•  

Local Office Blogs

rss
Feel free to peruse our blog or search for posts based on a specific term.





February 27, 2015

The Daily News hosted the third annual Women & Business Seminar at the Brooks Museum. This year was the second in a row in which the event sold out. We are honored to have been a sponsor since the seminar’s inception and to have Linda Lauer speak about the national CBIZ Women’s Advantage in the event’s opening remarks. This year’s keynote speaker was Keri Wright, Chairman and CEO of Universal Asset Management (UAM).

Appointed to Chief Operating Officer at UAM when she was only 25, Keri attributes her success to finding confidence and courage in herself. Her speech was particularly focused on finding these traits at a young age, something she gained while flying an airplane solo at the age of 15. Pointedly, Keri can relate everything in her career to “having to land the plane.” The phrase repeatedly served as the driver behind all of Keri’s points in her speech, whether it be literally or figuratively. Keri notes that learning to take full ownership of a tough situation with confidence and courage and seeing it through is what she strives to teach young women.

The Q&A section allowed audience members to inquire about common issues in the workplace including flexible work arrangements, work-life balance, and finding trusted business partners. Kim Grant, Owner of Kim Grant Homes, echoed Keri’s sentiments regarding age being a business hurdle she has had to overcome. Interestingly, even with both women working in extremely male-dominated industries, each claimed age to be her larger issue at hand.

Judy McLellan of Crye-Leike spoke to the importance of having a mentor, citing her mother, a former realtor, as her biggest influence. And Lauren McHugh, President of Huey’s, also noted the importance of finding a mentor at a young age, noting that connecting with someone early on in your career can be a tremendous help in your professional growth.

The entire panel spurred the over 250 women and men into discussion, and the room’s intimate setting allowed for quick dialogue. Publisher of the Daily News, Eric Barnes, took questions up until the last second with hands still raised. With the chatter only continuing at the event’s wine and cheese reception, one thing is clear - the women & business seminar series is flying, and it doesn’t look like it’s ready to land anytime soon.




February 25, 2015

If you read Part 1 of our blog post series concerning self-rental income, you know that the Net Investment Income (NII) Final Regulations removed self-rental relationships from the inclusion in Bucket 1 of the NII. While the focus of the previous blog post centered with the rental income in Bucket 1, we will now look at the impact of the self-rental relationship impact on Bucket 3 and some additional tax planning considerations.

After the Proposed Regulations were released, many tax professionals suggested converting triple net-lease arrangements to operating leases. An operating lease holds you responsible for more than just collecting money each month. A triple-net lease designates the tenant as solely responsible for all costs and services for the property.

By converting to an operating lease, the belief was that the rental income would not be included in Bucket 1 due to meeting the “derived in a trade or business in which the taxpayer materially participates” language. However, the Final Regulations relieved this concern by exempting activity falling under Reg. §1.469-2(f)(6) and Reg. §1.469-4(d)(1) as illustrated in our previous blog post. By meeting either of those two positions in the Regs, any gain or loss should also be excluded from Bucket 3.

However, there still may be some benefit in converting a triple-net lease into an operating lease even after the change from the Proposed Regs to the Final Regs.

The operating lease may strengthen your position that the rental activity is a trade or business vs. an investment. The disposition of property used in a trade or business is generally considered ordinary under §1231, therefore if the property is disposed of at a loss it might be considered ordinary under §1231 instead of a capital loss (subject to capital loss limits) on investment property. Additionally, if there is a COD event in respect to real property used in trade or business, there may be an opportunity to make an election under §108(c) to reduce the basis of depreciable real property instead of recognizing COD income. This election would not be available if the property was deemed to be an investment property.

If you have further questions regarding the NII tax or your self-rental property, feel free to reach out to me at bkoch@cbiz.com or one of my colleagues.




February 18, 2015

The Net Investment Income (NII) tax went into effect in 2013, but if you participate in a self-rental property arrangement, now may be a good time to review your tax filings and entity structuring as we head into filing season. The NII Final Regulations included a reversal from a position taken in the 2012 Proposed Regulations concerning the treatment of self-rental income.

