P h i l l i p H . L a nd e
A B R , A S P , C D PE , C R S
4 S A L E B Y D IVO RC E Divorce & Real Estate June 2016
The Importance of Basis
DID YOU KNOW FREE Credit Reports Many times, divorcing clients will provide their attorneys with a list of their existing debt, however, the safest way to make sure no debt is overlooked, it is advisable to obtain independent credit reports for both divorcing parties. In 2003, Congress passed the Fair and Accurate Credit Transaction Act as a way to address identity theft. FACTA is an addendum to the Fair Credit Report Act. Under the FACTA, consumers have the right to request one free copy of their credit report from all three bureaus: Experian, Equifax and TransUnion.
With the real estate market continuing to improve and divorcing clients selling their marital home, it may be an important time to review the importance of Basis in selling real estate. The basis of the property is usually the cost. The cost is the amount paid in cash, debt obligations, other property, or services as well as significant property improvements made to the property. Often times overlooked for inclusion of the basis is any ‘special assessments’ paid by owners who are selling condominiums, townhomes, etc. In addition to the cost of the property, certain other fees and expenses become part of your cost basis as well.
Real Estate Taxes. If you pay real estate taxes the seller owed on the real property purchased and the seller did not reimburse you, treat those taxes as part of your basis, not property taxes paid. If you reimburse the seller for taxes the seller paid for you, you can usually deduct that amount as an expense in the year of the purchase. Do not include this amount in the basis of the property. If the seller is not reimbursed, this amount must be reduced from the basis.
Settlement Costs: Your basis includes the settlement fees and closing costs for buying the property. You cannot include in your basis the fees and costs for getting a loan on the property. A fee for buying property is a cost that must be paid even if the property was purchased with cash. Settlement costs do not include amounts placed in escrow for the future payments of items such as taxes and insurance.
Congress also created a website where consumers can order all three reports in one place: www.annualcreditreport.com Tip: Advise clients to maybe pull one bureau every 3-4 months as a way to monitor their credit for free on a constant basis.
Phillip H. Lande RE/MAX Legends Group/ Atlas Group Direct: 317.863.2356 plande@atlasrealty.com www.remax-atlasgroup.com