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Francis Vayalumkal

Very often, I talk to people who are concerned about the real estate market mostly because of the reduction in price and the large number of homes for sale that they see around them. Many are investors who own several properties and have nightmares about words such as “real estate bubble”, “crash,” etc.

On the other hand, several buyers see this as an opportunity to take advantage of the slashing prices and great builder incentives for purchasing a home. For the last few years, we had unbelievable rates of appreciation in home prices and that has come down to a much smaller rate. Buyers have waited for years but perhaps the agony is over. It is official; the National Association of Realtors (NAR) has confirmed that we are now in a buyer’s market.

According to the NAR June report on existing home sales, there is now a 6.8 month supply of existing homes on the market. One year ago the supply was 4.4 months. The joint report of the Department of Commerce and the Department of Housing and Urban Development on new home sales contained similar news; the supply of newly constructed homes on the market will take 6.1 months to absorb at the current sales pace compared to 4.3 months a year ago.

The NAR survey found that sales were down modestly in June and home prices were still rising, although at a much slower pace than we have become accustomed to in recent years. Seasonally adjusted existing home sold at a rate of 6.62 million annual units in June, a 1.3 percent decrease from the upwardly revised rate of 6.71 million in May. This was a drop of 8.9 percent from the 7.27 million annual unit sales pace in June 2005.

David Lereah, NAR's chief economist, said that the market is "flattening-out." "Over the last three months, home sales have held in a narrow range, easing to a level that is near our annual projection, which tells us the market is stabilizing. At the same time, sellers have recognized that they need to be more competitive in their pricing given the rise in housing inventories."

The median existing-home price for all housing types – single family, town homes and co-ops – was $231,000 in June, a 0.9 percent increase over June 2005's median price of $229,000.

NAR President Thomas M. Stevens said that, "people who were discouraged by the bidding wars that were so common over the last few years are finding more choices now. Relative to the five-year housing boom, this year is a buyer's market in much of the country with plentiful supply, along with interest rates which remain historically favorable; so, it's a good time to buy a home."

Single-family home sales were down 0.9 percent to an annual rate of 5.81 million from May to June. That was 8.2 percent lower than a year earlier and the median price, $231,000, was identical to that for all housing types.

Condos and co-ops experienced a sharper drop than single-family units. Sales of such units were off 5.5 percent since May to an annual rate of 805,000 units. This was a loss of 14.6 percent from the pace in June of last year. Median prices declined 2.1 percent year-over-year to $226,900.

The Northeast took the biggest hit in sales volume, dropping 3.5 percent since May and 9.8 percent from June 2005. Yet this was the only region in which median prices were up from one year ago, a gain of 7.2 percent to $298,000.

In Florida, existing-home median sales price rose 9 percent to reach $254,800 in the second quarter; a year ago, it was $234,500. In 2001, the second-quarter statewide median sales price was $127,400, which is an increase of about 100 percent over the five-year period. The median is a typical market price where half the homes sold for more, half for less.

The latest economy outlook from NAR notes that the housing market is in the process of stabilizing with little change in overall sales volume expected over the balance of the year. Analysts report that the level of activity remains high historically -- 2006 is expected to be the third best year for existing home sales.

Francis Vayalumkal is a loan officer at Market Street Mortgage and can be reached at (813) 971-7555 or via e-mail at

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Nitesh Patel
DEMYSTIFYING THE VARIABLE ANNUITY: Helping Your Retirement Nest Egg Last as Long as You Do – PART I

According to the US Census Bureau’s, more than 71 million Americans will face retirement in the next 20 years. (2000 Census, U.S. Bureau of Census). If you’re one of them, the possibility of outliving your income should have crossed your mind by now. If not, here’s a reality check. For a 65-year-old married couple, there is a 53 percent chance one spouse will live to age 95 and a 25 percent chance one will make it past age 100 (Northwestern Mutual Data: Survival Probabilities, best issue class, non-tobacco/premier-issue 2006). Will your retirement nest egg last 30 years or longer?

With the increasing scarcity of reliable pension plans, the rising average number of years spent in retirement, and the bleak outlook for Social Security and traditional pension plans, saving enough for retirement is a looming concern for many.

