Thetaxadviser.com Real Estate

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The Maze Of Real Estate Rentals

5 days ago

A real estate professional has the opportunity to have the activity treated as nonpassive if he or she materially participates in the rental real estate activity. 5 A real estate professional is one who spends more than one-half of her personal services performed in all trades or businesses during the year in real property trades or businesses

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Is The Sale Of Real Property Ordinary Income Or Capital Gain

6 days ago

Determining whether a real estate sale produces ordinary income or capital gain is difficult and is potentially an issue that can cause a taxpayer to be liable for significantly higher taxes. Unfortunately, as this case demonstrates, there is no bright-line test.

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Real Estate Professionals: Avoiding The Passive Activity

8 days ago

For a real estate professional who participates in a rental real estate activity for more than 500 hours during the tax year or who participated in such real estate activities for more than 500 hours in five or more years during the 10 immediately preceding tax years, the gross rental income and gain or loss resulting from the disposition of

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Sale Of Improved Land: Capital Or Ordinary Gain

1 days ago

When real property is subdivided into lots and actively sold, the common result is that the gain on sale of the property is subject to ordinary income tax treatment. However, this may not always be the case under Sec. 1237. In certain situations, a taxpayer still may be able to claim capital gain treatment under the five- or 10-year rule, even

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Land Sales: Is The Taxpayer Considered A Dealer Or Investor

4 days ago

In 1999, the property was sold to a real estate development corporation under an installment sale arrangement. On their 2004 Form 1040, U.S. Individual Income Tax Return, the Allens reported the final installment payment of $63,662 as a long-term capital gain.

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Elective Capitalization As A TCJA Planning Tool

8 days ago

For those projects, Regs. Sec. 1. 266 - 1 (b) (1) (ii) (a) is phrased more broadly to apply to "interest on a loan" other than "theoretical interest" of a taxpayer using its own funds. Arguably, the breadth of that language would permit a broader sweep for elective interest capitalization for real estate development projects.

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Land Donations May Not Result In Desired Tax Benefit

6 days ago

A recent Tax Court case, Triumph Mixed Use Investments III, LLC, T.C. Memo. 2018-65, determined that a real estate development company was not entitled to claim a charitable contribution deduction for its transfer of certain open land to a city.

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Income From Parking Facilities Is Qualifying REIT Income

2 days ago

In Letter Ruling 201628020, the IRS ruled that amounts received by a real estate investment trust (REIT) from the provision of parking spaces in its parking garage, in part, to the tenants of the REIT's office building and, in part, to a third-party owner of an adjacent building under a long-term lease constitute qualifying rents from real property. . Letter Ruling 201628021 appears to address

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Buyer’s Withholding Obligation Under FIRPTA

7 days ago

On the surface, the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), P.L. 96-499, seems straightforward enough: Foreign persons must pay a 10% or 15% tax when they sell a piece of U.S. real estate. As always, though, the devil is in the details. And there are many details, exceptions, and complicating factors.

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Texas Comptroller Provides Rules On The Texas Franchise Tax

2 days ago

Real estate entities should be passive entities as long as the sale of real estate results in a capital gain. Note that entities receiving real estate rental income should also be partnerships in case the real estate is sold for a capital gain. If a rental property is sold, it should be …

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Grouping Rental Real Estate Activities Under Regs. Secs. 1

4 days ago

Regs. Sec. 1.469-4: Grouping of trade or business activities with rental real estate is limited by Regs. Sec. 1.469-4 (d) as noted above. Regs. Sec. 1.469-9: All interests in rental real estate held by real estate professionals are grouped as a single activity. There are special rules for certain management activities.

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Final Regulations Clarify Definition Of Real Property For

1 days ago

Final Regulations Clarify Definition of Real Property for REITs. The IRS issued final regulations (T.D. 9784) clarifying the definition of real property for purposes of the real estate investment trust (REIT) provisions. The regulations went into effect Aug. 31, 2016, and adopt, with modifications, the proposed regulations ( REG - 150760 - 13

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FIRPTA Rules Impact U.S. Real Estate Transactions

4 days ago

Real Estate. The Association of Foreign Investors in Real Estate released the group's 22nd annual survey in early 2014, indicating that the United States remained the most stable and secure country for foreign investment in real estate by more than 50 percentage points over the second most stable and secure country, Germany, the widest margin since 2006.

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Equitable Ownership And Mortgage Interest Deductions

9 days ago

Interest paid by the taxpayer on a mortgage upon real estate of which he is the legal or equitable owner, even though the taxpayer is not directly liable upon the bond or note secured by the mortgage, may be deducted as interest on his indebtedness. [Emphasis added.] Thus, if the taxpayer is not the legal owner of the residence but can

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LLC Member Debt: Recourse Or Nonrecourse

6 days ago

Editor: Annette B. Smith, CPA. LLCs & LLPs. Regs. Sec. 1.704-2(b)(4) defines the term “partner nonrecourse debt” as “any partnership liability to the extent the liability is nonrecourse for purposes of §1.1001-2, and a partner or related person (within the meaning of §1.752-4(b)) bears the economic risk of loss under §1.752-2 because, for example, the partner or related person is the

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Lease Payments Are Not Always Rent

1 days ago

A leasehold interest in real estate with 30 years or more left on the lease can be considered a fee simple interest in real estate under Sec. 1031. Payments made by the tenant to the landlord: Lease termination payments received by the landlord are taxable income to the landlord as a substitute for rental payments under Regs. Sec. 1. 61 - 8 (b).

