How do I have my property rezoned?

It is often advantageous for real estate developers to have properties they purchase rezoned to fit the vision they have for a property. Unfortunately, local governments and citizens do not always share the same vision as the developer. The discrepancies that arise as a result have led the rezoning process to become quite cumbersome, and in some cases, downright painful. There is, however, hope for developers who are willing to reach out to the community and patiently follow the steps required to have their property rezoned.

In Bryan, TX, for example, a developer (or individual) wanting to have their property rezoned must first fill out a “Rezoning Application” and submit it to the Bryan Department of Development Services. The minimum requirements for submission to the department include:

- $300.00 application fee,

- Metes and Bounds description of property, and

- a completed and signed application form.

In the application, the developer is given the opportunity to describe the reasons for their rezoning request, the changing conditions in the area which make the zoning change necessary, whether or not the change is in accordance with the Future Land Use Plan, and any other reasons the developer wishes to include.

Once they have applied for rezoning, it often helps for a developer to reach out to the public. Placing informational ads in local newspapers and/or magazines is a good way to do this. If the rezoning proposal is drastic, one that would affect a large portion of the community, holding an open forum to allow anyone with questions or concerns an opportunity to voice them is often advisable. This demonstrates the developer’s willingness to consider the wishes of the community while providing a venue to clearly present the benefits of the proposed zoning change.

Different local governments have varied requirements regarding public involvement. Some insist that a public forum be held, while others only require that public notice be made. In other areas, no public notice may be required at all. The developer should research the local governing body’s requirements before attempting to have property rezoned.

If you need assistance or advice regarding property rezoning, contact the Texas Real Estate Lawyers at Peterson Law Group.

What is a 1031 Exchange?

A 1031 exchange is a tax planning strategy that allows individuals to defer capital gains taxes. Real estate investors may qualify for this type of exchange when they sell a property and reinvest the proceeds in a “like-kind” property.

This leads to the question of what qualifies as “like-kind” property. The IRS states that “properties are of like-kind, if they are of the same nature or character, even if they differ in grade or quality.” In a 1031 exchange the definition of “like-kind” properties does not apply to livestock of different sexes, or to exchanges of inventory, stocks, bonds, notes, other securities or evidence of indebtedness. One important note: in an exchange of real property it generally does not matter if the properties are improved or unimproved. What does matter, however, is whether or not both properties are located in the United States.

In order to participate in a 1031 exchange, the IRS requires that a qualified intermediary facilitate the exchange. This intermediary will be able to walk an individual through all of the special rules found in the Internal Revenue Code regarding 1031 Tax Free Exchanges.

The attorneys at Peterson Law Group have formed a qualified intermediary called Brazos 1031 Exchange Company. If you have any questions or would like to perform a 1031 Tax Free Exchange, contact them today.

College Station's Draft Comprehensive Plan

The City of College Station has come out with a draft of their Comprehensive Plan. Developers in Bryan/College Station should take a look at the future land use and throughfare plans to see any effects on potential developers. Landowners, especially those in the City's extraterritorial jurisdiction, may want to look at how the future land use plan may affect the sale or development of their property.

College Station's new zero rise floodplain ordinance taking shape

The City of College Station has come out with a draft zero rise floodplain ordinance. It is a pretty significant departure from current city policy. Those interested in real estate development in the City of College Station should attend a stakeholder meeting on April 13th at the College Station Conference Center from 11:30 am to 1:00 pm. Lunch will be served at that meeting.

College Station's Draft Tree Preservation Ordinance

On March 26, 2009, the College Station City Council is going to consider a tree preservation ordinance that has been in the works for some time. This ordinance will affect both developers and homeowners, so it is something that all should be aware of.

The ordinance's purpose is stated as: "The purpose and intent of this Section is to promote the preservation of trees and tree stands during construction to facilitate site design and construction that contributes to the long-term viability of existing trees and to develop a process to control the removal of trees. It is further the purpose of this ordinance to prevent the untimely and indiscriminate removal or destruction of trees, maintain and enhance a positive image of the City and to protect trees and promote the ecological environmental and aesthetic values of the City."

