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August 29, 1997     Cape Gazette
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August 29, 1997

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10- CAPE GAZETTE, Friday, August 29 - September 4, 1997 Tax changes should benefit Cape real estate market $250,000 of their gain. Gains beyond those with inherited property, who may have a could sell the house in Wilmington, put the Realtors say capital gains tax reductions will be stimulant By Dennis Forney Federal tax.legislation signed into law on Aug. 5, 1997, is expected to improve an al- ready healthy Delaware Cape Region real estate market. A number of area Realtors polled this week said that a reduction in the capital gains tax along with changes on how capi- tal gains realized on the sale of primary res- idences are taxed should spur the market. Pat Campbell White of Prudential Joy- Gallo Realty in Re- hoboth Beach said the changes approved by Congress and signed by President Clinton represent the most comprehensive changes affecting real estate since 1986. "I've been working ever since that time CAMPBELL with the National As- WHILE sociation of Realtors (NAR) to reverse some of the damage done with tax law changes in that year. That's when the capital gains tax was increased from 20 percent to 28 percent and as far as I'm concerned that and related tax changes brought on the savings and loan crisis. Now those taxes that killed the American economy from the commercial market side are being reversed." Under the new law, couples who file a joint tax return can exclude upto $500,000 of gains on sale of a primary residence. Single return filers can exclude up to exclusions will be taxed at the reduced cap- ital gains tax rate of 20 percent versus the previous 28 percent. Those changes are significant in the Cape Region where prop- erty values have risen rapidly over the past 15 years. Under previous law, a couple or single filer were permitted only a one time capital gains tax exclusion of $125,000 and that could only be taken after a person reached the age of 55. The new law places no limits on how many times exclusions can betaken with the provision that the property must be owned for at least two years. And now there is no age limit on when an exclusion can be taken. The new tax law also allows first-time home buyers to use up to $10,000 of their Individual Retirement Account (IRA) mon- ey - or IRA money from spouses, parents, children or grandchildren - without any penalty being levied against money with- drawn for. that purpose. A definite help "This will absolutely help in our market," said Campbell White. "There are people out there who have lived in large homes for several years that have increased in value. They've hesitated to sell them - to move, say from Henlopen Acres or Henlopen Av- enue in Rehoboth, to the Plantations - be- cause of the big capital gains tax they would have to pay by downsizing and tak- ing a profit. But I don't think people will rush to sell their houses. We're very cycli- cal around here with most of the buying and selling coming in the fall and spring. I don't think this will cause a glut of homes on the market." "I think the impact will be significant," said Doug Davis of Re/Max, a Realtor in the area for 14 years, "though it's not been mentioned yet. There are people, especially greater inclination to sell now because their taxes on the proceeds will be less. They may have been holding on since the removal of the capital gains benefit in 1986. But I think the $500,000 exclusion may be the biggie. It may encourage people to move up quicker since they don'thave to DAVIS sit and debate on whether to take the one time $125,000 exclusion. Or they may de- cide to go ahead and retire earlier - go ahead and buy that dream house. Activity in the real estate market's already great be- cause of the baby boomers and the stock market gains. It's the best I've seen here in my 14 years." Bill Vernon of O'Conor, Piper and Flynn said he thinks the changes will be helpful but not right away. "I think it will be six months to a year before people decide how to take advantage of the changes," said Ver- non. "I think the ch.anges will be of some help to those who have been holding com- mercial properties for a while. And some people who have a very expensive house in D.C. and think about retiring here may see some advantages." May retire earlier People thinking about retiring may also seize the opportunity to get moving earlier according to Bill Lingo of Jack Lingo Real- tor. "I think the changes will have a very positive impact here. We're most definitely a retirement destination. Take a guy who lives in Wilmington and has a second home here and eventually plans to retire here. Under these changes he could now move his retirement schedule up sooner. He Variety of Lewes-related litigation continues to By Dennis Forney Litigation involving the city of Lewes - everything from property disputes and charges involving sexual offenses to challenges of a recent annexation and conditional use approval - continues to grind along in a variety of courts. The United States District Court for the District of Delaware re- cently set two trials for early 1998 involving the victims of sexual of- fenses for which former Lewes Police Officer Gilbert Clampitt was found guilty and imprisoned. Robin Williams of Lewes filed suit against the City of Lewes and Mayor George H.P. Smith, former director of public safety Jack She asked for a jury trial. Date for the trial has been set for Jan. 19, 1998, at l0 a.m. Stephanie Daniels of Westover, Md., filed a similar suit in United States District Court in Wilming- ton District Court, against the same individuals, for the same