Aside from the fact that you are an excellent writer and story teller (and champion of small town Vermont), your story has made me feel SO much better about my own recent pill of an IRS bill that I had to swallow for a mistake I made. I commend you for not concluding ‘F it to the whole thing’ and taking it as learned experience and moving forward with your good work.
I'm sorry you had to go through this. It really sucks. The irony is that the 1031 exchange was not scrapped (surprise, surprise- the prez likely benefits). It provides huge windfalls for wealthy (for profit) investors. Effectively you can NEVER pay a cent in capital gains taxes by simply rolling the proceeds of a sale into another purchase (which can then be laundered in a few years resulting in actual $ in pockets).
I'm no DOGE believer, but I do wonder if it's time for the feds to get out of the grant (and earmark) business. We've seen the insane level of admin costs from FEMA. I've personally experienced it with security grants for non-profits. A 50K grant requires >>200 hours from the grantee with endless back and forth and delays from the state and the feds. I think if you value the volunteer time and the actual costs of state and federal employees administering, it likely costs more in administration than is doled out. Congressional earmarks often result in one town or entity receiving a free firehouse or several electric school buses while other towns pay full freight. I don't see the equity in that.
Honestly it's indefensible. Yes, it results in continued investment, but I believe it's the only such carve out in the tax system. When you sell a painting, stock or anything else at a profit you (rightfully) pay capital gains taxes regardless what you do with the proceeds. Homeowners do receive a 500K exemption in many instances when selling at a profit.
For nonprofits, the grants cover staff time too - since both the organization and affordable housing are 100% grant-funded enterprises, the system works, particularly in VT. The nonprofits build generational capacity to manage the administrative compliance associated with the grants, even though it is expensive. Could VT do without grants? Sure, and the result would be many fewer affordable apartments.
thanks for educating me- it's helpful. The rules are certainly different for other types of $- my temple is certainly not being compensated for the time folks spend writing and complying with the grant, which I fully understand and accept. There's no question we need more affordable housing- I just wonder if there's a more efficient way to make it happen. I realize unintended consequences are difficult to avoid with any policy. As someone who is building now, I think increasing the size of the local workforce is absolutely necessary. I have a relative in rural Western NC who has built many houses in the last 5 years. Wages are much lower and availability much higher. Of course, lower wages are bad for workers, not a great thing.
Jonah, thanks for your honest assessment of the mistake you made. But more importantly, thanks for the great brick and mortar work you're doing to recapture the value of older structures, make affordable homes for people who really need them, and for building community.
Despite the ice-cold bath, the learning curve also benefitted the funders who are grappling for the first time with awarding grants to for-profit developers. The lesson will keep on giving so thanks for being the guinea pig and continuing to chart the course for others.
Thank you for sharing your journey in such great detail! It’s upsetting when incentives don’t align with the intended outcome of building affordable housing, but appreciate you sharing these lessons for those of us looking to do the same.
Aside from the fact that you are an excellent writer and story teller (and champion of small town Vermont), your story has made me feel SO much better about my own recent pill of an IRS bill that I had to swallow for a mistake I made. I commend you for not concluding ‘F it to the whole thing’ and taking it as learned experience and moving forward with your good work.
Wow. That's high praise, thank you. Was your IRS issue real estate related?
Hang in there Jonah !!!! The whole system/world is upside down & inside-out. Glad you were able to push through it.
Thanks, Craig. Building with even more of a vengeance now!
I'm sorry you had to go through this. It really sucks. The irony is that the 1031 exchange was not scrapped (surprise, surprise- the prez likely benefits). It provides huge windfalls for wealthy (for profit) investors. Effectively you can NEVER pay a cent in capital gains taxes by simply rolling the proceeds of a sale into another purchase (which can then be laundered in a few years resulting in actual $ in pockets).
I'm no DOGE believer, but I do wonder if it's time for the feds to get out of the grant (and earmark) business. We've seen the insane level of admin costs from FEMA. I've personally experienced it with security grants for non-profits. A 50K grant requires >>200 hours from the grantee with endless back and forth and delays from the state and the feds. I think if you value the volunteer time and the actual costs of state and federal employees administering, it likely costs more in administration than is doled out. Congressional earmarks often result in one town or entity receiving a free firehouse or several electric school buses while other towns pay full freight. I don't see the equity in that.
Thanks Dan. I’ve never done a 1031 but have looked into it at different points. Major tax loophole!
Honestly it's indefensible. Yes, it results in continued investment, but I believe it's the only such carve out in the tax system. When you sell a painting, stock or anything else at a profit you (rightfully) pay capital gains taxes regardless what you do with the proceeds. Homeowners do receive a 500K exemption in many instances when selling at a profit.
For nonprofits, the grants cover staff time too - since both the organization and affordable housing are 100% grant-funded enterprises, the system works, particularly in VT. The nonprofits build generational capacity to manage the administrative compliance associated with the grants, even though it is expensive. Could VT do without grants? Sure, and the result would be many fewer affordable apartments.
thanks for educating me- it's helpful. The rules are certainly different for other types of $- my temple is certainly not being compensated for the time folks spend writing and complying with the grant, which I fully understand and accept. There's no question we need more affordable housing- I just wonder if there's a more efficient way to make it happen. I realize unintended consequences are difficult to avoid with any policy. As someone who is building now, I think increasing the size of the local workforce is absolutely necessary. I have a relative in rural Western NC who has built many houses in the last 5 years. Wages are much lower and availability much higher. Of course, lower wages are bad for workers, not a great thing.
Jonah, thanks for your honest assessment of the mistake you made. But more importantly, thanks for the great brick and mortar work you're doing to recapture the value of older structures, make affordable homes for people who really need them, and for building community.
Appreciate the encouragement, Ben!
Despite the ice-cold bath, the learning curve also benefitted the funders who are grappling for the first time with awarding grants to for-profit developers. The lesson will keep on giving so thanks for being the guinea pig and continuing to chart the course for others.
Hopefully something will change for future developers. Doesn't seem like sustainable tax policy to promote affordable housing.
Thank you for sharing your journey in such great detail! It’s upsetting when incentives don’t align with the intended outcome of building affordable housing, but appreciate you sharing these lessons for those of us looking to do the same.
Thanks for your support Tapasya!
Can I ask: what state was this in? The more details you provide, the more likely your community can help fix this red tape authoritarian nonsense.
I am in Vermont
Eyes are open now thanks to your post! Wish there was a way to make this a win win for all. Thanks for educating us.
Hopefully others will be able to avoid the same pitfalls!