The ordinance will require a tree removal permit before removing trees greater than 8+ inches in diameter or before clearing a site containing such trees. It also has special requirements for "protected trees", a term which is defined in the ordinance. In order to remove these trees, there must be replacement trees planted.

The ordinance is very specific and should be evaluated in detail. If you want a copy of the draft, contact the City of College Station or e-mail us at chris@brazoslawyers.com.

As always, if you have a legal need, contact Peterson Law Group at 979-703-7014 or through our website, BrazosLawyers.com.

2009 First Time Home Buyer Tax Credit

There is a new tax credit available for first time home buyers. The tax credit is $8,000 and does not have to be repaid.

Am I eligible?

To qualify, you must be a buyer who has not owned a principal residence in the 3 years prior to this purchase, and you must be a US citizen who files tax returns.

Does it matter how much money I make?

You can claim the full tax credit if you are single and make less than $75,000 or married and make less than $150,000. You can take a partial credit if you make less than $95,000 as a single person or $170,000 as a couple. The credit is not available if you make more than those amounts.

When do I have to buy a home?

Home purchases made between January 1, 2009 and December 1, 2009 qualify for the tax credit. The transaction must officially "close" during that time period, so don't wait until the last minute.

What types of homes qualify?

All single family homes, townhomes and condominiums qualify as long as you plan to use it as your principal residence (and meet the other requirements above).

How does the credit work?

When you file your tax return, you will apply the tax credit against the amount of income taxes you owe. So, if you owe $10,000, your tax bill will be reduced to $2,000. If you owe $5,000, you will get a tax refund of $3,000. Remember that if you are employed and have been paying withholding from your paycheck or have paid quarterly estimated taxes, you already have tax money stored up with the IRS. This credit is in addition to what you have personally paid.

To find out more information, check out www.federal housingtaxcredit.com.

EPA issues new regulation on lead-based paint

The Environmental Protection Agency has come out with a new lead-based paint rule that will affect the building and remodeling industry. The poress release follows:

"To further protect children from exposure to lead-based paint, EPA is issuing new rules for contractors who renovate or repair housing, child-care facilities or schools built before 1978. Under the new rules, workers must follow lead-safe work practice standards to reduce potential exposure to dangerous levels of lead during renovation and repair activities.

"The "Lead: Renovation, Repair and Painting Program" rule, which will take effect in April 2010, prohibits work practices creating lead hazards. Requirements under the rule include implementing lead-safe work practices and certification and training for paid contractors and maintenance professionals working in pre-1978 housing, child-care facilities and schools. To foster adoption of the new measures, EPA will also conduct an extensive education and outreach campaign to promote awareness of these new requirements.

"The rule covers all rental housing and non-rental homes where children under six and pregnant mothers reside. The new requirements apply to renovation, repair or painting activities where more than six square feet of lead-based paint is disturbed in a room or where 20 square feet of lead-based paint is disturbed on the exterior. The affected contractors include builders, painters, plumbers and electricians. Trained contractors must post warning signs, restrict occupants from work areas, contain work areas to prevent dust and debris from spreading, conduct a thorough cleanup, and verify that cleanup was effective. "

More information: EPA's lead program (http://www.epa.gov/lead)

Texas Vehicle Exemption for Personal Vehicle Used in Business

The following reminder comes from the Texas Association of Realtors:

"Don't ignore April 1 deadline for exempting your vehicle from taxationYou already know you aren't required to pay property tax on your personally owned vehicle that you also use for business purposes. But do you know how your local appraisal district is handling this exemption?
"Each of the 253 appraisal districts in Texas is handling the exemption of these so-called mixed-use vehicles from taxation differently. Some districts don't require an exemption form for such a vehicle if the owner was not charged property tax on that vehicle in 2007. If you haven't previously had to pay property tax on your personally owned vehicle that you use for business, check with your local appraisal district before you make the decision to not file an exemption form. Without filing an exemption form, there is no guarantee that the appraisal district won't tax you. A list of county appraisal districts with each district's contact information is available online. Those districts that require an exemption to be filed must receive your 2007 exemption by April 1; your 2008 exemption is due April 30."

For all of your legal needs, contact us at 979-680-9993 or via our website, BrazosLawyers.com.

