Journalofaccountancy.com Real Estate

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Trust Can Be A Real Estate Professional

5 days ago

Trustees performing services on a trust’s behalf qualify the trust for the exception for real estate professionals to the passive activity loss disallowance. The Tax Court held that a trust’s rental losses could be currently deducted since the trust qualified as a real estate

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The QBI Deduction For Rental Real Estate Activity

4 days ago

Real estate activities are not considered a trade or business if real property is used as a residence as defined in Sec. 280A (i.e., it is used personally by an owner for a number of days that exceeds the greater of 14 days or 10% of the number of days during the year in which the property is rented at a fair rental); and

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Mortgage Broker Is Not A Real Estate Professional

4 days ago

The Tax Court recently held that a mortgage broker was not a real estate professional and therefore was subject to the passive activity loss rules of Sec. 469 (Hickam, T.C. Summ. 2017-66).During the years at issue, Kurt Hickam brokered real estate mortgages and other loans secured by real estate, both as an independent contractor and as an employee.

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Self-Rental Income Considered Active

Just Now

Under IRC sections 469(c)(2) and (c)(4), income from rental real estate is generally considered passive activity income, regardless of the taxpayer’s level of involvement in the property. However, the recharacterization or self-rental rule of regulations section 1.469-2(f)(6) provides that rental realty income is not passive activity income

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Short-Term Rentals Preclude Use Of Losses

6 days ago

CPA tax practitioners who have clients involved in a real estate rental trade or business are no doubt aware of the rule allowing $25,000 of passive losses from rental real estate to be deducted against nonpassive income and the 750-hour material participation rule for qualifying as a real estate professional under the passive activity loss rules.

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Right To Purchase Land Is A Capital Asset

2 days ago

Right to purchase land is a capital asset. By Charles J. Reichert, CPA. March 1, 2015. A taxpayer’s sale of his position in a lawsuit resulted in capital gain rather than ordinary income. The Eleventh Circuit held that a real estate developer’s sale of his rights in a lawsuit regarding a land sale contract produced capital gain rather than

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Creating Joint Ownership: Avoiding The Tax Traps And Other

Just Now

Without having a proper estate plan in place, Jack decides to add his daughter, Liz, as joint owner of a rental property he owns that is valued at $600,000. His action unwittingly triggers a $300,000 gift transaction (one-half of the property’s value). (If Jack is married and owns the property jointly with his wife, each of the parties named

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Like-kind Exchanges Are Now Clearer

Just Now

Like-kind exchanges are now clearer. The enactment of the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, amended Sec. 1031 to apply only to exchanges of real property. Because of this change, the exchange of personal property for other personal property of like kind is now a taxable event. In response to this change, questions

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Financial Reporting For Real Estate

Just Now

Real Estate Accounting and Financial Reporting: Tackling the Complexities, a CPE self-study course (#734620) Fair Value Accounting: A Critical New Skill for All CPAs, a CPE self-study course (#733301) For more information or to place an order or register, go …

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The Home Sale Gain Exclusion

2 days ago

The gain on the sale of a home is excluded from income only if, during that five-year period, the taxpayer owns and uses the property as a principal residence for periods totaling two years or more. Either 24 full months or 730 days will satisfy the two-year ownership and use requirements. Example.

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What Happened To Limited Partnerships

4 days ago

Tax law changes, increased audit scrutiny by the Internal Revenue Service and falling real estate and oil and gas prices brought an end to the glory years. By late 1989, some analysts had estimated that if all real estate LPs were liquidated, 70% or more would lose money. Nearly one-third had not paid out any cash for six months.

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Avoid Tax Traps With A Timely Appraisal

8 days ago

Under the rules in Prop. Regs. Sec. 1. 1014-10 (c)(3)(ii), if an estate tax return was required to be filed for a decedent's estate under Sec. 6018(a) and the executor of the estate failed to file a return, a taxpayer inheriting property from the decedent would have a zero basis in the property until a final value was established for the

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Income Tax Accounting For Trusts And Estates

6 days ago

The tax calculation for estates and trusts with regard to long-term capital gains rates is the same as for individuals. Thus, just as for individuals, long-term capital gains and qualified dividends are currently taxed at 15% and, for trusts and estates in the 15% tax bracket (the lowest), zero. For trusts and estates, however, that bracket is

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Capital Loss Vs. Ordinary Loss

3 days ago

Observation: When an entrepreneur or real estate developer seeks to deduct a loss from a small business or a real estate venture, it is critically important to have documentation that supports classifying the activity as a trade or business. Howard Godfrey, CPA, PhD, professor of accounting, University of North Carolina at Charlotte.

