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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

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

IRS Guides Taxpayers on Repeal of Installment-Sales Repeal 

The Internal Revenue Service has clarified the implications of Congress' recent change of heart about repealing the installment sales method for accrual basis taxpayers. Signed in December 2000, the Installment Tax Correction Act repeals former Internal Revenue Code Section 453(a)(2),

LLC Self-Employment Regulations Can Be Taxing 

The limited liability company has emerged as the ownership vehicle of choice for real estate in most jurisdictions. Because of federal "check the box" regulations — which allow newly formed entities to choose how they will be taxed for federal

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

IRS Ruling May Free Up Corporate Real Estate Value 

In June, the Internal Revenue Service issued Revenue Ruling 2001 29, which states that a real estate investment trust might be party to a tax free separation of corporate owned real estate if certain conditions are met. This ruling comes

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

Analyzing Local Tax Laws Can Save Property Owners Money 

Property taxes are a major expense for commercial property owners often second only to financing costs. Yet many owners resign themselves to rising property tax expenses, accepting their annual assessments as a cost of doing business. Because property values rise

Are You a Candidate for an IRS Audit? 

Benjamin Franklin is credited with observing, “In this world, nothing is certain but death and taxes.” To whom taxpayers answer in death is a question of debate, but there is no question that U.S. taxpayers must answer to the Internal

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

The Benefits of Cost-Segregation Studies 

When a commercial property is purchased or constructed, a building asset is created and the dollars are entered into a fixed asset system as 39 or 27.5 year property. Using the straight line method,

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

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

Creative Planning May Reduce State Taxes 

State and local taxes represent an increasing portion of the overall tax cost of any real estate transaction. As more businesses become national and even global, state and local tax planning become more crucial. In early March, the New Jersey

5 Tax Tips for Developers and Investors 

In today&rsquo s economy it is essential for commercial real estate professionals to be aware of tax planning opportunities and the potential cash savings available to their companies. The following five tax tips may help real estate owners and developers

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

Estate Tax Repeal Affects Property Disposition by Beneficiaries 

On June 7, President Bush signed the Economic Growth and Tax Relief Reconciliation Act of 2001, a $1.35 trillion tax cut plan. Among other things, this act provides for a phased in repeal of the estate tax with a full

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

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

QRPBI Exception Calculations 

Two calculations must be applied that limit the amount of excludable cancellation of debt income when utilizing the qualified real property business indebtedness exception to COD income. While these calculations are complex and not comprehensively covered in this article, this

Bonus Deductions 

The Jobs and Growth Tax Relief Reconciliation Act of 2003 provides a number of tax breaks and incentives to the commercial real estate industry. One particular benefit is the increased bonus depreciation amount, which creates an even greater tax incentive

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

1031 Details 

Internal Revenue Code Section 1031 tax deferred exchanges may look similar to simple property acquisitions in which the buyer uses funds from a previous building sale. However, these transactions entail specific closing details that differ from traditional real estate sales.

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

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