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August, 2008 - Newsletter for the Maui Market
Aloha! Here is your eNewsletter for the Maui Market from Jim Foster
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Make sure you check out the Useful Internet Sites and Real Estate Tips at the end of this newsletter which includes some valuable information.
Don't forget! We provide a free Automatic E-mail Notification Service that goes out to recipients whenever a new listing becomes available for a particular condominium complex. Each of these notifications includes a link to view the details of the brand new listing in the MLS. We DO NOT SHARE YOUR EMAIL ADDRESS or your contact information with anyone. To subscribe to our Automatic E-mail Notification Service, please send Won an email at Won@JamesBFoster.com with your first and last name, your email address, and the condominium property you wish to be notified of.
Another service we provide is the Condominium Real Estate Market eUpdates which is sent out periodically to inform potential buyers and owners of specific condominium properties about the real estate market activities at those properties. This service is provided exclusively for those who own a condominium property or who are interested in a particular condominium complex on West Maui. If you would like to subscribe to the Condominium Real Estate Market eUpdates for a particular complex or to get a list of all condominium properties that are included in the eUpdates, email Won at Won@JamesBFoster.com.
Maui Real Estate - When you are tired of hearing the gloomy economic and financial forecasts remember, Maui is a coveted place and many buyers are interested in owning real estate here. Many of those retiring or planning in advance of retirement would like to own on Maui. Maui real estate is great value because it is on Maul. I have been licensed and selling real estate since 1972 and have experienced many real estate market fluctuations. The real estate market will recover but it may take 18 to 24 months for a complete turn around and shake out. Plan and take advantage of the many opportunities and stay positive. “Turbulent Times – America’s Crisis of Confidence” an interview of Tony Robbins by Matt Lauer on the Morning Today Show go to this site and listen - http://www.msnbc.msn.com/id/21134540/vp/25715596#25715596
If you would like to view the Paul Brewbaker Hawaii Economic Forecast for July, 2008 enter this site http://yourwebcast.com/ram/brewbaker08.htm into your browser search window. Paul Brewbaker is the Chief Economist from the Bank of Hawaii and this was the presention to the Realtors Association of Maui on July 18, 2008.
To view the 2007 & 2008 Year End Statistics go to www.JamesBFoster.com and click on the tab Condo Sales then scroll down to Maui MLS Statistics 2007 & 2008 and click to open the ADOBE pdf.
The West Maui real estate market continues to favor Buyers with Sellers willing to negotiate their prices. The current inventory of West Maui condominiums for sale is now at 703 and the same date in 2006 it was 393. Properties are requiring more time to sell such as five to six months and Buyers have a much larger inventory of properties for sale to choose from. If you’re curious about current trends in Maui real estate and where the market is headed, the answer is - it depends on Location - it depends on if it is condominium or single-family residential - it depends on whether you look at volume, average or median prices. In the current Maui real estate market the for sale inventory continues to increase and prices are typically flat or have decreased.
Condominiums for Sale - In the West Maui real estate market, at the beginning of January, 2007 - 410 condominiums with the total value of $372,238,031.00; February, 2007 - 431 condominiums with the total value of $393,681,669.00; March, 2007 - 458 condominiums with the total value of $420,941,268.00; April, 2007 - 479 condominiums with the total value of $429,708,159.00; May, 2007 - 472 condominiums with the total value of $424,095,260.00; June, 2007 - 455 condominiums with the total value of $415,187,129.00; July, 2007 - 475 condominiums with the total value of $432,797,008.00; August, 2007 - 469 condominiums with the total value of $420,479,301.00; September, 2007 - 474 condominiums with the total value of $430,914,408.00; October, 2007 there were 471 condominiums with the total value of $423,631,002.00; November, 2007 there were 466 condominiums with the total value of $416,008,907.00; December, 2007 there were 485 condominiums with the total value of $421,080,117.00; January, 2008 there were 511 condominiums with the total value of $445,656,447.00; February, 2008 there were 559 condominiums with the total value of $500,946,603.00; March, 2008 there were 595 condominiums with the total value of $529,779,322.00; April, 2008 there were 647 condominiums with the total value of $606,635,687.00; May, 2008 there were 634 condominiums with the total value of $583,391,821.00; June, 2008 there were 644 condominiums with the total value of $590,736,279.00; July, 2008 there were 680 condominiums with the total value of $662,919,268.00; and at the beginning of August, 2008 there are 703 condominiums for sale in the West Maui area with the total value of $693,069,348.00. The condominium for sale inventory since July, 2005 has been as low as 165 and is up to 703 for August 1, 2008. The “for sale” inventory on West Maui continues to increase.
