Tax Law Change Gives Builders a Boost

Some home builder companies are posting gains, thanks in large part to a change in tax laws that allowed companies to apply losses incurred in 2008 and 2009 to income earned in any five years through 2007. Home builder Lennar Corp. posted its first quarterly profit since 2007.

Previously, losses could be counted against profits over just two previous years.

Lennar also had a 3 percent increase in new orders in 2009, its first since 2006.

Toll Brothers said last month that it expects a $162 million income tax refund when it files its 2009 taxes, thanks to the change in the law. And last month, Wall Street analysts upgraded KB Home’s shares because of an expected refund.

In a paper by John R. Graham and Hyunseob Kim for the National Bureau of Economic Research, Graham and Kim estimated that the tax-loss carrybacks would cost the government $53 billion, with the beneficiaries “concentrated in the home-building, automobile, and financial industries.”

Source: Fortune, Colin Barr (01/07/2010)

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