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William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Real estate’

Guidance on receiving the 20% deduction from qualified business income; many rental real estate owners may claim deduction

Posted by William Byrnes on January 25, 2019


The Treasury Department and the Internal Revenue Service issued final regulations and three related pieces of guidance, implementing the new qualified business income (QBI) deduction (section 199A deduction).

The new QBI deduction, created by the 2017 Tax Cuts and Jobs Act (TCJA) allows many owners of sole proprietorships, partnerships, S corporations, trusts, or estates to deduct up to 20 percent of their qualified business income.  Eligible taxpayers can also deduct up to 20 percent of their qualified real estate investment trust (REIT) dividends and publicly traded partnership income.

The QBI deduction is available in tax years beginning after Dec. 31, 2017, meaning eligible taxpayers will be able to claim it for the first time on their 2018 Form 1040.

The guidance, released today includes:

  • A set of regulations, finalizing proposed regulations issued last summer, A new set of proposed regulations providing guidance on several aspects of the QBI deduction, including qualified REIT dividends received by regulated investment companies
  • A revenue procedure providing guidance on determining W-2 wages for QBI deduction purposes,
  • A notice on a proposed revenue procedure providing a safe harbor for certain real estate enterprises that may be treated as a trade or business for purposes of the QBI deduction

The proposed revenue procedure, included in Notice 2019-07, allows individuals and entities who own rental real estate directly or through a disregarded entity to treat a rental real estate enterprise as a trade or business for purposes of the QBI deduction if certain requirements are met.  Taxpayers can rely on this safe harbor until a final revenue procedure is issued.

The QBI deduction is generally available to eligible taxpayers with 2018 taxable income at or below $315,000 for joint returns and $157,500 for other filers. Those with incomes above these levels, are still eligible for the deduction but are subject to limitations, such as the type of trade or business, the amount of W-2 wages paid in the trade or business and the unadjusted basis immediately after acquisition of qualified property. These limitations are fully described in the final regulations.

The QBI deduction is not available for wage income or for business income earned by a C corporation.

For details on this deduction, including answers to frequently-asked questions, as well as information on other TCJA provisions, visit IRS.gov/taxreform

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What are the tax benefits of real estate investment?

Posted by William Byrnes on February 5, 2014


Q. In general, what are the tax benefits of real estate investment?

What limitations may restrict enjoyment of those benefits?

As a general rule, an investor takes the same deductions and credits and recognizes income whether the investor owns the property directly or has an interest in a limited partnership that “passes through” the deductions, credits, and income. However, …..

For the three-page analysis of Income, Interest, Taxes, Credits, Depreciation, Deductions, Limitations, and other issues, read William Byrnes and Robert Bloink of Tax Facts Online on > Think Advisor <

2014_tf_on_investments-m

2014 Tax Facts on Investments provides clear, concise answers to often complex tax questions concerning investments.  Pertinent planning points are provided throughout.

Organized in a convenient Q&A format to speed you to the information you need, 2014 Tax Facts on Investments delivers the latest guidance on:

  • Mutual Funds, Unit Trusts, REITs
  • Incentive Stock Options
  • Options & Futures
  • Real Estate
  • Stocks, Bonds
  • Oil & Gas
  • Precious Metals & Collectibles
  • And much more!

Key updates for 2014:

  • Important federal income and estate tax developments impacting investments, including changes from the American Taxpayer Relief Act of 2012
  • Expanded coverage of Reverse Mortgages
  • Expanded coverage of Real Estate Investment Trusts (REITs)
  • More than 30 new Planning Points, written by practitioners for practitioners, in the following areas:
    • Limitations on Loss Deductions
    • Charitable Gifts
    • Reverse Mortgages
    • Deduction of Interest and Expenses
    • REITs

Plus, you’re kept up-to-date with online supplements for critical developments.  Written and reviewed by practicing professionals who are subject matter experts in their respective topics, Tax Facts is the practical resource you can rely on.

Posted in Taxation, Uncategorized | Tagged: , , , , , , , , , | Leave a Comment »

FATCA Act: Foreign Trusts

Posted by William Byrnes on November 25, 2010


President's Advisory Panel for Federal Tax Reform

Image via Wikipedia

Use of Foreign Trust Property and Deemed Distributions

The new FATCA law expands 26 U.S.C. § 643(i) to provide that any use of trust property by a U.S. grantor or U.S. beneficiary, or any U.S. person related to a U.S. grantor or U.S. beneficiary, is treated as a distribution equal to the fair market value of the use of the property. [1]

“Thus, the rent free use of real estate, yacht, art work or other personal property (wherever located including the United States) or an interest-free or below-market loan of cash or uncompensated use of marketable securities will trigger a distribution equal to the FMV for the use of such property to the extent of distributable net income”. [2]

However, if the trust is paid the fair market value, within a reasonable period of time, for the use of property or the market rate of interest on a loan by the trust, the new law does not create a deemed distribution. [3] Read the entire article at AdvisorFYI.

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Planning Concept: Traditional Private Annuity in Trust Variation

Posted by William Byrnes on September 23, 2010


The traditional private annuity is a transaction used by some wealth managers for clients whose circumstances permit.  Generally a private annuity transaction occurs where the grantor transfers assets to a third party who pays the grantor an annuity, usually for the life of the grantor.

When a trust is involved with a traditional private annuity, the common transaction may look like this:  “The owner of highly appreciated commercial real estate transfers the property to an irrevocable trust in exchange for the trust’s promise to pay an annuity for life. The present value of the annuity equals the fair market value (‘FMV‘) of the property. The trust then sells the property to a third party for a sale price equal to its FMV.”  For additional introductory discussion on private annuity contracts see AUS Main Private Annuity. 

Planning Concept:  Some wealth managers have recently begun to structure private annuities for their clients slightly differently than the traditional methods.  For a discussion and analysis, please see AdvisorFYI

Posted in Estate Tax, Insurance, Trusts | Tagged: , , , , , , , | Leave a Comment »

 
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