In Colborne Corp. v. Weinstein, 09CA0724 (Colo. App. Jan. 21, 2010), the Colorado Court of Appeals ruled that creditors of a Colorado limited liability company (LLC) had standing to sue the LLC's managers who authorized and its members who accepted unlawful distributions from the insolvent LLC.
Under the Colorado Business Corporation Act, C.R.S. sec. 7-101-101 et seq., and Colorado case law, corporate directors are liable to the corporation for unlawful distributions, and officers and directors of insolvent corporations have limited fiduciary duties to the corporation's creditors. Pursuant to this statutory and common law, Colorado courts have recognized that corporate creditors have the right to sue directors for distributions authorized while the corporation was insolvent or that render the corporation insolvent.
In Colborne Corp., the Court determined that the judicial decisions permitting corporate creditors to sue directors for unlawful distributions should be applied to LLCs. Following those decisions, the Court ruled that managers of an LLC have limited fiduciary duties to the LLC's creditors when the LLC is insolvent. These limited fiduciary duties only require the managers to avoid favoring their own interests over those of the creditors. The Court further ruled that creditors of an LLC could recover from the members for unlawful distributions received by them.
Posted By: Brent W. Houston, Esq.
Monday, February 1, 2010
Tuesday, January 5, 2010
ETHICS REMINDER FROM THE COLORADO U.S. DISTRICT COURT
In a recently published decision, McClelland v. Blazin' Wings, Inc., Case No. 09-cv-01580-CMA-BNB (Dec, 29, 2009), the United States District Court for the District of Colorado gave Colorado attorneys a valuable reminder that their professional responsibilities extent to actions of their agents.
In McClelland, the attorneys for the plaintiff engaged a private investigator to gather facts regarding the case, which arose out of a bar fight at a Buffalo Wild Wings restaurant. The investigator interviewed the bartender on duty on the night in question, but make several mistakes from an ethical perspective: (1) he did not disclose to the bartender that he was working on behalf of the plaintiff; (2) he did not obtain the permission of the defendant's counsel before interviewing the bartender, an employee of the defendant, regarding the circumstances of the fight; and (3) he tape recorded the interview without disclosing that fact to the bartender.
The Court found that plaintiff's counsel committed three ethical violations stemming from the investigator's interview of the bartender. The investigator's conduct is attributed to plaintiff's counsel under Rule 8.4(a) of the Colorado Rules of Professional Conduct ("CRPC"), which prohibits a lawyer from violating the rules "through the acts of another" and attributes the misconduct of an agent to the supervising lawyers.
First, plaintiff's counsel violated CRPC 4.2, which prohibits communicating with an opposing party when that party is represented by counsel, when the investigator contact the bartender, an employee of defendant, without the permission of defendant's counsel. See, Colorado Formal Ethics Opinion 69.
Second, plaintiff's counsel violated CRPC 4.1, which prohibits making a false statement of or failing to disclose a material fact to a third person, when the investigator failed to disclose that he worked for the plaintiff and that the purpose of the interview was to gather facts for the plaintiff in the lawsuit.
Third, plaintiff's counsel violated CRPC 8.4(c), which prohibits "conduct involving dishonesty, fraud, deceit, or misrepresentation," when the investigator recorded the interview without notice or consent. See, Colorado Formal Ethics Opinion 112.
The Court's remedy was to preclude the use of interview in connection with pretrial discovery, but did not preclude the plaintiff from developing the same information in a proper manner.
Although the penalty was not terribly severe in the context of the plaintiff's case, the ruling is certainly a wake up call for attorneys to properly educate and control non-lawyers engaged to work on their cases.
Posted By: Brent W. Houston, Esq.
In McClelland, the attorneys for the plaintiff engaged a private investigator to gather facts regarding the case, which arose out of a bar fight at a Buffalo Wild Wings restaurant. The investigator interviewed the bartender on duty on the night in question, but make several mistakes from an ethical perspective: (1) he did not disclose to the bartender that he was working on behalf of the plaintiff; (2) he did not obtain the permission of the defendant's counsel before interviewing the bartender, an employee of the defendant, regarding the circumstances of the fight; and (3) he tape recorded the interview without disclosing that fact to the bartender.
The Court found that plaintiff's counsel committed three ethical violations stemming from the investigator's interview of the bartender. The investigator's conduct is attributed to plaintiff's counsel under Rule 8.4(a) of the Colorado Rules of Professional Conduct ("CRPC"), which prohibits a lawyer from violating the rules "through the acts of another" and attributes the misconduct of an agent to the supervising lawyers.
