Did You Repair Your Real Estate Property or Improve it?
Repairs to tangible property, such as buildings, machinery, equipment or vehicles, can provide businesses a valuable current tax deduction — as long as the so-called repairs were not actually “improvements.” The costs of incidental repairs and maintenance can be immediately expensed and deducted on the current year’s income tax return. But costs incurred to improve […]
Related Parties’ Property Exchange Does Not Qualify as Like-Kind
Like-kind exchanges under Internal Revenue Code Section 1031 provide a valuable tool for taxpayers to defer taxes on capital gains. The exchanges are subject to some strict rules that are intended to prevent tax avoidance scams. In a recent U.S. Tax Court case, the parties to a like-kind exchange ran into one of those restrictions […]
LLCs: How Limited Is Your Liability?
Adam M. Levine
Many real estate investors hold title to their investment properties through a limited liability company (LLC). While LLC rules vary by state, this structure protects real estate investors from personal liability beyond the member’s equity investment. The administration of an LLC is fairly uncomplicated and, in addition, may offer potential tax benefits; however, there are […]
Historic Tax Credit is Alive and Well
Kathy Z. Jeziorski
The Historic Tax Credit (HTC) for rehabilitating historic buildings survived the TCJA but is less beneficial than it was for projects completed before 2018.
Valuation Matters: Appraisers Apply Four Tests to Determine Highest and Best Use
Kadir P. Sunardio
An important factor for an appraiser to consider when valuing real property is its “highest and best use.” This article reviews the four tests appraisers typically apply to determine that use.
Eminent Domain and the “Project Influence” Rule in Property Valuation
Eminent domain refers to the power of the government to take private property for public use. Under the Fifth Amendment, the government exercising this power must provide the property owner “just compensation,” which is generally the property’s fair market value (FMV). However, the valuation of the property may be influenced by the government’s plans for the acquisition, which can increase or decrease the FMV of the property. This is where the project influence rule comes into play.
Five Immediate Factors to Consider Before Buying That Real Estate “Bargain”
Sarah M. Zambrano
With the real estate industry’s steady growth over the past several years and property values holding reasonably constant, investors are eager to jump on a perceived bargain. While securing the lowest price is not a bad idea, investors need to be careful about doing their research before closing on an apparent deal. That so-called “bargain” can quickly turn into a problem if you fail to consider more than just the purchase price. Before taking the plunge and buying a seemingly good parcel, here are five other factors to consider.
Using Cost Segregation Studies for Like-Kind Exchanges
Cost segregation studies have been utilized by many property owners to take advantage of accelerated depreciation methods, including bonus depreciation and Internal Revenue Code Section 179 expense deductions. Accelerated first-year deductions do not change the total amount of deductions over an asset’s useful life, but they do change the timing of deductions. This lowers taxes and generates extra cash flow in the year an asset is placed in service.
Captive Insurance Strategies Can Pay Off for Real Estate Operators
Federal tax law has permitted U.S. businesses to form so-called “captive” insurance companies for many years, and numerous large companies have done so. It is only relatively recently that the arrangement has gained traction with smaller public and privately owned companies. Could your real estate business benefit from pursuing captive insurance strategies? To find the […]
Crowdfunding Comes to Commercial Real Estate
Kadir P. Sunardio
You have probably heard of Kickstarter and other popular crowdfunding platforms that are used to obtain funding from individual investors for everything from independent movies and music to health care and legal expenses. In the past few years, crowdfunding platforms have also popped up to offer individuals a way to invest in commercial real estate […]