Extreme Makeover May Not Be A Blessing

[Feralpeg]

According to an article on the Kansas City Channel website, the recent home and furnishing provided by Extreme Homemaker may put a huge financial burden on the family. They have a new home, but still owe the mortgage on the old demolished home. Their property taxes will rise significantly along with their utility bills. And, ABC and the IRS seems to disagree as to the taxable nature of the home and furnishings. ABC says the family is not responsible for taxes. The IRS says the home and furnishings are taxable income.

"KANSAS CITY, Mo. -- Having the television show "Extreme Makeover: Home Edition" build and furnish a new home for them made some things easier for the Jacobo family of Kansas City.

But the financial pressures facing Jesus and Michelle Jacobo and their extended family of 12 didn't disappear when they moved into the new home in the Northland.

The Jacobos' property taxes will double, utility and insurance costs on the new home will increase -- and they still owe $121,000 on the mortgage of the old home.

And, while the television show's producers disagree, the Internal Revenue Service and H&R Block Inc. say families who benefit from Extreme Makeover are subject to income taxes on increased home equity and the furnishings.

Those involved in helping to build the house have started a fund to help the Jacobos afford the house and furnishings, which viewers will see them receive when the episode airs May 13.


"We don't want to see the incredible blessings and outpouring provided in the short term become a financial burden for the family in the long run," said Rep. Jeff Grisamore, R-Lee's Summit, who is helping fund organizers.



Jesus Jacobo, 39, builds cranes and Michelle Jacobo, 38, cares for their four children and five nieces and nephews. A grandparent also lives with them.


On March 18, the family was given a home five times the size of the 912-square-foot home in which they had lived.


"They're still excited, they love the home," said Kevin Green, a Parkville homebuilder who coordinated local volunteers.


Green said he had raised about $50,000 to help the family with remaining expenses, about $71,000 short of what he needs.


The Jacobos paid $1,156 in property taxes last year on a home the county valued at $95,600. Clay County assessors have appraised the new home at $200,000, said Assessor Cathy Rinehart, meaning the property tax bill could be around $2,500.


"Extreme Makeover: Home Edition" is produced for ABC by Endermol USA. The show's producer said ABC officials believe the increased value of the new home and furnishings are not taxable income.


The show considers those items rent paid to use the property to produce an episode. Under federal tax codes, a homeowner who rents out a house for less than 15 days does not have to pay tax on that income.


But the IRS considers those items prizes or awards that are taxable income, according to a 2005 letter written by Robert M. Brown, associate chief counsel. IRS officials referred all questions to a copy of the letter on the agency's Web site.


H&R Block also would advise clients that all equity, furnishings and vehicles received on the show is taxable income, said Jackie Perlman, the company's senior tax research coordinator.


That could mean a one-time tax bill of $20,000 or more for the Jacobos, if they paid in the lowest 10 percent tax bracket.


Although three new Ford vehicles were filmed in front of cheering crowds when the Jacobos were given the home, Green said the family will instead choose something from Ford that is equal in value that fits their needs.


Conrad Ricketts, co-creator and executive producer of the show, said families agree that they are responsible for property taxes. Managing local taxes and costs is the responsibility of the family and those who want to help, he said.


The Jacobos' increased home equity will help them manage finances, Ricketts said. Energy-efficient building materials and appliances are designed to keep utility bills affordable.


In the four years that the show has built houses -- the Jacobos' was the 93rd -- no families have sold or lost their homes, he said. The recipients are counseled on finances, and a producer for the show keeps in touch with them.


"We simply don’t build the families these houses and walk away," Ricketts said. "

 

[disneynutt1225]

I often wondered what happened to those who could barely afford their dilapidated houses to begin with. I mean, if you can't make the mortgage payment on the house you already have, how do you propose to make a payment on a house that's sometimes over twice its size! And I figured that property taxes and the like would escalate. I can't even imagine what the electric bills are like -- and most of the houses have pools!

I do feel bad for the people in those situations. Although EHM says they give financial counseling. But still, if you're having trouble making ends meet you're going to have an even bigger problem when the house gets bigger!

 

[SandraVB79]

I also always wonder how those families can afford the swimming pool, A/C or heating for the huge house etc etc etc.

It's nice to get it installed for free, but keeping it up and running costs a lot of money too

 

[mickeyfan2]

I have found watching this show to be less enjoyable lately. I always comment if they could not afford the collaping house how would they afford the McMansion+? They need to improve the house not pimp it out.