Condominium Sales in 2006 - The total condominium sales for West Maui during the month of January, 2006 there were 42 sales and the total value was $28,574,643.00; for February, 2006 there were 48 sales and the total value was $32,995,078.00; for March, 2006 there were 40 sales and the total value was $32,199,584.00; for April, 2006 there were 43 sales and the total value was $41,898,525.00; for May, 2006 there were 51 sales and the total value was $39,644,886.00; for June, 2006 there were 40 sales and the total value was $32,533,500.00; for July, 2006 there were 30 sales and total value was $26,212,000.00; for August, 2006 there were 28 sales and the total value was $31,885,500.00; for September, 2006 there were 30 sales and the total value was $24,770,000.00; for October, 2006 there were 29 sales and the total value was $23,359,299.00; for November, 2006 there were 22 sales and the total value was $13,414,600.00; and for December, 2006 there were 30 sales and the total value was $23,169,999.00. For 2006, the monthly average sales were 36 sales per month with the average sales value of $29,221,468.00 per month.
Condominium Sales in 2007 - The total condominium sales for West Maui during the month of January, 2007 there were 37 sales and the total value was $33,091,000.00; for February, 2007 there were 26 sales and the total value was $16,330,000.00; for March, 2007 there were 32 sales and the total value was $24,121,000.00; for April, 2007 there were 27 sales and the total value was $16,766,000.00; for May, 2007 there were 28 sales and the total value was $30,774,929.00; for June, 2007 there were 28 sales and the total value was $18,917,000.00; for July, 2007 there were 21 sales and the total value was $13,314,200.00; for August, 2007 there were 32 sales and the total value was $33,258,999.00; for September, 2007 there were 23 sales and the total value was $24,701,900.00; for October, 2007 there were 42 sales and the total value was $28,159,900.00, however this included a packaged sale of 19 units at Aina Nalu in Lahaina; for November, 2007 there were 15 sales and the total value was $15,930,000.00; and for December, 2007 there were 13 sales and the total value was $13,335,500.00. For 2007, the Month of December has seen the lowest number of sales in 2007. The monthly average sales were 27 sales per month with the average sales value of $22,391,702.33 per month.
Condominium Sales in 2008 - The total condominium sales for West Maui during the month of January, 2008 there were 20 sales and the total value was $16,186,800.00; for February, 2008 there were 20 sales and the total value was $14,414,584.00; for March, 2008 there were 26 sales and the total value was $20,079,000.00; for April 2008 there were 26 sales and the total value was $19,435,500.00; for May 2008 there were 21 sales and the total value was $19,790,000; for June 2008 there were 14 sales and the total value was $11,957,000; and for July 2008 there were 10 sales and the total value was $6,955,999. The average monthly sales were slightly less than 20 sales per month with the average sales value of $15,545,544.71 per month.
The total condominium sales for August, 2005 was 52; September, 2005 - 58; October, 2005 - 38; November, 2005 - 48; December, 2005 - 47; January, 2006 - 42; February, 2006 - 48; March, 2006 - 40; April, 2006 - 43; May, 2006 - 51; June, 2006 - 40; July, 2006 - 30; August, 2006 - 28; September, 2006 - 30; October, 2006 - 29; November, 2006 - 20; December, 2006 - 30; January, 2007 - 37; February, 2007 - 26; March, 2007 - 32; April, 2007 - 27; May, 2007 - 28; June, 2007 - 28; July, 2007 - 21; August, 2007 - 32; September, 2007 - 23; October, 2007 - 42; November, 2007 - 15; December, 2007 - 13; January, 2008 - 20; February, 2008 - 20; March, 2008 - 26; April, 2008 - 26, May, 2008 - 21, June, 2008 - 14, and July, 2008 was 10.
