Archive for Property Tax

Church Wins Round In Court Over Property Tax Exemption

In a recent court case, a New York court ruled that two churches closed by a Catholic Diocese remained exempt from property taxes. In this situation, the diocese had announced plans to permanently close the churches and issued canonical “decrees of suppression.” This action has the effect of terminating the diocese. The property was transferred to other parishes. The local tax assessor informed the diocese that the churches were being placed on the tax rolls, removing the property tax exemption from the two churches.

The diocese asked the court to reinstate the tax-exempt status of both churches, citing the fact that the properties were being used on occasion for religious purposes including monthly religious services. In addition, the diocese stated that the churches were not used for any other purpose. The assessor countered that the properties were not Read More

Written by | Posted in Property Tax • Religion • Tax Controversy

E.U. NEWS – The Corporation Tax Bill (Northern Ireland)

The Corporation Tax (Northern Ireland) Bill was published on 8th January 2015. The British Government hopes the Bill will be passed before the UK General Election in May.

The Bill, if passed, would allow Northern Ireland to apply its new Corporation Tax rate on most trading profits from April 2015.

The current rate paid by companies in Northern Ireland is 21% while the rate in the Republic of Ireland is 12½%.

According to the UK Government Press Release “if the rate was lowered, around 34,000 businesses in Northern Ireland would stand to benefit including 26,500 SMEs.” Read More

Written by | Posted in Corporate • Property Tax • Tax Policy

Filing Season And Rental Activities

A regular area for Tax Court litigation for the past few years involves individuals with a few rental properties deducting the losses from them under the theory they are real estate professionals (using a special rule of section 469(c)(7)). These individuals usually have jobs outside of the real estate profession and do not devote more hours than in their other employment to the rentals. They clearly do not qualify for the special rule. Yet, they claim the loss (rate her than carrying it forward) and then after losing during the Internal Revenue Service audit, they go to Tax Court and lose. Why? A better way to challenge would be to try to get Congress to change the law. Perhaps trying to convince Congress to increase the income limit so they could use up to $25,000 of the loss currently (under a modified section 469(i)). Read More

Written by | Posted in Audit • IRS • Property Tax • Real Estate

Condemnations of Business and Income Producing Property

This article will explain the tax rules for determining a gain or loss from condemnations, how much of the loss is deductible or amount of gain taxable, and in what tax year, deferring gains from condemnations, and basis of replacement property when a gain is deferred. Also, an important aspect of replacement property is what qualifies as like-kind property to be able to defer the gain.

A condemnation is the threat or imminence of or the actual taking of property without the owner’s consent for public domain by a governmental agency through its power of eminent domain. Depending on the amount received and the adjusted basis of the property, a gain or loss may result. Part or all of a gain may be recognized and/or deferred. Read More

Written by | Posted in Property Tax • Real Estate

Tax Implications of Installment Sales

It seems more and more taxpayers are finding themselves compelled to engage in a structured installment sale of closely held business assets or rental real estate and I couldn’t help but notice that there are some common misconceptions about the associated tax implications, particularly if ‘related parties’ are involved in a transaction. So this is what I am telling people:

• Report installment sales on IRS Form 6252
• Report interest from installment sales on Schedule B
• Report capital gains from installment sales on Schedule D
• For more details refer to IRS Publication 537 or IRC 453 Read More

Written by | Posted in Property Tax • Real Estate

Basis and Depreciation: A Review for Tax Professionals Part II

Once you have determined the type of property/asset you are dealing with you must determine use. There are four use classifications of property:

1. Personal-use property (not the same as personal type) is owned for personal use and enjoyment or living purposes. Items such as a primary residence, vehicle, clothing, household goods, recreational items, pets, etc, all are considered personal use property.

2. Investment-use property is property owned with a primary objective of increasing in value even though some current income may be generated. This classification includes things like land, collectibles like art or coins, capital stocks, bonds, and buildings not used in active rental. Read More

Written by | Posted in Property Tax

Basis And Depreciation: A Review For Tax Professionals – Part I

Depreciation is one of the standards of tax preparation that every tax professional must have a firm grip on to do right by their client. In order to understand depreciation you must first understand basis. Over the next several posts in this series we will review basis and depreciation, discuss the relationships of them to each other, and review old, new and expiring depreciation provisions.

Basis is generally defined as the taxpayer’s investment in the asset and depreciation is defined as the allocation of an asset’s cost over a period of time that is in line with the useful life of the asset. This allows the recovery of normal wear and tear on an asset throughout it’s useful life. Read More

Written by | Posted in Property Tax

Sales of Business Assets

Business assets are not capital assets but the sale my result in long-term capital gain if the asset has been held for more than one year. Under Code Section 1231, the net gain from sale of all Section 1231 assets is long-term capital gain, but there are two are two exceptions for depreciable property. (1) For personal property, under Section 1245, gain is ordinary income to the extent of any depreciation allowed or allowable (depreciation recapture). Allowable means that if the taxpayer could have taken depreciation on the asset but did not do so, then this amount must reduce the basis of the asset and is considered as ordinary income when the property is sold for a gain. (2) Under Section 1250, real property depreciated under an accelerated method is also treated as ordinary income. The amount of recapture depends on when the asset was placed in service and what depreciation method Read More

Written by | Posted in Property Tax • Sales/Use Tax • Tax Provision/Tax Reporting

The Unenviable Case of The Seggermans

TaxConnections Picture - Green Question GuyWhat if Someone Dies Owning an Undeclared Financial Account?
What Should The Heirs Do?