 

[4nana]

Thx for sharing this article as DH and I often wondered how these chosen families would maintain the increased expenses that come along with a larger and nicer properties. Atho wonderful to be blessed with a new home etc, seems all the aftermath should really be given more consideration. Hope it all works out for this family still struggling.

 

[sugarpie]

Every time I see Extreme Home Makeover I think about this. You take people who are barely getting buy living in a shack and give them a huge house worth a lot of money. How are they supposed to be able to afford the taxes?

Sure, sometimes they pay off the mortgage but not often. I wonder how many have to sell their fancy new homes or end up in a worse financial situation than what they started because they try to keep the house.

 

[snowy76]

I have found watching this show to be less enjoyable lately. I always comment if they could not afford the collaping house how would they afford the McMansion+? They need to improve the house not pimp it out.

McMansion! I love that.

Seems a long time ago the show would renovate the existing home - then there were a couple that were too far gone to be repaired - and POOF, everyone started getting these new homes.

I'm actually a little envious that they could get a new house like that and pay only $2500 in property taxes. My house - NOT new at all - has taxes that are higher than that! There's NY for ya. But I definitely feel for them if they're stuck paying bills that are higher than the ones that got them in this predicament mess to begin with.

 

[MUFFYCAT]

That's why the show never appealed to me. They don't show how the families are going to afford this new home.

One thing to add a room. But they make so outlandish.

And Ty is so annoying. I wish someone would take that speaker he screams out into and scream into his ear.

 

[Mom2Ashli]

I could never really get into the show. I understand that some of the people really needed more room or whatever. But the homes in the end were more than they would know what to do with. Bigger houses more expenses.

 

[beattyfamily]

Aren't these families asking for a makeover? Don't they send in a video begging to be picked? They are choosing/asking for this makeover so I would think they'd be prepared for the added expenses. Also, on several shows, the builder raises enough money to pay off their mortgage. Not always but often. It's hard for me to sympathize with their tax issue. Sorry.

Here's what I found in an article about the tax issue:

"We're very upfront with the families in telling them that there's a likelihood that the value of the house will increase, and therefore there will be a resulting property tax increase," says David Goldberg, president of show producer Endemol USA. "But we see that as a worthwhile tradeoff for receiving a new home, and I can't tell you how many letters I've received from families saying, 'You changed my life.' "

But how about income taxes on all the appliances, toys and building materials people get? Goldberg says the show pays each family $50,000 to rent its house for 10 days, and it relies on federal tax rules that say income on rentals of less than 15 days is non-taxable. The producers also believe that any improvements they make to the house while renting it also are non-taxable.

"We consulted not one but many, many experts in the field," Goldberg says of the solution, which saves families tens of thousands of dollars.

"Endemol as well as ABC takes the welfare of each family seriously, and if it becomes a real problem we'll discuss the situation with them," he says. "The goal of this show is to help people."

Several Extreme Makeover families USA TODAY interviewed declined to discuss their financial situations, but all were ecstatic about their new houses.

"It was a tremendous, positive change," says Contessa Mendoza, a single mother whose Van Nuys, Calif., home was rebuilt by the show this year. "We have nice, new everything, and everything works."

 

[Beth76]

Yeah, I think this show is just ridiculous. I understand that they are just trying to help these people. But they should help with real, needed things. Like another poster said, they don't need to be pimped out. I remember seeing an Oprah show where she did the same thing to a house in the middle of the the ghetto. It was a gorgeous house with all sorts of expensive furnishings and appliances. Yeah, that seems safe.

 

[Toby'sFriend]

it is not that hard of a problem to solve -
sell the house, pay your taxes, and go live somewhere reasonable.




that "we're renting the house for 10 days and making improvements" to avoid paying the income taxes just pisses me off. They are paying those people an income of a new house for the use of their life drama to make a tv show. Income taxes need to be paid, just like WE all pay income taxes on our salaries.

 

[Crankyshank]

There are a lot of things about the show that bother me. I think there has been an increase what I personally feel are less deserving candidates because they fit a story ABC is looking to film. ABC has had on their website "If you or someone you know has had X issue, contact us to apply for an extreme home makeover".

I know that sounds awful, but to me rewarding people with mcmansions who are in dire straights because they continue to make stupid decisions isn't really changing their lives because they will likely continue to make the same stupid decisions and all that will change is their house. **NOTE** I am not saying this is true of all of the families featured.

I also have an issue with EHM not being energy friendly. There's been very few examples of solar and wind power being used. Huge houses = huge utility bills. And building massive 5+ bedroom houses in bad neighborhoods doesn't help the family out when/if they need to sell because who is going to buy a mansion in the hood?