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Grouping Activities Under Sec. 469

Just Now

Grouping Activities Under Sec. 469. Generally, a taxpayer may group one or more trade, business, or rental activities as one activity if the activities represent an appropriate economic unit in determining gain or loss for Sec. 469 purposes. Determining whether activities make up an appropriate economic unit depends on all the pertinent facts

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Passive Activity Credit Flowchart

4 days ago

Credits from rental real estate activities in which the taxpayer actively participates, such as the disabled access credit, and low-income housing and rehabilitation credits from any rental real estate activity, can be used against the special $25,000 allowance on a tax-equivalency basis. However, the ordering rules require the $25,000

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Revocable Trusts And The Grantor’s Death: Planning And

7 days ago

If Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, is required, the assets held in the revocable trust should be aggregated and reported on Schedule G, Transfers During Decedent's Life, rather than listed separately (e.g., stocks and bonds, real estate, mortgages, notes, cash, etc.). Additionally, the Part 4

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Gifting Of A Remainder Interest In A Home

5 days ago

Gifting a remainder interest requires the property ownership to be divided into two separate interests: a life estate and a remainder interest. A life estate gives the holder the power to retain ownership until death. If the taxpayer is married, the life estate

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Disposing Of Passive Activities

9 days ago

Example 4: ABC Corp. is a closely held, calendar-year C corporation that conducts business activities and rental real estate activities. The corporation is carrying forward $40,000 of suspended passive activity losses from the rentals when it elects S status on Jan. 1 of the current year.

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Guide To Expensing HVAC Costs

6 days ago

Guide to expensing HVAC costs. Heating, ventilation, and air conditioning (HVAC) replacement costs can be significant expenses for businesses that own or lease real estate. Find out about how to distinguish between deductible repairs and more extensive work that must be capitalized. By Eddie Price and Malik Javed.

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Current Leading Practices For Structuring The Family Office

6 days ago

The entrepreneurial risk taker who demonstrated expertise in a particular industry must now switch gears to oversee a more diverse portfolio (e.g., marketable investments, alternative investments, private equity, real estate holdings, and new business ventures) while balancing the potentially competing needs of the family members served by the

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IRS Provides Guidance On Interplay Of Rental Real Estate

4 days ago

Real Estate. The IRS Office of Chief Counsel in Chief Counsel Advice (CCA) 201427016 on July 3 advised on the interaction of the rental real estate grouping election under Regs. Sec. 1.469-9(g) and the real estate professional exception to the passive activity loss …

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Like-Kind Exchanges Of Partnership Properties

2 days ago

Owners of real estate often use Sec. 1031 to make tax-deferred exchanges of underperforming properties for newer replacement properties. However, when the real estate is held in a partnership or a limited liability company (LLC) having multiple owners (that is treated as a partnership for tax purposes), the exchange can become complicated if

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Partners’ Limited Liability And Self-Employment Tax

3 days ago

RCGW’s primary business activity involved the purchase, sale, and rental of real estate. The LLP maintained its income tax records on a cash basis. The firm’s partners were the beneficiaries of the ESOP. For 2004, the partners each held a one-third capital interest and …

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Maximizing The QBI Deduction With UBIA Property

4 days ago

Therefore, it is important to understand the components behind these two QBI deduction limitations, particularly the UBIA of qualified property. This will be especially important for high-income taxpayers who own nonspecified service businesses that pay little or no Form W-2 wages, such as some rental real estate businesses.

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Handling Gifts And Bequests Of LLC Interests

9 days ago

The adjustment is based on the FMV used for the decedent’s estate tax return. For transfers of interests (including transfers upon the death of a member), a basis adjustment under Sec. 743 is required if the LLC has a substantial built-in loss immediately after the transfer (unless the LLC is an electing investment partnership or LLC or a

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IRS Issues Guidance On REITs’ Treatment Of Certain Foreign

1 days ago

In Rev. Proc. 2018-48, the IRS has determined, under its Sec. 856(c)(5)(J)(ii) authority, that the Subpart F inclusions, passive foreign investment company (PFIC) inclusions, and global intangible low-taxed income (GILTI) inclusions attributable to investment by a real estate investment trust (REIT) in foreign corporations constitute qualifying income for purposes of the 95% income test in Sec

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Exiting The U.S. Tax System

2 days ago

The tax is equal to the value of the covered gift or bequest multiplied by the highest estate tax rate in effect on the date of receipt (Sec. 2801(a)). Administratively, the transferee presumes that a living donor is a covered expatriate and has the responsibility to determine if the transferor is a covered expatriate (see Prop. Regs. Sec. 28

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Important Lessons Regarding Valuation Issues

6 days ago

Estates, Trusts & Gifts. On April 28, 2011, the Tax Court held in Estate of Mitchell, T.C. Memo 2011-94, that an estate properly valued both real estate and artwork.The IRS had previously examined the estate’s federal estate tax return and claimed that the estate underreported the fair market values (FMVs) of paintings and interests in several real properties.

