Land for Love and Money

by Reid Lance Rosenthal

  Homeowners

  American Homeowners Association

  http://www.ahahome.com

  Livestock

  Animal Units

  http://www.thedairysite.com/articles/981/understanding-the-animal-unit-month-aum

  Land Trusts

  Land Trust Alliance

  http://www.landtrustalliance.org/about

  National Community Land Trust Network

  http://www.cltnetwork.org

  American Farmland Trust

  http://www.farmland.org/default.asp

  TAX, 1031 and Starker Exchanges

  US Tax Code Online

  http://www.fourmilab.ch/uscode/26usc/

  1031 Exchanges

  http://www.1031.org/about1031/faq.htm

  1031 Exchanges Made Simple

  http://www.1031exchangemadesimple.com

  Reverse Starker Exchange

  http://www.1031exchangetip.com/reverse-starker-exchange.htm

  1031 deferred exchange. A 1031 deferred exchange allows a seller to defer tax liabilities on gains of sales of property if strict criteria for investment of the sale proceeds into another like-kind property are met within a specific time period.

  Acquirer. A bank that stepped into the shoes of the failed S&L

  Agenda 21. The ever evolving bible of globalism, developed by the United Nations in 1992 and purporting to direct and guide countries, their provinces or states and even local municipalities towards environmental sustainability. “Private property ownership is the primary cause of social injustice.”

  Animal Unit (AU). A standardized measure of animals used for various agricultural purposes, based on a 1,000-pound beef cow as the standard measure.

  Animal Unit Month (AUM). The amount of forage needed by an animal unit grazing for one month. Used by land manager to determine stocking rates for range or pasture.

  Anti-merger clause. Provisions specified within a Purchase Agreement that provide for warranties that extend forever past closing, without which, such warranties, along with all other prior negotiations and discussions, will merge with closing and be extinguished.

  Appraisal. An assessment or estimation of the worth, value, or quality of property for the purpose of assessing tax, determining sales price, or the amount of a mortgage that might be granted on a property.

  Articles of Incorporation. The governing document by which the terms and conditions of a Sub-S Corporation are described and made legally binding.

  Articles of Organization. The governing document by which the terms and conditions of a Limited Liability Company is described and made legally binding.

  Asset. Any valuable item, including cash, stock, inventories, and including property rights.

  Bank Examiner. An government auditor who examines, among other things, bank loan files for discrepancies in compliance with banking laws, regulations and rules. Bank examiners visit banks between one and four times a year.

  Big brown stonefly nymphs. The subadult stage of the brown stonefly, an aquatic insect which lays eggs, hatches and spends all subadult stages of life in fast moving streams and rivers. A particularly yummy and tantalizing fly imitation used in early spring in the Madison River Watershed for fishing for trout, grayling and whitefish.

  Binder. A payment or written statement making an agreement legally binding until the completion of a formal contract, especially an insurance contract.

  BM. A euphemism for any partner or member of a Partnership, LP, LLC or S Corp who enters into a Partnership Agreement, and engages in fraudulent activities to the demise of the Partnership, the members and himself.

  Buyer’s Agency Agreement. A written agreement which sets out the terms and conditions of the relationship between the agent and client, and including such things as the duration of the agreement, the commission to be earned/paid, and the various rights, duties and obligations of the parties.

  By Laws. The agreements which set forth and describe the rights, responsibilities, powers, liabilities and authorities of the various shareholders of a Sub-S Corporation. Key to the operation of the entity, and it’s assets, distribution of profits or benefits, and resolving disputes.

  Capital gains. The taxable profit realized on the sale of a long term (12+ months) asset or property.

  Capitalization rate (CAP Rate). Annual net operating income/value. The income from land, when interpolated for valuation as a ratio between the net operating income produced by an asset and its capital cost (the original price paid to buy the asset).

  Certificate of Authority. A corporation or limited liability company is domestic to the state in where it was formed. Land ownership via an LLC, LP or S-Corps outside the state in which it is domiciled might require a Certificate of Authority, without which, the partnership may be subject to fines and legal action by the state in which it would be illegally transacting business. If a Certificate of Authority is filed, the partnership is subject to taxes and fees in both the state of formation and any states where the partnership is qualified.

  Comparables. Also referred to as Comps are properties similar to the property being appraised, located in the immediate or like market areas.

  Conforming property. A term defined by the financing industry to describe property that meets certain requirements in order to qualify for mortgage financing.

  Deed of Trust. A written agreement legally conveying property to a trustee, often used to secure an obligation such as a promissory note.

  Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). (Pub.L. 111-203, H.R. 4173) A federal statute, signed into law by President Barack Obama on July 21, 2010. A bureaucratic knee-jerk reaction to the great meltdown of 2008, it affects all federal financial regulatory agencies and almost every aspect of the nation’s financial services industry.

  Dwelling Unit (DU). Where zoning or other government overlayment might allow typical lot or small acreage subdivision (three and one-half houses per acre—aka 3.5/ D.U.)

  Due diligence. An investigation, normally by the buyer, of a potential target for acquisition focusing on existing conditions and material future matters.

  Eminent domain. An action of the government to seize a citizen’s private property, expropriate property, or seize a citizen’s rights in property, without the owner’s consent, either for use or by delegation to third parties who will devote it to public or civic use or, in some cases, economic development. Some monetary compensation is provided. The most common uses of property taken by eminent domain are for public utilities, highways, and railroads.

  Enhancement Derivative Planning. A term referring to planning strategy in which resource, agricultural, and other improvements to the property, result in real increases in value which may lead to very significant escalation of tax benefits. The grant of easements can also increase the value of adjacent lands not subject to easement, and of the rights that have been reserved. Depending upon the individual Grantor’s tax status, this strategy can lower the after-tax cost of acquisition of a property over time by a significant percentage of the purchase price.

  Farm Service Agency (FSA). The federal agency tasked with the implementation of farm conservation and regulation laws around the country.

  Farmer Mac—Federal Agricultural Mortgage Corporation. A stockholder-owned, government sponsored enterprise, created by Congress in 1988 to provide a secondary market in agricultural loans, and the guaranteed portions of agricultural and rural development loans guaranteed by the United States Department of Agriculture. Farmer Mac purchases loans from agricultural lenders, and sells instruments backed by those loans, Farmer Mac is responsible for guaranteeing the repayment of principal and interest to investors.

  Federal Deposit Insurance Corporation (FDIC). A government corporation which examines and supervises certain financial institutions, provides deposit insurance which guarantees the safety of deposits in member banks (up to $250,000 per depositor per bank as of January 2012), and manages Acquirers and failed banks via a Loss Share Agr
eement.

  Fence-out laws. In certain states, landowners are required to build and maintain fences to keep out livestock.

  Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Enacted in the wake of the Savings And Loan crisis of the 1980s, it established the Resolution Trust Corporation as successor to the FSLIC to close hundreds of insolvent thrifts and provided funds to pay out insurance to their depositors.

  For Sale by Owner (FSBO). The process of selling real estate without the representation of a real estate broker or real estate agent.

  Foreclosure. The process by which a lender attempts to recover the balance of a loan from an asset; a forced borrower sale of the asset used as the collateral for the loan.

  FSLIC (Federal Savings and Loan Insurance Corporation). The quasi-government entity that was responsible for insuring deposits in Savings and Loan institutions until the savings and loan crisis of the 1980s, at which time it became insolvent; and was abolished by the FIRREA in 1989, and the deposit insurance responsibility was transferred to the FDIC as manager of the FRF (FSLIC Resolution Fund) as manager of the RTC.

  General Partnerships. A basic business partnership, formed by two or more partners and created by Agreement, or an Partnership Agreement. The members, called Partners, share equally, and are all personally liable for any legal actions and debts the company may face. There is no managing partner. General Partnerships may or may not have a written Agreement.

  Grantor. The person donating or selling an easement, or instrument of conveyance.

  Homeowners association. A corporation formed for the purpose of marketing, managing, and maintaining properties in a residential subdivision.

  Joint Venture. A business partnership in which parties agree to develop a new entity and new assets by contributing equity. The members or partners share revenues, expenses and assets. Similar to a General Partnership.

  Like-kind exchange. A transaction that allows for the disposition of property and the acquisition of another, “like” property without generating a tax liability from the sale of the first.

  Limited Liability Company (LLC). A partnership in which the owners, or members, are protected from some or all liability of the LLC, registered under Articles of Organization. LLCs are run by manager(s), and governed via rights, responsibilities, powers, liabilities and authorities as described in an Operating Agreement.

  Limited Partner. The partner in a Limited Partnership.

  Limited Partnership (LP). A partnership in which the owners are called limited partners. Only one partner is required to be a General Partner (many times a corporate entity). Registered with the state under a Partnership Registration the agreements which govern the rights, responsibilities, powers, liabilities and authorities key to the operation of the entity, and it’s assets, distribution of profits or resolving disputes is Limited Partnership Agreement.

