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The article is half right in its comments. The following is wrong:

But the “glass is half empty” crowd see something much more ominous in this sale. There were not sufficient buyers to push up the demand so that yield is virtually nothing.

What really happens is that if not that many buyers to push up the demand, the yield goes up not down. That is because the issue ends up being discounted until it is sold. Higher yields would attract more buyers.

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The article is half right in its comments. The following is wrong:

But the “glass is half empty” crowd see something much more ominous in this sale. There were not sufficient buyers to push up the demand so that yield is virtually nothing.

What really happens is that if not that many buyers to push up the demand, the yield goes up not down. That is because the issue ends up being discounted until it is sold. Higher yields would attract more buyers.

[ucodegen]

The article is half right in its comments. The following is wrong:

But the “glass is half empty” crowd see something much more ominous in this sale. There were not sufficient buyers to push up the demand so that yield is virtually nothing.

What really happens is that if not that many buyers to push up the demand, the yield goes up not down. That is because the issue ends up being discounted until it is sold. Higher yields would attract more buyers.

[ucodegen]

[quote flu]Not going to happen either. Simply because the IRS does not have the bandwidth to go through the details of every person’s financial situation and figure out how a heloc was used, or a cash out refinance was used.[/quote]
The IRS is increasing their bandwidth. They are now using systems that can ‘read’ and ‘process’ the forms for tax ‘mistakes’. Its not perfect, but it is getting scary.

What the IRS may do is make the interest from an HELOC non-deductible as a default unless you can prove by receipts that the money was spent on improvements to the property. Only the interest on the principal that can be justified by receipts would be allowed.

As for cash-out refi, that would be easier. The interest on the amount that is cashed-out would not be deductible unless there are home improvement receipts for that amount.

[quote joec]Yeah, your idea sounds much better than renting someone else’s house. :)[/quote]
It was from my primitive understanding of how the wealthy were getting around the system before the home mortgage interest deduction was allowed.

[quote meadandale]I love how they always talk about how much these things are ‘costing’ the government. It’s not costing the government ANYTHING to give this deduction to home owners–it just means that they can’t collect that much additional tax.[/quote]
Actually it just shifts the tax burden, unless the gov. reduces spending(yeah, right). The total bill has to be paid eventually anyway. You can shift it to different parts of the population, or you can ‘time shift’ it using treasuries (fed borrowing).

[ucodegen]

[quote flu]Not going to happen either. Simply because the IRS does not have the bandwidth to go through the details of every person’s financial situation and figure out how a heloc was used, or a cash out refinance was used.[/quote]
The IRS is increasing their bandwidth. They are now using systems that can ‘read’ and ‘process’ the forms for tax ‘mistakes’. Its not perfect, but it is getting scary.

What the IRS may do is make the interest from an HELOC non-deductible as a default unless you can prove by receipts that the money was spent on improvements to the property. Only the interest on the principal that can be justified by receipts would be allowed.

As for cash-out refi, that would be easier. The interest on the amount that is cashed-out would not be deductible unless there are home improvement receipts for that amount.

[quote joec]Yeah, your idea sounds much better than renting someone else’s house. :)[/quote]
It was from my primitive understanding of how the wealthy were getting around the system before the home mortgage interest deduction was allowed.

[quote meadandale]I love how they always talk about how much these things are ‘costing’ the government. It’s not costing the government ANYTHING to give this deduction to home owners–it just means that they can’t collect that much additional tax.[/quote]
Actually it just shifts the tax burden, unless the gov. reduces spending(yeah, right). The total bill has to be paid eventually anyway. You can shift it to different parts of the population, or you can ‘time shift’ it using treasuries (fed borrowing).

[ucodegen]

[quote flu]Not going to happen either. Simply because the IRS does not have the bandwidth to go through the details of every person’s financial situation and figure out how a heloc was used, or a cash out refinance was used.[/quote]
The IRS is increasing their bandwidth. They are now using systems that can ‘read’ and ‘process’ the forms for tax ‘mistakes’. Its not perfect, but it is getting scary.

What the IRS may do is make the interest from an HELOC non-deductible as a default unless you can prove by receipts that the money was spent on improvements to the property. Only the interest on the principal that can be justified by receipts would be allowed.

As for cash-out refi, that would be easier. The interest on the amount that is cashed-out would not be deductible unless there are home improvement receipts for that amount.

[quote joec]Yeah, your idea sounds much better than renting someone else’s house. :)[/quote]
It was from my primitive understanding of how the wealthy were getting around the system before the home mortgage interest deduction was allowed.

[quote meadandale]I love how they always talk about how much these things are ‘costing’ the government. It’s not costing the government ANYTHING to give this deduction to home owners–it just means that they can’t collect that much additional tax.[/quote]
Actually it just shifts the tax burden, unless the gov. reduces spending(yeah, right). The total bill has to be paid eventually anyway. You can shift it to different parts of the population, or you can ‘time shift’ it using treasuries (fed borrowing).

