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TreatiseTreatise

Tax and Estate Planning with Real Estate, Partnerships and LLCs
(2nd Edition)
 by Jerome Ostrov
 
 Copyright: 2007-2010
 Last Updated: August 2010

 Product Details >> 

Product Details

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  • ISBN Number: 9781402408670
  • Page Count: 1030
  • Number of Volumes: 1
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  • The purchase of PLI titles may include Basic Upkeep Service, whereby
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“[Ostrov does a] masterful job in providing a guide to a broad range of tax considerations in dealing with real estate planning.”
—Real Property, Probate, and Trust Journal

”The author’s 'cut-to-the-chase' text gives this small firm practitioner quick answers, poses critical questions for follow-up, and points the direction with pertinent references. This book is a critical tool for those of us who cover multiple areas of business, tax, and estate planning.”
—Arnold G. Cohen, Leibowitz & Cohen, Nashville


PLI’s Tax and Estate Planning with Real Estate, Partnerships and LLCs provides you with clear, useful insight into estate planning, asset protection, and charitable giving using real estate, real estate partnerships, and LLCs.

This practical, plain-English planning tool brings you important analysis of the 2005 Tax Increase Prevention and Reconciliation Act, 2006 Pension Protection Act, and 2006 Tax Relief and Health Care Act. Among the key areas covered are personal residence tax issues; choice of entity; partnership and LLC tax law; REITS; distressed and awkwardly-held real estate; capital gains; tax-free exchanges; deductions and credits associated with constructing, leasing and improving real estate; charitable giving; exempt organizations; general estate planning; and estate planning valuation and discount issues.

Tax and Estate Planning with Real Estate, Partnerships and LLCs includes more than 200 examples that clarify difficult issues; easy-to-use footnote references for virtually every statement; and abundant paragraph headings that concisely describe the topics under discussion.

Updated at least once a year, Tax and Estate Planning with Real Estate, Partnerships and LLCs is a vital planning resource for tax and estate planning professionals, tax and real estate attorneys, and investment professionals, and accessible reading for interested investors.

