Welcome to David Scillieri, Esq.

1031 Exchange

Many of my Real Estate investor clients utilize a tax benefit known as a 1031 Deferred Exchange. This IRS regulation allows the seller of investment Real Estate ( and other types of investment Real Estate)  to sell the assets, make a profit, but not pay income tax on that profit in that year.

A 1031 Exchange allows an investor to defer the tax obligations incurred during the year of the sale by reinvesting those funds in a like/kind asset.

There are many variations of the 1031 Exchange plans the Real Estate investors can take advantage of .  I work with 1031 Exchange companies that handle all aspects of these transactions completely including all of the necessary reporting to the IRS so that my clients may rest easy that they have complied with the legal requirements to take advantage of these beneficial tax programs.

Bulk Sale Law

New Jersey applies the Bulk Sale Law to Real Estate sales regarding incoming producing property.  There is a lengthy list of specific types of transactions that are included, herein.  The purpose of this law is to make sure that any taxes that are owed or were previously due from an owner of income producing property have been satisfied.

The parties are required to notify the New Jersey Division of Taxation prior to the closing of the impending sale and to provide relevant data regarding the Seller including tax identification number.  The Division of Taxation will thereupon provide to the parties in the transaction an amount which must be held in escrow by the Purchasers Attorney until such time that the Seller resolves all of their outstanding tax obligations.  The Division of Taxation provides an estimated amount because they have not received all of the final tax information from the Seller.

Parties to these types of transaction need to keep the Bulk Sale Law in mind for several reasons.  There is a delay that occurs when waiting for the Division of Taxation to provide the escrow amount of the parties.  Additionally the sum to be held in escrow can be quite large which will affect the closing figures.

The Seller and its accountants can usually resolve the tax issues from the Division of Taxation rather quickly and if any money is owed , it can be paid from the the sum being held in escrow at the time of the closing.

 

Co-signing

Lately, I have been receiving many phone calls from clients regarding problems that have developed because they have co-signed mortgages for family/friends.  A co-signer is equally responsible for the repayment of the loan as is the actual home owner.

It is extremely important to obtain legal advice before agreeing to co-sign a Note or Mortgage to help someone else.  Too often, I have clients contacting me because their credit has been destroyed because they tried to help a friend or family member.

Furthermore, merely removing your name from the ownership of the Real Estate does not resolve the problem because a co-borrower is still responsible for repayment of the loan.  I have many clients coming to my office who have removed themselves from ownership of the asset but are still responsible for repayment of the indebtedness regarding that asset.

Again, any time that you are asked to sign documentation regarding Real Estate, whether it be a Deed, a Mortgage, or other loan type document , it is highly recommended that you speak with a Real Estate Attorney to understand all of the implications involved in executing such documentation.

Document Errors

Lately, I have seen a number of minor document errors create major headaches for my clients.  A simple inversion of 2 digits on a Deed can create hours of work and hundreds of dollars in additional filing fees to correct.  It is important that you make sure that whoever is preparing your legal documents takes the time to review and double check everything carefully.  Additionally, the client should check things over themselves to prevent typos that can create future problems.

While the client is not responsible for the legalese, the client can at least check the spelling of names and proper addresses inserted into the documents as errors are made very commonly, especially once a misstatement gets inserted into a computer.

Criminal Defense

Years ago, I was fortunate enough to handle a Capital Punishment Murder Case.  My client was found Not Guilty.  It was only the second acquittal in the State of New Jersey since they brought back the Death Penalty.

I was very fortunate to have been provided with the necessary time and resources to prepare the defense of my client.

In today’s fast paced internet world, everything needs to be done yesterday. A Lawyer needs to have the proper time and thought process in handling legal matters of all types.  It is especially true in criminal defense work.  The practice of law is not flipping a switch to illuminate the details in any case.  A Lawyers true strength is found in thoughtful review and analysis before taking action.

Therefore, anyone involved with criminal charges would be well advised to spend significant time with your Lawyer.

