Brentwood Press - Index

Brentwood Press - OakleyPress_08.22.08 - Index

August 22, 2008 EDUCATION brENTwOODprEss.COm | 7A
Face full of fun
Photo by Richard Wisdom
Excelsior Middle School teacher Joanne turner got a tasty mouthful
– well, actually a faceful – of cream pie during the school’s teacher
pie-throwing contest last week. the Excelsior social, held on
Aug. 15, also included an afternoon of music, games, ice cream and other
edible treats.
I wrote two weeks ago about the Housing
Economic Recovery Act of 2008. The main
purpose of this new law was to help ease our
housing crunch by providing more liquidity to
the lending market and help some homeowners
in bad loans. The jury is out as to how
successful this law will be. Whenever a law
like this hits the books, the question usually
surfaces, “How are we going to pay for this?”
To that end, often you will find in the fine print
where some other pet program or loophole
gets closed.
To that end, there is a very popular tax
strategy that is about to go away. In the past,
investors with large gains in rental properties
would move into the properties (or do a 1031
from a multiple-unit property into a singlefamily
home and then move in after a “reasonable”
amount of time) and claim them as
their principal residence. Then two years later,
they would sell the property and then would
be able to have $250,000 to $500,000 in gain
be tax-free. This would work even if the gain
didn’t happen during the time they lived in the
RENTAL TO RESIDENCE CHANGE
property as their principal residence.
Starting next year, investors that implement
this strategy will have to pro-rate gain
based on the percentage of time the property
was owned as an investment vs. time owned as
a principal residence. I don’t have the space in
this column to get into the finer points, or even
examples, of this change. But what’s important
for you to know is that if you had planned on
using this strategy to lower your capital gains
taxes on selling a rental property by moving
into it, you need to contact your tax professional
ASAP to see how this change may impact
your plans. The difference for an investor could
be in the hundreds of thousands of dollars in
gain moving from non-taxable to taxable, so
this is a MAJOR change. [Please see a tax professional
for specifics to your situation.]
If you have questions on this or any other
real estate topic, call me at (925) 240-MOVE
(6683). To search the MLS for free and view
virtual tours of homes for sale, go to: www.
SharpHomesOnline.com. Sharp Realty
They roll and tumble, run and jump;
yet you’re the one left breathless.
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How to reach higher. How to listen better.
How to tackle challenges with con� dence and a smile.
Call to schedule a free
introductory gymnastics class.
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The Little Gym of Brentwood
www.tlgbrentwoodca.com
925 634-0034
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