Investor Business – 1031

Hope you are doing well today!
Occasionally it is great to send out an article related to real estate that explains one of the tax benefits.  In this case it is the investor, who really can be anyone who has a rental property, or is thinking of buying one. 
The 1031 exchange has been used for years to avoid paying taxes on the sale of real estate.  The the article below while brief, does offer a nice summary of this rule.

To your success! 

NEW California Real Estate Fees!

Happy Friday! (this one may require a happy hour!)

The California Senate passed Senate Bill No. 2 (“Building Houses and Jobs Act”) which the Governor signed into law.

Commencing January 1, 2018, the bill will impose a fee, except as provided below, of $75.00 to be paid at the time of recording of every real estate instrument, paper, notice required or permitted by law to be recorded, per each single parcel of real property, not to exceed $225.00 per transaction.

The bill defined “real estate instrument, paper or notice” broadly to include: deeds, grant deed, trustees deed, deed of trust, reconveyance, quit claim deed, assignment of deed of trust, request for notice of default, subordination agreement, notice of default, release or discharge, etc.

The rule exempts: (1) transactions where a documentary transfer tax is imposed as defined in IRC 11911, and (2) any real estate instrument, paper, or notice recorded in connection with a transfer of real property that is a residential dwelling to an owner-occupier.

The rule contains several ambiguities which means that county recorders may interpret application of the rule differently. Some examples are:

** The rule doesn’t define “parcel.” Since the tax imposed is on a per parcel basis, does a piece of land with two APN numbers count as two parcels doubling the tax?

** The rule doesn’t define “transaction.” Since the tax is capped at $225.00 per transaction, if a lender needs to file a satisfaction of a loan that is paid off, is that a new transaction meaning a new tax?

** The rule doesn’t provide clarity on a transfer of real property as referenced in the exemption. Would a quit claim deed to remove a property out of a trust or add/remove a spouse count as a transfer permitting use of the exemption?

Considering the ambiguity in light of the 10% tolerances imposed by TRID, we as an industry foresee a significant cost as it relates to tolerances for recording fee in will provide further guidance as we move closer to January; however, I wanted everyone to be aware of the coming change.

This was from our compliance department this week and I will keep you posted from our end, but you may get additional clarification from CAR, title companies or your broker.

(My opinion, pure and simple: another subterfuge to find more money for out of control Sacramento government spending and “give aways” of hard earned tax-payer money)

All the best,