-
TRE 6/15
–1–
Route To:j Partners j Staffj Managers j File
LIST OF SUBSTANTIVE CHANGES AND ADDITIONS
PPC’s Guide to Real Estate Taxation
Twenty-first Edition (June 2015)
Highlights of this Edition
The following are some of the important update features of the
2015 edition of PPC’s Guide to Real EstateTaxation.
¯ Expired Internal RevenueCode Provisions. Various tax
provisions expired at the end of 2014 butmay beextended to 2015.
These items include the increased Section 179 deduction; additional
first-year bonusdepreciation; 15-year recovery period for qualified
leasehold improvements, retail improvements andrestaurant property;
and several tax credits. These expired provisions have been
highlighted in this editionof the Guide.
¯ Guidance on Accounting Method Changes Required to Comply with
the Tangible PropertyRegulations. The Guide has been updated for
coverage of revenue procedures issued in 2015 thatsupersede
existing guidance on making accounting method changes. Also, a
qualified small taxpayerexception allows certain taxpayers to make
the required accounting method change to comply with thetangible
property regulations without filing Form 3115.
¯ CourtRuling inHowardHughesCase.The impactof a recentTaxCourt
rulingwasdiscussed thatprovidesinformation on the definition of a
qualified homebuilder for purposes of the completed contract
method.
¯ Recent IRS Guidance and Court Decisions That Impact Real
Estate Professionals and Transactions.Revised discussions for
recent IRS guidance and court decisions that impact real estate
professionals andreal estate transactions.
¯ Choice of Business Entity. Several new appendixes were added
that provide summarized details fordetermining the most beneficial
type of entity to use when starting a real estate business.
Chapter Substantive Changes and Additions Reference
CHAPTER 1
Overview 1. Revised discussion for recent trends in real estate
valuesand businesses and the implications for tax
practitionersadvising clients in light of these developments.
Section 102
trep15sub
-
TRE 6/15
–2–
Chapter ReferenceSubstantive Changes and Additions
CHAPTER 2
Form of Ownership 1. Reformatted chapter to make the discussion
more conciseand added the following new appendixes:
Throughout
· SE and FICA Tax Treatment of Pass-through Incomeand Owner Wage
Payments
Appendix 2B
· Major Advantages and Disadvantages of Each Entity Appendix 2C·
Summary of Available Corporate Entities Appendix 2D· Summary
Comparison of Various Partnership/LLC Enti-
tiesAppendix 2E
· Comparison of Forms of Concurrent Ownership inCommon Law
States
Appendix 2F
CHAPTER 3
Acquisition of Real Estate 1. Expanded the discussion regarding
the holding period ruleof special use valuation property.
Section 302
2. Updated discussion for new accounting change methodprocedures
for taxpayers implementing cost segregationstudies.
Section 303
3. Noted June 2014 revisions to the Circular 230
rulesregardingwritten tax opinions that include cost
segregationstudies prepared by practitioners.
Section 303
4. Updated the discussion for the expiration of the higher
limitfor Section 179 deductions starting in 2015.
Section 303
CHAPTER 4
Subdivision andDevelopment
1. Updated transaction cost guidance for tax treatment
ofsuccess-based fees and alerted readers to a safe harborelection
available for these fees.
Section 401
2. Expanded the discussion regarding the treatment ofcommon
improvement costs made to land.
Section 402
3. Updated the discussion on rules addressing
partnershiptransactions involving contracts accounted for under
along-term contract method.
Section 405
4. Included recent TaxCourt casedecisionwhere the taxpayerdid
not meet the definition of a qualified homebuilder forpurposes of
the completed contract method.
Section 407
5. Noted the issuance of proposed regulations dealing
withtaxpayer-initiated accounting method changes.
Section 411
6. Added a new sample election for real estate developers touse
thealternativecostmethod for common improvements.