We have gone in to the Maui MLS database and pulled information for 2000 through 2007. In 2000 - 654 condominium units sold in the West Maui area for a total value of $209,064,010; in 2001 - 605 condominium units sold for a total value of $271,681,337; in 2002 - 730 condominiums sold for a total value of $240,178,915; in 2003 - 737 condominiums sold for a total value of $319,748,466; In 2004 - 700 condominiums sold for a total value of $375,033,467; in 2005 - 682 condominiums for a total value of $408,582,315; in 2006 - 435 condominiums for a total value of $351,782,614; in 2007 - 327 condominiums for a total value of $271,290,428.00. In 2008, from 1/1/08 to 8/1/08 - 140 condominium units sold in the West Maui area for a total value of $110,134,883.00.
For previous condo sale details, go to our web site, http://www.jamesbfoster.com/condosales.php then scroll down to your choice and click to open the ADOBE pdf. For the time period of 1/1/2008 to 6/30/2008 the average price for a home on Maui was $888,108 which is down 9% for the time period of 1/1/07 to 6/30/07 when the average price was $992,191. For the same time period the average price for a Fee Simple condo on Maui was $998,568 which is up 29% for the same time period when the average price was $773,944 according to the RAM (Realtor Assoc. of Maui) statistics. Condo sales in Wailea, Makena, Kapalua and Kaanapali are having an impact on the Fee Simple Condo average price by increasing it.
Mortgage Rates for week of August 1, 2008 - from First Hawaiian Mortgage - Rates: Houses & Condos Full docs: 6% 30yr fixed 2.0 pts (6.282 APR) 6.25% 30yr fixed 1 pt (6.437 APR) 6.5% 30yr fixed No Points (6.591 APR) Stated Income: 7.125% 30yr fixed 1.0 pt (7.323 APR) 6.625% 15yr fixed 1.0 pt (6.938 APR) Interest Only: 6.625% 30yr fixed 1.0 pt (6.8 APR) 7% 30yr fixed No points (7.094 APR) To $1M: 7.25% 30yr fixed No Points (7.338 APR) $$ for condotels.(Points include origination fee)
Mortgage Rates for week of July 7, 2008 - from First Hawaiian Mortgage - Rates: Houses & Condos Full docs: 6% 30yr fixed 2.0 pts (6.282 APR) 6.25% 30yr fixed .625 pt (6.401 APR) 6.375% 30yr fixed No Points (6.467 APR) Stated Income: 7.125% 30yr fixed 1.0 pt (7.323 APR) 6.5% 15yr fixed 1.0 pt (6.814 APR) Interest Only: 6.625% 30yr fixed 1.0 pt (6.8 APR) 6.875% 30yr fixed No points (6.961 APR) $$ for condotels. (Points include origination fee)
Mortgage Rates for week of June 2, 2008 - from First Hawaiian Mortgage - Rates: Houses & Condos Full docs: 5.625% 30yr fixed 2.0 pts (5.899 APR) 5.875% 30yr fixed 1.0 pt (6.058 APR) 6.125% 30yr fixed No Points (6.214 APR) Stated Income: 6.875% 30yr fixed 1.0 pt (7.069 APR) 6.25% 15yr fixed 1.0 pt (6.559 APR) Interest Only: 6.75% 30yr fixed 1.0 pt (6.943 APR) To $1M: 6.375% 30yr fixed No Points (6.466 APR) $$ for condotels. (Points include origination fee)
If you would like to view the most current sales statistics for Maui or West Maui Condominiums, you can go to my web site www.JamesBFoster.com and click on Condo Sales in the upper left corner of the home page or go to www.JamesBFoster.com/condosales.php.
