Small
Business Tax Bill Finally Approved
The Congress on September 23 give final
approval to a small business bill (H.R. 5297)
that includes $12 billion in tax cuts for small
businesses and a new $30 billion lending fund
to aid credit availability for small firms. The
White House said President Obama will sign the
bill into law Sept. 27.
The legislation includes a one-year extension of the 50 percent bonus depreciation
(Pub. L. No. 111-5), an increase in tax code Section 179 expensing limitations
up to $500,000, and an increase in the phase-out threshold amount to $2 million
for 2010 and 2011.
Key tax provisions in the legislation include:
• extension of the 50 percent bonus depreciation provision created in the
American Recovery and Reinvestment Act through 2010,
• an increase in the Section 179 expensing limitations up to $500,000 and
an increase in the phase-out threshold amount to $2 million for 2010 and 2011,
• allowing business owners to deduct the cost of health insurance for the
purpose of computing 2010 self-employment taxes,
• allowing general business credits of small businesses to be carried back
for five years. These credits will not be subject to the alternative minimum
tax,
• a 100 percent exclusion for capital gains from the sale of certain small
business stock,
• removal of cellular telephones from listed property under tax code Section
280F, and
• an increase in the allowable deduction for startup business expenses.
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What
Is a Tax Lien Sale?
A tax lien sale is a sale through which the county
government tries to recoup unpaid property taxes
by selling tax lien certificates. When you buy
tax lien certificates, you will assume the responsibility
for recovering the unpaid taxes. The property
owner will have to repay everything he or she
owes to you. If the property owner fails to repay
the property taxes, you have a right to initiate
foreclosure proceedings against the property.
If the proceedings are successful, you will be
able either to keep the property or sell it to
the highest bidder. While buying tax lien certificates
can wind up a great investment, it can also backfire
on you, so be cautious.
Buying a Tax Lien
When a property owner fails to pay his or her
property taxes, the county government has a right
to put the tax obligations up for sale. They
are sold at an open auction that is held every
year. If you are interested in buying a foreclosure
certificate, all you have to do is come in and
buy the certificate. Be sure to bring plenty
of cash--in most counties, you can't buy a tax
lien certificate any other way.
In most cases, you will be able to get whatever
certificate you want by paying the original price.
However, if another investor wants the same certificate,
you will have to make a bid. Whoever wins the
bid will get the certificate. Different states
have different methods to determine what you
need to do in order to win a bid.
They include
the following:
• Bid
down the interest--Under this method,
the county government gives a starting interest
rate. Investors can either accept it or agree
to a lower interest rate. Whoever agrees to the
lowest interest rate wins the auction.
• Premium -This
method is similar to what you expect at an auction. The country government
sets the sale price, and investors offer to pay
more. Whoever agrees to pay the highest amount
wins the auction.
• Random
selection -
Under this method, the winning bidder is chosen at random either by
a computer or by hand. This method is often used
when other methods don't produce a clear winner.
• Rotational
selection -
Under this method, the bidders are given numbers. When their numbers
are called out, they get a chance to buy one
of the randomly selected certificates. If they
pass, the person with the next highest number
gets the choice. This can continue until the
auctioneers go through all investors.
• Bid
down the ownership -
Under this method, the investor agrees to take only part of the
lien. For example, you can choose to get only
80 percent of the lien, and your certificate
will be worth 80 percent of its value. Whoever
agrees to the lowest percentage wins.
Holding a Tax Lien Certificate
Once you buy a certificate, the property owner
has to pay all of the taxes he or she owes, plus
interest set by the county government. The property
owner has to pay it off by the end of the period
set by the county government. Thanks to the interest
charges, the total payments will be greater than
what you paid for it, allowing you to earn profit.
If the property owner doesn't pay off the property
taxes in time, you have a right, as stated above,
to initiate foreclosure proceedings. You will
need to be able to prove that the property owner
failed to make the payments. If the judge accepts
your evidence, you will be get the ownership
of the property. At this point, you can either
hold on to the property or try to sell it, earning
even more profit.
The problem with this is that when you buy the
certificates, you don't have much information
about the property save for a cursory description.
And since you have to buy the certificates at
the auction, you have no time to verify this
information. As the result, you may wind up with
property that either isn't worth much money or
has so many problems that you will need to spend
far more money than it's worth to bring it to
a state of good repair.
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