Appendix 4A
CHAPTER 5
Operations and Leasing 1. Updatedguidance for recent
revenueprocedures related tothe tangible property regulations,
including those govern-ing dispositions and partial dispositions of
MACRS prop-erty.
Section 505
2. DiscussedaChiefCouncil Advice that lumpsumreimburse-ments for
improvements were not deemed to be rentalincome to a lessor.
Section 506
-
TRE 6/15
–3–
Chapter ReferenceSubstantive Changes and Additions
3. Includeda tableof theelectionsavailableunder the
tangibleproperty regulations and the procedural requirements
formaking these elections.
Appendix 5H
CHAPTER 6
Limitations onReal Estate Losses
1. Updated guidance for final regulations providing that basisin
debt is derived from any bona fide indebtedness of theentity that
runs directly to the interest holder.
Section 601
2. Mentioned a recent Chief Council Advice in which the IRSfound
that the guarantor of LLC debtmay be at risk for suchdebt even if
the guarantor does not waive rights ofsubrogation and
reimbursement.
Section 602
3. Discussed recent IRSguidanceon real
estateprofessionalswhobring together buyers and sellers qualifying
for the realestate professional relief provision.
Section 608
4. Explained a recent Chief Council Advice for taxpayerselecting
to combine rental real estate activities under thesingle activity
election of Reg. 1.469-9(g).
Section 608
5. A recent court case is included that clarifies the
originalreturn filing requirement of the single activity election
ofReg. 1.469-9(g).
Section 608
CHAPTER 7
Dispositions of Real Estate 1. Expanded installment sale
discussion for ineligible transac-tions.
Section 707
2. Discussed the BalsamMountain ruling regarding the abilityto
deduct a contribution of a qualified real property interest.
Section 715
CHAPTER 8
Tax Depreciation andCredits
1. Included recent IRS guidance regarding changes to auto-matic
accounting method procedures to comply with thetangibleproperty
regulations (Rev.Procs.2015-13,2015-14and 2015-33).
Section 801
2. Expanded discussion of property eligible for
additionalresearch or minimum tax credits, in lieu of bonus
deprecia-tion, for 2015 and 2016 (long-production period
property).
Section 801
3. Noted Stine case where placed-in-service date for a
retailstore buildingwasbasedon thebuilding’s ability toperformits
intended function, despite certificates of occupancy thatdid not
permit customers in the building.
Section 801
4. Discussed recent IRS guidance on the availability of
thelow-income housing credit when a tenant’s incomeexceeds required
limits.
Section 811
CHAPTER 9
Personal Residences 1. Discussed recent IRS guidance related to
the deductibilityof qualified residence interest for a property
co-owned bytwo taxpayers.
Section 902
2. Included the discussion of a court decision regarding
theinclusion of days spent performing repairs on a vacationhome as
days of personal use.
Section 906
-
TRE 6/15
–4–
Chapter ReferenceSubstantive Changes and Additions
CHAPTER 10
Estate Planning 1. Added a comment that holding an asset until
deathmay bemore beneficial than gifting the asset.
Sections 1001,1006
2. Included an observation about financing charges to
relatedparties to avoid the imputed interest rules.
Section 1001
-
TRE 6/15
P.O. Box 115008Carrollton, TX 75011-5008Tel (972) 250-7750 (800)
431-9025 Fax (888) 216-1929tax.thomsonreuters.com
Dear Subscriber:
Enclosed is your copy of PPC’s Guide to Real Estate Taxation. We
are sure the latest edition of this Guide will be anindispensable
tool for your real estate planning engagements. Please take a
fewminutes to familiarize yourself withthe contents and layout of
the Guide. Time invested now will save you valuable time later.Our
commitment is to provide youwith thebest possible guidance. To
accomplish this, our authors andeditorial staffconstantly monitor
legislative, judicial, and administrative developments.
