Tax Man Will Benefit from Reagan House

If President and Mrs. Reagan accept their Bel-Air house as a gift, they would not pay a gift tax, but they would pay greater capital gains when they sell than they would if they buy the house from the friends who purchased it.

Confusing? It’s simple, say tax attorney Phil Kavesh and CPA Tom Gau, giving a hypothetical situation.

“Assume that President Reagan bought the house for $500,000 and sold it for $1 million. His income-tax basis carries over from the original purchase price, and $500,000 would be the gain,” Kavesh said, “but say it cost the (Kitchen) Cabinet members $300,000, but it is worth $1 million when it goes to Reagan, he still has $300,000 as his basis.” The tax gain would be $700,000.

As for gift taxes, Gau said, “they are imposed on the person giving the gift, so the Reagans wouldn’t have to pay, but those giving might.”

The gift tax could not be avoided by selling the house for $1, because the IRS would not recognize this as “an arm’s-length transaction,” he added. “It would be considered a bargain gift.”

It’s also a common misconception, he added, that a gift can be used automatically as a tax write-off. Donations are now only allowed to a few approved charities.

“So that raises the question: Why would anyone give away something (like a house to the Reagans) in the first place? Just to be generous? To get recognition?”

As yet, we don’t know that the house will be a gift, although a letter from the Office of Government Ethics was released last week saying that the Reagans’ friends probably could give the house without violating conflict-of-interest laws.

All we know is that about 18 Reagan friends, known as Wall Management Services, paid $2.5 million for the place in 1986, and the land alone is worth $3 million today.

No telling what it will be worth when the Reagans move there in January. They signed a lease with an option to buy.

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The rest of that ultra-expensive Hawaiian estate I talked about last Sunday has closed escrow, for a total of $42.55 million, and it’s on leasehold property!

In January, Japanese billionaire Genshiro Kawamoto bought the Picnic House on 1.7 acres of the Kaiser/Goldman Estate for $4.55 million, and a few days ago, he acquired the two other estate homes, on 5.5 acres, for $38 million, according to the Honolulu Advertiser.

As for the leasehold, Scully Rogers, a real estate broker who lives in the neighborhood and has participated in several deals involving the property, said by phone, “Eventually, the whole area is scheduled to be sold in fee simple.” Then Kawamoto will have the right to buy the land!

The houses he purchased are magnificent, from what Rogers says. The 10,000-square-foot Picnic House, also known as the Boathouse, has been sold several times since the Goldmans bought the property about 20 years ago from the estate of the late industrialist Henry J. Kaiser.

The Goldman brothers, Alfred and Monty, kept the rest of the property. Alfred has been living in the 20,000-square-foot, one-bedroom main residence, and Monty built a James Bond-like place, with a koi pond, moat and six or eight 22-foot-high accordion-type doors that can fold open or shut.

When the Kaisers lived there, they entertained such overnight guests in the 2-bedroom Picnic House--which has a private elevator and electric drawbridge--as former First Lady Jacqueline Kennedy and President Lyndon Johnson. The estate also had kennels then, with air-conditioned puppy housing for Mrs. Kaiser’s poodles.

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James Cagney’s longtime home in Coldwater Canyon is among the U.S. properties that will be offered Monday through Wednesday at the American Real Estate and Investment Show in London.

The late actor’s estate sold the 4 1/2-acre site a year ago this month to investor Steve Dunn for the $1.8-million asking price. Now Dunn is asking $3.9 million.

Since he bought it, Dunn refurbished the 4,000-square-foot home built for Cagney in 1939 by architect Welton Becket. Dunn is including in the purchase price some plans for a 15,000-square-foot mansion he had commissioned. The property is listed with Gary More at Rodeo Realty.

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Roy Rogers and Dale Evans once rode these happy trails, but now the 33-acre Hidden Hills ranch is for sale at $5.7 million.

Lyn Sherer, who recently won a world equestrian championship, is selling the property with facilities for more than 100 horses because her children are away at college, said Chuck Harris, who has the listing at Fred Sands’ Westlake office.