One more update last night I guess it must have been 1:30am our time we finally have a signed contract with the first buyers. They are the ones we wanted anyway. This time instead of doing another written offer they did it verbally (it took 5 counter offers to do the deal). They stayed with their orignal bid but said we don't have to fix the roof. The cost we got for replacing the roof with 30 year dimensional shingles is $8,400. Our friend who sells roofing materials to roofers knows every roofer in Milwaukee and he is managing the re-roof job for us he found the roofer picked out the shingles etc. Ther roofer he picked out is right now re-roofing City Hall in Milwaukee so it is a good roofer plus our firend is going to go inspect the job before he pays them. We have been waiting since early November for the roofers to get to our job. It makes sense because there were jobs ahead of us so nothing we could do about it. Yesterday the first buyers say remove the roof job, same price and we'll buy. Now after waiting weeks and weeks for the roofer to start we have to call him off. However the roofers had started yesterday. They went over shoveld off the roof and had the dumpster set up. The replacement takes place today. Problem is I don't even knwo the name of the roofing company who is doing this and my friend was in a meeting and not answering his cell phone.
After a round of phone calls we convince the buyers to let the roof job go through and just up their bid by $8,400. Plus I am thinking what if their financing falls through our building is sitting there with a leaky roof. The roof needs to be done period so we were glad to finally finish that item. There was a $40,000 difference between the first buyer and the second buyer. The second buyer came up with another $8,400. So we walked away from $31,600 to go with these guys. It is a lot of money however we wanted to be sure it sold adn we feel these guys will work qucikly and agressively to close.
Now more bad news. I told you 2008 sucks! Our accountant has been sending me e-mails saying be sure to close in 2008 and not 2009 you will have sever tax consequences if you don't. I had asked him previously to run a projection and it was that we would have to pay about $30,000 in capital gains. Decide we need to talk again so I call him. It turns out that the IRS considers us taking back the restaurant through foreclosure a taxable event. We ahd amortized our capital gain fromt he sale back in 2001. Every year as we collected the revenue from the sale we paid back that portion in a capitol gain. With us taking possesion back through foreclosure the IRS wants us to pay all the Capital Gain in taxable year 2008. If we sell it in 2009 at a loss, which we will it will be a loss, we will recoup that Capital Gain we paid in 2008 however it will take us for the rest of our lifetime to collect. Our accountant says we will get it back over the course of years and years about 3,000 a year. This really sucks as once we sell the restaurant we would not have to file US taxes any more until we sold some stock or our US Condo. Forever and ever we would end up paying our accountant to do our taxes to collect this 3,000 a year form the iRS. Geesh! I have this information as the final negotiations are going on with the buyers but I say nothing. I already know the buyers are moving very swiftly to get their financing, very swiftly. I say nothing while we are finishing the counter offers etc. Then when that is all done I e-mail our accountant with theri bankers e-mail address adn ask our accountant to send their banker an e-mail laying out how we are going to have to pay an additional $30,000 in Capital gains taxes that will be credited back to us over eyars and year if we don't close this by December 31. I figure it can't hurt, most people are sympathetic to paying taxes. Lay it out for the banker, plus the buyers are getting an SBA loan ask the banker to let the guys at the SBA know and everybody fast track this loan. I ahve no idea if it will work out or not but I gotta give it a shot. I figure I'll let that stew and cook for a bit and if it looks like this is not going to close by December 31 then at the last minute we will sell it and carry the financing with so much down and the balance due in February. I'll have to talk the buyers into this of course, I have a plan on how to do that. The mian thing is these guys are real motivated and want possession as soon as possible so I think they woudl go along with it.
So now I am wrapping up details. I need to pay the plumber for blowing out the pipes etc but I never got a bill. I aksed the plumber to send the bill to our attorney's office so I call the plumber after everything has been signed and he says he is just behind on his billing and has not billed us yet. He also says, "Hey did Frank from local restaurant call you?" "Yeah, that is who we sold it to," I say. When I went into see the plumber he felt bad for my hsuband and myself and said hew would call around for us and spread the word. He specializes in restaurant plumbing he has got a real good business probably 10 plumbers working for him and there isn't a McDonalds or Kentucky Fried Chicken that goes in that he isn't doing the plumbing. Plus regualr restaurants as well not jsut fast food. So he really knows a lot of people. We didn't know it but it was our plumber who brought in the buyers. We promised him olive oil the next time we ship to the states or go over.
Now I work on the sales tax. This has me worried, I want to work it so that the next buyers don't have to pay the previous owners unpaid sales tax. This was a huge hang up in the deal of the foreclosure and I relied on general statements form our attorney, the broker and our accounant but now that I ws free to focus on this issue I decided to go look it up myself. I read case laws etc. it was really boring to read then I decided to go to the Department of Revenue website and see if I could find anything. There it was on page 69 of a .pdf file if e foreclose on the previous owner and after foreclosure do not oeprate the business but sell it the state does not come after us or the next buyers for sales tax. Next I call the Department of Revenue without thinking I would have any luck as our accounant said they would not tell me anything and our attorney said he called and they woudl not talk to him. Now that I read the regulations and find out we are home free for sales tax I decide what the heck, I'll call. I got through right away to the correct person and it turns out what I wanted was a Sales Tax release Letter. All I did was explain it to the revenue guy and gave both corporate names of us and the buyers and he said he would send it out. That is bitter sweet news! That point hung up the dismissal with stipulation of our foreclosue and we could have had this done before Thanksgiving instead of December 10th. This is now especially important since I find out it is going to cost us an extra $30,000 in Capital Gains tax if we don't close by December 31, now I wish we had those days back again. I learned a lesson, I should have not relied on the accountant, the lawyer and the broker, I should have gone and looked up the law myself. Isn't that what old peole say, "So late smart..."
Getting an accepted offer is only the first step adn as you can see we have more challenges ahead but we are going to hang tough and just work the problems as they arise. I cannot wait to end this thread. It reminds me of when AlanB bought his property.
