TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

Cong. Levin Bill (HR 2834) Proposing New §710, Treating Partnership Allocations To Investment Management Services As Ordinary Income. This bill is designed to attack REITs and large public partnerships which have some tax advantages. HR 2834 is that it would tax as ordinary income the income interests of "sweat equity" partners for a much broader class of partnerships than simply hedge funds and private equity. Examples are: A real estate property management company - not a REIT, just a parents and children apartment management company -- structured to give working kids a bigger percentage of the income than they'd earn on their capital contributions alone. A private holding company that owned operating companies as subsidiaries -- as the holding company owns those as "securities." The bill would convert income interests at the holding company level into ordinary income, while allowing income interests in each operating subsidiary (that's not based on...

Today's new reported mortgage rates for 30-year fixed loans hit 6.75%. This is the highest level in almost a year. Further, “sub-prime” defaults and foreclosures both are at record highs. More than 15% of“sub-prime” adjustable loans are delinquent and 3.75% are in foreclosure. This bad news for real estate certainly is a leading indicator of an economic decline.

Rising longer-term interest rates yielding 5.25%10-year Treasury marked the highest level in ten months. In early March, the 10-year yield was 4.5%. Because many consumer and corporate loans are tied to the 10-year Treasury, effective loan interest rates are rising. Home builders are concerned by large home inventories, rising interest rates, and tighter lending standards. This may be the final push for the weakened housing market and the general economy that has relied housing for growth in the past five years.