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Proposed Rules Affect Reorganizations Involving Disregarded Entities 

Proposed Internal Revenue Service regulations could affect tax planning for mergers involving commercial real estate structures such as real estate investment trusts that use disregarded entities. The proposed regulations will limit the number of reorganizational structures available to corporate taxpayers

QER Expenditures May Provide Tax Breaks for Brownfield Redevelopers 

When commercial real estate professionals advise their clients on redeveloping brownfield properties, they should consider the tax implications. The treatment of costs incurred to remediate environmentally damaged sites might affect a project's economic feasibility. Remediation Cost Considerations The time during

Proposed IRS Changes Ease Income Tax Regulations for Corporate Mergers 

The Internal Revenue Service recently reversed its course in a direction favorable to taxpayers regarding the proposed regulations on the income tax consequences of corporate mergers or consolidations involving entities that are disregarded for federal tax purposes. The regulations are

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

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

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

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

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

IRS Provides Guidance on Using Tenancy-in-Common Interests in 1031 Exchanges 

On March 19, the Internal Revenue Service released Revenue Procedure 2002 22, which addresses the use of real property fractional ownership interests as replacement property in Internal Revenue Code Section 1031 tax deferred exchanges. Commercial real estate professionals commonly refer

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

Leasehold Interests Offer Alternative 1031 Exchange Options 

Typical Internal Revenue Code Section 1031 exchanges involve the sale of real estate and the acquisition of like kind replacement property. Basically, property held for investment is like kind with any other property held for investment. Fee title investment real

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

QI Questions 

The unregulated Section 1031 exchange industry has suffered instances of misappropriated client funds, breaches of fiduciary duty, theft, and qualified intermediary bankruptcy filings. The task of qualifying a QI has become paramount for real estate investors and their advisers. Understanding

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

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

Big Breaks 

Last fall President Bush signed into law the American Jobs Creation Act of 2004, which provides additional deductions and reduced tax rates for many qualifying U.S. businesses. The AJCA is the most far reaching tax cut in years and benefits

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

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.

Inbound Investments 

In the midst of an unprecedented commercial real estate boom, some investors, particularly those from outside the United States, believe assets currently on the market reflect bargain basement prices. As these opportunities spring up throughout the country, international investors are

Condemnation Caveats 

The U.S. Supreme Court recently agreed to decide the scope of a local government’s ability to use the power of eminent domain to take private property. Several New London, Conn., residents contend that the city’s condemnation of their homes

Plan Now, Save Later 

At the beginning of each year, company owners and individual practitioners should review their business practices to determine if they are making the most of their tax deduction opportunities. Knowing which travel, meal, entertainment, home office, and education expenses to

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

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

Considering Commercial Property Investments with an IRA 

With today’s fierce competition in the commercial real estate world, it’s important to find a way to distinguish oneself as a professional. Having a specialized knowledge of inventory possibilities and ideas for creatively funding investment projects can set you apart