Like Kind Exchanges (1031 Exchanges)

The IRS recently came out with a new fact sheet answering some of the most common questions involving like-kind exchanges. The new fact sheet can be found below or by clicking this link.


Like-Kind Exchanges Under IRC Code Section 1031

FS-2008-18, February 2008 WASHINGTON — Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free.
The exchange can include like-kind property exclusively or it can include like-kind property along with cash, liabilities and property that are not like-kind. If you receive cash, relief from debt, or property that is not like-kind, however, you may trigger some taxable gain in the year of the exchange. There can be both deferred and recognized gain in the same transaction when a taxpayer exchanges for like-kind property of lesser value.

This fact sheet, the 21st in the Tax Gap series, provides additional guidance to taxpayers regarding the rules and regulations governing deferred like-kind exchanges.

Who qualifies for the Section 1031 exchange?

Owners of investment and business property may qualify for a Section 1031 deferral. Individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, trusts and any other taxpaying entity may set up an exchange of business or investment properties for business or investment properties under Section 1031.

What are the different structures of a Section 1031 Exchange?

To accomplish a Section 1031 exchange, there must be an exchange of properties. The simplest type of Section 1031 exchange is a simultaneous swap of one property for another.
Deferred exchanges are more complex but allow flexibility. They allow you to dispose of property and subsequently acquire one or more other like-kind replacement properties.
To qualify as a Section 1031 exchange, a deferred exchange must be distinguished from the case of a taxpayer simply selling one property and using the proceeds to purchase another property (which is a taxable transaction). Rather, in a deferred exchange, the disposition of the relinquished property and acquisition of the replacement property must be mutually dependent parts of an integrated transaction constituting an exchange of property. Taxpayers engaging in deferred exchanges generally use exchange facilitators under exchange agreements pursuant to rules provided in the Income Tax Regulations.

A reverse exchange is somewhat more complex than a deferred exchange. It involves the acquisition of replacement property through an exchange accommodation titleholder, with whom it is parked for no more than 180 days. During this parking period the taxpayer disposes of its relinquished property to close the exchange.

What property qualifies for a Like-Kind Exchange?

Both the relinquished property you sell and the replacement property you buy must meet certain requirements.

Both properties must be held for use in a trade or business or for investment. Property used primarily for personal use, like a primary residence or a second home or vacation home, does not qualify for like-kind exchange treatment.

Both properties must be similar enough to qualify as "like-kind." Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate. For example, real property that is improved with a residential rental house is like-kind to vacant land. One exception for real estate is that property within the United States is not like-kind to property outside of the United States. Also, improvements that are conveyed without land are not of like kind to land.

Real property and personal property can both qualify as exchange properties under Section 1031; but real property can never be like-kind to personal property. In personal property exchanges, the rules pertaining to what qualifies as like-kind are more restrictive than the rules pertaining to real property. As an example, cars are not like-kind to trucks.

Finally, certain types of property are specifically excluded from Section 1031 treatment. Section 1031 does not apply to exchanges of:
Inventory or stock in trade
Stocks, bonds, or notes
Other securities or debt
Partnership interests
Certificates of trust

What are the time limits to complete a Section 1031 Deferred Like-Kind Exchange?

While a like-kind exchange does not have to be a simultaneous swap of properties, you must meet two time limits or the entire gain will be taxable. These limits cannot be extended for any circumstance or hardship except in the case of presidentially declared disasters.
The first limit is that you have 45 days from the date you sell the relinquished property to identify potential replacement properties. The identification must be in writing, signed by you and delivered to a person involved in the exchange like the seller of the replacement property or the qualified intermediary. However, notice to your attorney, real estate agent, accountant or similar persons acting as your agent is not sufficient.

Replacement properties must be clearly described in the written identification. In the case of real estate, this means a legal description, street address or distinguishable name. Follow the IRS guidelines for the maximum number and value of properties that can be identified.
The second limit is that the replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier. The replacement property received must be substantially the same as property identified within the 45-day limit described above.

Are there restrictions for deferred and reverse exchanges?

