One of the trends underlying the growth is investors‚ desire for something that provides better yields than Treasury bonds along with capital appreciation, according to Robert A. Stanger of Robert A. Stanger & Co. in Shrewsbury, N.J., which tracks direct investment program sales.
"Direct investment programs can provide these benefits," he says. "The very strong growth in real estate programs in particular has been boosted by historically low mortgage debt costs and the continued outstanding performance of publicly traded REITs."
Among the trends in the latest sales data:
• Real estate programs are dominating the market, including equity and mortgage loan programs and untraded REITs. Real estate program sales totaled $7.3 billion, up from $4 billion a year earlier. Untraded REITs accounted for $7.0 billion of the total.
• There‚s been a consolidation in the overall industry. There are currently 29 sponsor firms offering 38 direct investment programs, according to Stanger. That‚s down from 296 sponsor firms and 404 programs in 1987. "The door is open for well-capitalized and experienced sponsors to enter this marketplace with investment products," Stanger says.
Calculating Capital Gains Gets Acrobatic
Figuring out capital gains rates is going to be a mind-bending exercise this year. Taxpayers will benefit from a smaller hit on long-term profits, but to get that smaller hit they‚ll have to wade through up to eight different rates for 2003.
As always, you‚ll have to account separately for short-term and long-term capital gains, but this year you‚ll also have to apply a five-month cutoff to certain profits. Ordinary income tax rates may be part of the equation, and on top of that, sales of art as well as certain investment property will have to be calculated separately.
"I expect more mistakes and tax returns to be wrong" because people will apply the wrong rates this year, says Mark Luscombe, principal analyst at tax publisher CCH Inc. in Riverwoods, Ill.
Here‚s a breakdown of the rules.
Stockholders who realized long-term gains after May 5, 2003, qualify for the lower top rate of 15%, or if they‚re in the lowest income brackets, of 5%. But those who sold before this time would still be subject to higher rates of 20% and 10%.