• Internal Revenue Code §168 governs depreciation methods applicable to tangible property, including bonus depreciation.• Bonus depreciation allows eligible property to be depreciated more rapidly than standard depreciation schedules.• Accelerated depreciation increases near-term deductions but can increase future tax exposure under §1250.• §168 plays a central role in cost segregation studies and long-term real estate…
What It Is A §1031 exchange, governed by Internal Revenue Code §1031(a)(1), permits the deferral of federal capital gains and depreciation recapture taxes when an investor sells qualifying investment or business real estate and reinvests the proceeds into other like-kind real property. Exchanges may be structured as simultaneous exchanges, delayed (forward) exchanges under Treasury Regulations…
• Internal Revenue Code §368 provides for tax-deferred treatment of certain qualifying corporate reorganizations.• §368 allows businesses to restructure ownership, assets, or capital structure without immediate recognition of gain.• Reorganizations must satisfy strict statutory definitions and continuity requirements to qualify for nonrecognition treatment.• §368 is commonly used in mergers, acquisitions, and internal restructurings involving real…
• Internal Revenue Code §1015 governs the determination of tax basis for property acquired by gift.• In most cases, the recipient of a gift assumes the donor’s adjusted basis rather than receiving a step-up in value.• Carryover basis preserves built-in capital gains and depreciation recapture for future disposition.• §1015 plays a critical role in evaluating…
• Internal Revenue Code §453 allows sellers to recognize capital gains over time as payments are received rather than entirely in the year of sale.• The installment method is commonly used when sellers provide financing or receive deferred payments from a buyer.• Taxable gain is generally recognized proportionally with each principal payment received.• §453 may…
• Internal Revenue Code §733 governs how a partner’s basis is adjusted when distributions are received from a partnership.• Distributions generally reduce a partner’s outside basis rather than triggering immediate taxable gain.• Taxable gain is recognized only when cash distributions exceed a partner’s adjusted basis.• §733 is most relevant in partnership, DST, and UPREIT structures…
• Internal Revenue Code §708 governs when a partnership is treated as terminated for federal tax purposes.• A partnership termination can trigger technical and administrative consequences even if business operations continue uninterrupted.• Historically, certain ownership changes could result in a “technical termination” of the partnership.• §708 is most relevant in transactions involving partnership restructurings, ownership…
• Internal Revenue Code §856 sets forth the requirements an entity must satisfy to qualify and operate as a Real Estate Investment Trust (REIT).• REIT qualification allows entities to avoid corporate-level taxation by distributing taxable income to shareholders.• §856 imposes strict tests related to assets, income, ownership, and distributions.• REIT qualification rules are foundational to…
Internal Revenue Code §1400 establishes the Qualified Opportunity Zone (QOZ) program to incentivize investment in designated communities.• The program allows for deferral and potential reduction of capital gains when reinvested through a Qualified Opportunity Fund (QOF).• Tax benefits are tied to both the timing of the original gain and the holding period of the QOF…
• Internal Revenue Code §1014 generally adjusts the tax basis of inherited property to its fair market value at the date of death.• The step-up in basis can eliminate built-in capital gains and depreciation recapture accrued during the decedent’s lifetime.• §1014 applies broadly to real estate, partnership interests, and other capital assets included in a…