1 of 8 Real Estate Law, 8th Ed. by Marianne M. Jennings Chapter 22 Tax Aspects of Real Estate Ownership and Transfer

2 of 7 Approaches Used for Assessed Value  Market approach  Income approach  Cost approach

3 of 7 Due Process for Property Owners and Tax Assessments 1.Property owners must be notified of the assessed value of their property. 2.Property owners must be given a reasonable amount of time after assessment to gather information and prepare a protest. 3.Property owners must have a procedure for filing a protest and must be given instructions about the how’s and when’s of such a filing. (continued on next slide)

4 of 7 Due Process for Property Owners and Tax Assessments 4.The local governmental body must provide a hearing forum: an administrative body or some form of judicial review for the property owners’ presentation of protests. 5.Property owners have the burden of proof, during the hearing, to show the overvaluation of the property.

5 of 7 Collection of Property Taxes  Notice  Notification of default  Lien  Notification of lien and foreclosure  Notice of sale  New U.S. Supreme Court requirements on notice service

6 of 7 Basis and Taxation on Gain in Sale of Real Property Selling price of property$297,000 Less Selling Expenses– $3,000 Amount realized$294,000 Basis of Property Cost$275,000 Depreciation+10,000 Improvements+ 2,000 Adjusted basis$287,000 Gain realized$7,000

7 of 7 Various Income Tax Issues in Real Property Ownership  Depreciation  Capital gains  Passive or suspended losses  At-risk issues  Low-income housing credits (Section 8 credits)  1031 Exchanges