Daily Real Estate News March 24, 2008

How to Help the Kids Buy First Home

Helping the kids buy a first home is a time-honored tradition that has become even more significant as home prices rise and incomes flatten.

Here are three ways parents can help their children:

• Cash. For parents with the means, cash is clean and easy. An individual can give $12,000 a year to a recipient without having to pay a tax on the gift. Therefore, a couple could give an adult child and the child's spouse a total of $48,000 in one year. To keep things simple, the gift is best given well in advance of the mortgage application.

• Cosigning or otherwise jointly investing in the property. This can work for parents of more limited means or those who want to be paid back. The biggest risk is that the offspring will be unable to meet their obligations and it will affect the parent’s credit rating.

• Knowledge and hard work are worth gold. Parents who can’t afford to help financially may be able to provide experience and even some sweat equity to help the kids make a smart housing choice.
  

Source: Market Watch (03/21/08)


David Labrecque
Exclusive Buyer Agent
http://www.fletcher-realty.com/

IRS Releases Vacation Home Ruling

The Internal Revenue Service recently issued a Revenue Procedure ruling that spells out how vacation properties can qualify for 1031 exchanges, which involve the exchange of investment properties.

The guidance aims to clear up the debate about whether vacation homes are investment or personal use properties. The ruling states that the property must be held by the taxpayer for 24 months. The holding period is broken into 12-month blocks, and during each the property must be rented at the fair market rate for no less than 14 days.

Additionally, the owner can use the property for 14 days or 10 percent of the days rented, whichever is greater, plus a "reasonable" number of days devoted to maintenance tasks. Because it is a safe harbor ruling, experts say failing to comply with all the rules does not mean the exchange will be denied or an audit will automatically occur.

However, they underscore the importance of keeping good records of the property's rental history and the dates the property was occupied by the owner for maintenance.

Source: Realty Times, Gary Gorman (03/06/08)


David Labrecque
Exclusive Buyer Agent
http://www.fletcher-realty.com