Good points. This is a very complex issue, and to say "Don't worry about it" is in my opinion, burying one's head in the sand. I've never heard of a salesperson informing potential buyers of the IRS issues, so I think that this forum is a good place for people to learn a little bit about what they may be buying into. Again, in my opinion, to deliberately withold that info is not being completely honest.

If you or I sell a house in Florida we will have to fill out a form called “Seller’s Real Property Disclosure Statement” . Questions like question #1a. Are you aware of existing, pending, or proposed legal actions, claims, special assessments, ……..affecting the property. If yes explain……

In my thinking if I sell my house in TV and I do not answer #1a. with IRS, grounds would exist for a civil suit against me for damages. Note I am not a lawyer.

If anything changes on this form you must inform your buyer of the change in 5 days.

If I am obligate to provide this information TV should also.

I hear what you are saying Shadow but isn't the property in question the special CDD's? not individual property? And TV development at this point is not under any proposed legal action even for this issue. Right?

But the point about this being a good place to find out about these things is a good one.

“I hear what you are saying Shadow but isn't the property in question the special CDD's? not individual property?”

It must be my accent that is what I said.

You did? Sorry, I still don't see special CDD in your quote.

I'm a little slow today could you highlight where you said that in the piece I quoted from you?

My point is that the property in question on the IRS issue is the special CDD's not our property. That sellers' form is about the property in question. No?

Buyer beware!
 

As I say , all this could rock the villages. It would be interesting to see if you sell and put no on the selling form, then the judgement comes down, and the buyer comes back on the seller to pay his huge portion to settle this up. For his time he lived in the home. Another reason for them to push new homes. For the lawyers in this area this will like shooting fish in a barrel. Or even shooting moose out of season. (we know that doesn't happen, just the govt messing with people) NOT!

Did you read post 33?

It was elk, I am a moose.:22yikes:

How to pay off the IRS
 

How do you stop tax free bonds? Redeem them, buy them back, with what money?

Answer: Wouldn't it be from the collection of (increased) amenity fees?

OK. I was responding to the post I quoted but I get it.

Still not sure how the residents of TV would be responsible for any monetary fines though. If bonds were sold of the districts that we don't own or live in then how could we be to blame? Wouldn't it just be either the developer (issuer of the bonds) or the bond buyers who would sue the developer since their yield isn't tax free any longer?

Does anyone who has some experience with bonds have an opinion?

Team Tutt/aka the VCCDD is us. We personally had no part or even knowledhe of the business transactions that occurred between the Seller and the Buyer. However, the buyer is our government and they represent us and used all fees, taxes amenities that flow to them for this purchase. If those funds are not available to the VCCDD and the IRS rules against the VCCDD and not the Developer what happens??????

Frankly based on the IRS filings I believe the IRS is more interested in the Developer for a number of reasons.

Peerhaps the nature of the Development district is as the Developer claims? I hope so and believe the Developer has a strong and correct argument given Florida Law. There are a few issues that rub the IRS the wrong way and that is why I believe they are pursuing this issue.

I am interested in thus issue but I am not losing any sleep over it

OK I see the connection. Thanks.

Shadow good information. This action began in the first quarter of 2009. It is now second quarter 2011. Don't know that the housing documents added this disclosure? I suspect with the number of closing documents, if the disclourse is included many buyers may have glossed right over it?

One point here is that whatever the IRS does here they will need to apply in every other CDD in the state of Florida