Henry Seggerman has first-hand experience with this type of situation. Without hesitation, my guess is that he’ll tell you to get the Estate into the IRS Offshore Voluntary Disclosure Program (“OVDP”). Henry is the son of a prominent New York businessman who passed away. Henry was named executor of his father’s estate, valued in excess of $24 million. Unfortunately, over half of this wealth, however, was maintained in secret and undeclared foreign bank accounts located in Switzerland and other jurisdictions. The father worked with his Swiss lawyer and other parties, arranging for over $12 million in the undeclared accounts to be left to his surviving spouse and five of his children, including Henry.

Henry’s position as executor charged him with various responsibilities, including filing an estate tax return for his deceased father. Henry signed the estate tax return for his father’s estate falsely underreporting its assets by over $12 million. Generally speaking one can say that an executor of an estate steps into the shoes of the deceased. Henry not only did that, he went a step further and perpetuated the fraud of the deceased. While this may possibly have pleased the deceased, it certainly did not please the Internal Revenue Service or the Department of Justice.

In order to access the undisclosed funds, the Swiss lawyer assisted Henry and three of his siblings (Suzanne Seggerman, Yvonne Seggerman, and Edmund Seggerman), in creating undisclosed Swiss bank accounts to hold the hidden money that they had inherited from their father. In order to tap the funds, Henry and his brother worked together, transferring funds from the brother’s Swiss account to a bank account for a foundation controlled by Henry. Henry then transferred the funds into the United States, in the guise of loan repayments. Read More

Written by | Posted in Estate Planning Tax • FBAR • Individual • IRS • North America • Property Tax

Regulations Bring Clarity to Treatment of Tangible Property Expenses

TaxConnections Blog Post - Harold Goedde about Tangible Property RegulationsWhile many of us were working long hours in mid-September to wrap up the 2012 tax filings for our clients, the IRS was busy as well. On September 13, 2013, the IRS issued the final, revised tangible property regulations TD 9636. In doing so, the taxing authorities have provided clarity for taxpayers in many areas surrounding the treatment of capital expenditures.

These regulations govern the treatment of expenditures incurred in acquiring, producing, or improving tangible assets, including rules on determining whether costs related to tangible property are deductible repairs or capital improvements. The regulations have broad application – they affect all taxpayers that acquire, produce, or improve tangible property.

History

By issuing these regulations, the IRS has sought to resolve the capitalization vs. expense conundrum that has befuddled taxpayers for years. These regulations have followed a tortuous path—the original proposed regulations from 2006 were withdrawn in 2008 after receiving a negative reception, and new proposed regulations were issued. Then in 2011 the 2008 proposed regulations were withdrawn and new regulations were issued in temporary and proposed forms. Those regulations were originally intended to be effective in 2012, but the difficulty of adopting the Read More

Written by | Posted in Corporate • Federal • IRS • Property Tax • United States

“W” is for Water

TaxConnections Blogger Chris Wittich posts about Water and Taxes“W” is for water.  Water, water everywhere… including in the world of tax.  Sometimes water is deductible sometimes it is not.  If you have a rental property, feel free to deduct the water bill as part of your utilities expense for the rental property.  That means if you own it and rent it out to someone else and you are paying the water bill, its deductible.  That doesn’t mean if you are renting it there is any way to deduct the utilities.  If you own a house that is just used as your principal residence your water bill won’t be deductible since it is just a personal expense.

Sometimes water can cause damage to your property.  Casualty losses fall in the nebulous sometimes deductible category.  Are the costs to repair a casualty to your property a deductible expense?  Yes.  Is that tax deduction going to save you any taxes?  Maybe.  A casualty first needs to be a single identifiable event. The gradual erosion of the property over time due to weather is not a casualty.  A single storm that damages your property is a casualty.

A casualty is deductible to the extent that the costs exceed $100 and 10% of your AGI for the year.  So if your costs to repair are $85 that’s not going to work.  If your income for the year was $350,000 and the costs to repair are less than $35,000 you are out of luck.  As you can see a 10% threshold knocks out many of the casualties from having a tax benefit.  One other important thing to note on the casualties is that a net operating loss generated from a Read More

Written by | Posted in Property Tax • United States

REITs – A South African perspective as an OTC investment option

iStock_ Africa Money and Flag XSmallReal Estate Investment Trusts or REITs is a well known internationally known appropriate business structure yet South Africa only adopted its tax law as of April 1st, 2013 and its stock exchange listed or publicly listed trading rules to accommodate REIT’s as of May 1st, 2013.

Since then many property groups not only converted to a listed REIT but also restructured their balance sheets to remove the debt linked to a unit or a share. Now, on September 6th, the first American Depositry Receipt (ADR) status was granted to a South African listed REIT. One ADR unit equals 10 REIT units on the Johannesburg Stock Exchange. Despite the ZA Rand being at a 3 week high, the more recent currency exchange is circa R10=1U$D.

Real Estate Investment Trusts (REIT)

REIT’s are tax transparent or tax through flow investment vehicles that invest in and derive their income from real estate properties and mortgage, without necessarily paying tax on their trade result. To qualify for the South African REIT dispensation, a the REIT (either a company or a trust) must be tax resident in South Africa and be listed as an REIT in terms of the JSE (Johannesburg Stock Exchange) listing requirements.

REIT profits are distributed as tax deductible expenses (effectively pre-tax income) which is then received and taxed in the investors’ hands as taxable dividend income. As of 1 January 2014 the SA dividend withholding tax at 15% or the treaty governed rate where the investor is resident in a treaty country, will apply to nonresident investors. Read More

Written by | Posted in Africa • International • North America • Property Tax • Real Estate • United States
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