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A New Path For Private Companies With VIEs

6 days ago

A new path for private companies with VIEs. Preparers may elect not to consolidate in certain circumstances under FASB guidance issued in 2018. Editor’s note: The author is a member of FASB. Many private companies frequently engage in common control arrangements that may be subject to complex variable - interest entity (VIE) guidance. Last

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Beyond Section 1031

5 days ago

ost real estate investors recognize the obvious benefit of an IRC section 1031 exchange—the tax bill due Uncle Sam is put on hold, allowing the full amount of equity in the property to continue compounding. What some investors are just beginning to realize is that exchanging does far more than just delay income tax consequences; it is a

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Electing To Aggregate Rental Activities: Better Late Than

9 days ago

real estate professionals For individuals and certain entities, Sec. 469(a) generally disallows for the tax year any passive activity loss, defined as the excess of the aggregate losses from all passive activities for the tax year over the aggregate income from all passive activities for that year.

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The Best Of Both Worlds

7 days ago

Section 1031 exchanges of real estate have long been a favorite tax-deferral tool for owners. In these exchanges, business or investment property is disposed of through a qualified intermediary, and the proceeds are used to purchase a replacement property of like kind.

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Valuation Discounts For Estate And Gift Taxes

6 days ago

For entities holding real estate, the DLOC is determined by comparing the trading price of shares of a selected sample of registered real estate limited partnerships (RELPs) or real estate investment trusts (REITs) to the net asset value of the respective shares. Citing mere averages or using generic samples of data is not sufficient.

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Real Estate Transfer Taxes: Practical Considerations

6 days ago

As a practical matter, a real property transfer tax is typically triggered if a deed is recorded; however, taxpayers often transfer real estate to a new owner without recording a deed, for example, by transferring the ownership interest in an entity that holds title to the property. Given such a loophole, it is small wonder that taxpayers have

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The Dos And Don’ts Of IRA Investing

6 days ago

Rents from real property are excluded in the definition of income under unrelated business income, so purchasing rental real estate in an IRA and collecting rents is an acceptable investment. Under section 512(b)(3), however, taxpayers must exercise caution if the rental property is leveraged.

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Tax Considerations For Buying And Selling Property With A

6 days ago

In a period of declining real estate values, CPAs of both lessees and lessors should be alert to the tax planning implications of property acquisition opportunities. Structuring a property acquisition as two contracts, one for the value of the lease and one for the property, could bypass the Tax Court objection to allowing a deduction in the

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Advising Private Foundations

4 days ago

Fair market value must be recalculated each year, except for investments in real estate, which must be valued by independent appraisal no less than every five years. Allowed adjustments include reductions for acquisition indebtedness, cash held specifically for …

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FASB Clarifies Scope Of Asset Derecognition Guidance

8 days ago

The amendments eliminate the scope exception in current GAAP that exempts investments that are considered in-substance real estate from the requirement that an entity derecognize an equity method investment in accordance with ASC Topic 860, Transfers and Servicing.

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Helping S Corporations Avoid Unreasonable Compensation Audits

9 days ago

But it would be a red flag for a return to show the code of a professional service firm or other active business while officer compensation expense on Page 1 of Form 1120S is zero (see, e.g., Sean McAlary Ltd., Inc., T.C. Summ. 2013-62 (S corporation reporting NAICS Code 531210, real estate agent/broker, not permitted to report no compensation

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Forfeited Deposits Are Ordinary Income

6 days ago

December 1, 2016. The Tax Court held that forfeited deposits the taxpayer retained from a terminated real estate sale agreement were ordinary income rather than capital gain. According to the court, by its plain language, Sec. 1234A does not apply to such deposits when the property has been used in the taxpayer's trade or business.

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Great Time For A GRAT

5 days ago

GRATs work best with assets that can outperform the Sec. 7520 rate. As a result, pre-IPO (initial public offering) stock, appreciating stocks, real estate, and hedge fund investments are great choices for a GRAT. Additionally, properly structured GRATs can be shareholders in S corporations, so closely held business interests may be contributed

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The Choice-of-Entity Maze

9 days ago

EXECUTIVE SUMMARY When advising clients on the choice of business entity, CPAs should consider the advantages and disadvantages of each type. If more than one entity is involved, CPAs should also determine whether clients can deal with the complexity of the resulting structure. The many issues to …

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Safe Harbor Allows QBI Deduction For Rental Real Estate

Just Now

A rental real estate enterprise is defined, for purposes of the safe harbor, as an interest in real property held for the production of rents. A rental real estate enterprise may consist of multiple properties. The interest must be held directly or through a disregarded entity.

