Real Estate Newsletter

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Three Things You Need to Know About Opportunity Zone Tax Incentives with New Developments

While the enactment of the TCJA and its stemming tax consequences have received mixed results, many taxpayers should be pleased with the opportunities that Qualified Opportunity Zones offer. Learn more about what you need to know and new developments in this Aprio blog.

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Outlook 2020

Past Events:

  • Heroes for Hope: On November 7, Aprio showed its support for Heroes for Hope at an awards ceremony, where Hope Atlanta honors an individual for significant contributions towards ending homelessness. Hope Atlanta’s mission is "to end homelessness through their dedication to the community and by helping our most disadvantaged citizens regain hope, dignity, independence and self-respect."
  • Aprio's Real Estate Roundtable: On November 19, Aprio hosted a Real Estate Roundtable event on macro-economic events in the real estate industry with Brian Olasov, Executive Director of Financial Services Consulting at Carlton Fields, and his special guests Michael Tippet, Mitchell Resnick, Greg Null and Stephan Rosewho. Discussions included how now is a great time to be a borrower, how real estate professionals need to speak with their legislators to get favorable legislation, and how multi-family housing is continuing to expand. 
  • Aprio Volunteer Day: On November 22, Aprio employees spent a day volunteering in the community on service projects that support both our environment and help those most in need. The Aprio Foundation’s Volunteer Committee organized events with 12 organizations between Atlanta and Birmingham, Alabama. Check out this photo of Aprio team members volunteering at Open Hand Atlanta.

Real Estate & Construction Industry Updates:

  1. The IRS recently issued a draft of the Schedule K-1 and instructions for 2019 Partnership Income Tax Returns, and there are a few big changes to note. First, the taxpayer listed on a K-1 must file their own tax return.  What that means is disregarded entities, like Single Member Limited Liability Companies and certain Trusts, should not be listed as the partner.  Instead, the Social Security Number or Taxpayer Identification Number of the beneficial owner should be entered, which is not a new concept but has not always been followed.  We recommend asking your partners who invest through a Limited Liability Company, Partnership or Trust for the Form W-9, which certifies the Federal tax classification of your investor.

    Second, the original draft K-1 required Partner’s Capital to be recorded on “Tax Basis”, instead of GAAP or 704b Basis, which many partnerships have used over the years.  The good news is the IRS just issued a notice that reporting on “Tax Basis” will be delayed until Tax Year 2020.  The law is still subject to change, but we thought to mention it here so you can start preparing for the change. 

    Finally, the draft K-1 now requires the reporting of each partner’s net built-in gain on contributed property, commonly known as net Section 704(c).  The recently issued IRS notice reiterated that this will be a new reporting item for 2019 and includes revaluation events. This change may become an administrative burden if the partnership has not previously tracked the Section 704(c) layers by partner.

    These changes may be the IRS’ way to identify areas that need to be examined and signal its intent to increase audit activity in partnerships. 

  2. The Tax Cuts and Jobs Act created many conversations surrounding promoted interest and the three-year holding period needed for long-term capital gains treatment this past year. The biggest question on everyone’s mind was whether the sale of a Section 1231 asset, such as a building, after a one year holding period but before the three-year mark would cause gain allocated to the promote member to be taxed at ordinary rates instead of the favorable long-term capital gains rate. The Treasury and the IRS are now expected to release guidance in early 2020. The proposed regulations are expected to limit S-Corporations from using the exemption available to Corporations, however we are hopeful the rules may also provide some clarity to the three-year holding period for certain Section 1231 assets.
  3. Code Section 163(j) for interest limitation was at the forefront of Tax Cuts and Jobs Act discussions. There is chatter that final legislation may be available in coming weeks.
  4. Georgia Film Tax Credits are an easy way to save on your Georgia taxes and become part of major movie productions like the Marvel Franchise or TV productions like The Walking Dead. As we approach the 2019 tax filing season Georgia taxpayers should consider asking their tax advisor about Georgia Film Tax Credits.

Upcoming Real Estate Events:

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Bisnow Construction & Development: Welcome to 2020

Jan. 9, 2020

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2020 CEO Strategy Summit

Jan. 29, 2020