First, plaintiff's counsel violated CRPC 4.2, which prohibits communicating with an opposing party when that party is represented by counsel, when the investigator contact the bartender, an employee of defendant, without the permission of defendant's counsel. See, Colorado Formal Ethics Opinion 69.
Second, plaintiff's counsel violated CRPC 4.1, which prohibits making a false statement of or failing to disclose a material fact to a third person, when the investigator failed to disclose that he worked for the plaintiff and that the purpose of the interview was to gather facts for the plaintiff in the lawsuit.
Third, plaintiff's counsel violated CRPC 8.4(c), which prohibits "conduct involving dishonesty, fraud, deceit, or misrepresentation," when the investigator recorded the interview without notice or consent. See, Colorado Formal Ethics Opinion 112.
The Court's remedy was to preclude the use of interview in connection with pretrial discovery, but did not preclude the plaintiff from developing the same information in a proper manner.
Although the penalty was not terribly severe in the context of the plaintiff's case, the ruling is certainly a wake up call for attorneys to properly educate and control non-lawyers engaged to work on their cases.
Posted By: Brent W. Houston, Esq.
Wednesday, December 16, 2009
ECONOMIC LOSS RULE BARS THEFT CLAIM
In Makoto USA, Inc., v. Russell, 08CA1372 (Nov. 25, 2009), the Colorado Court of Appeals ruled that the economic loss rule barred plaintiff's civil theft claim because it was inextricably intertwined with plaintiff's breach of contract claim.
In Makoto, plaintiff asserted claims of breach of contract and civil theft against the defendants arising out of plaintiff's purchase of defendants' business. Among the purchased assets was a utility patent, which, unbeknownst to the plaintiff, was unenforceable because the defendants had failed to make certain maintenance payments. The purchase agreement between the parties required plaintiff to pay defendants annual installments of $50,000 in satisfaction of the purchase price. Upon learning of the unenforceable patent, plaintiff ceased making payments and filed its action for breach of contract and civil theft.
The issue on appeal was whether the civil theft claim under Colorado's stolen property statute, Section 18-4-405, C.R.S. 2009, which provides for treble damages and attorneys fees, was barred by the economic loss rule. The Court of Appeals held that the civil theft claim was predicated on the existence of a breach of the contract, and therefore the economic loss rule barred recovery for civil theft.
The economic loss rule provides that "a party suffering only economic loss from the breach of an express or implied contractual duty may not assert a tort claim for such breach absent an independent duty of care under tort law." Id. For there to be a cognizable independent duty, "(1) the duty must arise from a source other than the relevant contract, and (2) the duty must not be a duty also imposed by the contract." Id.
The Makoto Court found that the civil theft claim was wholly dependent on the plaintiff's contract claim. The relief sought in the two claims were the same, and the theft claim could not have been proven without first proving that defendants also breached the contract. "Had defendants complied with the their reciprocal contractual duties, plaintiff would have no colorable claim that defendants 'stole' a contractual payment." Id. The Court further found that the legislature did not intend the stolen property statute be used to expand contractual remedies.
Posted By: Brent W. Houston, Esq.
In Makoto, plaintiff asserted claims of breach of contract and civil theft against the defendants arising out of plaintiff's purchase of defendants' business. Among the purchased assets was a utility patent, which, unbeknownst to the plaintiff, was unenforceable because the defendants had failed to make certain maintenance payments. The purchase agreement between the parties required plaintiff to pay defendants annual installments of $50,000 in satisfaction of the purchase price. Upon learning of the unenforceable patent, plaintiff ceased making payments and filed its action for breach of contract and civil theft.
The issue on appeal was whether the civil theft claim under Colorado's stolen property statute, Section 18-4-405, C.R.S. 2009, which provides for treble damages and attorneys fees, was barred by the economic loss rule. The Court of Appeals held that the civil theft claim was predicated on the existence of a breach of the contract, and therefore the economic loss rule barred recovery for civil theft.
The economic loss rule provides that "a party suffering only economic loss from the breach of an express or implied contractual duty may not assert a tort claim for such breach absent an independent duty of care under tort law." Id. For there to be a cognizable independent duty, "(1) the duty must arise from a source other than the relevant contract, and (2) the duty must not be a duty also imposed by the contract." Id.
