March 1, 2008

Re: Real Property Issues

Dear Friends, Clients, and Business Associates:

With the real estate recession, I thought it relevant to provide you with a newsletter involving certain changes in statutes and/or law which affect real estate. Hopefully, they are helpful to you. As always, if you have any questions, please feel free to contact my office to set an appointment.

1. In light of the sub-prime mortgage crisis, Congress has authorized certain specific tax relief on mortgage waivers. A mortgage waiver takes place when a lender forgives some, or all of their outstanding debt owed to them and secured by a mortgage or real estate. Under tax law, mortgage waivers are taxed as ordinary income (in other words, if the lender forgives a mortgage loan in the amount of $50,000 the borrower/homeowner is deemed to have earned $50,000 in taxable income). Congress had determined that any mortgage waivers granted between 2007 through, and including 2010 will not be treated as ordinary income if the following conditions apply:

A. The mortgage waiver does not exceed 2-million dollars

B. A mortgage waiver is for a borrowers homestead property rather than a second home or investment property

C. The note and mortgage being discharged must have been used to purchase, construct, or improve the borrowers primary residence; in other words, home equity loans or cash-out refinancing do not qualify unless used to make home improvements.

2. When a taxpayer’s primary home is sold, the taxpayer is permitted to exclude $250,000 of any capital gain for an individual and $500,000 of any capital gain for a married couple. In situations where one spouse has died, Congress has authorized the $500,000.00 exclusion on capital gains to apply for a sale of a primary residence that occurs within two years of the death of the first spouse.

3. For those of you who reside in the Tampa Bay area, you may have read that two (2) title companies have gone out of business (Eagle Title and Gulfside Title). At time the title companies closed, they had allegedly scammed from trust accounts the sum of $7,000.000 and $9,000,000 respectively. As a buyer or seller of real estate, you have the right to choose your title company, and I strongly advise you to investigate the closing agent/title company prior to closing. For more information regarding title insurance, you may visit our website at wollinkatitle.com.

Yours very truly,
David J. Wollinka

DJW/mms