Putting Real Estate To Good Use: Current Issues with Obtaining - - PowerPoint PPT Presentation
Putting Real Estate To Good Use: Current Issues with Obtaining Conservation Easement Deductions Conservation Easement Deductions and Rehabilitation Tax Credits Panelists: Robert Honigman, Arent Fox LLP Lee Sheller, DLA Piper ABA Tax Section
Panelists: Robert Honigman, Arent Fox LLP Lee Sheller, DLA Piper ABA Tax Section Meeting, May 2011
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Photo Credit: Department of Army
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¢ Qualified Conservation Easements ¢ Rehabilitation Tax Credit
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¢ Exception to the general rule denying
¢ Deduction amount granted for “fair
¢ No basis limitation on deduction
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¢ Qualified Conservation Contribution ¢ Highest and Best Use ¢ Before and After Method ¢ Before and After Method
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¢ Technical l Qualified Real Property Interest l Donated to a Qualified Organization l Exclusively for conservation purposes ¢ Administrative l Qualified Contemporaneous Appraisal l Filing Fee and Mandatory
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¢ Valuation ¢ Perpetuity ¢ Administrative Failures ¢ Administrative Failures
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¢ Charitable Deduction reduced by
¢ Reduction equals l the taxpayer’s aggregate rehabilitation
l to the fair market value of the building
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¢ Tax Credit = 20% X qualified rehabilitation
expenditures (“QRE”) for a historic building (10% for an old building)
¢ Credit is earned by the owner of the ¢ Credit is earned by the owner of the
“qualified rehabilitated building” at the time that it is “placed in service” (or by the lessee
“pass through” the credit to the lessee - §50(d)(5))
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¢ Qualified Rehabilitated Building ¢ Substantial Rehabilitation ¢ Qualified Rehabilitation Expenditures ¢ Qualified Rehabilitation Expenditures
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¢ Building is substantially rehabilitated ¢ Building placed in service before
¢ For old buildings certain % of walls
¢ Building is depreciable
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¢ QRE’s for a 24 month (60 month for
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¢ Amount chargeable to capital account for
nonresidential real property, residential rental property or real property with a class life of more than 12.5 years life of more than 12.5 years
¢ For a certified historic structure the
Secretary of the Interior must certify that the rehab was consistent with the historic character of the property or the historic district in which it is located
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QREs do not include:
¢ cost of acquisition of a structure or cost of
enlargement
¢ any expenditure unless straight line
depreciation is used depreciation is used
¢ any expenditure with respect to the rehab
allocable to the portion of a building which is tax exempt use property (using a greater than 50% factor for the portion of the property leased to tax exempt entities under disqualified leases)
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¢ Amount of QREs ¢ Tax exempt use property issues ¢ Ownership issues l Historic Boardwalk Hall LLC et al. v.
l Virginia Historic Tax Credit Fund 2001
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Federal Credit Investor
Put Right (set price) Call Option (FMV)
Developer LLC State Credit Fund Investors Property Owner, LLC
Property 98.9%
Managing Member
0.1%
Developer Fee
Management Fee
3% Priority Return 1.0% 16
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Federal Credit Investor
3% Priority Return 0.1% Managing Member
Incentive Management Fee Property Owner LLC
Master Tenant LLC Developer LLC
Property
Developer Fee
80% 20%
Managing Member 17
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¢ Contact Information l Lee Sheller
l Robert Honigman
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