Distressed real estate presentation version 110915 rr

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Tax Aspects of Commercial Real Estate Workouts

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Distressed real estate presentation version 110915 rr

  1. 1. Roger Royse<br />Royse Law Firm, PC<br />Palo Alto, San Francisco, Los Angeles<br />rroyse@rroyselaw.com<br />www.rroyselaw.com<br />www.rogerroyse.com<br />www.RoyseUniversity.com<br />Skype: roger.royse<br />Pitfalls and Opportunities in Distressed Assets<br />
  2. 2. Topics for Consideration<br /><ul><li>Sellers / Owners of Underwater Assets
  3. 3. Buyers / Investors in Underwater Assets
  4. 4. Partnership Workouts
  5. 5. Tax Issues in Bankruptcy
  6. 6. Update on Tax Laws</li></li></ul><li>Sellers / Owners of Underwater Assets<br /><ul><li>COD Income
  7. 7. Recourse and Non-Recourse Debt
  8. 8. Exceptions and Exclusions to COD</li></li></ul><li>Sellers / Owners of Underwater Assets<br /><ul><li>Related Party Acquisitions
  9. 9. Modifications</li></li></ul><li>Creditors<br /><ul><li>Lender Buys at a Discount
  10. 10. Market Discount
  11. 11. OID
  12. 12. Related Party Debt Acquisition
  13. 13. Modification After Acquisition
  14. 14. Gain = IP> Purchase Price
  15. 15. Capital Loss = Face > IP
  16. 16. OID</li></li></ul><li>Creditors<br /><ul><li>Bad Debt Loss
  17. 17. Business
  18. 18. Non-Business</li></li></ul><li>Buyers / Investors in Underwater Assets<br /><ul><li>Tax Liabilities
  19. 19. Section 382 Limitations
  20. 20. Withholding Tax Issues</li></li></ul><li>Partnership Workouts<br /><ul><li>COD Income and Exclusions
  21. 21. Liability Shift
  22. 22. Abandonment
  23. 23. Bad Debt/Worthless Security Loss</li></li></ul><li>Tax Issues in Bankruptcy<br /><ul><li>COD Income Exception
  24. 24. Discharge as a Purchase Price Adjustment
  25. 25. Non-dischargeable taxes and liens</li></li></ul><li>Updates<br /><ul><li>Jobs Bill (not yet approved) – Additional 1 year extension of 100% bonus depreciation of “qualified leasehold improvements” placed in service before Jan. 1, 2013 (see Section 168(k)(5)). Other benefits and government loans for “infrastructure projects”. Carried interest taxation may be an offset (real estate fund managers affected).
  26. 26. John Doe Summons for Property Tax Records not enforced. IRS made a request to obtain property tax records to investigate low-price transfers (gift tax issue).
  27. 27. California SB 858 (approved Oct. 2010) – Suspended NOL in 2010 and 2011 for Taxpayers with AGI of $300,000 or more, 2-year NOL Carryback delayed until 2013. </li></li></ul><li>PALO ALTO<br />1717 Embarcadero Road<br />Palo Alto, CA 94303<br />LOS ANGELES<br />10900 Wilshire Blvd.<br />Suite 300<br />Los Angeles, CA 90024<br />SAN FRANCISCO<br />33 New Montgomery Street<br />Suite 1530<br />San Francisco, CA 94105<br />www.rroyselaw.com<br />IRS Circular 230 Disclosure: To ensure compliance with the requirements imposed by the IRS, we inform you that any tax advice contained in this communication, including any attachment to this communication, is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to any other person any transaction or matter addressed herein.<br />

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