Trump administration considering tax break on capital gains

WASHINGTON — The Trump administration is studying the idea of implementing a big tax break for wealthy Americans by reducing the taxes levied on capital gains, but no decision has been made yet on whether to proceed.

Administration officials said Tuesday that Treasury Secretary Steven Mnuchin prefers deferring to Congress. But he does have his department studying the economic impact of such a change and the legality of proceeding without congressional approval.

The change would involve taxing capital gains — profits on investments such as stocks or real estate — after taking into account inflation, which would lower the tax bite. Capital gains taxes are currently determined by subtracting the original price of an asset from the price at which it was sold and taxing the difference without adjusting for inflation.

For example, a stock purchased in 1990 for $100,000 and sold today for $300,000 would produce a $200,000 capital gain. That amount, taxed at the top capital gains rate of 23.8 percent, would result in a tax bill of $47,600. However, if the $200,000 gain was trimmed to just $103,000 by adjusting for inflation over the past 28 years, the tax bill would be $24,514.

“There has been a great deal of interest in this provision for a long time,” said a White House official who spoke on condition of anonymity to discuss internal policy deliberations. “Treasury is currently evaluating the economic impact and whether it can be achieved without legislation.”

Indexing capital gains for inflation would reduce federal revenue by about $102 billion over a decade, according to the Penn-Wharton Budget Model. The Congressional Research Service has estimated that about 90 percent of the benefits would go to the top 1 percent of households.

The New York Times and the Washington Post reported Tuesday that the proposal was under active consideration by the administration. It has long been supported by Larry Kudlow, head of the president’s National Economic Council. Mnuchin, however, has signaled caution in approaching the idea.

Republicans, led by House Ways and Means Committee Chairman Kevin Brady, are leading an effort to extend and expand the $1.5 trillion tax cut President Donald Trump pushed through Congress last December. But GOP lawmakers had mixed views on whether the administration could lower capital gains taxes without the approval of Congress.

“I think they would need Congress to do that,” Senate Finance Committee Chairman Orrin Hatch, R-Utah, told reporters.

Sen. Susan Collins, R-Maine, a key vote on tax issues, also panned the idea.

“We just passed a major tax relief bill,” Collins said in an interview. “I don’t think this, or any other administration, has the legal authority to make that kind of change in our tax law.”

But other Republicans welcomed the chance for further tax cuts.

Sen. Pat Toomey, R-Penn., a chief proponent of lower taxes, said such the move would free up investment and “would be very good for the economy.”

Cutting capital gains taxes was one of the few items on Republicans’ wish list that didn’t make it into their tax legislation last year.

Mnuchin said in an interview with The New York times that if the capital gains change “can’t get done through a legislative process, we will look at what tools at Treasury we have to do it on our own and we’ll consider that.” But he emphasized that he has not yet concluded that Treasury has the authority to act alone.

“We are studying that internally, and we are also studying the economic costs and the impact on growth,” Mnuchin told the Times.

Democrats, however, vowed to oppose the change to how capital gains are taxed.

“Once again, Republicans have exposed the true priorities of their tax scam: billions in tax breaks for the wealthiest at the expense of everyone else,” House Democratic Leader Nancy Pelosi said in a statement. “American families are drowning under the weight of stagnant wages, higher health costs and soaring prescription drug costs, but the GOP continues to pick their pockets to give more handouts to the wealthiest 1 percent.”

In an interview in June with The Wall Street Journal, Mnuchin declined to speculate on whether Treasury has the legal authority to make the capital gains change on its own.

Democrats in the Senate have urged Mnuchin not to take the step, saying Treasury does not have the authority. They pointed to legal opinions written by the Justice and Treasury departments in 1992 finding that Congress intended the word “cost” to mean the price paid in nominal dollars — without adjusting for inflation.

Treasury acting on its own “would almost exclusively benefit the wealthiest Americans, add $100 billion to the ballooning deficit, further complicate the tax code and ignore the need for congressional” approval, Sen. Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee, and other Democratic panel members said in a letter to Mnuchin in May.

“The $100 billion price tag is a conservative estimate because it does not consider the abundant tax-sheltering opportunities that would arise,” the Democrats wrote. “Further, the proposal would fail American workers, investment and the larger U.S. economy.”

Smart Homes: The Way of the Future or a Risk to Homeowners?

By Liz Dominguez

Smart Homes: The Way of the Future or a Risk to Homeowners?

