Have a Commercial Real Estate Property? New Tax Laws on Your Side for Use of 1031 Real Property Exchanges

By Rana M. Gorzeck

The commercial real estate market breathed a sigh of relief when President Trump’s new tax bill, Public Law 115-97, preserved the use of 1031 transactions for commercial real estate properties.

Let’s review what a 1031 Like-Kind Exchange is defined by the IRS:

Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale.  IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange.  Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free.

With the domestic commercial real estate market thriving, income-producing real properties are being exchanged again with increasing popularity.  Congress did not allow the continuation of 1031 exchanges for personal property, such as vehicles, jewels, and stocks, but the capital gains tax will continue to be deferred when parties exchange like properties—as long as the strict 1031 rules are met.

As a result, in this increasingly active real estate market, we are witnessing a revival of 1031 exchange transactions at our firm.

3 Easy Steps to Take Advantage of Your Homestead Exemption

By Michael J Posner

Over 300,000 new people became Florida residents in 2017, continuing a growth trend that shows no signs of slowing.  With the new tax act squeezing many residents of high tax states in the northeast, the trend of continued population growth in the sunshine state is only expected to rise in 2018.  Many new residents purchase new homes or convert their previous vacation or second homes in Florida into their primary residence.  If this purchase or conversion is completed by December 31, those new residents may be eligible to apply for a Florida Homestead Exemption the following year.

Florida has two types of homestead:

• The first is set forth in the Florida Constitution under Article X, Section 4, which is an automatic provision to protect homeowners from claims of creditors or spouses who exclusively hold title, and to insure that a surviving spouse is not made homeless. This protection is automatic based upon purchasing a house, condominium or cooperative and making it your primary residence.

• The second form of homestead is known as the Homestead Exemption, and it is also set forth in the Florida Constitution under Article VII, Section 6, which provides a financial exemption from real property taxation of up to $50,000 in home value. Additional exemptions are available for veterans over 65, low income senior citizens, surviving spouses of a veteran or first responder that died in the line of duty, and certain disabled persons.

Who Gets the Tax Surplus After a Tax Deed Sale? Association vs. Property Owner

By Dane E. Leitner

There has been a lot of talk recently about the Tax Reform Act that was passed by the Federal government and primarily deals with income tax.  However, there has also been recent activity with a different type of taxes, real property taxes.  In December of 2017 the Fourth District Court of Appeal in Florida issued an opinion in the case of Jenifer E. Calendar v. Stonebridge Gardens Section III Condominium Association that dealt with the distribution of surplus funds from a tax sale of an owner’s condominium unit.

Owners of real property have an obligation to pay their property taxes each year.  If they do not, the Tax Collector holds an auction for a tax certificate sale to pay off the delinquent taxes.  The successful bidder at the auction is issued a tax lien certificate.  This entitles the holder of the certificate a lien on the property and interest on the lien.  If the tax lien certificate and accrued interest is not paid off within two years, the holder of the certificate may force a public auction of the property.  This is called a tax deed sale.  At the tax deed sale, the winning bidder purchases the property.  The tax lien certificate holder is paid, and any remaining lienholders and the prior property owner may apply for any excess funds.

Tax Reform Highlights

By Sasha A. Klein

The most significant change to the U.S. tax code in 30 years was approved by Congress and signed by the President just in time for Christmas 2017.  Many of the provisions became effective January 1, 2018, only a few days after being enacted.

SO, WHAT DOES IT CHANGE?

Corporate and Pass Through Entity Income Tax: Permanent

Corporate Tax Rates are reduced from 35% to 21%.

Business Income from Pass Through Entities: provides for a 20% deduction for individuals and trust and estates on domestic qualified business income from pass-through entities.

• Effectively reduces the top tax rate for those eligible to 29.6% (from 37%)
• Wages paid to owners and certain income from specified services business (i.e. attorney and accounting firms) are excluded from the deduction.

Basics of an Effective Anti-Sexual Harassment Policy

By Sally Still

With sexual harassment so prevalent in the news lately, employers are rightly asking…what is sexual harassment and what do I need to do about it?  If you’re an employer, let’s walk through your obligations to protect your employees from harassment and address how you should respond should it arise in your workplace.

First, an employer must exercise reasonable care to prevent and promptly correct any harassing behavior.  The way to do this is to have an effective anti-harassment policy, disseminate it to all employees, and swiftly conduct investigations into complaints of harassment when they arise.  Be clear that immediate and appropriate corrective action, including necessary discipline, will be taken whenever harassment has occurred in violation of the company’s anti-harassment policy.