The Makoto Court found that the civil theft claim was wholly dependent on the plaintiff's contract claim. The relief sought in the two claims were the same, and the theft claim could not have been proven without first proving that defendants also breached the contract. "Had defendants complied with the their reciprocal contractual duties, plaintiff would have no colorable claim that defendants 'stole' a contractual payment." Id. The Court further found that the legislature did not intend the stolen property statute be used to expand contractual remedies.
Posted By: Brent W. Houston, Esq.
Monday, December 14, 2009
ARBITRATORS NOT REQUIRED TO EXPLAIN AWARDS
The Colorado Court of Appeals has ruled "as a matter of Colorado law that arbitrators are not required to explain their reasons for issuing awards authorized by an agreement." Treadwell v. Village Homes of Colorado, Inc., 08CA0304 (Nov. 25, 2009). "Absent an affirmative showing of invalidity, arbitration awards may not be set aside for want of explanation (or ... remand for explanation)." Id.(internal quotations omitted). "'A mere ambiguity in the opinion accompanying an award, which permits the inference that the arbitrator may have exceeded his authority, is not a reason for refusing to enforce the award.'" Id. (quoting United Steel Workers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 598 (S. Ct. 1960).
In the Treadwell case, the defendant, Village Homes, appealed the district court's confirmation of the arbitrator's award of attorneys' fees, costs, and post- and pre-judgment interest in favor of the plaintiffs. The arbitration provision contained in the sales contract provided for award of attorneys' fees and expenses to the prevailing party "upon a showing of egregious conduct." Id. The arbitrator awarded the plaintiffs $525,000 in damages and close to $300,000 in attorneys' fees, costs, and pre-judgment interest, but made no written findings. On appeal, Village Homes argued that the arbitrator exceeded its powers with respect to the award of attorneys' fees, costs and interest. The Court of Appeals disagreed.
The Court of Appeals ruled that the award of attorneys fees and costs in this case involved the merits of the dispute, because the arbitration clause provide for attorneys' fees and costs for egregious conduct, and not whether the arbitrator was empowered to make such award. Further, the merits of dispute are not subject to judicial review, and an arbitrator's award cannot be overturned simply because the arbitrator did not explain the reasoning for the award.
The Court of Appeals noted that parties can require the arbitrator to issue written "findings," and in that instance, the arbitrator's failure to issue findings would exceed the arbitrator's powers. However, the merits of the case shown in the findings would not be subject to judicial review. Only whether the award was within the powers of the arbitrator would be reviewable.
Posted By: Brent W. Houston, Esq.
In the Treadwell case, the defendant, Village Homes, appealed the district court's confirmation of the arbitrator's award of attorneys' fees, costs, and post- and pre-judgment interest in favor of the plaintiffs. The arbitration provision contained in the sales contract provided for award of attorneys' fees and expenses to the prevailing party "upon a showing of egregious conduct." Id. The arbitrator awarded the plaintiffs $525,000 in damages and close to $300,000 in attorneys' fees, costs, and pre-judgment interest, but made no written findings. On appeal, Village Homes argued that the arbitrator exceeded its powers with respect to the award of attorneys' fees, costs and interest. The Court of Appeals disagreed.
The Court of Appeals ruled that the award of attorneys fees and costs in this case involved the merits of the dispute, because the arbitration clause provide for attorneys' fees and costs for egregious conduct, and not whether the arbitrator was empowered to make such award. Further, the merits of dispute are not subject to judicial review, and an arbitrator's award cannot be overturned simply because the arbitrator did not explain the reasoning for the award.
The Court of Appeals noted that parties can require the arbitrator to issue written "findings," and in that instance, the arbitrator's failure to issue findings would exceed the arbitrator's powers. However, the merits of the case shown in the findings would not be subject to judicial review. Only whether the award was within the powers of the arbitrator would be reviewable.
Posted By: Brent W. Houston, Esq.
Wednesday, December 9, 2009
COLORADO COURT OF APPEALS RULES ON SCOPE OF HEALTH CARE PROXY
Sections 15-18.5-103 and 15-18.5-104, C.R.S. 2009, provide for appointment of a person to act as a health care proxy to make medical treatment and health care benefit decisions on behalf of an incapacitated person. The Colorado Court of Appeals recently ruled that a decedent's estate was not bound by an arbitration provision contained in nursing home admission documents signed by the decendent's health care proxy. Estate of Lujan v. Life Care Centers of America, d/b/a Evergreen Nursing Home, Case No. 08CA2367 (Nov. 25, 2009).
