Hampton Topics: OSMS - Here is Answer

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	Name:	Maverick -
	Subject:	OSMS - Here is Answer
	Date:	7/24/2006 11:20:51 PM

If you change the property tax variable on the buy lot scenario to say 75% of the appreciation factor on the purchased lot. After the property tax tax benefit the the lot appreciation factor really does not change significantly from the 11%.

But if you assume lets say a 7% annual appreciation factor over the next 20 years on a $300k purchased lot and a 3.5% appreciation factor on the $500k house you build on both the purchased or leased lot, then after 20 years (after taxes - assuming you sell when LTCG are 20% for federal and state and there is only a $500k exemption on personal residence gains) you have a lot more cash in the bank under the lease scenario as the apprecation on the deeded lot and house have eaten up your $500k exemption and you pay signifincatly more in LTCG and under the lease lot sceanrio the majority of the $500k exemption is used to offset the gain on the house as you do not own the property. Remember to get the $500k exemption your lake home must be your primary residence for at least 2 of the past 5 years. Otherwise, you tax consequnce can differ significantly from the above.

Also, under the buy vs lease scenario, I never factored in buying the leased lot in say year 15 as your tax basis would be close to FMV I would think therefore really not a whole lot of tax consequences to consider at year 15.

Basically, based upon my assumptions leased lots if you can really get a good lot for say a $5k premium and $350.00 per month plus annual CPI, is not a bad deal, by any means, if you plan on selling and not leaving to your children or favorite charity (depending on estate tax exmeptions at tim eof death) and the home you build on the leased lot will appreciate as much as a deeded lot home.

DISCLAIMER - PLEASE CONSULT YOUR TAX ADVISOR BEFORE MAKING ANY BUY vs. LEASE DECISION - LOL.

For a small fee I will be more than happy to revise my assumptions to meet your particular tax needs. AND YES THIS IS AN ADVERTISMENT, as I need to figure out someway to retire to the lake fulltime.