distressed real estate presentation version 110915 rr

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Roger Royse Royse Law Firm, PC Palo Alto, San Francisco, Los Angeles [email protected] www.rroyselaw.com www.rogerroyse.com www.RoyseUniversity.com Skype: roger.royse Pitfalls and Opportunities in Distressed Assets

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Tax Aspects of Commercial Real Estate Workouts

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Page 1: Distressed real estate   presentation version 110915 rr

Roger Royse

Royse Law Firm, PCPalo Alto, San Francisco, Los Angeles

[email protected]

www.RoyseUniversity.com Skype: roger.royse

Pitfalls and Opportunities in

Distressed Assets

Page 2: Distressed real estate   presentation version 110915 rr

Topics for Consideration

• Sellers / Owners of Underwater Assets

• Buyers / Investors in Underwater Assets

• Partnership Workouts

• Tax Issues in Bankruptcy

• Update on Tax Laws

Page 3: Distressed real estate   presentation version 110915 rr

Sellers / Owners of Underwater Assets

• COD Income

• Recourse and Non-Recourse Debt

• Exceptions and Exclusions to COD

Page 4: Distressed real estate   presentation version 110915 rr

Sellers / Owners of Underwater Assets

• Related Party Acquisitions

• Modifications

Page 5: Distressed real estate   presentation version 110915 rr

Creditors

• Lender Buys at a Discount

• Market Discount

• OID

• Related Party Debt Acquisition

• Modification After Acquisition

• Gain = IP > Purchase Price

• Capital Loss = Face > IP

• OID

Page 6: Distressed real estate   presentation version 110915 rr

Creditors

• Bad Debt Loss

• Business

• Non-Business

Page 7: Distressed real estate   presentation version 110915 rr

Buyers / Investors in Underwater Assets

• Tax Liabilities

• Section 382 Limitations

• Withholding Tax Issues

Page 8: Distressed real estate   presentation version 110915 rr

Partnership Workouts

• COD Income and Exclusions

• Liability Shift

• Abandonment

• Bad Debt/Worthless Security Loss

Page 9: Distressed real estate   presentation version 110915 rr

Tax Issues in Bankruptcy

• COD Income Exception

• Discharge as a Purchase Price Adjustment

• Non-dischargeable taxes and liens

Page 10: Distressed real estate   presentation version 110915 rr

Updates

• 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).

• 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).

• 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.

Page 11: Distressed real estate   presentation version 110915 rr

www.rroyselaw.com

PALO ALTO1717 Embarcadero Road

Palo Alto, CA 94303

LOS ANGELES

10900 Wilshire Blvd.Suite 300

Los Angeles, CA 90024

SAN FRANCISCO33 New Montgomery

StreetSuite 1530

San Francisco, CA 94105

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.