INSIGHTS AND RESOURCES
The 2020 checklist
10 smart moves for real estate investors at year’s end
INSIGHT ARTICLE |
Authored by RSM US LLP
For the past decade, growth in commercial real estate has been on a steady run, bolstered by low interest rates and an abundance of dry powder. As the end of the current business cycle approaches, however, real estate owners and investors face increasing risks. As we close the book on 2020, here are 10 important year-end resolutions.
- Right those REITS. Review distributions from your real estate investment trust. Have you met the dispersal requirements for 2020? Here are some suggestions if your REIT hasn’t yet hit the distribution mark.
- Do some analysis that’s not too taxing. The IRS issued draft instructions for 2020 Schedule K-1s on Oct. 22, 2020, with some welcome relief that simplifies the tax capital reporting rules. Review your tax records to make sure that you have all information necessary to disclose the data for your 2020 K-1s.
- Don’t be afraid of phantom income. Debt forgiveness is still taxable income even if no cash has been received. Be prepared to potentially pay taxes on a loan workout.
- Make cash king. 2020 has been rough on many middle market businesses. Are you doing everything you can to minimize your operating costs? Here are some ideas to generate cash for private equity firms.
- Play it forward. Given the results of our presidential election, tax rates are likely not going to be lower in the near future than they are in 2020. Instead of following the typically sage advice to “accelerate expenses and defer income,” do the opposite—accelerate your income into 2020 and save a few percentage points of tax.
- Don’t give away the store on rents. Lease concession accounting may affect financial statements and rent forbearance may have its own implications for tax purposes too.
- No pain, no gain. The new Biden administration may look to eliminate 1031 exchanges in order to fund other programs. If it is part of your disposition strategy, plan accordingly.
- Consider converting. You’ll take a short-term tax hit, but converting a traditional IRA into a Roth may be worthwhile for the long haul. Tax-free distributions could pay off down the road, particularly if we expect higher tax rates in the coming years.
- Plan ahead. The current estate tax exemption is $11.58 million, meaning that your estate is tax-free up to that amount. You can use some of that exemption now by doing some creative planning. Under Biden’s tax plan, this exclusion is expected to come down significantly. Click here for more.
- Close the GAAP. Understand how the new FASB standard for leases (ASC 842) applies to your business. While it is not effective until Jan. 1, 2022, for private companies, adoption may be a heavy lift and require implementation of new software.
Call us at +1 213.873.1700, email us at email@example.com or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by Kelly Andiorio, Scott Helberg and originally appeared on 2020-12-04.
2020 RSM US LLP. All rights reserved.
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Vasquez & Company LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Vasquez & Company LLP can assist you, please call +1 213.873.1700.
Subscribe to receive important updates from our Insights and Resources.