As Americans begin taking more responsibility for retirement savings, the demand for investments that provide stability and support long-term retirement income needs is growing. Investors are increasingly looking to annuities as a reliable source of lifetime income. In fact, the combined net assets of U.S. variable annuities rose to $1.2 trillion at the end of the third quarter in 2005 – a 12.2 percent increase in just a year (National Association of Variable Annuities, “Third Quarter Variable Annuity Industry Data” Press Release, 12/05/05).

One type of annuity – the variable annuity – allows individuals to invest in a variety of underlying equity, bond, fixed or other funds and provides returns based on the performance of these funds. And though performance of a variable annuity is not guaranteed and when redeemed, may be worth more or less than the original investment, it does offers the advantage of tax-deferred growth, a guaranteed death benefit and guaranteed lifetime income options, based on the soundness of the issuing insurance company. However, with so many different product features, expense structures and planning considerations, the challenge is knowing which one to choose.

The first step in the selection process is understanding the common issues that arise regarding variable annuities. Here are four that seem to get the most attention.

Cost. A common mistake is comparing the costs of annuities or other investments, with those offering different types of funds and benefits. Only by comparing investments with similar benefits can you determine which options are most cost effective.

Liquidity. You should know what contractual charges or IRS penalties you might face if you want to get out of any investment. Variable annuities are designed as a long-term investment vehicle to meet retirement and other long term needs, and may be subject to IRS penalties if withdrawn before the age of 59.5. They offer a wide variety of surrender charges which range from none to those which can last 15 years or more.

Estate “friendliness.” A common misconception of variable annuities is that the tax deferral ends when the annuitant/owner dies. While this is a possibility, the beneficiary has an option that could defer potential estate and income taxes. The contingent annuitant or “stretch” feature available on most variable annuity contracts provides that at the death of the annuitant/owner, the beneficiary has the option of becoming the annuitant. While money cannot remain in an annuity indefinitely and IRS laws will supercede contractual provisions, this option can allow the tax deferral to continue through multiple generations, if desired.

Appropriateness for retirement plans. When does it make sense to use a tax-deferred annuity inside a tax-qualified plan, such as an IRA? The answer to this refers back to cost. Regardless of its tax-deferred status, the appropriateness of any investment should be measured by its net performance after expenses. Also, unlike other investments, a variable annuity allows portfolio rebalancing and asset transfers among investment choices without triggering a taxable event.

A variable annuity can be a great investment that satisfies the need to accumulate assets and secure a guaranteed stream of income for life. While annuities may seem complex, their ability to provide solutions for a multitude of financial needs makes the time spent learning more about them a worthwhile investment.

Nitesh Patel is a financial representative with the Northwestern Mutual Financial Network based in Clearwater for The Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin). To reach Patel, call (727) 799-3007 or e-mail

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Dr. Ram P. Ramcharran

Imagine this. Your child is diagnosed with a disability and you now have to face the reality that your child will never be able to things other kids take for granted. You may have suspected something was wrong but you were in denial for a while. Finally, you couldn’t take it any longer. So, you take the child to the doctor and your insight was correct. Your child has a disability that will limit him or her in some capacity for the rest of their life. What do you do next? Here are some suggestions that may help you deal with the shock and reality.

First thing:

1. Purchase "The Child with Special Needs" by Dr. Stanley Greenspan. It's a detailed book that covers a variety of issues and concerns all parents will face at some point with their child. You'll want to read the book right away because it will help you deal with the emotional side of your child’s disability.

2: Read about both sides on dealing with the new diagnosis: one that advocates treatments and cures, and another that specifically discourages them. You need to become extremely familiar with all the options available to you and by investigating them, you are better off in dealing with the matter at hand.

3: Join an online support group or local chapters of a support group that will help you cope with the new issue in your life. Groups such as Families of Children with Autism meet and share with others who have been where you are. This will help you gain insight and some sense of stability in dealing with issues that may arise in your home.

4: Visit or browse on the Internet listings of the specific disability your child may be suffering from. This will give you instant access to knowledge on how to cope and handle immediate issues.