As a reminder, the 3.8% Medicare surtax on qualifying NII includes three buckets:

  1. Gross income from interest, dividends, annuities, royalties and rents, unless derived in a trade or business in which the taxpayer materially participates
  2. Gross income from a trade or business that is a passive activity or the trade or business of trading in financial instruments or commodities
  3. Net gain from the disposition of property, other than property the income generated from which otherwise would be excluded under Bucket 1 or 2

For a detailed description of the NII tax, feel free to read our previous post on the topic.

In this example, Bob is an attorney and operates his law practice in which he materially participates inside an S-Corporation of which he owns 100% of the stock. Bob also owns the property in which the law practice operates inside of a separate single-member LLC. Under the terms of the lease, Bob’s law practice pays rent to the single-member LLC.

In most circumstances, rental income is by nature considered passive income. However under Reg. §1.469-2(f)(6), rental income derived from property rented to a trade or business in which the taxpayer martially participates “is treated as not from a passive activity.” In the example presented above, since the rental income in Bob’s single member LLC is derived from the S-Corp, which is an operating business in which Bob materially participates, the income would be considered nonpassive. Also, Bob may group the rental activity with the operating business activity under Reg. §1.469-4(d)(1) thus making the grouped activity a nonpassive activity.

Initially under the Proposed NII Regs, self-rental income appeared to be subject to the 3.8% because it fell within the “rents” description in Bucket 1, unless the rental income was proved to be “derived in the ordinary course of a trade or business.” After hearing complaints from tax professionals, Treasury reversed the position in the Final NII Regs allowing rental income from a self-rental to be excluded from Bucket 1 if it is treated as a nonpassive activity (Reg. §1.469-2(f)(6)) or if the rental activity is grouped with an active trade or business activity (Reg. §1.469-4(d)(1) ) (and the grouped activity is nonpassive to the taxpayer).

For most small business owners, it’s common to split real estate and active business operations into separate legal entities for liability issues. Therefore, it is critical that taxpayer’s develop an understanding of self-rental structuring. A rental lease’s arrangement could change the nature of a property owner’s involvement in the trade or business such as in the case of an Operating lease versus a Triple-net lease. This arrangement is one example of a tax planning opportunity available for self-rental property owners.

Also, how you deal with the disposition of the activity or property can affect if your operations are viewed as a trade or business or an investment property. Read more about these considerations in Part 2 of our blog post series.

If you have any further questions regarding the NII tax or your self-rental property, please feel free to contact Bryan Koch at bkoch@cbiz.com or 901.685.5575.




Tags

Phoenix tax Accounting affordable care act Alex Elliott anna howell Audit audit and assurance Award Awards awards and recognition BEPS Best Places to Work Betty Isler Bill Tapp BizJournals biztips bizwomen Blog Brad Hale brenda brigman bryan koch CBIZ CBIZ Kansas City CBIZ KC CBIZ MHM CBIZ MHM Memphis CBIZ MHM Tampa Bay cbiz security and advisory services CBIZ Women's Advantage CBIZBlog CBIZKC CBIZMHM CFO CFO & Controller Conference cfo conference CFO of the Year CFO of the year awards Charity Community Involvement Conference Construction Controller Conversation With country club plaza Craig Gilman cwa Dave Enick DOL EBP EBP Audits Ed Rataj Employee Benefit Plan Audits Employee Benefits employee engagement EmployeeBenefits EntreprenurialServicesGroup ESG Eustis Corrigan events Food Drive healthcare HR Human Resources Innovation International Tax Jenny Matasic Josh Finfrock Joyce Farris Kansas City KansasCity karen cassella KC CFO Breakfast Series KCEvents Linda Lauer Lloyd Grissinger Local Managing Director Manufacturing Mark Baricos MBJ Megan Murdock memphis Memphis Business Journal Memphis Daily News memphis super women in business mentoring monday mergers and acquisitions moira house Networking NFP Not-for-profit Paul Dunham pci compliance Phoenix promotions real estate Revenue Recognition SALT Service Social Committee sonya daniels Sponsorships Start Ups State and Local Tax steve dunavant Success Super Women in Business Tampa Bay Tampa Bay Business Journal tangible property regulations Tax Tax Incentives tax reform The Daily News Top Workplaces Tracey McDonald transaction advisory services Transfer Pricing UMB Bank University of Memphis Volunteer workplace award