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Clarifying Entity Classification Conversions 

Two recent Internal Revenue Service rulings on the tax treatment of converting single member limited liability companies into partnerships and vice versa likely will affect the commercial real estate industry because many transactions take place with partnerships and other entities

Cost-Segregation Solutions 

Cost segregation is an accepted Internal Revenue Service method of allocating the purchase price paid for real estate property. Generally, cost segregation enables owners to increase the depreciation deductions from their properties, providing substantial present value benefits by reducing income

Commercial Developers May Gain Basis Allocation Advantage 

A recent U.S. Tax Court decision may provide commercial developers with another creative tax planning tool, based upon a long standing basis allocation rule available to residential developers. In a series of judicial decisions dating back to the 1950s, courts

Accrual-Basis Taxpayers Lose the Use of Installment-Sales Tax Break 

Congress periodically has provided taxpayers with relief from the burden of current income tax liabilities generated in qualified transactions. Internal Revenue Code Section 1031, which governs like kind exchanges, is a familiar example of such a provision that allows taxpayers

Cost Segregation Helps Property Owners Maximize Depreciation Deductions 

While most property owners are aware of depreciation benefits, few take full advantage of them. It is rare that a building's entire cost is depreciated over the 39 year or 27.5 year life assigned to real property, but when owners

Constructive Receipt: Timing Is Everything 

A fundamental principle in efficient tax planning is the contemplation of the timing of income and loss events. While this principle seems relatively elementary, determining when a tax item actually becomes taxable can be more complex. Statutory Background IRC Section

Disappearing Lease Detour 

During the last several years, many tax deferred exchangers sold properties for a premium but found it challenging to locate and buy suitable replacement properties. Construction exchanges are a growing alternative because taxpayers can build value into the property to

History in the Making 

By taking advantage of rehabilitation tax credits sprovided under Internal Revenue Code Section 47, owners or developers of historic properties can inject significant equity into their real estate projects to cover funding gaps, increase project amenities, or avoid expensive bridge

Exchange With Caution 

Congress addressed what it considered to be abusive sale leaseback transactions involving tax exempt entities, known as sale in, lease out, or SILO transactions, by creating Internal Revenue Code Section 470 as part of the American Jobs Creation Act of

Improving Economics 

In recent years, many commercial real estate owners have become more familiar with the tax benefits of cost segregation. Due to cost and complexity, these studies were once only practical for large property owners. However, several boutique consulting companies have

Exchange Eligibility 

Joseph and Sara bought a three bedroom rental home that needed repair. After several months, they had completed the repairs and put the refurbished property on the market for substantially more than their original investment. Subsequently, a buyer put a

The Home Advantage 

Any broker who has worked with Internal Revenue Code Section 1031 tax deferred exchange clients knows the frustration of trying to find a replacement property at the right price with the correct amount of debt before the 180 day window

New Tax Rules Offer REITs More Flexibility 

Significant new federal income tax rules governing real estate investment trusts will allow REITs to compete on a more level playing field. Without being penalized, REITs now may operate and maintain control of companies that provide valuable services to their

Partnerships Can Use These Methods to Protect 1031 Gains 

Property owners wishing to dispose of appreciated assets often use Internal Revenue Code Section 1031 exchanges to defer capital gains taxes. However, partnerships wishing to execute exchanges face unique challenges, particularly when individuals in the partnership have diverging investment goals

IRS Ruling on Passive Activity May Offer Tax Break Possibilities 

Taxpayers often consider depreciable real estate a viable investment vehicle because of its potential for capital appreciation and cash flow and its inherent qualities as a tax shelter. From a purely tax perspective, depreciable real estate historically provides a positive

Partnership Abandonment May Not Be a Capital Offense 

When selling real property, individual taxpayers generally prefer to declare the profit as a capital gain rather than ordinary income because of the lower marginal rate on capital gains. But in the case of losses, this logic often is reversed

A PAT Answer 

Editor's note The November December 2006 issue of Commercial Investment Real Estate contains the article "A PAT Answer," which discusses private annuity trusts as a tax deferral strategy. After the magazine was printed, the U.S. Treasury Department issued proposed regulation

Reverse Exchanges Offer Investors Tax-Saving Benefits 

In an Internal Revenue Code Section 1031 exchange, when an investor must purchase the replacement property before the relinquished property can be sold, he should consider using a reverse exchange. In September 2000, the Internal Revenue Service clarified its position

Review Tax Changes to Maximize Employee Benefit Plans 

In light of changing legislation, commercial real estate companies should review their employee benefits plans. The Economic Growth and Tax Relief Reconciliation Act of 2001 contained numerous changes to fundamental retirement plan rules for small businesses. Effective for plan years

S Corporation Shareholders Benefit From Supreme Court Ruling 

The U.S. Supreme Court recently ruled in favor of taxpayers in a potential windfall decision for shareholders of S corporations. Many small companies, including real estate related ventures, elect to be treated as S corporations with the Internal Revenue Service.

Tax Squeeze 

The feeble transaction market is pushing commercial real estate professionals to expand their scope to include non transaction services that clients need in today&rsquo s shaky economy. Tax consultation, particularly property valuation protests, is a recession resistant service that is

Review the Fundamentals of Section 1031 Like-Kind Exchanges 

Taxpayers planning to sell, purchase, or construct real property should review the possibility of conducting an Internal Revenue Code Section 1031 like kind exchange to defer the incurrence of federal and general state income taxes on the capital gain. To

Retail Tenants Get Tax Break for Construction Allowances 

For years, federal income tax law was unclear about how to treat payments that owners or landlords make to tenants for construction allowances to improve leased retail space. Last September, the Internal Revenue Service adopted final regulations on previously created

A Taxing Workout? 

The slumping global economy and stagnant credit markets have taken a toll on nearly all commercial real estate properties. Many assets are struggling to generate sufficient income to meet financing obligations in the current market. As a result, many real

Give & Receive 

Is a non productive commercial real estate asset draining your client's cash flow? What can you do to help get rid of this white elephant while still adding value to your business? Many investors and corporate real estate professionals are