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Thread: A Harsh Tax Makeover -- EMHE

  1. #1

    A Harsh Tax Makeover -- EMHE

    http://tampatrib.com/nationworldnews/MGBHDL7I28E.html (LINK)

    A Harsh Tax Makeover
    Published: Apr 28, 2005

    ST. PETERSBURG - First the disadvantaged family wins a complete house renovation, furniture, appliances and other amenities on ``Extreme Makeover: Home Edition.''
    Then come the tax bills - drastically increased property taxes and likely a six-figure income tax bill due the Internal Revenue Service.

    Winners dealing with greatly rising taxes is one reality that is not mentioned during the hit ABC reality TV show, which features the Dolan family of St. Petersburg in its next episode, airing 8 p.m. Sunday.

    James Dolan, 30, was blinded in November when he was shot in the head while working at a St. Petersburg RadioShack as a manager-in- training.

    ``We are pretty up front with our families about taxes before we start. We encourage them to go to their own tax attorneys and use our accountant,'' said Tom Forman, executive producer of ``Extreme Makeover: Home Edition,'' produced by Endemol USA and purchased by ABC.

    ``We want them to know what they are getting into,'' Forman said. ``As families move along in the process from applicant to someone on our short list, there are mountains of paperwork, and discussing taxes is part of it.''

    At the time of the RadioShack shooting, Dolan was living in a small, 44-year-old house on 99th Way with his wife and three young children.

    For 2004, the Pinellas County property appraiser assessed the value of the house at $131,100.

    Thanks to the show, the Dolans live on the same parcel of land but in the fanciest house in the neighborhood: a home with 3,500-square-feet of enclosed living space that is twice the size of their old place. It was was built in less than one week in March by a team of local contractors.

    Property Tax Cap Doesn't Help

    The Dolans' property tax bill will not be affected in 2005, but for 2006 it could be at least three times the roughly $2,000 they will owe for this year.

    The new house would be worth about $450,000 in a neighborhood where that type of house typically is found, said Craig Gallagher, president of Lexington Homes of New Port Richey, the contractor that built the house and donated a majority of the building costs.

    Florida's Save-Our-Homes cap, which limits property tax increases on a Floridian's primary residence, is not applicable to the new house.

    ``A full renovation, in effect, eliminates the cap,'' said Jim Smith, Pinellas County's property appraiser.

    There is not much the Dolans can do to avoid a significant increase in their property taxes, said Beth Daniels, a Clearwater lawyer who specializes in challenging county assessments.

    By law, Smith's office must evaluate the Dolans' new home based on eight criteria including construction quality, square footage, replacement value and the price a property likely would command on the open market, Daniels said.

    The tragedy that befell the family when Dolan was shot and blinded is not a factor that can be considered, she said.

    Because their new home is in an older neighborhood of smaller homes, that could keep the appraised value down, Daniels said.

    ``What you spend to build it is not necessarily indicative of what it's worth to an actual buyer,'' she said: In that price range, a home buyer might prefer to live in a neighborhood among similarly valued homes.

    Income Tax Loophole In Doubt

    As for federal income taxes, Forman said that Endemol USA informed the Dolans and past show winners that they will not have to pay the IRS for receiving a new house.

    Many tax experts, though, are skeptical of the tax loophole cited by Endemol.

    Forman said Endemol informs show applicants that the U.S. tax code states that income, including home improvements, derived while renting a primary residence for less than 15 days is not taxable.

    To produce its programs, Endemol USA rents the homeowner's property for less than 15 days, during which it is radically remodeled or razed and a new home is constructed using round-the-clock labor.

    ``The IRS is not commenting on `Extreme Makeover,' '' IRS spokeswoman Gloria Sutton said.

    When asked about taxes incurred by show winners, ABC spokeswoman Marsha Smith said, ``ABC does not answer those questions.''

    Janice McClendon, a tax law professor at Stetson University College of Law, calls Endemol's tax loophole argument ``silly.''

    It does not matter if the payment comes in cash or in appliances, she said. ``Lease payments are income to the recipient.''

    The Internal Revenue Service could charge the Dolans up to 35 percent of the value of the home and its contents.

    However, enforcing income-tax payments from the Dolans or from others featured on the ABC show may be an unpopular move for the IRS, McClendon said. In recent years, the agency has worked to improve its public image.

    ``I'm not sure the service wants to get in this can of worms,'' McClendon said.

    It may be too early to compute the income tax implications of ``Extreme Makeover: Home Edition,'' which has aired 38 shows since its debut in December 2003. Many of the show's award winners only recently have filed their 2004 federal income tax returns.

    Community Pitches In

    The Dolan family, which according to family spokesman Ric Cornelius has raised more than $60,000 in a family trust, declined requests to be interviewed for this story.

    Cornelius said the Dolans are making preparations for future taxes and have been consulting with tax experts.

    The Dolans are carrying a $134,000 mortgage financed in 2003, according to Pinellas County court records.

    ``We are working to keep them in the house,'' Cornelius said. ``After all they have been through, taxes are not their first priority.

    ``James has been spending a lot of time training with his [service] dog, and the family is enjoying the house and adjusting to their new life.''

    During Sunday's telecast, viewers will see the Dolans presented with a check for $100,000 for future expenses.

    Cornelius and Craig Gallagher, the Lexington Homes president, said that if the money raised through donations is not enough to cover the Dolans' tax bills, they are confident the community will step up to support the family.

    Forman said no ``Extreme Makeover: Home Edition'' winners have sold their houses for any reason, but they are not obligated to keep them.