Some recent and past news about what is going on in Maui & Hawaii
Weather - As I am writing this newsletter today, August 3, 2008, it is about 88 degrees and beautiful, sunny weather. The next ten days we are expecting winds a little higher than average and possibly some rainfall but the weather is great.
Santa Fe Cantina - A new restaurant in Lahaina that is getting excellent reviews and is also open for breakfast, with hours from 8 AM to Midnight. Authentic southwestern cuisine. The web site is www.santafecantina.com
The Melting Pot For Cheese Lovers - Located at the brand new Lahaina Gateway Center across from Lahaina Cannery Mall, this spacious, elegant eatery features private booths for every occasion: family booths and large party booths for wedding showers, birthdays and meetings. There is also a Bar Fondue Lounge and even Intimate Signature Lover’s Lane booths with the utmost privacy. There is no chef as you are the chef. The server prepares and seasons your selected cheese at the table burner, then continues to be an integral part of your dining experience. The salad course offers a choice of four salads, and our Spinach and Mushroom Salad and California Salad were crispy, chilled and OH so fresh! For main entrees, choose from steak, chicken and seafood accompanied by four Cooking Style Selections – your choice of Fondue. There are ten delicious entrees to choose from and great deserts. A beautifully crafted wine room with glass enclosure is on display at the entrance and features over 100 different bottles. The Melting Pot of Gold opens for Dinner nightly at 5 p.m. For reservations, call 661-6181.
New Method Tested For Removal of Smelly Algae On Maui Beaches – A new device referred to as the "super sucker" that could help rid Maui beaches of invasive, smelly algae. The device sucks up decomposing algae, allowing it to be removed for composting. Basically it's like a giant vacuum cleaner that sucks up the algae right out of the water. The testing is being conducted by the county, University of Hawaii Botany Department, state Department of Health and Department of Land and Natural Resources is part of a feasibility study to determine if the county will use the technology to clean up beaches on a large scale.
Haleakala National Park Cabin lottery Has Ended - The lottery system used for years to select cabin users in the crater will end starting with September. Now all reservations for the wilderness cabins will be taken over the phone up to three months ahead of the reservation, on a first-come, first-reserved basis. Calls for reservations will only be accepted between 1 and 3 p.m. HST daily at 572-4400. The park maintains three cabins in the crater: Holua along the Halemauu Trail, Kapalaoa along the south wall and Paliku on the east end of the crater. Cabin fees are $75 per night, with the typical group staying two to three nights at a time. Each cabin can house a party of as many as 12 people. For more information visit the Haleakala National Park Web site at nps.gov/hale.
Transient Vacation Rental (TVR) A Hot Topic On Maui - The Maui County Council Planning Committee on Tuesday may have resolved three nagging issues that have swirled around the transient vacation rental and bed-and-breakfast controversy for some time. The committee found common ground on a provision from Mayor Charmaine Tavares' administration that will broaden the definition of B&Bs to allow a property owner with two homes on a single lot to live in one house and rent out the other to vacationers. The committee also approved B&Bs in rural districts, but dismissed a proposal to allow them in agricultural districts. Earlier this year a package of bills was produced, meant to streamline the B&B permitting process and for the first time allow B&Bs in rural and agricultural districts. The discussions in committee continued to focus on where B&Bs would be permitted. The most controversial bill would allow TVRs only in a business zone or the resort districts of Kapalua, Kaanapali, Wailea and Makena. The proposal would eliminate the existing conditional-use permit process for TVRs outside a resort district. TVRs are short-term vacation rentals where the owner is not present on the property. With a bed and breakfast, the owner lives in the house used for a short-term rental.
Critical Election Time For The West Maui Senate Seat - Sen. Rosalyn H. Baker is facing two challengers for her Fifth District seat: fellow Democrat Bart C. Mulvihill and Republican Janice M. Shields. Visit the Hawaii Office of Elections at for the full list of candidates and election news. http://hawaii.gov/elections/candidates This is one of the most crucial elections in years if we are going to get a new hospital in South Kihei and West Maui.