  Loan to value ratio (LTV). The ratio of the loan amount to equity based on appraisal. Example: If your appraisal is $100, and the loan is $50, you have a 50% LTV.

  Long-term capital gains. A profit or value of property accrued over an extended period time greater than one year.

  Loss Share Agreement. A agreement made between the FDIC and lenders, under which the acquiring banks are encouraged to purchase loans of failed banks at a significant discount, but are guaranteed profits, funded by the taxpayers by the FDIC on the face amount of those loans.

  Macroeconomics. Conceptual reference to economics dealing with the performance, structure, behavior, and governmental decision-making of the whole economy, including national, regional, and global economies including government policy, taxation and regulation.

  MAI. A professional designation held by appraisers who are experienced in the valuation and evaluation of commercial, industrial, residential and other types of properties, and who advise clients on real estate investment decisions.

  Managers. The member(s) of a LLC that carries management authority.

  Material affects. Either positive or negative, significant affects to property value and salability from environmental impacts, development and encumbrances.

  Member. The partner in a Limited Liability Company.

  Metaphysical. Referring to that which is without material form or substance; not existing in nature or subject to explanation according to natural laws; neither physical nor material.

  Millage tax. See property tax.

  Nonperforming asset. A classification level by which a loan no longer qualifies for continued financing, including loans on which payments of interest and principal are not being made.

  Northern Laramie Range Alliance (NLRA). An association of citizens and dedicated to preserving the open-space, agricultural and recreational character of the Northern Laramie Mountains in central Wyoming. Formed in March 2009 when it became evident that the Northern Laramies have been targeted for industrial-scale wind energy development.

  Office of the Comptroller of Currency (OCC). An independent bureau within the U.S. Department of Treasury, established by the National Currency Act of 1863 and serves to charter, regulate, and supervise all national banks, and the federal branches and agencies of foreign banks in the United States.

  Operating Agreement. A legally binding document which governs the rights, responsibilities, powers, liabilities and authorities of the various partners of an LLC, and key to the operation of the entity, management of its assets, distribution of profits or other benefits, or resolving disputes.

  Partnership Agreement. The written agreement by which the terms and conditions of a partnership are described and made legally binding.

  Performing. A term used to describe a loan for which payments of principle and interest are consistent with the terms set forth in the loan agreement. Also a level of classification used by bank examiners to rate loan files.

  Phantom income. Taxable income based taxable gain or proportionate shares of taxable gain of an S-Corp, LLC, or LP, in excess of cash distributions regardless.

  PPPPP Rule. “Prior planning prevents poor performance.”

  Property tax or millage tax. A tax levied on property including: land, improvements to land, personal property, and intangible property, by the governing authority of the jurisdiction in which the property is located.

  PTO or Power take-off. That point at which implements may be attached to machinery and from which power is transferred from the machinery, to a drive shaft and gear box attachment on the implement.

  Reserved rights. Property rights reserved by the owner, and therefore not donated, sold or otherwise transferred as conditions of a conservation easement.

  Review appraisal or second appraisal. An appraisal done to provide valuation on a property should the lender determine that the property require more scrutiny, is unique, or if comparable properties are difficult to obtain or not available.

  Riparian area protection fence. A fence designed and constructed to manage access to riparian zones with the purpose of restoration and protection of habitat within the riparian corridor and streambed.

  S&L—Savings and loan association. Also known as a thrift, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans.

  Seller financing. A loan provided by the seller of a property to the buyer, rather than the buyer obtaining financing from a bank.

  Shareholder. The partner in a Sub-S Corporation.

  SRA. A professional designation held by appraisers who are experienced in the analysis and valuation of residential real property.

  Starker Exchange. Exchange of certain types of property to defer the recognition of capital gains or losses due upon sale, and hence defer any capital gains taxes otherwise due.

  Sub S Corporation (S-Corp). A specialized corporation in which the members or shareholders share liabilities, profits and losses.

  Terms. Conditions and provisions of a purchase agreement, softer terms typically mean more lenient provisions, and a higher price. Sti
ff terms such as an all-cash deal, typically mean a price discount.

  Thrift. A savings and loan association, credit union, or savings bank.

  Title Insurance Commitment. A commitment by a qualified surety, to insure merchantable title to a properly.

  Triple mocha. An overpriced coffee beverage usually containing three (hence the name) shots of chocolate syrup and three shots of espresso.

  U.S. Tax Code. The approximately eighty thousand pages of the domestic portion of Federal statutory tax law covering income tax, payroll taxes, estate taxes, gift taxes and excise taxes; as well as procedure and administration.