Village Bonds and please pardon my ignorance
 

A couple of post refer to "bonds that WERE sold" as in past tense.
A few question come to mind.
1. As each subsequent group of villages/districts have been built and amenities sold have similar tax free bonds also been sold?
2. If not are the districts were these bonds were sold identified?
3. If the districts are identified, again pardon my ignorance, but what villages are in these districts? Do different districts fall under differnt VCCD type names? I thought I read about another name but not VCCD?
4.Not sure but it seems like each district may have different rules and laws especially seeing they are in three different counties. If the VCCD loses can d they have the authority to decide that all villages pay? Even the original ones that some hv no amenity fee?
5.Are or were these tax free bonds available for purchase to the public through brokerage companies?
6. How about the 7% bonds on new houses (I realize this is a different bond) Can anyone buy these too? Great deal, guaranteed 7% when the rest of the public US muni bonds are a questionable investment now (IMO).
7.I read here that part of the IRS problem is the appraisal of specific facilities and the possible inflated price paid by the VCCD. Are subsequent appraisals of new district facilites in the same ballpark? If so does that mean this issue that started years ago is going to expand to all new and future vilages/districts?
8. A previous poster said this IRS issue with the villages will affect hundreds of other plus 55 florida communities. I hope he is right but I would venture to say that no other plus 55 community in Florida and perhaps United States has and is continuing to grow like the villages. Which I guess means a lot more bonds here than anywere else.
Sorry for the long post and am seriously sorry for my laziness to those of you who suggest I search the many years of previous posts to look for my answers. Retired but still have type A behavior
Still looking forward to living in The Villages....I am closing on a new house in four weeks.

Does The Villages answer "yes" to that disclosure statement question when selling a new home since these IRS inquiries began?

I doubt it, and therefore don't see how homeowners would be held responsible for the tax if IRS "wins" and goes after it.

As a former real estate agent in Ohio (not in Florida) which has similar seller disclosure forms, I would have to say that new homes probably do not require this form. And it is not a form required at closing (with all the others), but prior to writing the purchase offer.

And since it is not specific to the individual property itself, I doubt if this is being disclosed when selling a resale home in Florida. I believe the IRS investigation is just that - an investigation - at this time, not a pending legal action.

I can't answer all the questions but the tax free bonds in question are the ones for the special CDD districts. Not the basic districts that all the homes are in.

As of two years ago, which roughly corresponds with the date of the IRS case, the only bonds that were sold for amenities, with only a few exceptions, involved the amenities north of 466. I have not heard of any subsequent sales of bonds or purchase of amenities by the CDD (that's not to say that this has not happened, however). My guess is that they are holding off on any future transfers until this issue is resolved.

In the last section of the Wikipedia entry on The Villages, there is a good summary of the IRS situation, which is footnoted with links for anyone who wants the detailed information. This is the best summary I've seen yet, and it's simple enough that even I can comprehend it.

http://en.wikipedia.org/wiki/The_Villages,_FL

I disagree, it depends on the way the CDD is structured. Example the IRS says to issue tax free bonds among other things the CDD must have a police department and the government must be at arms length from the developer. If the CDD has no police department the CDD is free to issue interest taxable bonds.

CDD Cannot Have Police Department
 

I was told by a member of The Villages Public Safety Department that The Villages cannot have a police department under the Florida statue that authorizes CDD's. I have not taken the time to read through the entire statue.

Shadow: Yes but its deeper. However for among other reasons, time being one, didn't want to get too detailed . To discuss just the CDD issue would probably time one out on TOTV.

If the bonds were found to be improperly issued, and were required to be redeemed and reissued as taxable bonds, it is more than likely that the new bonds would be priced at rates that may be equal to or lower than the original municipal rate. After all, rates are much lower now than they have been over the past 10 years, and the bonds would still be secured by the revenue stream of our amenity fees. The back taxes owed to the IRS from current bondholders who did not pay taxes on their interest earned would be relatively small and could be rolled into the new bond issue.

I just don't see much liability for village residents.

From your lips to God's ears!

Ditto and Amen!

Costs
 

I wish I could share your optimism, but my view of the possible scenarios ensuing IF the IRS prevails is somewhat different. Here are my thoughts regarding the points you raise:

First, a clarification for some of our readers. Technically, there should never be any liability to the IRS on the part of the Villages residents, at least not direct liability. The risk to us is that the Center Districts incur such a large liability to the IRS and to the bondholders (who would sue the Center Districts if the tax-exempt bonds turn out to be taxable) that the Center Districts can no longer afford to run the amenities system. Remember that amenity-fee increases are capped by the CPI, and the Center Districts can only tax within their borders.