[ucodegen]

[quote flu]Not going to happen either. Simply because the IRS does not have the bandwidth to go through the details of every person’s financial situation and figure out how a heloc was used, or a cash out refinance was used.[/quote]
The IRS is increasing their bandwidth. They are now using systems that can ‘read’ and ‘process’ the forms for tax ‘mistakes’. Its not perfect, but it is getting scary.

What the IRS may do is make the interest from an HELOC non-deductible as a default unless you can prove by receipts that the money was spent on improvements to the property. Only the interest on the principal that can be justified by receipts would be allowed.

As for cash-out refi, that would be easier. The interest on the amount that is cashed-out would not be deductible unless there are home improvement receipts for that amount.

[quote joec]Yeah, your idea sounds much better than renting someone else’s house. :)[/quote]
It was from my primitive understanding of how the wealthy were getting around the system before the home mortgage interest deduction was allowed.

[quote meadandale]I love how they always talk about how much these things are ‘costing’ the government. It’s not costing the government ANYTHING to give this deduction to home owners–it just means that they can’t collect that much additional tax.[/quote]
Actually it just shifts the tax burden, unless the gov. reduces spending(yeah, right). The total bill has to be paid eventually anyway. You can shift it to different parts of the population, or you can ‘time shift’ it using treasuries (fed borrowing).

[ucodegen]

[quote flu]Not going to happen either. Simply because the IRS does not have the bandwidth to go through the details of every person’s financial situation and figure out how a heloc was used, or a cash out refinance was used.[/quote]
The IRS is increasing their bandwidth. They are now using systems that can ‘read’ and ‘process’ the forms for tax ‘mistakes’. Its not perfect, but it is getting scary.

What the IRS may do is make the interest from an HELOC non-deductible as a default unless you can prove by receipts that the money was spent on improvements to the property. Only the interest on the principal that can be justified by receipts would be allowed.

As for cash-out refi, that would be easier. The interest on the amount that is cashed-out would not be deductible unless there are home improvement receipts for that amount.

[quote joec]Yeah, your idea sounds much better than renting someone else’s house. :)[/quote]
It was from my primitive understanding of how the wealthy were getting around the system before the home mortgage interest deduction was allowed.

[quote meadandale]I love how they always talk about how much these things are ‘costing’ the government. It’s not costing the government ANYTHING to give this deduction to home owners–it just means that they can’t collect that much additional tax.[/quote]
Actually it just shifts the tax burden, unless the gov. reduces spending(yeah, right). The total bill has to be paid eventually anyway. You can shift it to different parts of the population, or you can ‘time shift’ it using treasuries (fed borrowing).

[ucodegen]

A long time ago, I was against the home mortgage interest deduction.. that is until I heard how some people were using corporations to get around it.

What the mortgage interest deduction does, is harmonizes (makes consistent) the types of deductions that corporations can use, the types of deductions the wealthy were able to use because corps could and the wealthy had good attorneys, vs what the rest of the not so wealthy population.

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.

Another item the IRS might consider, is looking at what money is used for when there is a cash-out refi, or a second added to the mortgage.

A lot of the abuses that occurred leading up to the bubble implosion were aided by the equity withdraw interest payments being tax-deductible even though the money was not used to improve the property.

[quote joec]What I’ve always thought was annoying is that for income properties, you could always deduct all your expenses so if they made this across the board cut completely, you’d see all the home owners become renters and … I wouldn’t be surprised if one change leads to a whole bunch of strategies around it…[/quote]
BINGO.. though it is not quite as simple. I believe the real method is to create an investment identity and have the property in that identity rent back to you. Run the identity as a NOL until the property is sold. On the investment entities (like investment clubs) tax treatment is passthrough on income and type of income (LTCG, STCG etc)

[ucodegen]

A long time ago, I was against the home mortgage interest deduction.. that is until I heard how some people were using corporations to get around it.

What the mortgage interest deduction does, is harmonizes (makes consistent) the types of deductions that corporations can use, the types of deductions the wealthy were able to use because corps could and the wealthy had good attorneys, vs what the rest of the not so wealthy population.

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.

Another item the IRS might consider, is looking at what money is used for when there is a cash-out refi, or a second added to the mortgage.

A lot of the abuses that occurred leading up to the bubble implosion were aided by the equity withdraw interest payments being tax-deductible even though the money was not used to improve the property.

[quote joec]What I’ve always thought was annoying is that for income properties, you could always deduct all your expenses so if they made this across the board cut completely, you’d see all the home owners become renters and … I wouldn’t be surprised if one change leads to a whole bunch of strategies around it…[/quote]
BINGO.. though it is not quite as simple. I believe the real method is to create an investment identity and have the property in that identity rent back to you. Run the identity as a NOL until the property is sold. On the investment entities (like investment clubs) tax treatment is passthrough on income and type of income (LTCG, STCG etc)

[ucodegen]

A long time ago, I was against the home mortgage interest deduction.. that is until I heard how some people were using corporations to get around it.

