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Old 06-28-2012, 03:31 AM   #1
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Hi from deblmw

I lost a great friend last year to cancer. Surprisingly, he left everything to me, as he had no family. I am 50..just turned 50 and that's hard to type..!
I now own a successful bar/lounge, and a nice home mostly paid for. I want to move back to Florida (I am from Fort Walton Beach) and retire. I have 3 sons ages 28, 17, 15, and 1 grandson aged 9. The bar income pays for itself and the household, which is very good in this economy and compared to other bars in the area. The bar has been established since 1989 and has a good following.

The building the bar is in is leased. A month after my friend died the building went into foreclosure. We had never been late with lease payments. I did not have the down payment to purchase the building. So the stress of my friend dying was compounded with the building foreclosing twice (first time improper). The owner of the building filed bankruptcy right before the second foreclosure was to end, which drug things out through the holidays and into the new year before the judge awarded the property to the mortgage company. This went on for a year. I had to sign a new lease with the mortgage company, new security deposit ( we had initially given $6000 security deposit to previous owner ) and let them list the building. We have invested $70,000 into the building just to make it operational..it had been empty for 3 or 4 years and was in bad condition.
No one has put an offer on the building yet. The building was originally built as a Hardees in the early '70's. Our bar is the only business that has ever prospered there. The business continues to do well. The defaulted mortgage amount was $165k and they are now asking $270k. I plan on buying the building next year as I had to establish an income first. I am now writing myself paychecks and just depositing them into the business acct as "loan from owner". We had a 20 year lease with previous owner and the new lease is 1 year.

To make things unbearably worse, my younger sister died in December. She was 1 year younger and we were very close. I really don't have the spirit to have to deal with all of this, but I know I have to.

I have a lot of questions and need financial advise but I can't think of them right now as it is 3am, as usual I don't sleep much since my sister's death.

I'll start with this: I had previously been a single mother struggling to support my children. My credit is not the greatest, although it's not too bad. It definitely wasn't good enough to buy the building without a lot of $ down. My house payments are only $600 a month as he had it paid down. The amount owed is $70k. I know I can refinance for even lower payments. But I was told by one bank that I had to have 2 yrs tax returns and show income. That's why I am writing myself paychecks. I haven't filed personal taxes in 3 years. I had moved in with my friend to take care of him.
So the question would be is there some way I can get to the equity in the house before 2 years of writing myself paychecks? I do have the judgement paperwork from his estate saying that all belongs to me although the house is still in his name.

Any advice would be greatly appreciated as this is all new to me.
Thank you and I look forward to chatting and getting to know my way around in here
deblmw

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Old 06-28-2012, 07:42 AM   #2
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Get with a good tax lawyer and CPA FAST......today.

If you haven't filed taxes, that's your 1st step. Then, have a CPA review your tax situation, and if you owe income tax, pay it both at the federal and State level.

If the Government files a lien, no one will lend you anything.....for a long time. If you don't owe any taxes, then you can start looking at credit consolidation, loans, and to the future. You can get a free credit report, and clean up your credit score, but no one can really tell you how unless they see it. So, share it with a knowledgeable friend or accountant and go to work on improving it. Pay every creditor or time, starting today, if you are behind on any bills.

My advice is to stayaway from anyone that wants to charge you really high fees to look everything over, a good small CPA firm is your best bet; interview two or three and pick the one you feel you can trust.

Good luck.......you may have no problem......you may have a big problem.....either way finding out and fixing it now is the thing to do.
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Old 06-28-2012, 07:48 AM   #3
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Get with a good tax lawyer and CPA FAST......today.

......you may have no problem......you may have a big problem.....either way finding out and fixing it now is the thing to do.
+1

Delaying facing your tax issue will only make things worse.
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Old 06-28-2012, 08:48 AM   #4
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I am sorry for your losses - sounds like you have had a tough go lately.

I agree with others but hope that the reason that you didn't file is because you were taking care of your friend and didn't have sufficient income to need to file.

With respect to refinancing, I would suggest that you talk to any local credit unions, savings banks, etc instead of the big banks or mortgage brokers. They are more likely to do a loan in-house and they may be willing to look to the historical earnings of the bar (since you now own it) rather than just your personal earnings in underwriting a refinancing, particularly if the collateral was strong (the value of the home was much higher than the refinanced loan).

Depending on the strength of the economy in your local area, you may be in a good position to negotiate purchasing the building the bar is in. I would take the amount of rent that the bar currently pays, subtract out any ownership cost that the landlord pays for (property taxes, insurance, etc.) and then back into the monthly payment that the bar could make on a mortgage and then convert that to a loan amount and then convert the loan amount to what the bar could offer for the building assuming a market down payment. Your banker or CPA can probably help you with the calculation. Then compare that number to the $270k the owner is "asking".

Or alternatively, see if you can negotiate a long term lease with an option to buy with the owner. From what you describe I wonder if the owner is just stringing the bar along with the 1 year lease until they can find a buyer for the building at which point the bar could be forced to move which would be disruptive to the business.