Glitches of early iterations aside, AI-based technology has come a long way, and has an increasingly active presence in the lives of homeowners who are looking for convenience and savings in a pushed-for-time era. From adaptive thermostats that automatically gauge energy usage and alter temperatures for optimal savings, to smart home speakers that use sophisticated artificial intelligence to provide services and information in real-time, a smart homeowner can now cross off a variety of menial tasks from their daily to-do list without doing more than speaking a phrase out loud or clicking a button on their mobile device.

What is the true cost of this convenience? Some gadget adopters are reporting invasion of privacy, security risks, and more. For those who have not yet invested in smart home technology, these factors are largely holding them back; in fact, it is the second-biggest reason for hesitation for 17 percent of non-users, behind price (42 percent), according to a recently released report by PricewaterhouseCoopers (PwC), “Smart Home, Seamless Life: Unlocking a Culture of Convenience.” In addition, 56 percent of surveyed individuals stated they would choose encryption to protect their data when creating their own smart home.

What are these misuses of technology that could lead to privacy or security risks? These are a few of the reported instances thus far:

  1. Gadgets May Be Susceptible to Hacking
    Last August, Wired published a story about a British security researcher for MWR Labs, Mark Barnes, who was able to install malware on an Amazon Echo device, turning it into a surveillance device that silently streamed audio to his own server. While newer models cannot be jailbroken this way, Amazon has not released any software to fix the issue with older units.

For the typical owner, this may not seem like a significant violation; however, this could lead to another type of home theft in which fraudsters break into homes looking to steal identifying information via smart home gadgets, leaving little to no evidence of their break-in behind. While Barnes installed code for the specific purpose of audio streaming, he clarified that the installation of malware could serve other uses, such as stealing access to a homeowner’s Amazon account, installing ransomware or attacking parts of the network.

  1. Smart Technology Could Lead to Location-Based Tracking
    Earlier this month, security investigator Brian Krebs reported on a privacy vulnerability for both Google Home and Chromecast—found by Craig Young, a researcher with security firm Tripwire—that leaks accurate location information about its users.

According to Young, attackers can use these Google devices to send a link (which could be anything from a tweet to an advertisement) to the connected user; if the link is clicked and the page left opened for about a minute, the attacker is able to obtain a location.

“The difference between this and a basic IP geolocation is the level of precision,” Young said in the article. “For example, if I geo-locate my IP address right now, I get a location that is roughly two miles from my current location at work. For my home internet connection, the IP geo-location is only accurate to about three miles. With my attack demo, however, I’ve been consistently getting locations within about 10 meters [32 feet] of the device.”

Google initially told Young they would not be fixing the problem; however, after going to the press about the issue, Young reports that Google will be releasing an update in mid-July to address the privacy leak for both devices.

  1. Glitches Could Lead to Invasion of Privacy
    According to local news stations in Portland, Ore., a resident (reportedly named Danielle) received a disturbing phone call from one of her husband’s employers telling her to shut off her smart home devices. After using Amazon devices throughout her home to control temperature, lighting and security, Danielle was made aware that a private conversation was accidentally recorded by Amazon’s artificial intelligence system, Alexa, and was sent to a number on the family’s contact list.

Amazon has since reported that the Echo speaker picked up words in Danielle’s background conversations that it interpreted as “wake words” for recording and sending audio to a contact; however, an article published by website The Information last July states that Amazon was considering obtaining recorded conversations and sending transcripts to developers so they can build more responsive software, making it unclear if these devices automatically record audio without waiting for “wake words.”

These Vulnerabilities Could Impact Real Estate
Smart homes are increasing across the country. According to Statista, a statistics website, the estimated value of the North American smart home market will be $27 billion by 2021.

Of course, the vulnerabilities that have cropped up for some users could have an impact on the selling process. For example, some sellers have already begun using their security systems as a way to listen in on prospective buyers or watch them as they visit the listed home, regardless of whether local laws prohibit these recording practices.

Additionally, if homeowners have devices such as Google Home or Amazon Echo, but do not have security cameras, how can they be sure that visiting buyers are not accessing sensitive information through these speakers? While agents always play a role in adding a measure of security by being present during showings, fraudulent activity that is internet-based only, such as obtaining online data through links, will be difficult to identify.

Before Your New Love Moves In


Before Your New Love Moves In

When love goes wrong, real estate owners may have a lot to lose.

Don’t take solo-ownership lightly no matter how you ended up owning your own condominium unit, house, or recreational property.

Inviting a new love to move in is much more complicated than asking someone to share a rental apartment or to lease a recreational property together. All the compatibility issues faced by two virtual strangers learning to live together apply in both ownership and rental situations. The difference is that the financial and legal ramifications of co-habitation can be more disruptive, expensive, and long-lasting where real estate ownership is involved.