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Sec. 467 Leases And Proper Structuring For Deferral Purposes

9 days ago

The commercial real estate market boom continues to provide opportunities for tax planning, specifically in the area of lease structuring. Careful planning and documentation in the lease agreement is the key to income deferral, but practitioners need to be aware that the IRS's interpretation of Sec. 467 is stricter than once thought.. Income Recognition Under Secs. 451, 61, and 467

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Sec. 1446 Withholding

9 days ago

Foreign investment in the United States continues to rise. The investment vehicle of choice, especially in the case of real estate, is generally a tax-transparent entity such as a limited partnership, limited liability company, or similar foreign transparent entity that is treated as a partnership for U.S. tax purposes.

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Summary Of Tax Rules For Liquidating Corporations

5 days ago

There are exceptions under Sec. 332(c) if the liquidating corporation is a regulated investment company or a real estate investment trust. Sec. 336(d) contains additional exceptions if any property is distributed to a related party under Sec. 267 or if property was acquired in a Sec. 351 transaction or as a contribution of capital and the

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Tax Considerations For Cancellation-of-Debt Income

4 days ago

Gross Income. This item provides an overview of the U.S. income tax implications of cancellation-of-debt (COD) income that results from bankruptcy or insolvency, with a focus on the differences in the tax treatment for C corporations, S corporations, and partnerships. Since the general rule provides that COD income is recognized even though

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Tax Court Uses Cost-to-Partition Approach To Value

6 days ago

Instead, it adopted the IRS expert’s 10% rate of return. The court determined the value assuming a two-year partition period with the partition cost to be 1% of the property’s FMV, the cost of selling the property to be 6% of the property’s FMV, a 3% long-term annual sustainable growth rate, annual operating costs of $350,000, and a 10%

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Limiting Business Interest Expense

5 days ago

It applies to both active and passive activities, but a rental real estate business can elect out. The Sec. 163(j) limitation applies only to business interest expense that would otherwise be deductible in the current tax year (Prop. Regs. Sec. 1.163(j)- 3 (b)(1)).

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General Partner Of Private Investment Fund: In A Trade Or

5 days ago

Private investment funds are typically structured as limited partnerships with an entity as a general partner. That general partner is responsible for the overall management of the fund and is usually compensated by a performance fee or allocation (sometimes called a carried interest) in exchange for services rendered.

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Sec. 1234A And Termination Fees

7 days ago

In CRI-Leslie, a partnership (CRI-Leslie) owned and operated a real estate property that included a hotel, restaurant, swimming pool, parking lot, and landscaping. The property constituted real property used in CRI-Leslie's hotel and restaurant business under Sec. 1221(a)(2) and property used in its trade or business under Sec. 1231.

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Service Businesses That Qualify For The 20% QBI Deduction

3 days ago

The proposed regulations specifically excluded real estate and insurance agents and brokers (Prop. Regs. Sec. 1. 199A-5 (b)(2)(x)). Excluding these two sets of professionals significantly increased the number of those taxpayers eligible for the deduction.

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Violating Certain “Bad Boy” Guarantees Can Trigger

2 days ago

The bad-boy guarantee is a typical arrangement in real estate loans. When a borrower takes a nonrecourse loan to purchase real estate, the lender can foreclose only on the real estate; it cannot go after the borrower. To reduce risk for the lender, these …

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Guide To Expensing Roofing Costs

9 days ago

When compared to the alternative option of depreciating the cost over a 27.5-year life for residential rental real estate or a 39-year life for commercial real estate under the modified accelerated cost recovery system, an incorrect conclusion may lead to a significant overpayment of tax liability.

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S Corporations’ Charitable Contributions Of Appreciated

4 days ago

Before the Pension Protection Act of 2006, P.L.109-280 (PPA ’06), it was generally understood that an S corporation’s charitable contribution of appreciated property reduced each shareholder’s adjusted basis in stock by the shareholder’s pro-rata share of the charitable deduction, which often was a portion of the contributed property’s fair market value (FMV).This potentially could

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S Corporation Sale Of Assets Followed By A Liquidation

7 days ago

Real estate: 1,500: 3,250: Intangible assets - 0 - 1,000: Total: $2,000: $5,000: SCOSCOSCO has $1,000 in cash and a $4,000 note and will distribute these assets in complete liquidation. The same result would occur where the shareholder sold the stock subject to a Sec. 338(h)(10) election—a deemed sale of assets followed by a liquidation.

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About thetaxadviser.com real estate

Although real estate was by far the most common property involved in like-kind exchanges, real estate transactions that include more than just raw land almost always involve some amount of personal property. Even under the old rules, Sec. 1031 did not consider real property and personal property to be of "like kind" to one another.

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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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