The Court ruled that the person appointed as the decedent's health care proxy did not have the authority to enter into an arbitration agreement because a decision to arbitrate is not a "medical treatment decision," and therefore the the estate was not bound by the arbitration agreement contained in the admission documents. Id. Note that the issue of whether an agreement to arbitrate is a "health care benefit decision" was resolved in the negative at the trial court level and was not raised on appeal.
The Court agreed that the decision to admit an incapacited person to a nursing home facility may fall with the definition of "medical treatment decision," but concluded that the General Assembly intended that this term be construed narrowly. In support of this conclusion, the Court pointed to Section 13-64-403(7), C.R.S. 2009, which provides that a health care provider cannot condition provision of medical care services on the patient's signing an arbitration agreement, and to Section 13-64-403(1), C.R.S. 2009, which requires arbitration agreements to be entered into voluntarily by the patient.
The Court further concluded that because of the incapacitated person's inherent lack of choice in appointment of the proxy "the health care proxy's authority should be viewed as a last resort and should be strictly limited to those decisions that are necessary to preserve a patient's health and well-being and that the patient would likely make were he or she able to do so." Id.
Posted By: Brent W. Houston, Esq.
The Court ruled that the person appointed as the decedent's health care proxy did not have the authority to enter into an arbitration agreement because a decision to arbitrate is not a "medical treatment decision," and therefore the the estate was not bound by the arbitration agreement contained in the admission documents. Id. Note that the issue of whether an agreement to arbitrate is a "health care benefit decision" was resolved in the negative at the trial court level and was not raised on appeal.
The Court agreed that the decision to admit an incapacited person to a nursing home facility may fall with the definition of "medical treatment decision," but concluded that the General Assembly intended that this term be construed narrowly. In support of this conclusion, the Court pointed to Section 13-64-403(7), C.R.S. 2009, which provides that a health care provider cannot condition provision of medical care services on the patient's signing an arbitration agreement, and to Section 13-64-403(1), C.R.S. 2009, which requires arbitration agreements to be entered into voluntarily by the patient.
The Court further concluded that because of the incapacitated person's inherent lack of choice in appointment of the proxy "the health care proxy's authority should be viewed as a last resort and should be strictly limited to those decisions that are necessary to preserve a patient's health and well-being and that the patient would likely make were he or she able to do so." Id.
Posted By: Brent W. Houston, Esq.
Wednesday, November 11, 2009
PARTITIONING COLORADO REAL ESTATE: HOW TO FORCE A SALE
Any party with an interest in real property can force a partition. But, partition in kind (physical partition) is favored over a forced sale. A Colorado district court may only direct the sale of property which is subject to being partitioned under limited circumstances. See 4 Thompson on Real Property § 38.04 , (David Thomas ed. 1994). To force a sale a party must have a court appointed commissioner (one or more) report to the Court and have the Court find that “partition of the property cannot be made without manifest prejudice to the rights of any interested party.” C. R. S. § 38-28-107 [emphasis added]. Only in that event does the Court have the power to direct a public sale. Id. But, what is “manifest prejudice” and how do you prove it?
“Manifest prejudice” is directly addressed in Young Properties v. Wolflick, 87 P.3d 235, 238 (Colo. App. 2003), which states:
"No Colorado court has defined 'manifest prejudice' in the context of a partition action. However, other jurisdictions require a showing of 'great prejudice' before partition by sale may be ordered. In our view 'great prejudice' is equivalent to 'manifest prejudice.' See Webster’s Third New International Dictionary 1375 (1986) (defining “manifest” as capable of being readily and instantly perceived, obvious, overt). In those other jurisdictions, great prejudice has been shown when either (1) the physical characteristics of the land make it impracticable to divide into equal parts; or (2) the value of the whole is materially greater than the sum of its parts. See Ashley v. Baker, 867 P.2d 792, 796 (Alaska 1994) (test for prejudice is whether combined value of the shares would be materially less than the whole); Wilcox v. Willard Shopping Ctr. Assocs., 208 Conn. 318, 544 A.2d 1207 (1988) (partition in kind of shopping center held to be impracticable); Boltz v. Boltz, 133 Wis.2d 278, 282, 395 N.W.2d 605, 607 (Ct. App. 1986); Thompson on Real Property, supra. We agree with those decisions. [Emphasis added.]"