You are correct that today's low interest rates would mitigate the "hit" that the Center Districts would take. However, given the scandal that would underlie any issue of the replacement taxable bonds, one would think that the taxable bonds might require a relatively high interest rate in order to find buyers. More importantly, the taxable bonds, are not being issued at today's interest rates. If they are ever issued, they will be issued at tomorrow's interest rates-- whenever "tomorrow" is. (Let's hope it never comes.) Those interest rates are probably going to lot higher than today's interest rates.

In addition, your analysis (in addition to assuming no penalties are imposed) implies that the liability of the Center Districts is limited to paying the back taxes on the original bonds. Remember that the bond holders, who got a warranty from the Center Districts that the bonds were tax exempt will (if the IRS prevails) also lose future tax-exempt income and will, one would think, try to hold the Center Districts liable for that as well.

Finally, as I recall, the interest on the existing bonds goes back as far as 8 years. It will be even longer if the controversy continues to drag on. If the average bondholder is in the 33% marginal tax bracket and the taxpayers have to pay interest to the IRS, as well as the taxes, I am not sure that we are talking about a "relatively small amount" that can be "easily rolled into the new bond issue". Have you run any numbers? (I have not tried, but intuitively, it would seem that we are talking about a lot of money.)

Despite my concerns, I hope that you right, and more importantly, I hope that the IRS does not prevail, or that if it does prevail, that it prevails in a way that places the costs of its victory directly on the Developer. It is the Developer who should, after all, be liable for all the damages in the event that the IRS prevails in this matter. But as shown by the circumstances surrounding the class action lawsuit, collecting from the Developer may not be that easy. The fact that the VCCDD (out of our amenity fees), not the Developer, is paying the legal fees to defend the tax-exemption of the existing bonds does not bode well in this regard.

Advagoda ur a thinker
 

Great post! I agree so much with you. With the possible outcome of all this. Now could be " the good 'ol days of the villages" hey pompeii fell and it all worked out.
At least ol' Troy will be out there killin' dem gators.
Yayayayayaay

Not Good!
 

You guys all just managed to put my house build on hold for another year if at all.

My sales rep has told me nothing about this matter. For some reason two days ago the wife and I canceled our December build date.

We had absolutely no reason why we just felt something uneasy?

Now after reading 7 pages of this issue I feel ill about the whole matter.

Would be like me selling you all a brand new car saying the warranty will take care of it, knowing full well the vehicle was designed as a flaw and will never be right. Oh wait that would be GM they did that!

Maybe 200 inches of snow isn't that bad after all. At least no one is here going to take my home fine me or tax me on someone elses greed.

Well I have a year to see where this is playing out before we let the lot go.

I appreciate all the good articles to date. I might be in a panic or you guys might have saved us from a future retirement financial nightmare.

I agree - its difficult to see where this is all going, and just because a bunch of residents say "nothing is going to happen" or " it won't amount to much money" doesn't guarantee anything. The sales reps are purposely not telling potential buyers of this situation, which I feel is dishonest. When you're thinking of potentially plunking down a quarter of a million dollars on a home, or more, it seems like you shouldn't have things making you uneasy.

An excellent question. Should the sales reps be telling prospective buyers about the IRS issue? If so, it would likely cause a downturn in sales. If, on the other hand, there is "really" nothing to it, then they shouldn't be sabotaging their own sales efforts.

Should all sales agents tell prospective buyers that there is an IRS investigation currently underway that might impact current and future residents?

Should they - yes. Will they - no. It seems to me that they aren't under any legal obligation to bring it up since there is nothing resolved or pending in the matter. If a potential buyer asks about it they should be forthright about what's going on. That probably wouldn't happen in most cases though.

There is one thing everyone is missing. The issuance of tax free bonds requires special lawyers, Bond Consul, Bond Consul writes the bonds and the bonds are approved by The IRS as non taxable bonds prior to being sold.
If a mistake is made by Bond Consul causing the IRS to claim the Bonds as taxable then Bond Consul and their insurance are as much on the line as the issuer of the bonds. There are many deep pockets in front of the residents.
I think that whatever the final ruling is will have a much larger effect on new bond issues than it will on the current issue.
For the IRS CDD's issuing bonds is new territory because CDD's are a new quasi form of government that have become popular in retirement communities so every ruling is precedent setting. I could see this going either way with no monetary penalties but changing precedent for future bond issues.