It is important to know that taking control of cash or other proceeds before the exchange is complete may disqualify the entire transaction from like-kind exchange treatment and make ALL gain immediately taxable.

If cash or other proceeds that are not like-kind property are received at the conclusion of the exchange, the transaction will still qualify as a like-kind exchange. Gain may be taxable, but only to the extent of the proceeds that are not like-kind property.

One way to avoid premature receipt of cash or other proceeds is to use a qualified intermediary or other exchange facilitator to hold those proceeds until the exchange is complete.

You can not act as your own facilitator. In addition, your agent (including your real estate agent or broker, investment banker or broker, accountant, attorney, employee or anyone who has worked for you in those capacities within the previous two years) can not act as your facilitator.
Be careful in your selection of a qualified intermediary as there have been recent incidents of intermediaries declaring bankruptcy or otherwise being unable to meet their contractual obligations to the taxpayer. These situations have resulted in taxpayers not meeting the strict timelines set for a deferred or reverse exchange, thereby disqualifying the transaction from Section 1031 deferral of gain. The gain may be taxable in the current year while any losses the taxpayer suffered would be considered under separate code sections.

How do you compute the basis in the new property?

It is critical that you and your tax representative adjust and track basis correctly to comply with Section 1031 regulations.

Gain is deferred, but not forgiven, in a like-kind exchange. You must calculate and keep track of your basis in the new property you acquired in the exchange.

The basis of property acquired in a Section 1031 exchange is the basis of the property given up with some adjustments. This transfer of basis from the relinquished to the replacement property preserves the deferred gain for later recognition. A collateral affect is that the resulting depreciable basis is generally lower than what would otherwise be available if the replacement property were acquired in a taxable transaction.

When the replacement property is ultimately sold (not as part of another exchange), the original deferred gain, plus any additional gain realized since the purchase of the replacement property, is subject to tax.

How do you report Section 1031 Like-Kind Exchanges to the IRS?

You must report an exchange to the IRS on Form 8824, Like-Kind Exchanges and file it with your tax return for the year in which the exchange occurred.
Form 8824 asks for:
Descriptions of the properties exchanged
Dates that properties were identified and transferred
Any relationship between the parties to the exchange
Value of the like-kind and other property received
Gain or loss on sale of other (non-like-kind) property given up
Cash received or paid; liabilities relieved or assumed
Adjusted basis of like-kind property given up; realized gain

If you do not specifically follow the rules for like-kind exchanges, you may be held liable for taxes, penalties, and interest on your transactions.

Beware of schemes

Taxpayers should be wary of individuals promoting improper use of like-kind exchanges. Typically they are not tax professionals. Sales pitches may encourage taxpayers to exchange non-qualifying vacation or second homes. Many promoters of like-kind exchanges refer to them as “tax-free” exchanges not “tax-deferred” exchanges. Taxpayers may also be advised to claim an exchange despite the fact that they have taken possession of cash proceeds from the sale.

Consult a tax professional or refer to IRS publications listed below for additional assistance with IRC Section 1031 Like-Kind Exchanges.
References/Related Topics
Publication 544, Sales and Other Dispositions of Assets
Form 8824, Like-Kind Exchanges (PDF)
Form 4797, Sales of Business Property

For your real estate legal needs, please contact Chris Peterson at 979-680-9993 or on the web at BrazosLawyers.com.

In the News -- Chris Peterson

The Burton Creek TIF (TIRZ #19) was approved by the Bryan City Council in a meeting on June 26, 2007. To read more about the final vote, see the article from the Bryan-College Station Eagle from June 27, 2007. Once again, Chris Peterson represented the developer, Burton Creek Development, Ltd., before the City Council.

If you need help with a real estate project, please contact us at 979-680-9993 or through our website, Brazos Lawyers.com.

In the News: Chris Peterson

Today, the Eagle again featured a story on Chris Peterson and the City of Bryan's Tax Increment Reinvestment Zone #19. Chris is representing Burton Creek Development, Ltd. in its planned development near the Bryan Post Office. For the complete story, click here.

If you have a real estate development project and need legal help, please contact us at 979-680-9993 or through our website, BrazosLawyers.com.

I sold my home for a profit. Do I have to pay taxes on that?