Thus, if you can show that the physical characteristics of the land make it impracticable to divide into two equal parts or that the value of the whole is materially greater than the sum of any parts that could be created by physical partition, you should obtain an order forcing a public sale.
Physical Characteristics Making It Impracticable to Divide Property Into Equal Parts
Disparities in such factors as topography, slopes, views, drainage, access, water zones, sewage disposal, or existing utilities may make it impracticable to physically divide the property without substantial prejudice to anyone. The law also allows for creative, but logical arguments about properties based on their location. For instance one can argue the absence of an approved site-specific development plan for property whose location makes its highest and best use a residential neighborhood community makes physical partition inherently speculative and prejudicial. This conclusion flows from the inability of owners to reasonably calculate future development costs or revenues without the vested rights which arise by operation of law upon governmental approval of a site specific development plan. See, C.R.S. § 24-68-101, et seq.
Value of the Whole Materially Greater Than the Sum of Parts
Certain land is more valuable as a whole than when divided into smaller parcels. This is true when various physical features (water, views, road access, drainage) must exist together to create higher value. For property slated for residential neighborhood community development, land use planning and engineering experts may be able to demonstrate the entire acreage has a greater net value than would the sum of the net values of parcels resulting from physical partition. This conclusion obtains when smaller parcels would be created that either cannot be developed or for which additional Special Districts, engineering, planning, and legal costs would decrease net value substantially. Thus, when certain properties are subject to being partitioned physically, a party may be able to show the separate costs for soil evaluations, water and sewer engineering studies, and the other various aspects of engineering and community planning required would be duplicated or substantially increased.
In conclusion, either one of two factors alone may justify a finding that a property cannot be partitioned without manifest to any interested party. One factor is that the physical characteristics make it impracticable to divide into parts. The other factor is that the value as a whole is greater than the sum of the values of the parts to result from partition.
Posted By: Wesley B. Howard, Esq.
“Manifest prejudice” is directly addressed in Young Properties v. Wolflick, 87 P.3d 235, 238 (Colo. App. 2003), which states:
"No Colorado court has defined 'manifest prejudice' in the context of a partition action. However, other jurisdictions require a showing of 'great prejudice' before partition by sale may be ordered. In our view 'great prejudice' is equivalent to 'manifest prejudice.' See Webster’s Third New International Dictionary 1375 (1986) (defining “manifest” as capable of being readily and instantly perceived, obvious, overt). In those other jurisdictions, great prejudice has been shown when either (1) the physical characteristics of the land make it impracticable to divide into equal parts; or (2) the value of the whole is materially greater than the sum of its parts. See Ashley v. Baker, 867 P.2d 792, 796 (Alaska 1994) (test for prejudice is whether combined value of the shares would be materially less than the whole); Wilcox v. Willard Shopping Ctr. Assocs., 208 Conn. 318, 544 A.2d 1207 (1988) (partition in kind of shopping center held to be impracticable); Boltz v. Boltz, 133 Wis.2d 278, 282, 395 N.W.2d 605, 607 (Ct. App. 1986); Thompson on Real Property, supra. We agree with those decisions. [Emphasis added.]"
Thus, if you can show that the physical characteristics of the land make it impracticable to divide into two equal parts or that the value of the whole is materially greater than the sum of any parts that could be created by physical partition, you should obtain an order forcing a public sale.
Physical Characteristics Making It Impracticable to Divide Property Into Equal Parts
Disparities in such factors as topography, slopes, views, drainage, access, water zones, sewage disposal, or existing utilities may make it impracticable to physically divide the property without substantial prejudice to anyone. The law also allows for creative, but logical arguments about properties based on their location. For instance one can argue the absence of an approved site-specific development plan for property whose location makes its highest and best use a residential neighborhood community makes physical partition inherently speculative and prejudicial. This conclusion flows from the inability of owners to reasonably calculate future development costs or revenues without the vested rights which arise by operation of law upon governmental approval of a site specific development plan. See, C.R.S. § 24-68-101, et seq.
Value of the Whole Materially Greater Than the Sum of Parts
Certain land is more valuable as a whole than when divided into smaller parcels. This is true when various physical features (water, views, road access, drainage) must exist together to create higher value. For property slated for residential neighborhood community development, land use planning and engineering experts may be able to demonstrate the entire acreage has a greater net value than would the sum of the net values of parcels resulting from physical partition. This conclusion obtains when smaller parcels would be created that either cannot be developed or for which additional Special Districts, engineering, planning, and legal costs would decrease net value substantially. Thus, when certain properties are subject to being partitioned physically, a party may be able to show the separate costs for soil evaluations, water and sewer engineering studies, and the other various aspects of engineering and community planning required would be duplicated or substantially increased.
