TAX UPDATE

There has been several new tax laws passed in New Jersey this summer, as well as some changes in the federal tax code, they are as follows:

• Mansion Tax - Effective 8/01/04 the purchaser of a NJ property zones 'residential' selling for $1 Million or more is required to pay a 'Mansion' tax at the time of settlement equal to 1% of the total sales price.

• Transfer Fee - On the transfer of all real property a transfer fee is paid to the state by the seller.  As of 8/01/04 a new component was added.  All transfers in excess of $350,000 are subjected to a "general purpose fee" and is charged on the entire consideration stated.

FORMULA:

Consideration                                                                     Cost per $1000.

not over $150,000                                                                     $5.80

$150,000 to $200,000                                                                8.50

$200,001 to $550,000                                                                9.60

$550,001 to $850,000                                                               10.60

$850,000 to $1,000,000                                                             11.60

over $1,000,001                                                                          12.10

• Mandatory Withholding - Effective 8/01/04, non resident individuals, estates and trusts must pay estimated New Jersey gross income tax on gain.  The estimated tax is a minimum of 2% of the gross sales price or 8.97% of the gain on the property. An exception would be if the seller is participating in a 1031 tax deferred exchange.

SOME GOOD NEWS!

Reduction in Capital Gains: 

• The tax rate has been lowered to 15% for higher income taxpayers and to 5% for lower income tax payers.  These changes for the higher income taxpayer is effective from 05/06/2003 through 2008 and through 2007 for the lower tax brackets.  In 2008 the 5% rate drops to zero for that year only.  In 2009, barring an additional legislation, the tax rates will convert back to 20% and 10%.

The above is only a quick review of recent, it is always best to speak with a professional tax advisor when contemplating any change in your investment portfolio.