How do people "afford" the Extreme Makeover Home Edition?

Question

I know that this same question is out there, but here are my thoughts. First, how does one afford to pay for all the new things in it that work- as stated in the q&a posted below, how does one afford the landscaping and heating a house that is 3 times bigger than before? But also, in CA [as far as I know], if someone receives a "gift" of over 12K, you have to pay taxes on it. I also read in TIME Magazine that when Oprah gave away the 100 Red Ford Taurses to poor women, more than 1/2 of them had to sell them b/c they couldn't afford to pay the taxes?!!? Accountants, tax people, gov't officials- someone please help me understand how one can "afford" the extreme makeover home edition!?!?


http://answers.yahoo.com/question/index;_ylt=AgCG38.fdCqQF8JI_u8jEqdIzKIX;_ylv=3?qid=20060905115159AAWWfof

Answer 1

Disney, being a multi-billion dollar company, builds the homes and asks the families to pay utilities and property taxes for the next 10 years. Should the family decide to move, the house reverts back to Disney to sell. Essentially, Disney becomes the landlord and spends its own money to build the houses just to rent them back to the families. There's no mortgage, nothing involved and no dealings with the IRS.

{EDIT} One of the houses was used as a bed and breakfast while family members of the other house were paid a 6 figure salary.

Answer 2

Here is the deal.. Extreme Home Makeover (run by ABC) makes a significant profit off each house they build compared to the amount of advertising revenue which they receive. Remember, a 30 - second ad on ABC national TV can net anywhere from 100K - 2.5 million (of course this may buy a few runnings of the commercial). At one point and time, Extreme Home Makeover's dumb*ss accountants' tried to come up with away to get around paying taxes... The IRS has rules which state as long as someone rents a property for less than 14 days out of a given year, then the property is not rental property and the income received does not need to be reported... Extreme Home Makeover would pay UNUSUALLY high amount to "rent" the soon to be torn down house. However, the IRS stated that this was an evasion of taxes and made ABC pay taxes on these. ABC now covers some of the particulars on electricity bills, taxes, and other behind the scenes.. Trust me, a typical show will need 1 - 1.5 million in true advertising if they have a popular show or a few hundred thousand for a sucky show..

Hope that helps..

Answer 3

Swinging the utility bills is probably the easiest for those folks to deal with. A 1,200 sq ft home with little or no insulation costs a lot more to heat and cool than a 4,000 sq ft modern state-of-the-art home. My boss recently built a 4,500 sq ft home and his utility bills are about 1/4 of what mine are on a 2,900 sq ft home built 27 years ago.

Income and property taxes are what kills those folks. The homes are NOT a gift under our tax laws but are considered ordinary income. A gift would not be taxed; the DONOR pays the taxes on gifts. However to be a gift the donor must get nothing in return and the producers get PLENTY in return for giving away the homes -- the publicity for the show and the advertising revenue that it attracts.

To help defray the taxes involved the show does give them enough cash to cover the income taxes and the property taxes for the first couple of years. Even so, that money is taxable as well which further increases the tax bill.

If the folks are really lucky and budget carefully they may come out OK. As long as they don't blow the extra cash and use it for the taxes, with a little luck their property tax bills will be less than their old mortgage payments were and they'll be able to keep the home. If not, they'll probably have to sell in a couple of years at most and will likely wind up right about where they were in the first place.

Answer 4

I don't know how EMHO handles the taxes, but I'm suspecting that they pay the taxes too. So now the prize is more than just a house. Now it's the house and taxes. It makes the prize even bigger. But even though it's Hollywood, I'm sure they are smart enough to calculate the right amount to withhold to the government.

As for all the on going costs associated with a new, huge house - I have no idea how some of these people afford them.