No Taste of Lahaina on 2008 – A slowing economy has forced a cancellation of the annual Taste of Lahaina and Best of Island Music event this September but organizers hope economic conditions will allow a revival in 2009. The organization will still host the "Maui Chefs Present" event on Sept. 5. That will be held at The Ritz-Carlton, Kapalua.
Maui Loses Seabury Hall founder, Roger Madden Melrose - Melrose, 84, of Kealakekua, Hawaii, died June 26, 2008, at his residence. Seabury Hall began with 51 students and a building that had been converted from a five-car garage, on an estate that had been donated to the Episcopal Church. Roger Melrose was born Nov. 23, 1923, in Seattle. He was a World War II Navy veteran and received a honorary doctorate of divinity from his seminary, the Church Divinity School of the Pacific, for establishing Seabury Hall. Roger Melrose remained at Seabury Hall until he retired in 1987.
Local Motion Lahaina Surf Classic Makes Come Back - Consistent early summer south shore waves this year came the return of the Local Motion Lahaina Surf Classic at Lahaina Harbor. The event began in 1991 at the historic West Side port and gained a reputation as a first-class event with quality waves, good prizes, and smooth organization for wave riders of all ages. The contest took a four-year hiatus, creating a void for the competition from Hana to Honolua. Mother Nature cooperated with glassy three-foot waves for the June 21 contest, which was held for the 12th time at the doorstep of the historic Pioneer Inn. More than 100 contestants were treated to a full day of the surfing and camaraderie that make Hawaii – and Lahaina – so unique.
Lahaina Town Denied a Halloween Permit - The Maui County Cultural Resources Commission denied permits for the Lahaina Town Action Committee to conduct a Halloween program, including a costume contest. But it can't prevent Halloween from taking place, and Maui police said they will prepare for a crowd, organized or not.
Lahaina is designated a state and national historic district, and members of the Cultural Resources Commission concluded Thursday that the annual 30,000-person costume party does nothing to promote the town's Hawaiian cultural history. The commission voted 6-0 against requests for permits to set up food, activity and craft booths as well as erect stages by the Lahaina Town Action Committee. The commission did approve a permit for the afternoon keiki costume parade held by Soroptimist International of West Maui. As Halloween falls on a Friday this year the police anticipate the crowd could be larger than last year. Police still plan to close a portion of Front Street to traffic during the night and to have additional officers working to monitor the crowds. Lahaina Police believe there still are going to be a lot of people coming into town, despite not having an organized event. Halloween has not been cancelled.
Maui Land & Pineapple To Lay Off Hundreds - The energy and real estate woes throw a wrench into restructuring plan for ML&P. It is cutting its work force by 274 positions in a reorganization under pressure of higher costs and lower revenues. The company has been facing challenges in all three divisions: Maui Pineapple Co., Kapalua Resort and community development and expects that Maui Pine will return to profitability next year. The drastic cuts, representing a quarter of its current work force, are the latest in a long line. In 2003, the company restructured Maui Pine and announced that by the pineapple operations would be cut from 1,100 to about 500. That was before oil prices and a slowing economy - which affects tourism - slammed the company. Tourism is down, and the trend will continue for the remainder of the year. The Neighbor Islands, and especially Maui, which benefited from relying on Mainland tourism when the national economy was booming, are now feeling the opposite effect. Over half of Maui's tourists come from California, hard hit by the housing crisis. This catches Kapalua at a bad time, when it is trying to reacquaint the high spenders with its refurbished hotel and golf courses and take advance reservations for as-yet unbuilt resort real estate.