You are wise not to build or buy here. It would be wrong for you to feel frightened and insecure.

This issue has been in place for many years now with the IRS. It was going on four years ago when we were thinking to buy our first home here in TV. We have sold that home and are now building our second home here.

We are not capricious people, we spend our money carefully, and go to the big box stores for better prices. We have carefully thought out all nine homes we have bought and built.

I cannot guarantee that the IRS will not rule against the Morse organization.

I am absolutely in awe of the way this beautiful, affordable, clean, wonderfully run,completely satisfying small city presents us with opportunities to live, enjoy, and continue in life with interesting and successful people all around us.

I see evidence everywhere that the Morse family are dependable.

They are definitely Republican and huge contributors to the Republican party. (Just for your information. Sometimes the slant of the paper and the political speakers invited to the squares is a huge and unpleasant surprise to some people) I am a moderate fyi.


It is up to you.

Living
 

in fear is not the way to live your life. Imagine if our ancestors decided it was not worth the risk to cross the USA in covered wagons because they may, starve, get scalped by indians, catch a disease, wagon breakdown etc., etc.
We will be over 100,000 strong in a few short years. We will have the strength to fix whatever comes our way. I am surrounded by smart resourceful people. Listen to Gracie. Whatever comes our way, we will handle it!!!

Is it correct/accurate to interchange the term “Morse organization” and Developer with CDD? Is the issue not with the IRS and the CDD?

When we look back on our lives, we will be more disappointed by the things we didn't do, than by the ones we did.I researched this issue until i was blue in the face(Kentucky Blue) and based my decision on living the life i imagined for myself.I based my decision on all the information i accumulated and it's logical consequences. I decided i'm not waiting for the IRS to make it's final decision, could be years away,and nobody knows the outcome. I'm not putting my life and dreams on hold. Remember, it's the life in your years that counts, and we are not getting any younger, except maybe Gracie:D

Awesome thought! I'm going to use that one.

It is sad to see that the usual suspects, by thoughtless accident or sinister design, continue to tacitly discourage those considering buying or building in the Villages as evidenced in this thread. You have to wonder how many future Villagers have turned away as a direct result of their unsettling, acid speculative rants. Oh....for sure they have an absolute right to their unbalanced suppositions and "right to know" warnings. However, at what point does their myopic conjecture do actual harm to the collective interest of the community as a whole. Open forums are a brilliant exercise in democracy. Unfortunately, in the heat of debate, real consequences and responsibility are sometimes absent from the equation.

I recall that Advogado has offered a clearly defined and articulate overview of the IRS issue. I believe I complemented him on that in this forum. However, I take vigorous exception to his abundant guess work and "what ifs" about an outcome that cannot be predicted because the entire subject is without significant precedent. Accordingly the bombardment of worst case scenario inferences based on incomplete information seems to be the predicate for gloomy cynicism. Others eagerly join the bash and aggressively perpetuate the most negative illusions about the matter in the worst possible terms to vicariously satisfy their "glass half empty" pessimism and/or their desire for an " I told you so outcome". What if The Villages win? With tongue-in-cheek.........do I get to say I told you so? Unfortunately those who based their decision on negative speculative outcomes by amateurs will have lost a great opportunity......while the critics continue to enjoy their own full access to the benefits of being Villagers. That presumes, of course, all the critics actually live in The Villages.

To advocate without doing harm would be a refreshing and welcome alternative.

As I have said before, "To those of you on the fence, be of good cheer and make the move. If we had waited six years ago for the perfect scenario.....we would have missed out on six years of enjoying new friends, great new neighbors, a fabulous lifestyle and what have become the best years of our lives."

Kentucky Blue......boy......did you nail it.....and with a magnificent economy of words....well done.

Man, you sure can write.The best I could do is the covered wagon scenario.:beer3:

I don't know Shadow. Is it correct?

The person who writes for the Orlando Sentinel.....

Is that Laura Richards? I can't remember her name.:D

It is hard to figure out who is who and what they really stand for on this forum.

Except Cabo. He says it like it is.