The following are some of the important update features in this
edition of PPC’s Guide to Real Estate Taxation:¯ Expired Internal
Revenue Code Provisions. Various tax provisions expired at the end
of 2014 but maybe extended for 2015. These items include the
increasedSection 179 deduction; additional first-year
bonusdepreciation; 15-year recovery period for qualified leasehold
improvements, retail improvements andrestaurant property; and
several tax credits. These expired provisions have been highlighted
in this editionof the Guide.
¯ Guidance on Accounting Method Changes Required to Comply with
the Tangible PropertyRegulations. The Guide has been updated for
coverage of revenue procedures issued in 2015 thatsupersede
existing guidance on making accounting method changes. Also, a
qualified small taxpayerexception allows certain taxpayers to make
the required accounting method change to comply with thetangible
property regulations without filing Form 3115.
¯ CourtRuling inHowardHughesCase.The impactof a recentTaxCourt
rulingwasdiscussed thatprovidesinformation on the definition of a
qualified homebuilder for purposes of the completed contract
method.
¯ Updated IRSGuidanceonQualifications for theReal
EstateProfessional Relief Provision of IRCSec.469(c)(7).Recent
IRSguidancediscussed the ability of real estate
professionalswhobring together buyersand sellers qualifying for the
real estate professional relief provision.
¯ Choice of Business Entity. Several new appendixes were added
that provide summarized details fordetermining the most beneficial
type of entity to use when starting a real estate business.
We hope you are pleased with PPC’s Guide to Real Estate
Taxation. If so, you only need to file yourGuide accordingto the
enclosed “Filing Instructions” andpay the invoice. If for some
reason youdecide not to accept this publication,return it to us
within 30 days of receipt, and we will cancel your
subscription.
Thank you again for subscribing to PPC products.
Sincerely,
Blake T. Smith, CPASenior Director of Product DevelopmentTax
Publications
Route To:j Partners j Staffj Managers j File
trep15GenLtr
-
TRE 6/15
-
TRE 6/15
FILING INSTRUCTIONS
PPC’s Guide to Real Estate Taxation
Twenty-first Edition (June 2015)
YOUR SHIPPING PACKAGE INCLUDES:
1. A letter to subscribers.
2. One shrink-wrapped package containing the text.
New subscribers also receive:
1. One binder with inserted cover and spine.
2. One shrink-wrapped package of tabs.
Existing subscribers also receive:
1. A list of Substantive Changes and Additions to be filed at
the front of the Guide binder.
TO FILE PPC’s Guide to Real Estate Taxation:
1. If you already have the previous edition, remove the text
from your binder and discard, but save the tabs.
2. Insert the new text into the binder. File the tabs behind the
chapters listed below.
3. If anyparts of yourGuide aremissingor if youhavequestions
about filing, call our customer service departmentat (800)
431-9025.
4. Your Twenty-first Edition of PPC’s Guide to Real Estate
Taxation is now ready to use.
Placement of Tabs
Tab Description File Behind100—OVERVIEW Introductory
Material200—FORM OF OWNERSHIP Chapter 1300—ACQUISITION OF REAL
ESTATE Chapter 2400—SUBDIVISION AND DEVELOPMENT Chapter
3500—OPERATIONS AND LEASING Chapter 4600—LIMITATIONS ON REAL ESTATE
LOSSES Chapter 5700—DISPOSITIONS OF REAL ESTATE Chapter 6800—TAX
DEPRECIATION AND CREDITS Chapter 7900—PERSONAL RESIDENCES Chapter
81000—ESTATE PLANNING Chapter 9
FINDING LISTS AND INDEX Chapter 10CPE INFORMATION Finding Lists
and Index
trep15GenFin
-
TRE 6/15
-
Visit yourcheckpoint.thomsonreuters.com/proview or scan here to
learn more or see a demo on eBooks on Thomson Reuters Proview.
ProView has been selected as a 2013 finalist for a SIIA CODiE
Award for Software Excellence in the category of “Best Business
Information Solution”.
