House passes bill affecting single-asset bankruptcies The House has passed a bankruptcy reform bill (H.R. 3150) that would eliminate the debt limit on single-asset real estate bankruptcies.
Under the Bankruptcy Code, single-asset real estate is a property or project (other than one-to-four-family housing) which produces substantially all of the debtor's gross income and on which no business is conducted by the debtor other than the operation of the project and incidental activities.
Secured creditors in single-asset cases can get expedited relief from the automatic stay against foreclosure on the property.
Currently, single-asset treatment is limited to properties with no more than $4 million in debt. Earlier this year, the House passed a bill (H.R. 764) to raise the debt ceiling to $15 million, but the latest legislation would remove the debt limit completely.
The bill would also revise the definition of single-asset real estate to include properties operated by a commonly controlled group of business entities which are all debtors in a Chapter 11 bankruptcy case.
Single-asset debtors can avoid foreclosure by making monthly interest payments to secured creditors based on the value of the creditors' interest in the property. Under current law, the interest rate to be used in calculating the amount of the payments is the present fair market rate, but the bill would require use of the contract rate for the debt. The bill would also make it clear that the debtor can use rents or other income generated by the property, before or after the bankruptcy petition is filed, to make the required payments.
Another provision in the legislation would give a bankruptcy trustee 120 days after entry of an order of relief from the automatic stay to assume an unexpired lease on nonresidential real property. The current limit is 60 days. The court could extend the 120-day period by up to an additional 150 days.
Section 8 owners barred from renting to relatives HUD has issued regulations for the Section 8 tenant-based rental assistance programs that generally bar landlords from renting to relatives.
The prohibition applies if the owner is the parent, child, grandparent, grandchild, sister or brother of any member of the certificate or voucher holder's family.
The only exception to this ban allows a unit to be leased to a relative with Section 8 assistance if the lease would provide a reasonable accommodation for a family member with a disability.
IRS memo clarifies rules for partnership property swap A like-kind exchange of partnership property won't qualify for tax-deferred treatment under Section 1031 of the Internal Revenue Code if the replacement property goes directly to the partners, according to the Internal Revenue Service.
The IRS explained its position in a technical advice memorandum (TAM 9818003), which doesn't establish a precedent for cases involving other taxpayers, but does illustrate the Service's thinking on an issue.
In this case, a partnership planned to liquidate by disposing of its properties through tax-deferred exchanges conducted through a qualified intermediary, as provided in Section 1031. Under the plan, the partners would designate replacement properties to be acquired with their share of the proceeds of the sale of the partnership properties, and the replacement properties would be deeded directly to the partners.
In concluding that this transaction wouldn't qualify for tax deferral under Section 1031, the IRS noted that there was no exchange because the partnership, which owned the relinquished properties, never received the replacement properties.
House passes bill to fund rural housing programs The House has approved a fiscal 1999 agriculture appropriations bill (H.R. 4101) that would provide $100 million for Section 515 rural rental housing loans. The bill also includes $583.4 million for rural rental assistance, to subsidize the rents of low-income tenants.
The House measure also provides a program level of $125 million for Section 538 guaranteed multifamily loans, with an amendment to allow such guaranteed loans to be used in combination with tax-exempt bonds. The Office of Management and Budget (OMB) has opposed the use of government-guaranteed loans to back tax-exempt obligations, but the U.S. Department of Agriculture supported the amendment to override the OMB objection. O
* A House-passed bill would expand the special treatment of single-asset real estate bankruptcies by removing the debt limit.
* The bill would also revise the definition of single-asset real estate to include properties operated by a commonly controlled group of business entities which are all debtors in a Chapter 11 bankruptcy case.