Presentation is loading. Please wait.

Presentation is loading. Please wait.

C O A L I T I O N Corner Understanding Real Estate Law: 11 Elements of Compliance Coalition Corner: Business training tools for HR staff, real estate licensees.

Similar presentations


Presentation on theme: "C O A L I T I O N Corner Understanding Real Estate Law: 11 Elements of Compliance Coalition Corner: Business training tools for HR staff, real estate licensees."— Presentation transcript:

1 C O A L I T I O N Corner Understanding Real Estate Law: 11 Elements of Compliance Coalition Corner: Business training tools for HR staff, real estate licensees and other service professionals in the relocation and real estate industries © 2005, Employee Relocation Council/Worldwide ERC ® Coalition

2 C O A L I T I O N Corner This program supplements a monthly editorial feature in ERC’s Mobility magazine In this segment, users will learn that: –Transactions must follow accepted criteria (listed in ERC’s Eleven Key Elements and Procedures of an Amended Value Option” in order for the employee to receive full tax advantage –Severe tax consequences are possible if criteria are not followed –Expenses may be tax deductible –Licensees should avoid giving tax advice –Employees are often unfamiliar with the tax implications, and should be referred to appropriate advisors within their company or the RMC Program Objectives

3 C O A L I T I O N Corner Background on Managed Move Issues Home sales and purchases can carry significant tax liabilities if the transaction is not structured appropriately. Real estate licensees should understand basic real estate tax law in order to assist the principals in the transaction to avoid unnecessary and costly tax consequences.

4 C O A L I T I O N Corner Direct Reimbursement The employer may make a direct reimbursement to the employee for moving expenses. This program is simple to arrange, but may prove to be a major disadvantage to the employee, since the reimbursement can be considered ordinary income and taxed as such.

5 C O A L I T I O N Corner Types of employer-assisted home purchase plans Employer-assisted home purchase plans that carry more favorable tax treatment to the employee include: - direct purchase - assigned sale transaction - amended value transaction - buyer value option (BVO) These are programs through which the employer or RMC will probably be purchasing the home from the employee and will then sell the home to an outside purchaser. In order for each transaction to have the most favorable tax consequences, it should incorporate 11 key elements as outlined by ERC.

6 C O A L I T I O N Corner Be Familiar With Forms! There are many forms used in managed moves. If the employer or relocation management company (RMC) becomes a principal in the transaction (through the purchase of the employee’s home), they must be knowledgeable about the forms used in each state. Real estate licensees who are familiar with the forms and procedures bring significant value to the transaction and parties involved.

7 C O A L I T I O N Corner 11 Key Elements minimize tax risks to employees 1.The employee will list the property for sale with a real estate professional licensed in the jurisdiction. The listing will be subject to an exclusion clause which states that no commission will be paid to the real estate licensee if the listing agreement is terminated due to the sale of the property to the employer or to a third-party relocation management company (RMC). 2.The employee should never accept a down payment from any outside purchaser. 3.The employee should never execute a purchase agreement with any outside purchaser.

8 C O A L I T I O N Corner 11 Key Elements minimize tax risks to employees 4. Upon receipt of an acceptable offer to purchase, the employee will sign a binding purchase agreement with the employer or the RMC for the sale of the property. 5.Upon execution of the purchase agreement with the employer and after the employee vacates the property, the employer or RMC will assume all of the benefits and burdens of ownership. 6.The purchase agreement at the amended value (or higher price) is unconditional and not contingent upon the future occurrence of any event; e.g., the third-party purchaser receiving a mortgage commitment. …continued

9 C O A L I T I O N Corner 11 Key Elements minimize tax risks to employees 7.The subsequent sale of the property to a third-party purchaser is not subject to the control or influence of the employee, or of the employer if a RMC is utilized. 8. The employer or RMC will subsequently enter into its own separate listing agreement with a licensed real estate professional for the purposes of marketing and selling the property. 9.The employer or RMC will subsequently enter into a purchase agreement with a third-party purchaser for the sale of the property. …continued

10 C O A L I T I O N Corner 11 Key Elements minimize tax risks to employees 10. The employer or RMC will arrange for title to the property to be conveyed to the third-party purchaser. 11. The terms and price of the sale by the employer or RMC to the third-party will have no effect on the sale price which was paid to the employee. …continued

11 C O A L I T I O N Corner Manage Your Professional Risk… Don’t put your reputation or the transferee’s financial standing on the line. Avoid giving tax advice – leave it to the experts! Refer transferees to their company or RMC advisors to learn about tax implications


Download ppt "C O A L I T I O N Corner Understanding Real Estate Law: 11 Elements of Compliance Coalition Corner: Business training tools for HR staff, real estate licensees."

Similar presentations


Ads by Google