As 2007 comes to an end and planning for 2008 begins, real estate developers and investors should consider some tax tips that could save money for companies in the long run:
1. Properly account for lease income. You may be accounting for your lease income for tax purposes based on the cash received or on the terms of the lease agreement. However, a Code section specifically addressing leases may require the income to be accounted for differently.
2. Determine if you are a dealer or an investor. Do you know your status as either a dealer or an investor for tax purposes? Proper planning up front will ensure the desired treatment upon disposition of the property.
3. Allocate land cost to your benefit. To defer income upon the sale of parcels from a tract of land purchased, proper allocation of the cost among the various parcels must be done. The IRS requires that the cost be "equitably apportioned." But how? There are several methods available that should be considered when allocating cost.
4. Color your building green. Including solar and other alternative energy property in a new building can generate tax credits. A new owner can deduct up to $1.80 per square foot of the cost of an energy efficient commercial building instead of depreciating it over 39 years.
5. Take full advantage of depreciation. Has your company recently undertaken new construction projects, expansions or renovations? Substantial long-term savings could result from a cost segregation study, which categorizes your assets into the appropriate and most tax-advantaged depreciable lives.
To learn how these tax tips may apply to your real estate business, please contact your tax advisor.
Comments(0)