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Real Tax Savings In Real Estate

4 days ago

By statute, rental real estate activities are “passive” and thus subject to the passive loss limitation rules of IRC § 469 (c) (2). Generally, under those rules, all aggregate losses from passive activities are limited to the amount of aggregate income from passive activities. Taxpayers who conduct a “real

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Mortgage Loan Loss

5 days ago

Mortgage Loan Loss Can't Offset Real Estate Gain on Sale of U.K. Home . M r. and Mrs. Quijano were U.S. taxpayers who sold their home in the United Kingdom. They purchased it in September 1986 for 297,500, financing the entire amount with a mortgage, which two years later they increased to 330,000 and, in March 1990, to 333,180.

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How CPAs Help Clients Reinvent Struggling Businesses

7 days ago

Finding the key to real estate sustainability. As rental income declined during the pandemic, Brandon Hall, CPA, serving as his clients’ outsourced CFO, did real estate portfolio analyses for real estate investor clients to determine how they might improve performance.

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Passive Or Nonpassive Activity—IRS Wins Either Way

1 days ago

The Tax Court recently ruled on the same day in favor of the IRS in two unrelated cases involving the passive loss rules for rental activities (see also “ Real Tax Savings in Real Estate,” page 68).In one case, the court determined that a taxpayer’s rental activity was passive, since the taxpayer was unable to demonstrate that the activity qualified as a real property trade or business

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FASB Clarifies Scope Of Derecognition Of In Substance Real

4 days ago

FASB on Wednesday issued Accounting Standards Update (ASU) no. 2011-10, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate—a Scope Clarification (a consensus of the FASB Emerging Issues Task Force). The ASU clarifies that the guidance in Accounting Standard Codification (ASC) Subtopic 360-20, Property, Plant, and Equipment—Real

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When Should Advertising Be Capitalized

4 days ago

Costs a company incurs to rent or sell real estate projects should be capitalized if they will be realized when the project is sold or rented. FASB Statement no. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects , says companies should expense the capitalized costs in the period revenue is recognized. The flowchart

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The TCJA And Foreign Real Property Taxes

5 days ago

This column describes how certain of these taxpayers living in a foreign residence and earning wages abroad may be able to nonetheless claim an exclusion from gross income for foreign real estate taxes they pay or incur. The TCJA added Sec. 164 (b) …

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Companies Rethink The Office, But They’re Not Ready To Say

Just Now

Eventually, those shifts could materialize in the office real estate market, but Machinga said that there aren’t clear, long-term signals yet. She’s watching for changes in sale prices for properties, along with more subtle signs like investments in HVAC systems, which could indicate a …

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President Signs Repeal Of Expanded 1099 Requirements

4 days ago

It did this by specifying that “a person receiving rental income from real estate shall be considered to be engaged in a trade or business of renting property.” The 1099 Act strikes IRC § 6041(h) in its entirety, effective for payments made after Dec. 31, 2010 (the original effective date of section 6041(h)), placing individuals who

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Co-Op Real Estate Taxes Not Deductible For AMT

6 days ago

The Tax Court disagreed, saying a tenant-shareholder’s share of the co-op’s real estate taxes was not deductible for purposes of determining the AMT. The taxpayers appealed to the Second Circuit Court of Appeals. Result . For the IRS. IRC section 164 (a) (1) allows taxpayers to deduct real property taxes paid or accrued during the taxable year.

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About journalofaccountancy.com real estate

Optimizing residential real estate deductions. The tax deduction rules for residential landlords have changed dramatically in recent years, with the release of the final tangible property regulations in 2013 (T.D. 9636) and the creation of the qualified business income (QBI) deduction under Sec. 199A by the law known as the Tax Cuts and Jobs

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Total: 40 New Post

FAQ?

Is real estate a good investment right now?

Real estate is generally a great investment option. It can generate ongoing passive income and can be a good long-term investment if the value increases over time.

How much can you make in real estate?

Real estate is often a referral-based business. Those who are involved in the business longer typically are the most successful. Those with 16 years or more experience earned the highest real estate income: approximately $78,850 on average.

What is the best real estate market?

Dallas tops the list of real-estate markets over the period studied, exhibiting strong price appreciation, while remaining a market in which investors saw strong rents relative to property values.

What is the most expensive real estate in the US?

Manhattan real estate is the most expensive in the US per square foot with some properties topping $10,000: Study. Move over San Francisco — the Big Apple tops Silicon Valley as most expensive place to live in the United States, a new study shows.

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