Haik Chilingaryan | TaxConnections

04 Jun 2020

Basis And Basics Of 1031 Exchanges

Pursuant to Internal Revenue Code section 1031, taxpayers are allowed to defer the gains realized on sales or exchanges of real property if the exchange meets the requirements of the provision. These benefits will be allowed only to real property held for productive use in trade or business or for investment if the properties subject to the exchange are also of “like-kind” by their nature. In order to understand the benefits of a like-kind exchange (or “1031 exchange”), a taxpayer should have a fundamental understanding on basis because basis management is a fundamental component in like-kind exchange planning.

BASIS

Basis is the amount of a person’s investment in a particular asset. The types of assets that are subject to basis calculations include real estate, securities, intangible assets, and tangible assets ranging from inventory to physical possessions. Depending on the type of asset in question, there are numerous factors that can affect the value of its basis. As a starting point, the first factor under consideration is the amount the person paid to acquire a particular asset. This is otherwise known as the cost basis of an asset. Generally, costs that are associated with a purchase, such as legal fees, commissions, closing costs and taxes, are adjusted to increase the basis of the asset.

Adjusted Basis

Since this article primarily focuses on the basis of real property, other factors that can affect the adjusted basis of real estate assets include improvements and depreciation. Adjusted basis can be calculated by the cost basis of the asset increased by any improvements less any depreciation deductions that may or may not have been taken throughout the course of the useful life of the asset. Improvements, such as new construction of a guesthouse, are additions to the property that did not exist before, which thereby increase the adjusted basis of the asset. However, mere repairs such as remodeling of a bathroom are not deemed improvements and consequently do not increase the basis of that asset.
Read More

Written by Haik Chilingaryan | Posted in 1031 Exchange Basics

15 Apr 2020

Coronavirus Economic Stimulus Package Highlights

In response to the COVID-19 pandemic, Congress passed a series of legislations including the “Coronavirus Aid, Relief, and Economic Security Act” or the “CARES Act”, which was signed into law by President Trump on March 27, 2020. The CARES Act is designed to provide economic relief for individuals and small businesses who have suffered economic hardships due to the coronavirus pandemic. The $2 trillion CARES package is the largest financial support package in U.S. history.

Overview

This article breaks down the CARES Act (hereinafter, “CARES”) by first analyzing the economic relief provided to individuals followed by small businesses.

The most commonly sought relief under CARES with regard to individuals includes the stimulus checks for people who fall within certain income thresholds, an increase in unemployment benefits, temporary student loan suspensions and modification of retirement plans.

In order to provide economic relief to small businesses, CARES grants the authority to the Small Business Administration (hereinafter, “SBA”) to allocate $377 billion to small businesses that have experienced economic disruptions due to COVID-19 through two loan programs: expansion of the Economic Injury Disaster Loan and creation of the Paycheck Protection Program.
Read More

Written by Haik Chilingaryan | Posted in Economic Stimulus Package Highlights

29 Aug 2019

What To Expect From A Revocable Living Trust

Living trusts, otherwise known as inter vivos trusts, are created during the lifetime of the person who created the trust, who is otherwise known as the grantor, trustor, or settlor (hereinafter, “Grantor”). A Revocable Living Trust (“RLT”) can be established for a specified period of time, upon the occurrence (or nonoccurrence) of a specified event, or until the death of the Grantor. The three essential parties to an RLT are the Grantor, Trustee, and Beneficiary.

The Trustee manages the trust assets for the benefit of the Beneficiary. The Grantor of an RLT retains the absolute right, during his lifetime, to alter the terms of the trust, amend the trust in whole or in part, and revoke the trust in its entirety. A revocable trust morphs into an irrevocable trust when the Grantor dies, or when the Grantor surrenders title to the property held in the trust during his lifetime and relinquishes the right to alter, amend, revoke, or terminate the trust.

Written by Haik Chilingaryan | Posted in Revocable Living Trust • TaxConnections

20 Aug 2019

Sell Your Property And Pay Taxes Later – What Are Like-Kind Exchanges?