Fix their houses, build them new ones if needed, but REASONABLE ones.

 

[mookie]

There are a lot of things about the show that bother me. I think there has been an increase what I personally feel are less deserving candidates because they fit a story ABC is looking to film. ABC has had on their website "If you or someone you know has had X issue, contact us to apply for an extreme home makeover".

I know that sounds awful, but to me rewarding people with mcmansions who are in dire straights because they continue to make stupid decisions isn't really changing their lives because they will likely continue to make the same stupid decisions and all that will change is their house. **NOTE** I am not saying this is true of all of the families featured.

I also have an issue with EHM not being energy friendly. There's been very few examples of solar and wind power being used. Huge houses = huge utility bills. And building massive 5+ bedroom houses in bad neighborhoods doesn't help the family out when/if they need to sell because who is going to buy a mansion in the hood?

Fix their houses, build them new ones if needed, but REASONABLE ones.

 

[ducklite]

The answer would be to build in Habitat For Humanity's vision of "decent, affordable housing" rather than pimped out McMansions. Larger homes that aren't falling apart which will serve the families needs don't need to be McMansions. I would rather see more utilitarian type homes built that won't double living costs, but will help the family live more economically by saving on heating and appliance costs.

The swimming pools and some of the other items are over-the-top IMHO. Use that land to plot a sustainable vegetable garden to help the family with food bills. Use the money spent on "wants" put into some additional money saving items such as a deep freeze for storing the veggies, ceiling fans and a radient barrier for the roof to keep the house cool without AC in the warmer months, and a solar powered hot water heater.

The problem is that "decent, affordable housing" doesn't make for good television, and frankly they don't do this out of the goodness of their hearts, they do it to get ratings and generate ad money.

Anne

 

[netMick]

Every time I see Extreme Home Makeover I think about this. You take people who are barely getting buy living in a shack and give them a huge house worth a lot of money. How are they supposed to be able to afford the taxes?

Sure, sometimes they pay off the mortgage but not often. I wonder how many have to sell their fancy new homes or end up in a worse financial situation than what they started because they try to keep the house.

Well, none have sold them, if you read the first article.

But really, how is a tax increase of $1400 over 12 months going to put them out of the house? That's just putting away an extra $115 dollars a month. They already were paying their regular mortgage, and that's all they need to keep paying. They don't have to worry about constant repairs, or wasted utilities. They can spend more time being productive, having slept well in beds, being able to actually cook food again, not having to get water from the hose next door, etc., etc...

Not that I don't think the show is ridiculous. I want to see 200% more house, and %500 less boo-hoo-hoo.

 

[kabbie]

I've always wondered why they tear down the families' torn down house and build a new fancy home in the bad area. What do the neighbors think and does theft occur?

 

[ducklite]

Well, none have sold them, if you read the first article.

But really, how is a tax increase of $1400 over 12 months going to put them out of the house? That's just putting away an extra $115 dollars a month. They already were paying their regular mortgage, and that's all they need to keep paying. They don't have to worry about constant repairs, or wasted utilities. They can spend more time being productive, having slept well in beds, being able to actually cook food again, not having to get water from the hose next door, etc., etc...

Not that I don't think the show is ridiculous. I want to see 200% more house, and %500 less boo-hoo-hoo.

For some people $115 a month is an unattainable amount of money.

Anne

 

[sugarpie]

Well, none have sold them, if you read the first article.

But really, how is a tax increase of $1400 over 12 months going to put them out of the house? That's just putting away an extra $115 dollars a month. They already were paying their regular mortgage, and that's all they need to keep paying.

Well, I watched the last episode and the family was putting a garbage bag into the toilet and going into the garbage bag because they couldn't afford a plumber. I think to some of these people $115 a month is a huge amount of money.

I just would rather see them help more people and build less lavish homes. I know it's all about ratings, but still. They build mansions in neighborhoods filled with crumbling shacks. It's just kind of sad.

 

[beattyfamily]

Well, none have sold them, if you read the first article.

But really, how is a tax increase of $1400 over 12 months going to put them out of the house? That's just putting away an extra $115 dollars a month. They already were paying their regular mortgage, and that's all they need to keep paying. They don't have to worry about constant repairs, or wasted utilities. They can spend more time being productive, having slept well in beds, being able to actually cook food again, not having to get water from the hose next door, etc., etc...

Not that I don't think the show is ridiculous. I want to see 200% more house, and %500 less boo-hoo-hoo.

ITA. They know going in that their taxes will increase. They asked ABC to come and do their house over.