you could breathe, you could borrow money. It didn’t take long for the criminal minds to pounce on this opportunity. While in law enforcement, I was called upon numerous times to assist investigations involving real estate. Believe it or not, in 2001, the Feds were getting ready to just blow the doors off and aggressively pursue investors who were ripping off lenders, homeowners, and consumers. I was invited to participate.

But then WHAMMO, Sept 11 happened and law enforcement was turned upside down and Homeland Security went to the front burner. The dust has settled a bit, as far as law enforcement goes; however, the criminals have never slowed down. There are several recent cases locally in my town where investors, attorneys, mortgage brokers, appraisers, and more have been indicted and charged with ripping off lenders and folks in real estate scams.

PROTECT YOURSELF NOW! Remember this powerful phrase.
Ignorance of the law is NOT a get out of jail free card.

Here’s some simple no-brainer tips and red flags to avoid as a real estate investor.

• NEVER Buy using a Quit Claim Deed
• NEVER do “kitchen table closings.”
• ALWAYS use a “GOOD and REPUTABLE” real estate attorney or title company.
• ALWAYS buy Title Insurance when you are buying an investment property.
• NEVER buy investment property using a land contract for contract for deed
• NEVER try to sell real estate you do not own (Sandwich lease optioning is Russian Roulette for new investors!)

If you are selling a property and you want to sell it real bad…. Be very careful about what you do to help your seller. Many times a loan officer or loan broker will ask a Seller to prepare another form or they may ask you to just sign this form and they’ll say “We Do This All The Time.” If you hear this phrase, you might want to run.

(Remember, ignorance is not a get out of jail free card.)

NEVER buy using a “Contract for Deed, Land Contract, or Agreement for Deed.” Once again, always have a professional full blown closing with a real estate expert attorney or title company.

Some common schemes seen by IRS criminal investigators include:

“Property Flipping” — A buyer pays a low price for property, then resells it quickly for a much higher price. While this may be legal, when it involves false statements to the lender, it is not. (Now do you really want to say you are a “FLIPPER” or you “FLIP” Properties… the new F word.)

Two Sets of Settlement Statements — FOLKS, This is FRAUD!

Fraudulent Qualifications — Real estate agents assist buyers who would not otherwise qualify by fabricating their employment history or credit record.
Happy Hunting and watch out for these Red Flags of Fraud.

Keep Cranking It 24-7!
Mike Butler

http://www.mikebutler.com/ new great audio training on 15 Secrets to Fortunes In Foreclosures!

How To Screen Tenants (Part 3)

Tenant Screening Part 3

Managing tenants effectively builds our wealth and begins with screening tenants properly when they submit an application. Most landlords use applications for a fee. My objective here is to give you a smorgasbord of screening tips allowing you to select items of your choice to work into your system.

Application: first of all, make sure your application is proper and legal and does not violate any fair housing laws or local laws. On the back, include a section with a few lines allowing the applicant a place to write comments. Also include a small section of text briefly detailing your qualifying standards and permission for the landlord to check all sources in evaluating their application for tenancy. Also include a phrase stating an “false or incomplete application” is a reason to be disqualified or not approved. Their signature line is below this small bit of text.

The first section on the application asks for their full real name, date of birth, social security number, and phone numbers to contact the applicant. Ask for several phone numbers – home, work, cell, pager, etc. After attending a class by an enforcement officer of the Equal Housing Commission, I learned to my surprise it is permissible to ask for “date of birth” for identification purposes; although you can not ask the applicant their age -baffling, but true.

Rental History: The next section deals with rental history for the last five years, including addresses, owner / manager contact information, and dates of residency along with reason(s) for moving.

Income: This next section demonstrates the applicant’s ability to afford and pay the rent. Information about their employer, wages, and other source(s) of income are entered here.

Incidental but powerful information section falls below the income section. It includes “What kind of animals do you have?” Do NOT ask “Do you have pets?”. This phrase almost automatically implies the landlord does not accept animals and your applicant will almost always answer this question with a “No”. The first question implies it is okay to have animals.

“What is the name of your attorney?” Having this question on your application is powerful. Many leave it blank (which is great). Those who fill it in quickly might ring a bell with you. It might be one of those attorneys on TV advertising “Help me find somebody to sue”.

How many evictions have been filed on You? It seems like the applicant has trouble reading the question properly. Even when confronted with false information on the application, the Applicant who answered this question ZERO or None will respond “I have never been evicted!”. Fortunately, that is not the question. Read the question again, if you need to. Again, this question puts another bullet in your gun to protect you. Load up on some ammo.

Household composition is the next section. You can not use the word “family” or “children”. Think of those words as lighting fuses to cause you trouble. If you are doing it, STOP IT NOW. Substitute the phrase “How many people are in your household?” If they answer and respond about children and spouses, you are in good shape. They volunteered and offered the information. You did not ask it. Yes, it does seem a play on words; however, the fair housing shoppers (investigators) looking for landlords who violate the federal laws can call and record your phone conversation. Be aware.

Keep Cranking It 24-7!

Mike Butler

Use Mike Butler's Rental Application for your investing business!

Use My Rental Application, Get It Now

Happy Labor Day

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