Real Estate Transaction Tax Rumors

The National Association of Realtors has some tax advice for users of the Internet: Don't believe everything you read.

There has been a recent flare-up of chain wails purporting that, come Jan. 1, all real estate transactions will be subject to a 3.8% federal sales tax. The problem: That's not true. "This is grossly inaccurate," said Stephanie Singer, a spokeswoman for the Washington-based Realtors association. "It's not a sales tax on all properties."

The basis for the rumors is the new 3.8% Medicare tax on unearned income, which will take effect next year (Sec. 1411). That provision provides the rumors with a kernel of truth: A very small number of taxpayers will pay a surtax on gain from the sale of a principal residence. The new tax will only apply to single taxpayers with a modified adjusted gross income (MAGI) in excess of $200,000 and married taxpayers with a MAGI in excess of $250,000 if filing a joint return, or $125,000 if filing a separate return. Those taxpayers will pay the tax on gain from sale of a principal residence, but only on the amount of gain that exceeds the thresholds in Sec. 121 ($250,000 for single taxpayers; $500,000 for joint returns).

False rumors about a wider-reaching real-estate tax began to find their way to inboxes in 2010, when Congress passed sweeping health care reform legislation (the Patient Protection and Affordable Care Act, P.L. 111-148, and the Health Care and Education Reconciliation Act of 2010, P.L. 111-152)—the same legislation opponents have dubbed "Obamacare"—which was the genesis of the Medicare tax.

Since June, when the U.S. Supreme Court upheld the legislation, there has been another spike in email-rumor activity, said Singer, who noted that the Realtor association does not have a position on the legislation.

As a result of the rumors, tax practitioners have been getting questions from concerned clients. The first thing for practitioners to convey to clients is that the "real estate sales tax"—at least, the version described in some emails—is largely a hoax. Practitioners should then be prepared to explain the facts:

• The new tax would only apply to single taxpayers with a modified adjusted gross income (MAGI) in excess of $200,000 and married taxpayers with a MAGI in excess of $250,000 if filing a joint return, or $125,000 if filing a separate return.
• The tax is equal to 3.8% of the lesser of the taxpayers' "net investment income" or the amount by which their MAGI exceeds the threshold amount.
• Under Sec. 1411(c)(1)(iii), net gain attributable to the disposition of property (other than property held in an active trade or business) is subject to this tax. That means taxable gain on the sale of a personal residence in excess of the Sec. 121 exclusion amount would be included. Sec. 121 provides that taxpayers may exclude up to $250,000 ($500,000 for joint returns) from the gain on the sale or exchange of a principal residence provided they meet certain ownership and use requirements.
• Only taxpayers with MAGI over $200,000 (or $250,000 if married filing jointly) who sell their principal residence and realize more than $250,000 in gain ($500,000 if married filing jointly) will be subject to the 3.8% tax and only on the amount of gain they realize over the Sec. 121 threshold (and on their other net investment income).

Example: A married couple with MAGI of $325,000 purchased a home in California many years ago for $350,000 and sold it this year for $900,000, realizing a gain of $550,000. After excluding $500,000 gain under Sec. 121, they are left with $50,000 investment income (assume they have no other investment income). Since their AGI is $75,000 over the tax's threshold amount for married taxpayers filing jointly, the lesser amount of $50,000 would be subject to taxation. At 3.8% they would owe $1,900.

New Oregon Pre-license Exams

The Oregon Real Estate Agency has not changed the course material or final exam questions since 2002. Effective January 1, 2013 there will be an entirely new set of questions included in the state's final exams. Since current pre-license courses contain questions appearing in over 90% of the state exams, the first time pass rate for new applicants will drop dramatically after the first of the year. We highly encourage anyone wanting to obtain any real estate license to complete their course studies and take the state exams no later than December 31, 2012.

Reactivate your Oregon Real Estate License!

Is your Oregon real estate license inactive and would you like to get back into the business? The market is changing and now is a good time to again partipate in your career. The Oregon Real Estate Agency requirements for reactivation can be fulfilled by completing a new course from Superior Training Systems, Inc. It is continuing education course 3043 Broker Reactivation, which includes everything you need to qualify for the state reactivation. It also contains the Law and Rule Required Course (LARRC) material. This 30 hour course is available from either Superior Schools www.a1schools.co or Career Academy www.a1careers.co for only $99.00.

This is interesting?

It sounds like he has done some research into this and feels strongly enough to make a rather professional presentation of it.

Copy Paste this URL and check it out.

http://youtu.be/P4pZ0zJdfAY

Watch your LARRC "dates"!

If you have a Broker license renewal coming up soon and you have taken a Law and Rule Required Course (LARRC) prior to 2012 you have satisfied the OREA requirement. However, if you have NOT taken a LARRC course prior to January 1, 2012, you MUST take one that includes the new 2012- 2013 material. This is very important to satisfy the new license renewal requirements. If there is any doubt check with your school to verify the course content.

Considering a website? Here are some samples.

Came across this and thought it could be helpful for those wanting to create their own website. It is a large collection of real estate websites considered to be "the best".

http://www.smashingmagazine.com/2009/04/23/30-beautiful-real-estate-websites/

"Fast Track" your Oregon real estate license hours

The goal of the Superior Training Systems’ (STS) Oregon real estate pre-license course is to offer the student as much of a “condensed” course as possible. One that gives them everything they need to know to pass the Oregon real estate exam with the least amount of effort and time consumed.

The Association of Real Estate License Law officials (ARELLO) determines if a real estate course meets the hour requirements set by the Oregon Real Estate Agency. ARELLO, as most regulatory agencies, recognize an “instructional hour” as 50 minutes. So a 3 "hour” course should take the average student 150 minutes rather than 180 to complete. Using this 50 minute criteria, STS has revised their Oregon real estate pre-license course to reflect this "condensed" time standard from ARELLO.

This is an exciting change that students have been wanting for quite some time. They now have a method to “fast track” towards their goal of preparing for their state exam.

If you would like to take advantage of this "condensed" course, you can contact Superior Schools in Bend, Careers Real Estate School in Eugene, Appraisal and Real Estate School of Oregon in Medford or ask your principal broker if they are participating in the Superior Training Systems (superior@peak.org) affiliate program.