Tag: real-estate
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The Basics of Forming Florida Nonprofit Organizations
Most nonprofits in Florida are formed under the Florida Not For Profit Corporation Act. This act governs how the nonprofit is organized and operated. Nonprofits can have members with voting rights or no members at all. If the nonprofit decides to have members, the articles and bylaws must specify their voting rights for important decisions.…
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Are Consequential Damages Recoverable Under a Title Insurance Policy for the Time It Takes to Attempt to Cure a Title Defect?
Time is very important in real estate, especially when property values are going down. If there’s a problem with the title of a property, the seller might ask their title insurance company to fix it quickly so they don’t lose the sale or the value of the property. But even if the title insurance company…
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A Potpourri of Potential Pitfalls To Avoid with Qualified Domestic Trusts
In Florida, when one or both spouses are not U.S. citizens, special planning is needed for their estate. If the surviving spouse is not a U.S. citizen, they cannot receive a marital deduction for estate tax unless the property is held in a Qualified Domestic Trust (QDOT). This rule was created to prevent noncitizen spouses…
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Rethinking the Valuation of Family Limited Partnerships Holding Passive Assets
Appraisers have a hard time figuring out how much to discount the value of an interest in a family limited partnership (FLP) because FLPs are different from regular business entities. Non-family members wouldn’t want to buy into an FLP, so the discount could be as high as 80%. But owners wouldn’t want to sell at…
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Evaluating and Making a Choice of No Entity for Real Property Held for Investment or Lease
A tax co-tenancy is an investment structure for real estate that offers some tax advantages. It doesn’t require a separate tax return, allows for separate like-kind exchanges, and provides a step-up in basis when a co-tenant dies. This can be a good option for investors who want to simplify their taxes and have more flexibility…
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The New Limited Liability Company in Florida
In 1998, Florida stopped charging a tax on certain types of businesses called LLCs. This made lawyers reconsider which type of business they recommend to their clients. This article explains how the law changed and compares the benefits and costs of different types of businesses. In 1998 and 1999, new laws were passed in Florida…
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The New York (and Other States) Death Tax Trap
Many retirees move to Florida from other states and keep a home in their former state. These individuals, known as “snowbirds,” may face unexpected taxes on their properties in their former state. Changes to estate tax laws in 2001 and the creation of a new tax regime in 2010 could affect their estates. Before EGTRRA,…
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The Incredible Taxpayer: The U.S. Tax Court and I.R.C. §7491
In 1998, Congress passed a new law that says if a taxpayer has good evidence for why they don’t owe taxes, and they have kept good records, then the burden of proof is on the IRS to show that the taxpayer does owe taxes. There have been few cases that interpret this law, but one…
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Kuro and Muben-Lamar In the Eye of the Beholder?
In Florida, when you transfer an interest in real property to a company or individual, you have to pay a tax called the deed tax. This tax is based on the amount of money or other property exchanged in the transfer. This tax has been around since 1931 but has become more important as real…
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Family Limited Partnerships: To Qualify or Not to Qualify for the Bona Fide Sale for Full and Adequate Consideration Exception Under §2036
The recent cases have looked at whether certain rules apply to FLPs, and how to avoid those rules. The focus is on a specific exception that allows for a genuine sale of property. This article will analyze those cases and discuss ways to plan to avoid the rules by meeting the exception. This exception is…
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CrescentDid the Florida Supreme Court Effectively Repeal the Documentary Stamp Tax on Transfers of Real Estate?
