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More Money for Millionaires?

12/21/2011

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I received this as an email from a great accountant, Fred
Muehlmeyer CPA
, and even though it does directly have anything to do with financing, I thought it would be good to pass the information to you.  Please contact your legislators and tell them what you think about this.
 
"Last  year's federal budget deficit topped $1.48 trillion. With money so tight, you'd expect government to focus its efforts on those who really need the help. But that's far from the case, according to Oklahoma Senator Tom Coburn. Last month, he released a 37-page report entitled Subsidies of the Rich and Famous, outlining "sheer Washington stupidity" that he claims costs taxpayers billions of dollars every year. 
 
The first part of Coburn's report focuses on direct payments like Social Security and Medicare benefits, unemployment benefits, and farm subsidies. (NBA star
Scottie Pippen, rocker Bruce Springsteen, and billionaire broadcaster Ted Turner have all gotten federal farm subsidies.) But Coburn also heaps his scorn on specific tax breaks that he calls a "reverse Robin Hood style of wealth distribution." He claims he's not interested in raising rates on anyone. And he cautions against demonizing "those who are successful." But he does want to means-test benefits, close loopholes, and limit deductions that pamper millionaires with "unnecessary welfare to create an appearance everyone is benefiting from federal programs." 

What sort of tax breaks have Senator Coburn so upset? Here are three: 

"Subsidizing Millionaires' Mansions":
For 2009, 143,441 out of the 235,413 taxpayers reporting incomes over $1 million claimed mortgage interest deductions, averaging $30,995 each. 

Rental Expense Deduction:
69,074 of those million-dollar earners claimed a total of $12.5 billion in rental property expenses, including mortgage interest, cleaning and maintenance, and depreciation. 

Gambling Losses Deduction:
Finally, 8,225 of the top earners reported a total of $4.2 billion in gambling losses. 
 
Coburn's points seem reasonable at first glance. Does Oprah Winfrey really "need" a tax break for her $50 million California mansion? Should Vegas high-rollers count on us to bail them out when the dice come up snake eyes? On closer look, however, his objections may not hold up. The mortgage interest deduction, for example, is already limited to interest on $1 million of "acquisition indebtedness" on a primary residence and one additional residence, plus $100,000 of home equity
indebtedness. Coburn would ditch the deductions for second homes and home equity  interest, and drop the overall cap to $500,000 of indebtedness. But critics respond that over 11% of American homes are valued over $500,000, and limiting the deduction would cut home prices off at the knees at a time when they need all the support they can get. 

Coburn's objections to deducting rental real estate expenses and even gambling losses seem to make less sense. Paying tax on gross rents and gambling winnings? Rental real estate losses are already limited by "passive activity" rules. If millionaires can't deduct their rental real estate expenses, they won't invest in real estate at all. That would drag prices down in the same way as limiting mortgage interest deductions. And gambling losses are deductible only to the extent of gambling winnings. Is it fair to tax anyone, millionaire or not, on gross winnings without letting them net out losses? 

As the economy continues to struggle, Washington gridlock intensifies -- just look at the bickering over the payroll tax cut extension, which both parties say they want. And the 2012 presidential election draws near, we can expect to hear more rhetoric like Coburn's. What do you think? Do tax breaks for millionaires offend your sense of fairness? Or should millionaires get to take
advantage of the same rules as the rest of us?"

Thanks for the information, Fred.   
Fred  Muehlmeyer CPA


Proactive Tax Planner

8232 Louisiana Blvd NE   Ste B
Albuquerque, NM  87113

505-855-9195 office
505-228-4726 cell 

www.muehlmeyerpc.com
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Commercial Lending Crystal Ball for 2012?

12/19/2011

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Year 2012 will see a continuation of improving lending conditions if commercial real estate values stabilize and borrowers find stable footing in the markets.  Owner-occupied properties, multifamily and stabilized, cash-flowing investment real estate will be the favored property categories.  Development and construction will still be industry laggards.  Private lending for business and real estate deals has blossomed in the past year as investors flee from the stock market looking for more sensible, safe, dividend-type investment vehicles.  No longer does private money always equate to near usurious interest rates and multiple point originations.

Industry experts expect Small Business Administration (SBA) lending to be active in 2012, particularly SBA 504. “I see a rush of SBA 504 refinances prior to the program’s scheduled end in September 2012. But I also wonder if the program will be extended or made permanent, a move that would make sense to me. On the other hand, the U.S. government does not seem capable of passing any legislation that makes sense, so I am not holding my breath,” says Michael D. Sneden, Executive Vice President at ValueXpress.

Government-sponsored multifamily programs (Fannie Mae, Freddie Mac and HUD) will continue to dominate the multifamily sector.  CMBS conduit loans will creep back into the lending forefront for multifamily properties that are ineligible for government-backed originations. Both of these options will provide excellent debt capital flux into the multifamily sector overall.  In addition, small-balance portfolio loan programs exist in the multifamily arena, making this property type a continued favorite of mine for smaller RE investors.

Commercial Mortgage-Backed Security (CMBS) conduit programs, which virtually disappeared a couple years ago as the secondary market dries up, should increase for 2012. But don't expect them to increase by leaps and bounds. "The CMBS market as a whole generated about $30 billion in CMBS loans in 2011 [a fraction of the 2005 - 2008 hay day], will grow to about $50 billion in 2012 [still a fracture of the peak volumes],” say Sneden.

In summary, although we saw some traction in commercial lending in 2011 compared to 2009 and 2010, the progress was slow.  I credit this progress much less to sane lenders' origination policies and more to credit-worthy borrowers coming out from under the woodwork.    So in 2011, the commercial lending market  improved for stabilized, income-producing and owner-occupied real estate, albeit very slowly.  In 2012, we would expect to see more loan originations as additional lending sources open up and existing lenders bring more sanity into their lending practices.
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Small Business Adminstration Debenture Rates Posted for 504 Loans

12/16/2011

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The SBA has posted their interest rates for 504 Loan program for December 2011.

Loan Rates are:
Real   Estate:    20 YEAR 4.95%
Refinance Rate: 20 YEAR  5.153% 

Amoung other things, the key eligibility criteria: 
The business must occupy at least 51% of the building. 
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