If you sell your home, you may be able to exclude from income any gain (the amount of your profit) up to a limit of $250,000 ($500,000 on a joint return in most cases). To exclude the gain:

1. You must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale.

2. You must not have, within the past 2 years, sold another home at a gain and excluded all or part of that gain.

If you cannot exclude gain, you must include it in income.

To determine the maximum dollar limit you can exclude and for additional information, refer to IRS Publication 523.

Unfortunately, you cannot deduct a loss on the sale of your home.

For any real estate need, please contact Chris Peterson at 979-680-9993 or www.BrazosLawyers.com.

What is the plan for growth and development on the east side of College Station, Texas?

Since we are located in College Station, Texas, we get asked this question a bunch. College Station, which is home to Texas A&M University, is booming. This surge in jobs, residents and development has led to a myriad of traffic problems not previously seen here. However, there has been a plan proposed by a traffic consultant hired by the City. The plan extensively changes traffic patterns in east College Station, and will lay the groundwork for future subdivision and retail development in that area of town. The report can be found by clicking here.

If you are planning to develop land in College Station, please contact us if we can be of assistance. Our website is BrazosLawyers.com.

Can I collect a real estate commission?

In Texas, only a licensed real estate agent or a licensed attorney can collect a real estate commission. Chapter 1101 of the Texas Occupations Code specifies as follows:


§ 1101.806. LIABILITY FOR PAYMENT OF COMPENSATION OR COMMISSION.
SUBTITLE A. PROFESSIONS RELATED TO REAL ESTATE

SUBCHAPTER Q. GENERAL PROVISIONS RELATING TO LIABILITY ISSUES

(b) A person may not maintain an action to collect compensation for an act as a broker or salesperson that is performed in this state unless the person alleges and proves that the person was:

(1) a license holder at the time the act was commenced; or

(2) an attorney licensed in any state.

To find out more about becoming a licensed real estate agent, check out the Occupations Code, Chapter 1101 or the Texas Real Estate Commission website.

To find out more about Peterson & Swearingen, click here.

How do I get my homestead exemption on my new home?

Certain types of property will qualify for an extra Texas property tax rebate called the homestead exemption. Basically, the homestead exemption allows you to pay less in taxes on your home than you would normally be entitled. For example, if your home was worth $100,000 and the tax rate was 2%, you would pay $2,000 in property taxes ($100,000 x 2% = $2,000). However, if the hoemstead exemption was $50,000, you would only pay $1,000 in property taxes ($100,000 - $50,000 = $50,000 x 2% = $1,000).

To make sure that you get this reduction, go to your county appraisal district office and fill out a homestead exemption application. There may also be other exemptions for which you may qualify that could also reduce your Texas property tax bill.

As always, please feel free to contact us through our website, BrazosLawyers.com, if we can be of assistance.

Practical real estate advice

While looking for some ideas on future blog entries, I came across this excellent, starightforward blog entry from a real estate agent in Sugarland, Texas. Click here for the full article. It contains the true facts for 5 of the most popular homeownership myths. One of particular interest is about how transferring real estate into an adult child's name may actually end up costing the child more than simply going through the probate process.

How can I obtain a credit report?

You can contact one the 3 major credit reporting agencies. Their contact information is below:


Equifax – www.equifax.com
P.O. Box 740241
Atlanta, GA 30374-0241
Telephone: 1-800-685-1111


Experian - www.experian.com
P.O. Box 949
Allen, TX 75013-0949
Telephone: 1-800-397-3742


TransUnion – www.tuc.com
P.O. Box 1000
Chester, PA 19022
Telephone: 1-800-916-8800

In the News -- Chris Peterson

Chris Peterson, a partner in Peterson & Swearingen, LLC, recently won a bench trial in Burleson County, Texas involving a real estate dispute. Judge Reva Corbett awarded our clients damages for brecah of contract in the amount of $57,693.30. The Judge also awarded $32,750.00 in damages for violations of Section 5.077 of the Texas Property Code. We also recovered $22,000.00 in attorney's fees spent in pursuing the case.

Congratulations to our clients, Jesse & Sonja Turner for their victory.