In conclusion, either one of two factors alone may justify a finding that a property cannot be partitioned without manifest to any interested party. One factor is that the physical characteristics make it impracticable to divide into parts. The other factor is that the value as a whole is greater than the sum of the values of the parts to result from partition.
Posted By: Wesley B. Howard, Esq.
Homebuyer Tax Credit Extended and Liberalized
The popular tax credit available to first-time homebuyers was extended and liberalized by enactment of the "Worker, Homeownership, and Business Assistance Act of 2009" (H.R. 3548) on November 6, 2009.
The top credit for qualifying first-time home purchases is $8,000 ($4,000 for a married person filing separately) or 10% of the residence's purchase price, whichever is less.
The first-time homebuyer credit is extended to apply to a principal residence purchased before May 1, 2010, and also applies to a principal residence purchased before July 1, 2010, pursuant to a written contract entered into prior to May 1, 2010.
In addition to first-time homebuyers, the credit may be claimed by a homeowner who is a "long-term resident," which means a person who maintained the same principal residence for any 5-consecutive year period during the 8-years ending on the date that the person purchases the subsequent residence. There is no requirement that the current home be sold in order to qualify for the credit, but the new residence must become the homeowner's principal residence. The maximum credit for aqualifying existing homeowner is $6,500 ($3,250 for a married individual filing separately), or 10% of the purchase price of the subsequent principal residence, whichever is less.
For purchases after November 6, 2009, the homebuyer credit phases out at higher modified AGI levels. For individuals, the phaseout range is between $125,000 and $145,000, and for persons filing joint returns, the range is between $225,000 and $245,000.
There also is a new price cap for the credit. For purchases after November 6, 2009, the homebuyer credit cannot be claimed for a home if its purchase price exceeds $800,000. Importantly, there is no phaseout. If the purchase price exceeds $800,000 by any amount, the entire credit is lost.
The new law includes several new anti-abuse rules. These include: (1) beginning with the 2010 tax returns, settlement statements for the qualifying residence must be attached to the taxpayer's returns; (2) for purchases after November 6, 2009, the taxpayer must be at least 18 as of the date of purchase; (3) for purchases after November 6, 2009, the taxpayer cannot be a person who can be claimed as a dependent by another person for the tax year of purchase; and (4) certain related-party restrictions.
Posted By: Brent W. Houston, Esq.
The top credit for qualifying first-time home purchases is $8,000 ($4,000 for a married person filing separately) or 10% of the residence's purchase price, whichever is less.
The first-time homebuyer credit is extended to apply to a principal residence purchased before May 1, 2010, and also applies to a principal residence purchased before July 1, 2010, pursuant to a written contract entered into prior to May 1, 2010.
In addition to first-time homebuyers, the credit may be claimed by a homeowner who is a "long-term resident," which means a person who maintained the same principal residence for any 5-consecutive year period during the 8-years ending on the date that the person purchases the subsequent residence. There is no requirement that the current home be sold in order to qualify for the credit, but the new residence must become the homeowner's principal residence. The maximum credit for aqualifying existing homeowner is $6,500 ($3,250 for a married individual filing separately), or 10% of the purchase price of the subsequent principal residence, whichever is less.
For purchases after November 6, 2009, the homebuyer credit phases out at higher modified AGI levels. For individuals, the phaseout range is between $125,000 and $145,000, and for persons filing joint returns, the range is between $225,000 and $245,000.
There also is a new price cap for the credit. For purchases after November 6, 2009, the homebuyer credit cannot be claimed for a home if its purchase price exceeds $800,000. Importantly, there is no phaseout. If the purchase price exceeds $800,000 by any amount, the entire credit is lost.
The new law includes several new anti-abuse rules. These include: (1) beginning with the 2010 tax returns, settlement statements for the qualifying residence must be attached to the taxpayer's returns; (2) for purchases after November 6, 2009, the taxpayer must be at least 18 as of the date of purchase; (3) for purchases after November 6, 2009, the taxpayer cannot be a person who can be claimed as a dependent by another person for the tax year of purchase; and (4) certain related-party restrictions.
Posted By: Brent W. Houston, Esq.
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