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Tax Tips For Our Real Estate Friends…

January 25, 2011

Here are a few tips for our real estate friends (those who are investors, agents and homeowners) re the first time homebuyers credit, Chinese drywall and a recent court ruling!

  • IRS is ramping up efforts to police home buyer credit to stop fraud. It plans to launch 200,000 audits this year of folks who took the credit, shifting personnel from other enforcement areas to handle the load. Remember, first time home buyers must enclose a copy of the settlement statement with Form 5405. Those who are claiming the $6,500 credit for taxpayers who previously owned a home should attach documentation showing they owned a home for five consecutive years out of the last eight…records of property taxes, insurance coverage and the like.
  • There’s mixed news for filers in homes plagued with Chinese drywall: the repair costs qualify as a casualty loss. Those without pending insurance claims can treat all repair cost as a casualty. Depending on the insurance reimbursement they later get, filers may have to report an additional casualty loss or taxable income in that year. To use this relief rule, write “Revenue Procedure 2010-36” at the top of Form 4684. But only itemizers can get relief, since casualties are an itemized deduction. Two offsets also apply: The casualty loss is reduced by $100 ($500 for 2009 losses). The balance is deducible only to the extent it exceeds 10% of adjusted gross income.
  • In a recent tax audit (Hsu, TC Summ. Op. 2010-68). unmarried co-owners of a house can claim the full home-sale exemption. Each can exclude up to $250,000 of the profit if the residence was their main home for two out of the last five years. Prior to, the auditor, had allowed the two 50% owners to exclude only $125,000 apiece, but the Court expressly overruled such a restrictive interpretation of the exclusion.

There you have it, some interesting tax tidbits. GAI ( will continue to blog this information to you as soon as we receive it. Give us a call at 212-979-6830 or stop by for a visit. We are here to help you with all of your financial scenarios. See you soon!

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