reasons, relating to sexual offens- es perpetrated against her by Clampitt in August of 1994. She also asked for a jury trial and the date has been set for Feb. 9, 1998, at 9 a.m. The Wilmington law firm of Sawyer, Akin and Herron is repre- senting the Scottsdale Insurance Company on behalf of Lewes. Roger Akin was unavailable for Warrington, Ronald Gooch and Clampitt. She seeks compensatory and punitive damages and reasonable attorney fees against all those specified be- cause of the stxual offenses per- petrated against her bY Clampitt and because she feels the others knew or should have known about Clampitt's behavior and didn't follow proper policies and proce- dures to insure against his behax;- ior. (Ctampitt pleaded guilty to unlawful sexual intercourse, kid-- napping and official misconduct and is now serving an eight year prison sentence.) Chief of Police" comment. Cases like these are of- ten settled out of court. Walsh land deal Lewes attorney Tempe Steen is also continuing to correspond with attorney Michael Parkowski who represents J.B. Walsh in the matter of property ownership of 34 acres of canalfront land.on Lewes Beach. Lewes City Man- ager Elaine Bisbee said she ex- pects a meeting soon of the parties involved in the dispute. "There's an issue of ownership and there's also an issue of zoning," said Bis- bee. "The zoning question in- volves whether Walsh is using land properly for the zone where it lies." Walsh claims ownership of the 34 acre parcel of Lewes Beach land fronting the canal from his Angler's Road property down to a line that crosses the canal roughly in front of Bill Ingram's Pilottown Road property. He says he has used the land without challenge from anyone else for a period long enough to justify his legitimate claim. Lewes has been research- ing that claim. Other matters challenged Steen said two recent decisions by Lewes Council have also been challenged in the Sussex Court of Chancery. She said Lewes resi- dent R)chard Anthony has chal- lenged the recent annexation by Lewes of approximately 16 acres of land owned by Ossie Warring- ton eyed for development of an assisted-living project. Anthony has also challenged, said Steen, the recent granting of a condition- al use permit to Sussex Life Care Inc. for placement of a sales office at the end of Ocean View Boule- vard for lots for sale in Phase Two of the Pilottown Park project. No further details of those challenges were available as of press time. grind Steen said the Wilmington firm of Sawyer, Akin and Herron is al- so representing Lewes and Scotts- dale Insurance Company in the Sussex Chancery Court litigation involving a claim by Cape Shores Associates that it should be reim- gains aside in savings, and move down here to his second home. Then he could live in that for two years have it qualify as a pri- mary residence, and then sell it and take an- other capital gains ex- 61usion and buy a re- tirement house. And I think people will move quickly on this because LIINGO they'll be afraid this law may be changed back to what it was." Mark Hocker, Certified Public Accoun- tant, agreed that the exclusion changes may have the greatest impact. "Going from a one time exclusion on gains of $125,000, after age 55, to no limit on age and up to a half a million exclusion many times - that's a big change," said Hocker. Joe Reed of Re/Max said he felt the changes in capital gains law will also have another indirect positive impact on local re- al estate sales. "People who have made money in the stock market may cash those in and buy a beach house - something tan- gible. Pushing that will be the lower tax rate - 20 percent versus 28 percent - that they now must pay on the gains realized in the stocks." Reed said he's dealt REED with property owners who didn't want to sell because of the high capital gains tax. "A lot of people have been waiting to see what:would happen," said Reed. I think some people will sell now who wouldn't have otherweise. It should lead to more supply of some of the prime properties in the area." through courts bursed $1.7 million in lease exten- sion fees because the city has . treated other leaseholders differ- ently. That case is still in a fact- finding stage. Cape Shores attor- ney Eric Howard was not avail- able for comment. DP&L drops request for Indian River asphalt plant By Michael Short Delmarva Power and Light has proposed and then withdrawn a proposal to place an asphalt plant at the site of its Indian River Pow- er Plant near Millsboro. Delmarva Power and Light had applied to the Sussex County gin with, it is considered a recy- cling effort because the plant would use much of the quarter million tons of coal ash produced every year by the coal burning power plant. That material tends to sit at the plant site in great ash mountains Board'of Adjustment for a vari- . or be buried in burrow pits or ance or special use exception to locate a facility at the site. Actual- ly, the plant would be operated by IA Construction of Delmar. But Sussex County Planning and Zoning Director Lawrence Lank said this week that the coun- ty has been told by Delmarva Power that the application is being withdrawn. Although asphalt plants tend to have a rather tarnished image, Delmarva Power officials said this is a plant of a different sort. To be- landfills. The company is con- stantly looking for a use for the waste product. It has the consis- tency of dirt or sand and it's been used in shingles, in concrete for road work or mixed with concrete to form an artificial ieef to attract fish near Indian River Inlet. That reef is considered a successful reef, which has attracted a number of bottom fish and Dr. Kent Price of the University of Delaware's College of Marine Studies has Continued on pLge 12