The Florida Supreme Court ruled that transfers of real estate from a parent company to its wholly owned subsidiary, without any money changing hands, are not subject to the Florida documentary stamp tax. This means that fewer transfers of Florida real estate will be taxed. According to Florida law, the tax applies to deeds for…
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Valuing Interest in Tenancies by the Entirety Under Craft
In the case of United States v. Craft, Mr. and Mrs. Craft owned property together. Mr. Craft didn’t pay his taxes, so the IRS said he owed a lot of money. To avoid the IRS taking their property, Mr. Craft gave his share to Mrs. Craft for just $1. But the IRS said this was…
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The Ins and Outs of the Florida Estate Tax
The Florida estate tax is connected to the federal estate tax, so if no federal estate tax is owed, then no Florida estate tax is owed. The tax law in 2001 changed the responsibilities of personal representatives of estates under federal and Florida law. A resident who passes away in Florida is subject to the…
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New Rules for Qualifying a Transaction as a Statutory Merger or Consolidation Under Section 368(a)(1)(A) of the Internal Revenue Code
Section 368(a)(1)(A) of the Internal Revenue Code says that a merger or consolidation between two companies can be considered a reorganization for tax purposes. A merger is when one company takes over another, while a consolidation is when two or more companies come together to form a new one. If a merger or consolidation meets…
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Can FIRPTA Be Avoided With Financial Instruments?
Foreign investors are looking to invest in U.S. real estate due to uncertainty in the stock markets. However, they face tax obstacles under the Foreign Investment in Real Property Tax Act (FIRPTA). This law requires foreign investors to pay taxes on any gains from selling U.S. real estate. Some investors are using financial instruments to…
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Estate Planning During Turbulent Times
Low interest rates and market downturns can create opportunities to transfer wealth to the next generation without paying taxes. This can be done through techniques like giving gifts, making loans within the family, or setting up trusts. The IRS sets minimum interest rates for these transactions, which can affect how much wealth can be transferred…
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Accelerating Losses with an Assignment for the Benefit of Creditors
When a partnership or S corporation has losses, the owners can use those losses to reduce their taxes, especially if they have enough investment in the business. Developers and home builders have been experiencing losses due to the economic downturn, and they can use these losses to get a tax refund. However, they need to…
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IRS Rules Total Return Swap Tied to Real Estate Index Is Not Subject to FIRPTA
The IRS ruled that a type of investment called a total return swap, which is tied to U.S. real estate, does not count as U.S. real property for tax purposes. This is good news for foreign investors using this type of investment to invest in U.S. real estate. Total return swaps are contracts where two…
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Profits Interest Converting Compensation to Capital Gains and Other Planning Ideas
Profits interest, also called carried interest, gives a person the right to receive a percentage of profits from a partnership without having to put in any money. Some hedge fund managers have received huge amounts of money through profits interest and paid lower taxes on it. This article explains how profits interest is taxed and…
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Family Limited Partnerships: Are They Still Alive and Kicking?
About a year ago, a lawyer wrote an article about family limited partnerships in The Florida Bar Journal. Since then, the IRS has won two cases involving family limited partnerships. The article discusses these recent cases and provides tips on how to avoid making the same mistakes. It also talks about a survey that showed…
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Relationship Dissolution Planning Part II: Planning for Married Couples
When people are getting a divorce, they can plan ahead by creating a property settlement agreement. This agreement says how their property and debts will be divided after the divorce. They can include details about each asset they own and all the money they owe. This can help make the divorce process smoother and less…
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Achieving Capital Gains Treatment on Predevelopment Real Property Appreciation
Real estate values are going up, so property owners are choosing to develop their own projects instead of selling to someone else. When they sell the units, they have to pay taxes on the profit they make. But if they plan carefully, they can save money on taxes by treating the profit as a capital…
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Using Shared Appreciation Mortgages to Avoid FIRPTA
Foreign investors are putting a lot of money into U.S. real estate because the U.S. dollar is weak and interest rates are low. The main issue for foreign investors is a law called FIRPTA, which makes them pay U.S. taxes when they sell U.S. property. One way to avoid this is by using a shared…
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Documentary Stamp Tax: The Legislature Strikes Back
For a long time, people in Florida have been arguing about whether a tax should apply when someone sells a piece of land to a company they own. In 2005, the Florida Supreme Court said no, but then in 2009 the state changed the law to make it apply in some cases. This caused problems…