Medical Facilities on Maui - The Association for Improved Healthcare on Maui (AIHM) http://www.aihm-maui.org whose mission is to serve as an advocate for the creation of a system that will provide improved healthcare services to all of the citizens and visitors of Maui County has been making some excellent progress. For more information on making a contribution to this great cause, please visit the web site for AIHM at www.aihm-maui.org/ourfriends.htm. To stay informed of what is transpiring with future approvals of either the Kihei or West Maui hospital, you can send me an email and request a subscription to the “Coconut Wireless” to either my email at Jim@JameBFoster.com or Jan@SunshineRainbows.com
Jan Shields - Running for Office - http://www.JanShields4Senate.com Go to this web site to read more
Real Estate & Financial Planning Tips:
Depreciation Recapture Issues in a 1031 Exchange
Depreciation - You are required to deduct or write-off a certain percentage of the cost of the structures and/or improvements on your real property held for rental, investment or use in your business as depreciation expense each year. The depreciation deduction recognizes the decrease in the value of the property caused by wear, tear and usage.
Investment real estate is depreciable when it is placed in service; not when acquired.
To qualify for depreciation deductions, your tangible or intangible property must
be used in your business; be income-producing, or held as investment property;
be property in which you have a capital investment; have a determinable useful life;
have an expected life of more than twelve (12) months; and not be excepted property.
Property held for personal use, such as a home, second home, vacation home, or automobile, cannot be depreciated since it is not held for investment. Inventory held primarily for sale, including real estate investments, cannot be depreciated.
You can depreciate most types of tangible property (except land), such as buildings, machinery, vehicles, furniture, and equipment. You can also depreciate certain intangible property, such as patents, copyrights, and computer software.
Depreciation Recapture - You may be required to "recapture" the depreciation deducted by you on your real estate investment property upon the disposition (sale) of the investment property. This means that you may have to recapture or add back into your taxable income the amount of depreciation taken on your investment property when you dispose of (sell) your investment property, unless you take advantage of any number of tax-deferred or tax-exclusion strategies available to you. Depreciation allowed or allowable, whether deducted or not, must be included in the depreciation recapture income tax computation upon the disposition (sale) of your real estate investment.
Income Tax Rates – Typically, you will find yourself subject to the maximum Federal capital gain income tax rate of 15%. However, you may not know that depreciation recapture is taxed for Federal income tax purposes at a substantially higher flat rate of 25%. You may be subject to state or local income taxes as well. Real estate that has been held and depreciated over an extended period of time may be subject to significant depreciation recapture income tax liabilities and may be a big reason you decide to participate in a 1031 exchange.
Section 1250 Property (Depreciable Real Property) - Generally, real estate investment property, as defined under Section 150 of the IRC, must be depreciated for income tax purposes. The depreciation method used depends on a number of factors including when the investment property was placed into service, the type of investment property, and the depreciation methods allowed under applicable tax laws and regulations at the time the investment property was placed into service. A more complex set of rules comes into play when the asset sold is depreciable real estate. This is so because, in that case, a maximum rate of 25% will apply to what's called un-recaptured section 1250 gain and a maximum rate of 15% will apply to the balance of the gain. “Un-recaptured section 1250 gain” refers to the portion of gain that is eligible for capital gain treatment even though it is attributable to previously allowable depreciation. A further complication is that the portion of the gain that is un-recaptured section 1250 gain depends, as shown below, on when the property was placed in service.
Property placed in service after 1986. For real estate placed in service after 1986, all depreciation deductions allowable before the sale of the real estate give rise to un-recaptured section 1250 gain. Thus, if you sell, at a gain of $200,000, a building on which $90,000 of depreciation deductions were allowable to you through the time of sale, $90,000 of the gain is un-recaptured section 1250 gain that will be taxed at a rate of 25%. The remaining $110,000 of the gain will be taxed at a rate of 15%. Property placed in service before 1987 and after 1980. For real estate placed in service before 1987, but after 1980 (pre-1987 realty), the treatment of gain on sale depends on whether the real estate is residential or nonresidential.
Residential Real Estate - If you depreciated residential pre-1987 realty using just straight line depreciation, the tax results if you sell it will be the same as for a sale of post-1986 property, as described above. But if (as was possible) you, at any time, used a declining balance method to depreciate the real estate, the gain on sale would be taxed as follows: Gain, to the to the extent of the depreciation claimed that exceeds what would have been allowable under straight-line depreciation, will be recaptured as ordinary income, and, thus, taxed at rates as high as 35% in 2003 and later years (“ordinary income rates”) (but the amount of excess depreciation subject to recapture may be less for certain low-income housing). Gain, to the extent of the depreciation that isn't recaptured as ordinary income, will be taxed at a rate of 25% and the balance of the gain will be taxed at a rate of 15%.
