Real Estate

Grassi & Co. offers accounting and business consulting services for the Real Estate industry throughout the New York Metro area, including NYC, New Jersey, Long Island, Connecticut, and Pennsylvania. Read our Real Estate blog posts to learn more about Real Estate accounting in New York.

E-Alert: IRS Issues Notice on Implementation of Executive Order 13789

On July 7, 2017 the internal revenue service issued Notice 2017-38, 2017-30 IRB[1] which announced the implementation of Executive Order 13789.  Executive order 13789 was issued by President Donald J. Trump on April 21, 2017, and was a directive designed to reduce tax regulatory burdens. This executive order instructed the Secretary of the Treasury to review all significant tax regulations issued after January 1, 2016.  The Secretary of the Treasury is tasked to identify proposed regulations that: Impose an undue financial burden on U.S. taxpayers; Add undue complexity to the Federal tax law; Exceed the statutory authority of the Internal Revenue Service (“IRS”). One of the proposed regulations that was issued after January 1, 2106 was the change to Section 2704 on Restrictions on liquidation of an Interest for Estate, Gift, and Generation-Skipping Transfer Taxes. These proposed regulations attempted to reduce significantly the ability to take discounts for estate and gift valuations. Proposals: Definition of control – control of an LLC, or any other entity that is not a corporation, partnership, or limited partnership, as the holding of an interest or capital of at least 50%. Changes to the lapse rule – a transfer that results in the restriction or elimination of any rights or powers associated with the transfer interest is treated as a lapse within the meaning of Code Sec. 2704(a). Narrow the exception to when a lapse of a liquidation right occurs and limits it to a transfer occurring three or more years prior to the transfer’s death that does not restrict or eliminate the rights associated with the ownership interest. Amend Regulation Sec. 25.2704-1(c)(2)(i)(B) to...

Why a Law Passed Last Year Should Get You Thinking About Estate Planning Today

Most people prefer not to think about or even discuss estate planning. However, it is a very important topic and if not planned for early on it could severely affect your loved ones upon your passing. On April 1, 2014, New York State passed a new law to change the way that the estate tax will be calculated. Before we discuss the laws and how they could affect one’s estate, let us look at how an estate was taxed prior to April 1, 2014.   Original Estate Tax Law in New York prior to April 1, 2014 Before the new law, the New York estate tax exclusion amount was $1,000,000, which was significantly below the current federal estate tax exclusion of $5,340,000. An estate that was greater than the exclusion was taxed based on the difference between the value of the estate and exclusion. For example, if someone passed away with an estate worth $2,500,000 they would be subject to tax on $1,500,000 (estate value $2,500,000 less exclusion of $1,000,000). Under the old law, the most you could pay would be up to 16% on the amount over $1,000,000. Under each example, we will show you the new imposed tax rate compared to the old rate.   Estate Tax Law in New York after April 1, 2014 Effective April 1, 2014 the new estate tax law was put into effect. The estate exemption is set up to be a gradual build-up over the years 2014-2019, at which point it will equal the federal exemption. Below are the exclusion limits:   Tax on estate: In accordance with the new legislation,...

Tenants are Everything at Cresa New York

Cresa New York is the largest tenant only representation commercial real estate services firm in New York and across the United States. Businesses looking for new locations from which to conduct their operations turn to the experts at Cresa for guidance and representation with this process. To find out more about the services Cresa provides in the New York Metro area, we sat down with former New York Giants all-pro tight end and current Cresa New York Principal, Howard Cross, in this month’s Q&A.   What does it mean that Cresa New York is a tenant-only representation firm? Outside of payroll, occupancy costs are usually the second or third largest expense a company has. As a result, it is essential that companies have the best advice possible when searching for space to suit their needs. Being a tenant only representative simply means that we do not represent anyone besides the tenant. While we negotiate with and know property owners of all sizes, we only work for the tenant. Because of that, we are not looking to close deals at “certain locations.” As such, there is no bias on our part toward one building over another when helping a tenant find the right location to setup shop. Working under this model ensures that the tenant’s needs are analyzed fully, negotiated on their terms and met to their satisfaction.   What does a company need to consider when hiring a real estate advisor? The most important thing is to make sure they are hiring someone who is truly interested in the client’s goals. The broker should have knowledge of all of...

Property Insurance Limits

Homeowners beware: there is a hidden pitfall built into many property insurance policies you should be aware of.  Read carefully to make sure when the time comes and you need to utilize your property insurance policy that you’re “covered” the way you think.   Consider the case of a policyholder with an insurance policy covering a single building. The owner has taken great care to have their building appraised to determine the correct value, and buys a limit of insurance so that the building is fully insured to 100% of current replacement value. A line of tornados rolls through town and totally destroys the building.   The insurance adjuster looks at the policy, sees it is properly written with the correct limit, and immediately writes a check for the full policy limit. But, there is a mortgage on the property and the lenders get paid first. After most of the insurance proceeds go to pay off the loan, the insured building owner is left with clear title to the property, a pile of debris he has to remove and dispose of, and does not enough money left over from the insurance proceeds to do the job.   This is not an unusual problem with insurance policies written to cover specific buildings or structures. Such policies may not have adequate limits in the event of a total loss to pay for the loss, and for costs to clean up the debris, also. The problem is that debris removal costs are not in addition to the amount of insurance on the building, they are included within policy limits. If you had...

Estate Tax Planning: Use A GRAT to Gift Subchapter S Stock or Real Estate

The Grantor Retained Annuity Trust, or “GRAT,” is an under-utilized tax planning technique. A GRAT is frequently poorly understood, and it is therefore not incorporated into many estate plans. S corporations and real estate are ideal properties to use to fund a GRAT.   A GRAT is an irrevocable trust that must contain the following terms: Prohibit distributions to or for the benefit of any person other than the grantor of the interest during the term of the interest; Fix the term of the interest for the life of the holder, for a specific term of years, or shorter of those periods; Prohibit prepayment of the income interest; If the annuity is stated in terms of a fraction or percentage of the initial fair market value of the trust property, require payment adjustments or repayments as a result of any incorrect determination of the fair market value of the property; Require the pro rata computation of the annuity amount in the case of a short taxable year and the last taxable year of the term; Prohibit additional contributions to the trust. Income tax considerations: In the case where the trust is considered as a grantor trust, the grantor is considered the owner of the trust. Accordingly, the grantor is taxed on all of the trust’s income during the trust’s life.   Gift tax considerations: When a person gives a gift, the value of the gift is equal to the gifted property’s fair market value. In a GRAT, the gift is valued at the property’s fair market value at the time the property is transferred to the trust less the...