Please search elsewhere for advice on selecting the ideal mate, when to hand out a key or key-code, or how to overcome daily challenges as you learn to live together. Here we focus on protecting your ownership advantage however the relationship ends up.

That’s not heartless. That’s heart-felt concern that real estate ownership offers benefits and security that are not easily recovered when lost to emotional, thoughtless, manipulative, or out-right fraudulent pressure from those we are attracted to.

What do you value most about real estate ownership?

  • The most obvious value lies in a proven, secure investment which will appreciate in value and that you can also live in or rent out to earn income. [bullet] As a property owner, you have a louder voice with levels of government and the creative freedom to do what you like with your real estate.
  • The added advantage of being able to liquidate accumulated equity without selling, means your home becomes a financial partner in realizing dreams and achieving goals.
  • Do you place the greatest value in the fact that you always have choices and the power to do what you want?

Before your new love moves in or, ideally, before there’s even a relationship on the horizon, consider two broad categories of relevant issues:

Financial responsibilities, including “who pays what” regarding ongoing expenses, insurance, taxes, and maintenance, should be made clear in writing to each party in both ownership and rental situations. Discussions and decisions should cover all relevant “what-if?” situations including job loss, prolonged illness, home-based business use, illegal activity on the premises, and irreconcilable incompatibility. The goal should be a reasonable financial disentanglement even if the relationship’s end is not a calm, harmonious one.

Legal consequences are a bigger issue when ownership is involved, but who’s name is on the lease is a significant factor in rentals. Ownership is our focus here. Seek professional advice on rentals to fully understand all that could go wrong whether your name is or is not on the lease. Forewarned is forearmed. Caution: When a rent-controlled unit is involved, you may find yourself financially-challenged if you end up out of the rental apartment and shopping for a new home in an inflated rental market.

Short-term thinking can cause problems. Be careful you don’t jump into a live-in relationship solely because you need financial or emotional support. Renting out a suite, floor, or room in your home to a tenant is not the same as launching into a co-habitation relationship:

  • Tenancy laws protect tenants and landlords in rental relationships. Money changes hands in exchange for shelter—that’s a business relationship and can be managed as such. Sharing your real estate as a couple is a different story.
  • If you have children, putting your real estate at risk may put their futures at risk, too.
  • Relationships are not always fair. Nor are they predictable—except to those around you who have watched you repeatedly make the same mistakes. Listen to what friends or family have observed and see whether that pattern puts your real estate and, therefore, your future at risk.
  • Consider that the “move in” could be you moving into your new love’s home until you both discover how well things will work out. This would allow you to rent out your home to achieve the financial support you require while enjoying your romantic relationship at your love’s home.
  • If your new love is chasing a business dream, slow down before you cash in or mortgage your real estate to support the venture. Even in this magic internet era, at least 80 percent of business ventures fail.

Many send related loved-ones’ money and real estate down the drain when they do. Caution: Seek professional advice to learn all your options and risks before you act.

  • If your new love exerts undue pressure or leaves you with an odd feeling about true motives, trust your gut and run.When deciding if this person is THE ONE, there are many logical issues to consider, but it often seems easier and more romantic to throw logic out the window and concentrate on passion. Do you understand that you’ll benefit from exploring finances and legalities before you are in a relationship or at least before the lover moves in? Your cool-headed due diligence will serve you well when passion cools as it inevitably does.

    #1. Investigate how long a person may live with you before they are legally considered to have a claim on your real estate. Will the amount they contribute to expenses, maintenance, or renovation make a difference to their claim to ownership? If your new love knows more about this than you do, you may find yourself out-maneuvered down the road.

    #2. Explore pre-cohabitation agreements to protect your interests and allow both parties to begin living together with clear understanding of where they are starting from and where they could end up. Along with learning about how an agreement could protect your real estate, you’ll discover how to explain its value to the other party without diminishing romance. If you decide to marry later, would you want this protection of your asset ownership to continue?

    While you are clear-headed and not in a brand-new relationship, build your professional support team. Search out an experienced real estate professional and a real-estate-savvy financial advisor and a lawyer. This solid backup expertise will allow you to protect your ownership and enter into a new relationship relaxed and confident.

For Fifth Month Straight, Pending Home Sales Slide

Thursday, June 28, 2018— In a continuing downtrend, May’s pending home sales slid, declining 0.5 percent for the fifth month in a row (year-over-year), according to the National Association of REALTORS® (NAR) Pending Home Sales Index (PHSI).

Despite gains in three of the four major regions in the U.S., a considerable drop in the South tamped down the total. Activity increased 2.9 percent in the Midwest, 2 percent in the Northeast and 0.6 percent in the West, but slumped 3.5 percent in the South.