Non-Residential Real Estate - As is the case for residential pre-1987 realty, if you depreciated nonresidential pre-1987 realty using just straight-line depreciation, the tax results if you sell it will be the same as for a sale of post-1986 property, as described above. But if, as was possible, you, at any time, used a declining balance method to depreciate the realty, the gain on sale would be taxed as follows: gain, to the extent of the full amount of depreciation allowable to the time of sale, would be recaptured as ordinary income, and, thus, taxed at ordinary income rates;
the balance of the gain would be taxed at a rate of 15%.
Exchange for Non-Depreciable Property - When depreciable section 1250 property is exchanged for non-depreciable real property, such as raw land, then excess depreciation and 1250 un-recaptured gain is recaptured and is taxable at the time of the exchange, even though no taxable boot is received in the exchange. This is a tax trap that few taxpayers are aware of.
Increased IRS scrutiny of partnership "drop & swaps" have had an effect on real estate. Do you know how and when to dissolve a partnership so partners can go their separate ways in a §1031 Exchange?
Some substantial recent rulings on "related party" exchanges have impacted real estate transactions between related parties. Do you know how to buy from or sell to a related party and avoid the pitfalls?
A recent revenue procedure allows IRC §121(primary residence capital gain exclusion) and IRC §1031 to be combined to maximize a seller's tax advantages.
Do you know how to combine these tax codes maximize your tax advantages?
A recent IRS revenue procedure establishes guidelines for how vacation properties and second homes can qualify for §1031 treatment. Do you know these guidelines to ensure that your clients’ vacation properties or second homes qualify?
Hawaii Real Property Tax Law (HARPTA) was enacted to provide a means for the state to collect capital gains taxes from absentee owners. There are exemptions from HARPTA http://www.harpta.com
Withholding of the 5% HARPTA is not required for a disposition of Hawaii real property if the transferor (seller) furnishes to the transferee (buyer) a certification (Form N-289) that establishes: 1. The transferor is a resident person; 2.By reason of a non-recognition provision of the Internal Revenue Code that the transferor is not required to recognize gain or loss with respect to the transfer; or 3. For the year preceding the date of the transfer, the property has been used by the transferor as a principal residence and the amount realized for the property does not exceed $300,000. Form N-289 Certification for Exemption from the Withholding of Tax on the Disposition of Hawaii Real Property. This is one of the forms signed by the seller as part of the escrow process if the seller qualifies for one of the three exemptions listed above. If the seller is doing a 1031 exchange, they qualify under #2 above for an exemption from the withholding. Form N-288B Application for Withholding Certificate for Dispositions by Nonresident Persons of Hawaii Real Property Interest. This form is filed to receive a waiver from all or part of the HARPTA withholding. It must be completed and submitted to the State of Hawaii with the waiver approved by the State of Hawaii prior to the close of escrow. You then provide this certificate to escrow.
File this waiver if either of the following applies: 1.The transferor/seller will not realize any gain with respect to the transfer; 2.There will be insufficient proceeds to pay the withholding required after all costs, including selling expenses and the amount of any mortgage or lien secured by the property. You cannot file form N-288B after the date of transfer. Also, even if you qualify for the waiver, you are still required to file an income tax return whether or not you derive a taxable gain.
Installment-Sale in lieu of a tax deferred exchange - Sell the property over time and receive your money over the next several years. In an installment sale, you pay federal income taxes as you receive the payments from the installment contract buyer.