What the mortgage interest deduction does, is harmonizes (makes consistent) the types of deductions that corporations can use, the types of deductions the wealthy were able to use because corps could and the wealthy had good attorneys, vs what the rest of the not so wealthy population.

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.

Another item the IRS might consider, is looking at what money is used for when there is a cash-out refi, or a second added to the mortgage.

A lot of the abuses that occurred leading up to the bubble implosion were aided by the equity withdraw interest payments being tax-deductible even though the money was not used to improve the property.

[quote joec]What I’ve always thought was annoying is that for income properties, you could always deduct all your expenses so if they made this across the board cut completely, you’d see all the home owners become renters and … I wouldn’t be surprised if one change leads to a whole bunch of strategies around it…[/quote]
BINGO.. though it is not quite as simple. I believe the real method is to create an investment identity and have the property in that identity rent back to you. Run the identity as a NOL until the property is sold. On the investment entities (like investment clubs) tax treatment is passthrough on income and type of income (LTCG, STCG etc)

[ucodegen]

A long time ago, I was against the home mortgage interest deduction.. that is until I heard how some people were using corporations to get around it.

What the mortgage interest deduction does, is harmonizes (makes consistent) the types of deductions that corporations can use, the types of deductions the wealthy were able to use because corps could and the wealthy had good attorneys, vs what the rest of the not so wealthy population.

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.

Another item the IRS might consider, is looking at what money is used for when there is a cash-out refi, or a second added to the mortgage.

A lot of the abuses that occurred leading up to the bubble implosion were aided by the equity withdraw interest payments being tax-deductible even though the money was not used to improve the property.

[quote joec]What I’ve always thought was annoying is that for income properties, you could always deduct all your expenses so if they made this across the board cut completely, you’d see all the home owners become renters and … I wouldn’t be surprised if one change leads to a whole bunch of strategies around it…[/quote]
BINGO.. though it is not quite as simple. I believe the real method is to create an investment identity and have the property in that identity rent back to you. Run the identity as a NOL until the property is sold. On the investment entities (like investment clubs) tax treatment is passthrough on income and type of income (LTCG, STCG etc)

[ucodegen]

A long time ago, I was against the home mortgage interest deduction.. that is until I heard how some people were using corporations to get around it.

What the mortgage interest deduction does, is harmonizes (makes consistent) the types of deductions that corporations can use, the types of deductions the wealthy were able to use because corps could and the wealthy had good attorneys, vs what the rest of the not so wealthy population.

I would suspect what may happen is the IRS start looking at what a HELOC is used for, and whether the tax deduction on the interest is really ‘legal’ or justified. If equity is withdrawn from a property to improve it, the interest on it is tax deductible. If equity is withdrawn from a property to fund a nice new BMW, the interest covering that HELOC(amount) is not supposed to be tax deductible.

Another item the IRS might consider, is looking at what money is used for when there is a cash-out refi, or a second added to the mortgage.

A lot of the abuses that occurred leading up to the bubble implosion were aided by the equity withdraw interest payments being tax-deductible even though the money was not used to improve the property.

[quote joec]What I’ve always thought was annoying is that for income properties, you could always deduct all your expenses so if they made this across the board cut completely, you’d see all the home owners become renters and … I wouldn’t be surprised if one change leads to a whole bunch of strategies around it…[/quote]
BINGO.. though it is not quite as simple. I believe the real method is to create an investment identity and have the property in that identity rent back to you. Run the identity as a NOL until the property is sold. On the investment entities (like investment clubs) tax treatment is passthrough on income and type of income (LTCG, STCG etc)

[ucodegen]

[quote jstoesz]I find GSEs beyond the scope of the federal government, but the courts disagree with me on that too.[/quote] I am on the fence with the GSEs. If they were run as originally chartered, I have no problems with them. They prevent mortgage interest ‘extortion’ by banks/lenders, stabilize interest rates, and allow the Fed better control of the money supply. Unfortunately their original charter was usurped for political correctness (which of course reduced the Fed’s control of the money supply).

I still think that the government should be involved in the basic ‘standards’ of education (“three R’s”), beyond that, it should be less regulated.

[ucodegen]

[quote jstoesz]I find GSEs beyond the scope of the federal government, but the courts disagree with me on that too.[/quote] I am on the fence with the GSEs. If they were run as originally chartered, I have no problems with them. They prevent mortgage interest ‘extortion’ by banks/lenders, stabilize interest rates, and allow the Fed better control of the money supply. Unfortunately their original charter was usurped for political correctness (which of course reduced the Fed’s control of the money supply).

I still think that the government should be involved in the basic ‘standards’ of education (“three R’s”), beyond that, it should be less regulated.

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