In the event that an investor should be involved with a sale or exchange of real estate, it is critical to understand the benefits and scope of “Like-Kind Exchanges.” Generally, the sale and exchange of property is a taxable event. However, under Section 1031 of the Internal Revenue Code, an investor may qualify for the taxable gain from the exchange to be deferred indefinitely.

Prior to the passage of the “Tax Cuts and Jobs Act of 2017” (otherwise known as the GOP Tax Plan or the Tax Reform Bill), both personal property and real property exchanges were granted the tax-deferred treatment. The new law now limits the deferral treatment for exchanges involving only real estate transactions.

The scope of permissible tax-deferred exchanges is very broad, including the exchange of an apartment building for a vacant lot. However, like-kind exchanges generally do not apply to primary residences and vacation homes. They only apply to exchanges of real property held for the purpose of investment or for productivity use or used in a trade or business. In addition, the property received in the exchange must also be held for the same or similar purpose. Our firm can help an investor decide whether a like-kind exchange is suitable to his or her circumstances.

Written by Haik Chilingaryan | Posted in Like-Kind Exchanges • TaxConnections

14 Jun 2019

5 Fundamentals Of LLCs

A Limited Liability Company (“LLC”) is a hybrid business entity which contains elements of a partnership and a corporation. LLCs consist of members and managers. An LLC may provide tremendous benefits for its members, which include asset protection, inter-generational transfers, tax saving strategies, wealth preservation, flexible management structures, and clarity on the roles of all essential parties involved in the company as set out in the Operating Agreement.

The following five concepts are fundamental for establishing an LLC: Asset Protection, Inter-generational Transfers, Tax Saving Strategies, Management, and Funding.

Asset Protection

Generally, the more assets a person owns in one’s name, the more likely it is that he or she will be a target mark for creditors. This is why it’s good practice to own as little as possible in your own name. In order to accomplish this goal, it’s important to evaluate the types of asset protections tools that are available to you. An LLC is one such tool that is effective for asset protection purposes.

Written by Haik Chilingaryan | Posted in 5 Fundamentals Of LLCs

22 May 2019

5 Fundamentals Of Limited Liability Corporations

A Limited Liability Company (“LLC”) is a hybrid business entity which contains elements of a partnership and a corporation. LLCs consist of members and managers. An LLC may provide tremendous benefits for its members, which include asset protection, intergenerational transfers, tax saving strategies, wealth preservation, flexible management structures, and clarity on the roles of all essential parties involved in the company as set out in the Operating Agreement.

The following five concepts are fundamental for establishing an LLC: Asset Protection, Intergenerational Transfers, Tax Saving Strategies, Management, and Funding.

Asset Protection

Written by Haik Chilingaryan | Posted in Limited Liability Corporation

30 Apr 2019

Tax Reforms Impact On Individuals

During this segment, we discuss how the new changes in the tax laws may have an overall positive effect on individual rates and deductions. However, a crucial component of the Tax Cuts and Jobs Act is that the rates and other provisions of the new tax code have a sunset provision, which means that on December 31, 2025, all of the rates are likely to be reinstated unless some legislation is introduced that will retain these rates or lower them even further.

Synopsis

The Tax Cuts and Jobs Act of 2017, otherwise known as GOP tax reform bill, largely went into effect on January 1, 2018. A crucial component of TCJA is that the rates and other provisions of the new tax code have a sunset provision. This means that on December 31, 2025, all of the rates are likely to be reinstated unless some legislation is introduced that will retain these rates or lower them even further.

The following are the list of major changes under the new tax code:

Written by Haik Chilingaryan | Posted in Tax Reforms Impact On Individuals

04 Apr 2019

What To Expect From A Revocable Living Trust

Haik Chilingaryan- Revocable Living Trust

Written by Haik Chilingaryan | Posted in TaxConnections

27 Feb 2019

Estate Tax Planning Under Tax Cuts And Jobs Act

Even though Estate Tax Planning is currently utilized by only high net worth individuals, historic trends have shown that the risk of a person’s estate being subject to the estate tax may be applicable to also those individuals with more modest estates. If the federal estate taxes are owed at a person’s death, the then dead individual (“decedent”) has considerably less money to pass to his or her heirs, given that nearly half of the taxable amount may be taxed. There are available avenues that may lessen the value of a person’s estate by the time of death and potentially escape the estate taxes altogether.

