End of 100% Bonus Depreciation

Bill | January 3, 2012 - 1:31 pm

Some wished that the 100% bonus depreciation deduction of the past 15 months would be extended into 2012.  The President signed the contentious H.R. 3765  in December 2011,  extending for only two months the temporary payroll tax break, the long-term employment benefits, and so-called doc fix. The 100% bonus depreciation was not extended.

Since this is only a 2 month bill – who knows what we will get at the end of February.

50% bonus depreciation will exist for certain personal property for 2012, as well as section 179 expense up to $500,000.

For those companies who took advantage of 100% bonus depreciation in 2011, they have to realize when they sell the equipment, it will have a very low, close to zero basis.    If you have a zero basis and sell the equipment for more than zero (hopefully) – Uncle Sam wants a pay back of the depreciation taken in 2011.  To avoid triggering taxes on personal property being sold, to save taxes and  improve cash flow, consider doing a 1031 like-kind exchange.  Realty Exchange Corporation has been exclusively in the IRC 1031 business since 1990 and serves as the Qualified Intermediary for both real estate and personal property equipment exchanges. Give us a call at 1-800-795-0769 to get the all the answers to any and all of your exchange questions.

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IRS Form 8824 Workbook for 2011

Bill | December 17, 2011 - 6:09 am

The IRS Form 8824, used to report a 1031 exchange, is very complicated and uses terms most exchangers are not familiar with.  Our 8824 workbook on how to complete the IRS from 8824 is updated for the 2011 tax season.   The 8824 form has not changed this year, but several other forms involving investment properties have changed.  Please let us know if you have any questions.

http://www.1031.us/8824/IRS8824.htm

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Virginia earthquake added as a Federally Declared Disaster

Bill | November 14, 2011 - 6:30 pm

When there is a Federally  Declared Disaster, 1031 exchanges potentially qualify for to extend the 45-day ID and 180 day exchange periods.  The Virginia earthquake has recently been added as a federal disaster, covering Louisa County VA.  The IRS posts notices of Tax Relief in Disaster Situations here:http://www.irs.gov/newsroom/article/0,,id=108362,00.html.

Special rules are provided for 1031 exchanges when there is a Federal Declared Disaster.  Go to Section 17 of “Revenue Procedure 2007-34” (http://www.irs.gov/irb/2007-34_IRB/ar13.html#d0e2854)  to learn the qualifications and rules for a 1031 exchanger to extend his 45 Day ID and 180 day exchange period dates.

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2011 Rental Property Schedule E and 1099 MISC Alert

Bill | November 14, 2011 - 6:29 pm

Caution – the IRS Form 1040, Schedule E (page 1), which is the main form used to report rental income and expenses, has been drastically changed. IRS has published the final version of the 2011 Schedule E at:  http://www.irs.gov/pub/irs-pdf/f1040se.pdf     and the final version of the 2011 Schedule E Instructions are at: http://www.irs.gov/pub/irs-pdf/i1040se.pdf

The real estate and accounting industry fought a hard legislative battle in early 2011 to have 2011 rental property expenses excluded from Form 1099 MISC reporting by landlords. The 2011 IRS instructions for Form 1099 MISC did not pick up this legislative change, but IRS did publish the following notice of importance to all landlords.
“Legislative Change Affecting 2011 Instructions for Form 1099-MISC ”
http://www.irs.gov/formspubs/article/0,,id=239708,00.html    

Section 3 of Public Law 112-9 repealed section 6041(h) of the Internal Revenue Code, which would have required the reporting on Form 1099-MISC of rental property expense payments made after December 31, 2010  http://www.gpo.gov/fdsys/pkg/PLAW-112publ9/pdf/PLAW-112publ9.pdf.

Therefore, in the 2011 Instructions for Form 1099-MISC, please disregard:
•    Treatment of rental property expense payments under What’s New on page 1,
•    The second paragraph under Trade or business reporting only on page 1, and
•    Rental property expense payments on page 3.

IRS has published the Form 1099 MISC Instructions here: http://www.irs.gov/pub/irs-pdf/i1099msc.pdf

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IRS 2011 Form 8824

Bill | November 14, 2011 - 6:27 pm

For 2011 returns the IRS has put the final Instructions and Form 8824, Like-Kind Exchanges, on its web site www.irs.gov, http://www.irs.gov/pub/irs-pdf/f8824.pdf

We have distributed since 1991 and put on our web site www.1031.us the workbook by Ed Horan on “Reporting the Like-Kind Exchange of Real Estate Using IRS Form 8824”.  http://www.1031.us/8824/IRS8824.htm

The 8824 Workbook is written and made available because form is very complicated and uses terms most exchangers are not familiar with. The 8824 Workbook for 2011 returns should be out by early December 2010. We will announce its availability on this Blog site.

While its publisher is not engaged in rendering legal or accounting service every effort is made to insure the guidance is in agreement with the IRS Form 8824 instructions.

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