NOT YOUR AVERAGE eBOOK
INTRODUCING RIA®, PPC® AND QUICKFINDER® eBOOKS ON THOMSON
REUTERS PROVIEW™
Access trusted Thomson Reuters content from your computer,
Apple® iPad® and Android® tablet on our revolutionary new eBooks
that provide advanced mobility, speed and customization that no
other tax and accounting reference providers can match.
Unlike eBooks from other providers that run on generic eReader
apps and are limited to features developed for leisure reading, our
eBooks are powered by Thomson Reuters ProView – the only eReader
app developed specifically for tax and accounting professionals.
ProView has been exclusively created to support professional-grade
eBooks with unique features that are custom-tailored to each
Thomson Reuters publication. Our new eBooks allow you to:
• Access your tax and accounting library anytime, anywhere
• Find your answers quickly from the Layered Table of Contents,
advanced index tool or full-text search
• Dive deep into your research with fully linked content,
history tool and navigation tools customized to each eBook
• Add personal notes, highlight text and set bookmarks that
automatically sync to your other devices and transfer to your next
edition – saving you time and ensuring that your work is always
with you
BUY BOTH PRINT + eBOOK AND SAVEThomson Reuters eBooks are
available individually or as the perfect companion to your print
title.
-
SELF-STUDY CPE COURSESBASED ON PPC GUIDANCE
CPE RELATED TO THESE PPC GUIDES IS AVAILABLE!What better way to
meet your CPE requirements than to take courses related to the
guidance you use every day? The following Guides include related
self-study CPE courses to optimize your use of the PPC approach,
and earn credit. Online grading is available through the Checkpoint
Learning platform and provides real-time results! For more CPE
information, visit cl.thomsonreuters.com or call 800.231.1860. All
courses are available in electronic format. Certain courses are
also available in print format.
• Audit Risk Assessment• Auditor’s Reports• Audits of Employee
Benefit Plans• Audits of Financial Institutions• Audits of Local
Governments• Audits of Nonprofit Organizations• Audits of Nonpublic
Companies• Business Valuations• Cash, Tax, and Other Bases of
Accounting• Compilation and Review
Engagements• Construction Contractors• GAAP• Homeowners’
Associations• HUD Audits• Nonprofit GAAP• PPC’s 1040 Deskbook
• PPC’s 1041 Deskbook• PPC’s 1065 Deskbook• PPC’s 1120S
Deskbook• PPC’s 990 Deskbook• Preparing Financial Statements•
Preparing Governmental Financial
Statements• Preparing Nonprofit Financial
Statements• Quality Control• Tax Planning for S Corporations•
Single Audits• Tax Action Bulletins• Tax Planning for
High-Income
Individuals• Tax Planning for Partnerships• Write-Up
Services
NOW IT’S EASIER THAN EVER TO MEET YOUR CPE REQUIREMENTS WITH THE
PPC GUIDANCE YOU USE AND TRUST!The CPE & Training Solutions
Online Grading Center gives you easy accessto many print-based
self-study courses and allows you to complete yourCPE exams online
for immediate results. Plus, the My Courses featureprovides
convenient retention and retrieval of your CPE course
certificatesand completions.
Complete exams online without:• mailing or faxing exams,•
waiting for grading, or• paying express fees.
Visit cl.thomsonreuters.com for more information. If you aren’t
interested in Online Grading, we still offer grading for print
exams submitted via mail or fax.
THE MORE CPE YOU TAKE,THE MORE YOU SAVE!Standard grading fees
are $89 per course. Discounts apply for three or more courses
submitted for grading at the same time by a single participant.
• 3 courses: 5%• 4 courses: 10%• 5 or more courses: 15%
SFPPC15
CHECKPOINT LEARNING®
FOR MORE INFORMATION, VISIT CL.THOMSONREUTERS.COMOR CALL
800.231.1860.