It seems that it would be best for you to concentrate in the near term on getting the real estate situation for the bar stabilized, keep the bar operating profitably and then in a few years you might be able to sell the house and the bar and move back to FL.
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Old 06-28-2012, 11:42 AM   #5
Confused about dryer sheets
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Thank you for the advice. And yes, I didn't file personal taxes because I wasn't required to. I am in no trouble with taxes. That's why I am paying myself now ( or showing income ) so I will be able to file and refinance. I just don't want to have to wait on 2 yrs tax returns and it seems with all the collateral I have in the home that I would be able to do something sooner.
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Old 06-28-2012, 01:03 PM   #6
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I would also suggest retitling the home sooner vs. later.

On an extreme case - a family I know has an inherited vacation property that is still in the deceased parents name - 40 years after he died. It was left to his children. They used it through the years, paying prop taxes, etc... But never transfered title etc. They want to sell and are being hit with back estate/transfer taxes that are more than the property is worth. It's a big mess and a nightmare for all involved.
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Old 06-28-2012, 05:28 PM   #7
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Thank you for the advice. And yes, I didn't file personal taxes because I wasn't required to. I am in no trouble with taxes. That's why I am paying myself now ( or showing income ) so I will be able to file and refinance. I just don't want to have to wait on 2 yrs tax returns and it seems with all the collateral I have in the home that I would be able to do something sooner.
I still think you should check with a CPA or tax expert. It doesn't matter if you had personal income or income from the bar you own....either way, if it's income its taxable. Your logic may be correct but I don't understand how any income isn't taxable.

I stand by my advice, I've owned small businesses, I've never figured out how my salary was taxable but if I didn't take a salary, my business income wasn't. Good luck.
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Old 06-28-2012, 05:32 PM   #8
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I stand by my advice, I've owned small businesses, I've never figured out how my salary was taxable but if I didn't take a salary, my business income wasn't. Good luck.
Huh? Business income is taxable.
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Old 06-28-2012, 05:36 PM   #9
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Huh? Business income is taxable.
I think that's what he meant.
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Old 06-29-2012, 05:23 AM   #10
Confused about dryer sheets
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Of course the business taxes are filed and paid yearly. I just wasn't required to file personal taxes because I had no income. Richard (my friend) was supporting me while I was taking care of him. The bar was put in my name a month before he died. I am in no trouble with taxes. We have used an accounting firm for the business for years and I plan on seeing them about my personal situation today, due to your advise.
I was also told that the original owners of the building have a year to reclaim the property. Alabama law. Since he can't come up with the money, I was told I could buy his redemption rights and pay a lower cost to purchase building, I only have until January.
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Old 06-29-2012, 08:06 AM   #11
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I like that idea. The former owner assigns his redemption right to you in exchange for some small amount and then you exercise that right. Or you provide the financing to the former owner, he redeems and then sells or provides a deed in lieu of foreclosure to you. Good luck.
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Old 06-29-2012, 09:22 AM   #12
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I would also suggest retitling the home sooner vs. later.

On an extreme case - a family I know has an inherited vacation property that is still in the deceased parents name - 40 years after he died. It was left to his children. They used it through the years, paying prop taxes, etc... But never transfered title etc. They want to sell and are being hit with back estate/transfer taxes that are more than the property is worth. It's a big mess and a nightmare for all involved.
+1. This would be my first step if I were you. There is untapped equity in this property, is actually worth something and should be relatively easy to do with the help of a lawyer. Just take the will to a lawyer and ask him to help you transfer the title to your name provided everything has cleared probate and you are able to do so at this time.

You can also ask his advice of how to handle the business property situation. Not sure about deed in lieu of foreclosure assigned to you. That might pull you into the bankruptcy/foreclosure proceedings so I would certainly get good legal advice about that.

I actually used the "deed in lieu of" option 25 years ago as my ex-husband had sent the marital home into foreclosure (after living there and not paying the mortgage). It got my name off of the foreclosure proceedings. Hence, if the previous owner suggests this to you and you do it I can only imagine it very well might pull you into the proceedings.
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Old 06-29-2012, 09:37 AM   #13
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.....Not sure about deed in lieu of foreclosure assigned to you. That might pull you into the bankruptcy/foreclosure proceedings so I would certainly get good legal advice about that.
Just remember that in this instance she would be the lender, not the borrower, so I don't get your concern.
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Old 06-29-2012, 11:37 AM   #14
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I haven't filed personal taxes in 3 years.
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Of course the business taxes are filed and paid yearly. I just wasn't required to file personal taxes because I had no income. Richard (my friend) was supporting me while I was taking care of him. The bar was put in my name a month before he died. I am in no trouble with taxes. We have used an accounting firm for the business for years and I plan on seeing them about my personal situation today, due to your advise.
We frequently (all too frequently) have new posters come on the board to ask their questions and discuss their issues, who make statements which lead us readers to think that their issues are much more severe than the poster realizes.

You wouldn't be the first poster to make it appear that they neglected to file a required tax return. You've clarified that you didn't file a tax return because you weren't required to file a tax return, but frankly it was a little difficult to figure that out from your original statement. "Of course" isn't as blindingly obvious to all the people who post here.

We're also pretty accustomed to reading about accountants and financial advisors who have screwed up (or screwed over) their clients. So we tend to be a bit skeptical (perhaps even cynical) about relying on their advice, too.
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