    ``We customize each house so much to meet their needs that I don't think anyone wants to leave,'' Forman said.

    ``That's the whole show. These are real families living real lives, and they will choose to do what they want with their property.''

    Reporter Steven Isbitts can be reached at (727) 451-2336.

  2. #2
    Rebecca F
    Given the situations that these people are being salvaged from, I think to have an increase in property tax is minute in comparison to the gift that they are given in their absolutely spectacular homes.

    Just another way for people to try to ruin something that's really a nice thing just becuase it's in the spotlight. Sort of like celebrity couples: Building you up just to tear you down.

    This show is awesome. Really makes you realize that there are people out there with some great hearts.

  3. #3
    Nobody is actually ruining anything for anybody. I think you took that article a bit too personal because people should know all of the facts because they watch the show and want it so bad for themselves but they dont think of the REALITY of it...Some people cannot even afford to live with what they have now but to add on at the time might seem like it can be done but then later on they may regret every minute of it...AND the tax payment is not minute its actually rather large...and I love this show too it is wonderful if the families can afford to stay in their homes. I havent missed a show yet but this board is to post info and opinions on the show and that is a valid article with comments directly from the EMHE producer.

  4. #4
    Constant Lurker... realornot's Avatar
    Join Date
    Sep 2003
    In beautiful Indiana :)
    I think the article has some great points. I've wondered many times in the past when they've built these HUGE houses how someone affords the taxes, utilities and all that involved with having a new house, when they were struggling financially in the first place.

    That's why I enjoyed the latest episode. They built them a VERY nice, one story house, with 2600 sq. ft. It's still pretty large, but it's not obscene. Of course, they also received some money for future bills, so that would help take care of that, I guess. And those that did receive huge houses with all the fixings, do have some options. It may not be what they want to do, but they can sell the house and buy a more modest home.

    That being said, I love this show. I have it TiVo'ed each week and never miss it. And every time I see them redo a house -- even the outrageously huge ones! -- I think to myself, "Darn, I wish they'd come to my house and fix it!"
    "They want you to do a TV show?"
    "Well, they want me to come up with an idea. I don't have any ideas."
    "C'mon, how hard is that? Look at all the junk that's on TV."
    - George and Jerry, in "The Pitch"

  5. #5
    Last nights episode was very nice. The house they built was so nice yet small enough to be able to handle the bills and also they made it energy efficient. I also watch every week so I was sad that was the season finale. I already cannot wait for next season...I applied for the show myself but I never heard anything I honestly dont think my story is sad enough...but hey to me that is a good thing I wouldnt wish the problems these people face to my worst enemy...also I got a bit nervous whenever I read that article. That is the main reason I posted it because I applied and didnt know any of that so I wanted to make sure others had a chance to know some of the facts and that it is not all fairy tale...

  6. #6
    Starbucks is your friend Bill's Avatar
    Join Date
    Oct 2002
    I think that if ABC/producers talked to them about the tax implications there is nothing wrong going on. It only makes sense that property value goes up, that would be the point of the entire show.
    "George Oscar Bluth II, aka GOB, featured magician in the best selling videotape, "Girls With Low Self Esteem" invites you to enter his world.
    -- Arrested Development, Season III

  7. #7
    Really, I don't have a TV I_have_no_TV's Avatar
    Join Date
    Nov 2004
    Quote Originally Posted by Rebecca F
    Given the situations that these people are being salvaged from, I think to have an increase in property tax is minute in comparison to the gift that they are given in their absolutely spectacular homes. ... This show is awesome. Really makes you realize that there are people out there with some great hearts.
    Of course, no one is suggesting that any of the contestants are not deserving, or that the show producers don't have great hearts.

    But wouldn't it be horrible if one of the contestants was a few thousand dollars short on the property taxes and someone bought the tax lien and forced them to sell the house? Keep in mind some of these people are destitute-- that's why they live the way they do and get noticed for needing a new home.

    Or even worse-- what if the contestant had a high interest mortgage on the property and missed a payment and the creditor got to take over the new house?

    ABC looks like it's been pretty careful about these considerations. However, Fox had a show (Family Makeover?) where the contestants got hit with over $50k in property taxes.
    Last edited by I_have_no_TV; 05-23-2005 at 06:41 PM.
    I now have TV and TIVO and watch nothing but Fear Factor re-runs.

  8. #8
    I can speak from personal experiance with the show "Town Haul" and add that the opening comments are greatly exaggerated. You have to pay for the tax due on the materials used only, nothing on the labor...........so any way you look at the situation it is better to pay a little for some of the cost than for all of the cost. Just my $.02 worth from experiance with these shows.

  9. #9
    Wonky snarkmistress Lucy's Avatar
    Join Date
    Aug 2003
    Playing kickball for the beer
    Kellyskones, they're not talking about the tax on the work, they're talking about the actual, annual property tax due on the house, that you pay to the county or city the house is in. That tax is based on the assessed value of the house -- the complete, renovated house -- and property.
    It's such a fine line between stupid, and clever. -- David St. Hubbins

  10. #10
    all hot air Ana Bannana's Avatar
    Join Date
    Sep 2004
    in the palm of the mitten
    I often wondered why they go so totally overboard when they remodel or rebuild these homes. It seems like they could build a pretty nice place, with great furnishings and landscaping, without going crazy and driving up the tax liability. But who knows - we may not find it as entertaining if they built these families a modest little 2000 square foot home and furnished it with ValueCity Furniture.

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