Estate taxes are determined by the Basic Exclusion Amount (“BEA”) that is in effect at the time of the person’s death. The way the IRS calculates estate taxes is it tallies up the total value of the estate, then determines whether any gifts were made in any particular year that may have exceeded the Annual Exclusion Amount (“AEA”) and arrives at the final figure of the amount of tax owed. Both the BEA and AEA are indexed with inflation.

Written by Haik Chilingaryan | Posted in Tax Cuts & Jobs Act

02 Jan 2019

No Estate Plan Is The Same: Part 2 – Finances

Haik Chilingaryan - No Estate Plan Is The Same - Part 2

For all of our existence, one common misconception among the general public was that estate planning was only for rich people and “Trust Fund Babies”. However, this notion could not be further away from the truth, especially when considering the recent changes we have seen in family dynamics and financial opportunities.

The three major financial institutions of the United States consist of the banking industry, stock brokerage industry, and insurance industry. Under the Glass-Steagall Act, each major industry could not engage in activities that fell within the scope of the other two industries. In 1999, the Glass-Steagall Act was repealed and the door was left open for each major industry to conduct activities and transactions that fell within the scope of the other two industries. This in turn increased the probability for both unlimited prosperity and financial collapse.

The second part of this two-part article (View Part 1)analyzes financial planning from an estate planning standpoint. Financial planning is an essential component of estate planning. The amount of wealth you generate prior to retiring will generally determine whether you will have a comfortable retirement and have anything left over to pass on to your descendants after your death. When choosing a retirement plan, you ideally want some combination of the following tax efficient strategies: for the contributions to be tax deductible, the appreciation to be tax deferred, and the distributions to be tax-free.

Written by Haik Chilingaryan | Posted in Estate Planning • Haik Chilingaryan

04 Dec 2018

No Estate Plan Is The Same: Part 1 – Families

Haik Chilingaryan - Estate Planning- Families

For all of our existence, one common misconception among the general public was that estate planning was only for rich people and “Trust Fund Babies”. However, this notion could not be farther away from the truth, especially when considering the recent changes we have seen in family dynamics and financial opportunities.

Families have historically been composed of one male parent, one female parent, and a child (or children). While traditional families are still very much in existence, there are now compositions of family structures of virtually every imaginable scenario. This includes families with children raised by single mothers or single fathers, cohabiting couples with or without children, and people who neither have children nor domestic partners. By no means is this an exhaustive list. Therefore, the internal makeup of virtually every household is unique, which in turn requires carefully crafted planning techniques to be implemented for each individual family.

The first part of this two-part article analyzes planning considerations for families with young children, families with adult children, married couples, unmarried cohabiting couples, and people who neither have children nor cohabiting partners.

Written by Haik Chilingaryan | Posted in Estate Planning

30 Nov 2018

Taxation Of Corporations – C Corporation And S Corporation

There are generally two ways corporations may be taxed under the federal rules. By default, a corporation is taxed under Subchapter C of the Internal Revenue Code. However, a corporation may instead elect to be taxed under Subchapter S of the Internal Revenue Code.

The selection of a certain type of entity structure or election of a particular tax status is an individualized decision that will depend on the characteristics of the business itself and the business owner’s surrounding circumstances. In one aspect, there may be certain advantages in choosing one type of entity or tax structure over another, while there may be disadvantages in another aspect. For example, in the context of investment real estate, it is sometimes preferable for the property to be held by an LLC rather than a corporation. Whether a corporation should refrain from making the ‘S’ election and continue to be treated as a C corporation or in fact make the ‘S’ election and become subject to the rules that govern S corporations is a decision that should be guided by a qualified advisor.

Written by Haik Chilingaryan | Posted in C-Corp v. S-Corp