Legal Services on Maui - If you need to establish a trust for your Maui property, set up a Limited Liability Company, or need legal assistance for preparing legal documents and require a Maui or Lahaina attorney, Gary Robert has had a legal practice here for many years and is a good source for those requiring legal related services. He can be reached by phone at 808-667-7741, address is 808 Wainee St., Suite 201, Lahaina, HI, 96761 Fax is 808-667-7550 and Email grlaw@hawaiiantel.net
We receive calls on a regular basis and provide letters of Market Value at the time of death to assist in the Probate process for owners of Hawaii real estate. It is always unfortunate when estate planning has not been done and the tax liability has to be dealt with in a short period of time.
Take the time to review with your current financial plans and also estate plans with your advisors. If you do not have trusted advisors ask friends and business associates for recommendations because in the long run it may be the best investment you will make.
In past newsletters, I have mentioned that the easiest way to minimize the tax impact when selling is to do a tax deferred exchange. If you have questions about tax deferred exchanges give us a call. If you are considering selling your property in Hawaii, a tax deferred exchange will exempt you from the 5% HARPTA withholding and also the Federal Capital Gains Tax. Planning in advance for the disposition or acquisition of assets is always a wise decision. Another invaluable tool for sellers in doing a tax deferred exchange is having the option of using tenant-in-common (TICs) for qualifying for replacement properties. Many property owners who currently own underperforming assets can sell those assets, taking advantage of tax deferred exchanges, and turn an underperforming asset such as land into an income producing asset. Call me or send me an email if you would like additional information at 808-661-7994 or email Jim@JamesBFoster.com
If you are contemplating selling highly appreciated real estate during 2008 and would like for us to provide an analysis of how to best structure your transaction, please call us at 1-888-661-7994 or send us and email at Jim@JamesBFoster.com
Useful Internet Sites:
www.coolest-gadgets.com This is a web site for Gadget lovers with news and review of the latest gadgets and technology. Start your Christmas Shopping early or just visit for fun.
www.pickensplan.com A an excellent location to review and participate in pushing Congress and the White House to finalize a national energy policy. T Boone Pickens Plan has some real world solutions. Get Involved!!!
www.google.com/goog411 Now you can obtain phone and address information free from your regular phone or cell phone by dialing 1-800-GOOG-411 (1-800-466-4411). Once connected you can receive details or be connected. Google's new 411 service is free, fast and easy to use. Give it a try now and see how simple it is to find and connect with local businesses for free.
www.download.com Go to this web site location or copy and paste in to your browser http://www.download.com/One-Click-App-Killer/3000-2094_4-10654166.html
If the program you’re working with freezes up and keeps you from using anything else on your computer without doing a "hard" shut down, this can kill your frozen programs with one click. When you double-click on this program's icon, a target-like cursor shows up and then click anywhere on the frozen program and it closes down
www.worldwidetelescope.org/experienceIt/ExperienceIt.aspx Would you like to view some of the spectacular things Scientists at NASA see in the universe. Would you like to view what they see through a super high powered telescope on your computer and see the Earth from the same perspective that astronauts view on their way back to Earth? You can download the program at this site, compliments of Microsoft research.
http://www.retailmenot.com For great discounts when buying products or services online this web site makes it easy to get a promotion code for your item by simply entering the store’s web address. Once there press the "Get Coupons" button and you will be presented with any coupons available for that store. During the payment process most online stores will have a field to enter a coupon or promotion code. Entering a special code located here will give you a discounted rate or free extras.
https://www.mywonderfullife.com In addition to estate planning this site (keep your sense of humor) this helps with those final arrangements so your loved ones will not have to deal with it. A series of forms and checklists that make it easy to avoid overlooking any of the myriad of details in these preparations. You can prepare your obituary, upload photos, track wills, bank accounts, insurance policies, write letters to loved ones and make decisions regarding all of the many and often minute details your loved ones might struggle with without your guidance.
Kindest Regards, Jim Foster
Chase 'N Rainbows Real Estate, Inc.
Toll Free 888-661-7994
Direct Line 808-661-7994
Cell 808-870-5858
Fax 808-667-2957
Real Estate for Sale www.JamesBFoster.com
Vacation Rental www.ChaseNRainbows.com
Email Jim@JamesBFoster.com
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