Industry best practices
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The Tax Effect of a Lease Termination Payment to a Lessee
This past week, a client called with a question about the potential tax effect of a ground lease termination payment on their long-time leasehold interest. The facts (changed, of course, for privacy reasons): In 1985, ABC Partnership (“ABC”) entered into a 40-year ground lease agreement with a municipality (“City”) to develop and construct an affordable […]
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Debt-Financed Distributions and Interest Tracing Rules
It’s been a slow news week, so let’s talk about a common concept to real estate investing: debt-financed distributions and interest tracing rules. A debt-financed distribution occurs when a passthrough entity, such as a partnership, secures debt and then distributes a portion of the debt proceeds to its owners. Generally speaking, mortgage interest is deductible […]
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Faster Depreciation, Please!
There was an important clarification made in the Consolidated Appropriations Act, 2021 with respect to the Alternative Depreciation System (ADS) recovery period of residential real property held by an electing real property trade or business. Under the Tax Cuts and Jobs Act of 2017, a taxpayer could elect out of the Sec 163(j) business interest […]
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The Section 179D Deduction is Here to Stay!
The Energy Efficient Commercial Buildings Deduction (Section 179D) became a permanent addition to the Internal Revenue Code on December 27, 2020 upon the President’s signing of the Consolidated Appropriations Act, 2021, which included the Taxpayer Certainty and Disaster Tax Relief Act of 2020. Section 179D permits a first-year tax deduction for energy efficient improvements made […]
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The Energy-Efficient Home Credit (45L Credit) Gets a One-Year Extension
The Taxpayer Certainty and Disaster Tax Relief Act of 2019 retroactively extended the New Energy-Efficient Home Credit, also known as the 45L credit, for 2018, 2019, and 2020. This credit, along with thirty-two other temporary federal tax provisions, were scheduled to expire at the end of 2020. With the President’s signing of the Consolidated Appropriations […]
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Bye Bye, LIBOR!
After years of negative press and scandals, the London Inter-bank Offer Rate (LIBOR), the reference rate commonly used in calculating interest payments in variable (floating) rate loans, will stop being be published on June 30, 2023. It was previously announced that publication would cease at the end of 2021. The Secured Overnight Financing Rate (SOFR) […]