You’re Invited to Learn About the New Tax Laws That Are Affecting Commercial Real Estate
Please join us for an informative live presentation with Dan Adams, Senior Vice President & Commercial Lending Manager at Wells Fargo. Dan will be taking us through the changes, how they affect commercial real estate, and also conducting a Q&A to answer any questions you may have. Come prepared and ready to learn how you can maximize your business, personal, and investment strategy.
Date: March 29th, 2018
Location: KW Commercial Del Mar/Carmel Valley
Seats are limited to 30! Sign up today to secure your spot!
Registration is free and we encourage donations to Autism Tree Project Foundation (ATPF).
The Autism Tree Project Foundation helps spread community awareness for autism. Their goal is to give children on the autism spectrum a voice and additionally aims to build community compassion towards the parents and families of these special children. ATPF helps thousands of families with autism create a roadmap for their child with autism and navigate a very complex system of care required for children with Autism Spectrum Disorder.
All monies donated to ATPF go straight to helping real families in our community through one of their 20 critical programs. These programs are on-going and provided to families at no charge, making the Autism Tree Project Foundation very unique. They are a grassroots foundation and have only 1 full-time employee on staff. They do not charge any of their families for ATPF programs.
Earlier this month we asked you for your top questions on the new tax law. Dan was generous enough to answer some. Here’s the top 5:
1. There are new rules for Sub S corp and LLC’s. Do they apply to real estate in single asset entities?
Yes, the new pass-through rules apply to single asset (real estate) entities. This means that the 20% deduction of pass-through net income applies to the rental real estate owned by a business, an individual, or a living trust.
2. Are there any changes in expensing acquisition costs that were capitalized in the old tax rules?
No, those rules remain exactly the same.
3. Are there changes in the Alt Min Tax rules for passive investors?
Yes, there are significant changes to the Alternative Minimum Tax (AMT). Generally speaking, the AMT has basically been eliminated. It would be extremely rare for an active or passive investor to be subject to the AMT anymore. I have read some comments that the IRS now expects the AMT to impact fewer than 1,000 individual taxpayers going forward.
4. Any changes in 1031 or installment sale rules?
Yes, we can now only exchange real property (not tangible personal property like improvements). That creates a difficulty for buildings which had a cost segregation study done, in that the short-life assets would be taxed as boot (taxable gain) in the exchange. Ideally, the replacement property would need to have a cost segregation study done immediately so that the additional depreciation from that could be used to offset the taxable gain from the exchange boot.
5. How are the taxes on each property affected as far as tax write-offs? It seems if they only allow a certain amount of taxes to be written off, it is going to affect the property prices?
The $10,000 state and local tax limit applies to state income taxes and property taxes paid on your primary, secondary, or investment properties only. There is no limit on business properties or rental properties that are owned by a corporation/LLC. There is a chance that owning a home is less lucrative now because of the tax limitations. This could artificially increase demand to rent a home instead of own it.
Interview with Globest
In a recent article with Globest, Dan discussed some of the recent changes.
Below are a few highlights of the article, to view the full interview, click here
- Dan believes the new tax laws are positive for the industry by creating certainty.
- The tax policies ability to spur GDP growth is an indicator of the increase in the demand for office, industrial, warehouse, and other commercial property.
- The new tax law made numerous changes that will favorably affect commercial real estate as an asset class, including indirect changes such as reductions in tax rates.
- The law provides for a 20% reduction of business income for most pass-through entities.
- 1031 Exchanges are now only available with real estate.
- The increase in estate-tax exclusion to $11 million per person should be viewed as favorable since those are the assets that most often appreciate and are inherited by heirs.
- The demand for single and multi-family properties will go up as the tax advantage of owning a home has been significantly reduced.
- US-Based Manufacturing will increase, which could drive demand in that sector.
- Although it’s been said California was hit harder than other states, much has been exaggerated. The $500,000 capital-gain exclusion for sale of principal residence still exists.
- The new tax law isn’t a “one size fits all” situation. Brokers should consult their tax professional and figure out how to structure their business, their income, and their investments in a way that maximizes the advantages of the new tax law.
Daniel Adams – Senior Vice President, Business Banking Area Manager, Wells Fargo Bank – Dan leads a team that provides commercial real estate loans, treasury management, and credit lines to businesses in Southern California and Nevada. They provide loan structuring, underwriting and risk analysis for operating businesses and commercial real estate investors, and also offer working capital optimization technologies to help businesses operate more efficiently. Dan’s team originated over $300 million in loans in each of the past four years, including Small Business Administration, Healthcare Finance, Equipment Leasing/Purchases, and conventional lending products. Dan is a veteran U.S. Marine artillery officer with multiple deployments to the Middle East and Southwest Asia and also an adjunct Graduate Finance Professor at several local universities.
Wells Fargo’s Business Banking Group serves the needs of small- to mid-size privately held businesses throughout the country. They provide a proactive approach to a team of local Relationship Managers and others to provide customized service and rapid response to help our customers succeed financially.
Questions about the event? Contact us here