“Pending home sales underperformed once again in May, declining for the second straight month and coming in at the second-lowest level over the past year,” says Lawrence Yun, chief economist at NAR. “REALTORS® in most of the country continue to describe their markets as highly competitive and fast-moving, but without enough new and existing inventory for sale, activity has essentially stalled.

“With the cost of buying a home getting more expensive, it’s clear the summer months will be a true test for the housing market,” Yun says. “One encouraging sign has been the increase in new-home construction to a 10-year high. Several would-be buyers this spring were kept out of the market because of supply and affordability constraints. The healthy economy and job market should keep many of them actively looking to buy, and any rise in inventory would certainly help them find a home.”

10 Tips For A Pain-Free Renovation

Whether you’re painting your kitchen cabinets or ripping the whole kitchen out, renovating is exciting. Not as exciting is the mess that’s created, the potential issues with contractors, and the mad scramble to come up with more money when something goes awry. While you can’t avoid every unpleasantry associated with home renovations, you can prepare well to keep yours as pain-free as possible.

Move out!

Depending on how extensive your renovation is, staying in the home while it’s going on can be horrible. And, trust us when we say that this is one of those things you only think you can get through easily if you’ve never been through it before. A little time at a friend’s house or in a hotel instead of cramming your family into a bedroom or basement with one bathroom to share and a makeshift kitchen will make your world so much better.

Don’t hover…but don’t fail to check the work from time to time

True story: We had our floors redone last month (Goodbye, ugly tile and concrete where where foundation work had been completed, Hello luxury vinyl plank!) and we had to face this reality head on. While we didn’t want to be in their face all day, paying attention at key points uncovered areas that needed to be addressed. What we learned is this:

Finding that perfect balance is key to establishing trust with your contractor while also making sure the work is up to your standards. And, in the end, having cookies and other treats in the house makes everything better.

Concentrate on safety

If you are staying in the home and you have kids or pets (or both), you’ll want to make sure your contractors leave their work area as clean as possible and don’t create hazards with their equipment. On the first night of our flooring installation, our contractor left his tools – including two saws – in an open area, which our dog quickly discovered (Everyone is fine, but he got to spend the rest of the night in the bedroom!).

“While working in your home contractors should be willing to remove all tools at the end of each day. At the least, equipment should be stacked out of the way (and out of the reach of young kids),” Art Donnelly, former chairman of the board of the National Association of the Remodeling Industry, told Parents. “You can even request that your contractor set up temporary walls to shield your kids from the work site and reduce the amount of dust filtering into your living quarters.”

Budget more than you think you’ll need

It’s always going to cost more than you think. Setting aside an extra 10 percent – at least – will help you avoid a freak out and a panicked search for more money in the middle of your reno.

Invest in a good vacuum

And a carload of Swiffer dusters. Whether you’re having your floors done, adding a room, or redoing your kitchen, it’s gonna get dusty. And it doesn’t matter how well your contractor cleans up after the job is done—it still won’t be up to your expectations.

Don’t pay upfront

A contractor who asks for payment before work has begun could be a red flag. You don’t want to get duped, nor do you want to work with someone whose cash flow problem becomes your problem. Paying for materials as they are purchased is common and payment arrangements that include paying for a portion of the work at certain completion markers are sometimes worked out, but if it feels off, don’t be afraid to stand your ground.

Do your research

Even the most trusted referrals require further research. Perhaps the company is under new management since your friend used them or standards have dropped over time. Google the company and check reviews online before you move forward.

Communicate, communicate, communicate

Our project was almost derailed by a simple miscommunication that was, thankfully, discovered and worked through but that could have derailed the entire flooring installation.

“Ninety-Nine percent of problems are caused by breakdowns in communication,” said CAVDESIGN. “Don’t overwhelm your contractor with bits of paper and random suggestions. Instead, organize your thoughts, schedule a time, and go over any questions point by point. Then send a line-item list of what was decided upon so there is a clear paper trail.”

Pack up your valuables ahead of time

Yes, you want to protect yourself from theft. But you also want the things that are important to you to be safe from getting bruised or broken. If your contractor is moving furniture for you, it behooves you to take care of anything that’s an heirloom or that would devastate you if it was damaged during the renovation.

Check outside when the renovation is done

Some contractors clean up the work area better than others. There might be an errant piece of tile or a few wood pieces you’re not aware of on your front lawn because you typically come and go through the garage. But you can be sure your neighbors will be aware! If you’ve already pushed the limits of their patience with the constant sound of power tools, now’s the time to make sure your front yard isn’t an eyesore.