5. Seek professional guidance if you are having problems adjusting to the situation you are faced with. Avoiding and denying the problem will only create more issues that will ultimately lead to unnecessary stress in your life.

Dr. Ram P. Ramcharran can be reached at

Finance | Financial advice | Immigration | Banking | Accounting | Business

Kamlesh Patel
CRUNCHING ‘EM NUMBERS: Save Energy and Get a Tax Break, Too


New IRS rules have created a way for homeowners to trim their energy bill and save taxes to boot. Energy tax credits, which offset your federal taxes dollar-for-dollar, can be claimed for making improvements to your home’s energy efficiency. While the rules are a bit tricky, a little planning now may fatten your wallet come tax time.

The energy tax credit is a two-part, two-year program (2006 and 2007) with a $500 lifetime cap. The first credit is equal to 10 percent of the cost to improve the insulating qualities of your home, through such things as new exterior windows, doors, insulation and certain metal roofs. But before you buy those designer windows you’ve been dreaming of, be aware that the credit for windows is limited to $200.

The second energy credit is equal to 100 percent of the cost of newly purchased cooling or heating equipment. This would include qualifying heat pumps, air conditioners, furnaces, water heaters and fan components. But like the limit on windows, there are credit limitations on this equipment, too. Purchases of water heaters are limited to $150 of tax credit. Furnaces and air conditioners receive a maximum credit of $300.

There are a few more rules to consider. The materials and equipment mentioned above must be placed in service in 2006 or 2007, meet rigid technical requirements, and be expected to last at least five years. The good news is that you can safely rely on the manufacturer’s assertion of tax credit eligibility.

If you’re into saving energy, you might try solar technology. Solar and fuel cell investments can net up to $2,000 in tax credits. Again, special rules apply. did you forget something? file an amended return

How do you correct an income tax return you’ve already filed? If you forgot to report income or if you failed to take a deduction that would have reduced your taxes, you can file an amended tax return to correct the oversight. For example, more than one million taxpayers overpaid their taxes in 2004 because they forgot to deduct state and local sales taxes on their tax returns. This was a new deduction that year based on a new law that let taxpayers choose to deduct either their state and local income taxes or their state and local sales taxes.

To correct a tax return that’s already been filed, you need to complete and file Form 1040X. The IRS generally allows three years from the original due date of the tax return, including extensions, to submit an amended tax return.

There is no need to fear the IRS just because you file a corrected tax return. It is a routine matter. The more complicated the tax law becomes, the greater the chance that a previously filed tax return may need to be corrected. Oversights and missing information are quite common, so don’t feel you are alone if you discover that you need to amend a return.

An amended tax return may result in either a refund or a balance due. In deciding whether or not to file an amended return, you should take into account the amount of money involved. Unless your amended return is requesting a sizable refund, it should not make you any greater an audit target than your original tax return. And filing a return for a $50 refund would probably waste more of your time than it’s worth. gifts: who pays tax and when?

Receiving a gift is not a taxable event to the one who receives the gift. If the gift is large enough, it could result in gift tax being due by the donor.

In any case, you are not to report any gifts you receive on your income tax return. This is true whether the gift is in cash or a gift of property.

When you sell property you received as a gift, you have a whole new story. Your basis (cost) in the property is the same as it was in the hands of the donor. You are considered to have owned the property for as long as the donor owned it, and you also take the donor’s cost. This is true for gifts made while the donor is alive. Property received from an estate is treated differently.

So how does this work on your tax return? Let’s assume that you received a piece of real estate from your mother three months ago, and the real estate has a current value of $100,000. We will further assume that your mother owned the property for twenty years and had paid $30,000 for it.

If you sell the property this year for $100,000, you will have a long-term capital gain of $70,000 ($100,000 minus your mother’s cost of $30,000). You get the favorable long-term capital gain treatment because you are deemed to have owned the property for twenty years.

A final note about gifts: They are not taxable to the person receiving the gift, but they also are not deductible by the person giving the gift. Only gifts to charities and other organizations approved by the IRS provide a tax deduction for the giver.

Kamlesh H. Patel, CPA, can be reached at (813) 289-5512 or (813) 846-5687 or e-mail or

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