Congress OKs Legislation to Extend Closing Date for Homebuyer Credit

July 1st, 2010

On June 30, Congress passed H.R. 5623, the Homebuyer Assistance Improvement Act of 2010. The Act, which is now cleared for the President’s signature, provides first-time homebuyer credit relief to taxpayers who couldn’t meet a key June 30, 2010, closing date.

Under prior law, both the regular Code 36 first-time homebuyer credit of $8,000 and the reduced credit of $6,500 for long-term residents generally expired for homes purchased after Apr. 30, 2010. However, if a written binding contract to purchase a principal residence was entered into before May 1, 2010, the credit could be claimed if the purchase closed before July 1, 2010.

The Act amends Code Sec. 36(h)(2) to provide that if a written binding contract to purchase a principal residence was entered into before May 1, 2010, the credit may be claimed if the purchase is closed before Oct. 1, 2010. Thus, this extension allows homebuyers who signed a contract no later than the April 30th deadline to complete their closing by the end of September.

The three-month extension of the closing date provides tax relief for those who couldn’t close on time because of backlogs at lenders and federal programs involved in homebuyer loans. In the words of the Act’s supporters, the three-month extension “will give time for all the new mortgages to be processed and not punish those homeowners who have been delayed through no fault of their own.”

The cost of the three-month closing reprieve is fully offset with revenue raisers, including these tax changes: expanding the bad check penalty under Code Sec. 6657 to cover electronic payments, effective for instruments tendered after the enactment date; and providing for disclosure of prisoner return information under Code Sec. 6103(k)(10) to state prisons, effective for disclosures after the enactment date.

Source: © 2010 Thomson Reuters/RIA. All rights reserved.

Posted in Home Owners, Tax | No Comments »

2009 Update on Foreign Bank Account Reporting

June 16th, 2010

Did you know that you if you have a foreign account, or signature or other authority over a foreign account you may be required to file a Report of Foreign Bank and Financial Accounts (FBAR)?

Who has to file an FBAR, Report of Foreign Bank and Financial Accounts form number TD F 90-22.1?
Any United States person which includes a citizen or resident of the United States, a domestic partnership, a domestic corporation, and a domestic estate or trust who has a financial interest in or signature authority or other authority over any financial account in a foreign country, if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.
A single-member LLC, which is a disregarded entity for U.S. tax purposes is considered a United States person for FBAR purposes.  The tax rules concerning disregarded entities do not apply with respect to the FBAR reporting requirement.

What constitutes signature or other authority over an account?
A person has signature authority over an account if the person can control the disposition of money or other property in it by delivery of a document containing his or her signature (or his or her signature and that of one or more other persons) to the bank or other person with whom the account is maintained.  Other authority exists if a person who can exercise power that is comparable to signature authority over an account by direct communication to the bank or other person with whom the account is maintained, either orally or by some other means.

When is the FBAR due?
The FBAR is due by June 30 of the year following the year that the account holder meets the $10,000 threshold. The granting, by IRS, of an extension to file Federal income tax returns does not extend the due date for filing an FBAR. Filers cannot request an extension of the FBAR due date, however, persons with signature authority over, but no financial interest in, a foreign financial account for which an FBAR would otherwise have been due on June 30, 2010, will now have until June 30, 2011, to report those foreign financial accounts.

Contact us or visit the IRS website for more information on filing the FBAR.

Posted in Foreign Accounts, Tax | 2 Comments »

Virginia Tax Incentives for Investment Income from Technology and Science Start-ups

June 10th, 2010

The Commonwealth of Virginia has enacted a tax incentive for investment income from technology and science start-ups which exempts from Virginia taxation long-term capital gain and carried interest income from investments in small technology and science start-up companies.  In order to qualify for this exemption a taxpayer must report this income for federal tax purposes in taxable years beginning on or after January 1, 2011 for investments made in small technology or science companies made between April 1, 2010 and June 30, 2013.

For purposes of this exemption, the investment must be made in a company which:

1)      Has annual gross receipts for the most recent fiscal year which are not more than $3 million.

2)      Has its principal office or facility in Virginia.

3)      Is engaged in business primarily in or substantially produces its product in Virginia.

4)      Has not obtained during its existence more than $3 million, in aggregate, equity and debt, not including bank debt, financing.

5)      Is primarily engaged, or is primarily organized to engage in, the fields of advanced computing, advanced materials, advanced manufacturing, agricultural technologies, biotechnology, medical device technology, nanotechnology, or any similar technology related field determined by the Virginia Department of Taxation.

The Virginia Secretary of Technology is also authorized to approve any other business as qualified.

Finally, if a taxpayer has claimed a Virginia qualified equity and subordinated debt investment tax credit in a qualified business, the taxpayer is not eligible for the tax incentive for investment income for technology and science start-ups for the same business.  The Virginia qualified equity and subordinated debt investment tax credit is a credit of up to $50,000.  Eligible taxpayers can claim either the incentive for investment income for technology and science start-ups or the qualified equity and subordinated debt investment tax credit.  Taxpayers should analyze which tax incentive provides the greatest tax benefit based on the facts and circumstances.

If you have any questions regarding the above described tax incentive or the qualified equity and subordinated debt investment tax credit, please call or e-mail Robert Tobey at rtobey (at) kshgs (dot) com.

Posted in State Tax, Tax | No Comments »

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