Tax Appeals

In the State of New Jersey, the filing deadline for Municipal Tax Appeals is April 1.  The date is rapidly approaching.

A property owner can only appeal the Assessment for the subject property set by the Municipality.

You cannot appeal your taxes and you cannot appeal the town tax rate.  You can, however, contest the Assessment by proving that the town is valuing your property too high.  The relevant date of valuation is the prior October 1.  This means that you must prove the value of your property as it was last October 1.  A property owner can bring in a licensed NJ appraiser with a written appraisal report as proof of the value of the property.  The property owner can also utilize recent comparable sales in the neighborhood.

Many recent comparable sales are not permitted if they were foreclosed properties, bank owned properties, or other transactions that are deemed to be arms length transactions.

It is best to hire a Real Estate professional to handle the tax appeal for you so that you did not lose on a technicality. Anyone planning to do so, however, must now act fast as April 1 is approaching.

Residential Leases

It is very important that Landlords’s check their Residential Leases regularly.  Most leases are on a 1 term and automatically become month to month , thereafter.  A Landlord should prepare and submit to each residential Tenant a new Lease each year.  In this fashion, a Landlord can make sure that all the information and rental increases and other Landlord protections are current.

Many towns have rent control laws, wherein, you can only increase the rent annually based upon a limited percentage.  If you fail to do this for several years, you cannot go back and apply those increases retroactively.  By preparing new Leases every year, you can make sure you always get the necessary increases.  Another benefit of updating leases annually is to review and specifically cite the number and names of individuals permitted to reside in the apartment.

Additionally, Residential Leases should set forth that legal fees, late fees, and any other Landlord expenses are deemed as additional rent. This will allow the Landlord to include these amounts in non-payment cases.

Lastly, it is very important for the Landlord’s to keep the Tenant Security Deposit properly deposited.  If a Tenant has not been notified of the proper disposition of their Security Deposit, the Tenant can utilize said sum toward the payment of rent and leave the Landlord without any security deposit.

Updating Wills

I read a very good article today in USA Today’s  personal finance section.  It talked about preparation regarding your Will and your Estate.  The recommended steps are very valid and important to make things much easier for yourself and for your heirs.  The article discussed reviewing your last Will and Testament every five years.  The article discussed simplifying and consolidating your finances so that it is easier later on for those handling those affairs to know where everything is and to be able to deal with your assets in the manner of which you have directed.  Equally important, herein, is how your assets are titled.  (Joint accounts)  pass according to the title of that asset and not accordance with the directions in your Will.

For the above reasons, it is very important to meet with a professional to review all of your financial details while you still have a firm understanding of what you have and want you want to be done with it.

Short Sale Ramifications

New Jersey is still leading the nation in short sales of Real Estate.  This means that a seller is able to sell the home for an amount less that what is still owed to the Lender.

The Lender must provide their approval to do so obviously, because the Lender looses money from their original investment.

Many Sellers need and prefer the short sale option to foreclosure, because it is less damaging to their credit.  However, a short sale must be carefully examined by the Seller and the Sellers Attorney to determine the income tax ramifications of the transaction upon the Seller.  A forgiveness of debt can be considered as income to the Seller.

In such case, the Seller sells the house, (walks away with no money and no mortgage left on the property) , but then the Seller receives a notification in the mail six months later requiring the Seller to pay a large income tax payment based upon the forgiveness of debt.  It is for this reason that a seller in a short sell transaction should retain a knowledgeable Real Estate Attorney to assist them through the process.

Condominium Purchase

When you are purchasing a Condominium unit , it is very important that you carefully analyze the documentation for that development such as the Master Deed, By-laws and most importantly the physical statement and annual budget.

It is important that you see how many of the condominium  unit owners are current with their dues.  Your particular unit may be perfect, but if the association is in trouble, you could be buying into a money pit with their requirement to offset and be responsible for the dues requirements that are in arrears.