  Introduction and Synopsis of Recent Events
Chapter 1: The Personal Residence
  • § 1:1 : Introduction1-4
  • § 1:2 : Deductibility of Personal Interest Expense1-4
    • § 1:2.1 : “Qualified Residence”1-5
    • § 1:2.2 : “Acquisition Indebtedness” and “Home Equity Indebtedness” Concepts1-5
  • § 1:3 : Deductibility of Points1-6
  • § 1:4 : Whether Points May Be Deducted on Refinancing1-8
  • § 1:5 : Tax Issues Relating to the Rental of Vacation Homes1-8
    • § 1:5.1 : Deductions Limited by Personal Use of Property1-8
      • ? : Example 1-11-9
      • ? : Example 1-21-9
    • § 1:5.2 : Passive Loss Limitations1-10
  • § 1:6 : Home Office Deductions1-11
    • § 1:6.1 : In General1-11
    • § 1:6.2 : Soliman Case and “Principal Place of Business” Test: Law Through the End of 19981-12
      • [A] : The IRS’s Interpretation of the Soliman Rationale1-14
    • § 1:6.3 : Law Under the TRA 97 Applicable to Post-1998 Years1-15
    • § 1:6.4 : Calculation of the Home Office Deduction1-16
      • ? : Example 1-31-17
    • § 1:6.5 : Capital Gain Tax Attributable to a Previously Depreciated Home Office1-17
  • § 1:7 : Taxation of Gain on the Sale of a Principal Residence1-18
    • § 1:7.1 : In General: Law Prior to TRA 971-18
    • § 1:7.2 : Requirements Under Pre-TRA 97 Laws for Rollover Treatment1-19
      • ? : Example 1-4: Under Pre-TRA 97 Law1-19
    • § 1:7.3 : One-Time $125,000 Exclusion Under Pre-TRA 97 Law1-20
      • ? : Example 1-5: Under Pre-TRA 97 Law1-20
    • § 1:7.4 : Taxation of the Sale of a Principal Residence After TRA 971-21
      • [A] : The $250,000/$500,000 Exemption1-21
      • [B] : Two-Out-of-Five-Year Continuous Ownership and Occupancy Tests1-21
      • ? : Example 1-61-21
        • [B][1] : Nonqualified Use Limitation for Periods Subsequent to January 1, 20091-23
          • [B][1][a] : In General1-23
          • [B][1][b] : Conversion of Vacation Home to Principal Residence1-23
      • ? : Example 1-6A1-24
          • [B][1][c] : “After Last Date” Exception1-24
      • ? : Example 1-6B1-24
      • ? : Example 1-6C1-24
        • [B][1][d] : “Temporary Absence” Exception1-25
        • [B][1][e] : “Gain Attributable to Depreciation” Exception1-25
      • ? : Example 1-6D1-25
      • [C] : The Two-Year Anti-Churning Provision1-25
      • ? : Example 1-71-25
      • [D] : Exception to Anti-Churning Rules: Reduced Maximum Exclusion of Gain Under Specified Circumstances1-26
      • ? : Example 1-81-26
        • [D][1] : Temporary Regulations: Pre-August 13, 20041-26
        • [D][2] : Final Regulations Establishing Safe Harbor Provisions Effective August 13, 20041-27
      • ? : Example 1-91-28
      • ? : Example 1-101-28
      • [E] : Pre-May 7, 1997 Sales Disregarded in Applying Anti-Churning Rules1-29
      • [F] : Issues Applicable to Married Taxpayers and Unmarried Taxpayers Living Together1-30
      • ? : Example 1-111-30
      • ? : Example 1-121-30
      • ? : Example 1-131-31
      • ? : Example 1-141-31
      • ? : Example 1-151-32
      • [G] : Sale of Partial Interests1-32
      • ? : Example 1-161-33
      • [H] : Depreciation1-33
      • ? : Example 1-171-33
      • [I] : Need to Track Basis1-33
      • ? : Example 1-181-33
      • [J] : The Effect of Section 121 on the Foreclosure of a Personal Residence1-34
      • [K] : Strategy When Expected Gain on the Sale of a Residence Used As a Vacation Property Substantially Exceeds the $250,000/$500,000 Ceiling1-35
      • [L] : The Surviving Spouse Penalty1-35
        • [L][1] : Pre-2008 Law1-35
      • ? : Historic Example 1-19: Pre-2008 Law1-36
        • [L][2] : Law Effective January 1, 20081-36
      • [M] : Availability of Section 121 Exclusion to Trustee in Bankruptcy1-36
      • [N] : May the Section 121 Exclusion Apply to a Partnership Owned Directly or Indirectly by Occupants of a Principal Residence?1-37
      • [O] : Availability of Section 121 Exclusion to Heir, Estate, Trust or Single-Owner Entity1-38
      • [P] : Vacant Land1-39
      • ? : Example 1-201-39
      • [Q] : Gain Recognition from the Sale of a Principal Residence Acquired in a Section 1031 Like-Kind Exchange Within Five Years Prior to the Sale1-40
      • [R] : Sale of a Partial Interest in a Principal Residence1-40
      • ? : Example 1-211-40
      • [S] : Section 121 Related-Party Restrictions1-41
      • [T] : Moving from and Renting One’s Primary Residence Until Favorable Market Conditions Return1-42
      • ? : Example 1-21A1-42
  • § 1:8 : “First-Time Homebuyer” Tax Credit for Homes Purchased in the District of Columbia1-42
  • § 1:9 : Roth IRA Distributions Used to Purchase a Home1-43
    • § 1:9.1 : Background1-43
    • § 1:9.2 : Distributions from a Roth IRA1-43
  • § 1:10 : Transfer of Personal Residence Incident to Divorce1-44
    • § 1:10.1 : Background1-44
    • § 1:10.2 : Current Law1-44
    • § 1:10.3 : Basis to Transferee Spouse of Marital Property1-45
    • § 1:10.4 : Transfer of Property Subject to a Loan in Excess of Basis1-45
      • ? : Example 1-221-46
  • § 1:11 : Does a Federal Tax Lien Attributable to One Spouse Attach to Real Property Owned by Both Spouses As Tenants-by-the-Entirety?1-46
  • § 1:12 : Purchaser’s Obligation to Withhold Tax on Purchase of Residence from a Foreign Individual or Entity1-48
    • § 1:12.1 : Withholding Certificate Guidance Under Revenue Procedure 2000-351-51
      • [A] : In General1-51
      • [B] : How to Apply for the Withholding Certificate1-52
      • [C] : Format for the Withholding Certificate Application1-53
      • [D] : Residences Held for Investment and Traded in a Section 1031 Tax-Free Exchange1-54
  • § 1:13 : Credit for Residential Energy-Efficient Property1-54
    • § 1:13.1 : The Credit1-54
    • § 1:13.2 : Limitations on the Credit1-55
    • § 1:13.3 : Carry-Forward of Credit1-56
    • § 1:13.4 : Special Rules1-56
      • [A] : Labor Costs1-56
      • [B] : Solar Panels1-56
      • [C] : Swimming Pools1-57
      • [D] : Dollar Limit on Fuel Cell Expenditures Made to Dwelling Unit Occupied by More Than One Taxpayer1-57
        • [D][1] : Limit1-57
        • [D][2] : Proration1-57
      • [E] : Tenant-Stockholders in Cooperative Housing Corporations1-57
      • [F] : Condominiums1-57
  • § 1:14 : Credit for Nonbusiness Energy Property1-58
  • § 1:15 : Discharge of Indebtedness Relief Under the Mortgage Forgiveness Debt Relief Act of 20071-59
  • § 1:16 : Tax-Free Exchanges of Dwelling Units Held for Investment1-60
  • § 1:17 : First-Time Homebuyer Credit1-60
    • § 1:17.1 : Eligibility for Credit1-60
    • § 1:17.2 : Use of the Credit1-61
    • § 1:17.3 : Recapture of the Credit1-61
    • § 1:17.4 : Related-Party and Other Limitations1-61
    • § 1:17.5 : Modifications to the Credit Under the American Recovery and Reinvestment Act of 2009 Section 1006(a)(2)1-62
Chapter 2: Real Estate Partnerships
  • § 2:1 : Choice of Investment Entity2-8
    • § 2:1.1 : Comparative Attributes of Investment Vehicles Other Than Partnerships2-8
      • [A] : C Corporations2-8
      • [B] : S Corporations2-9
      • ? : Example 2-12-10
      • ? : Example 2-22-10
    • § 2:1.2 : Partnerships As Historically Preferred Investment Vehicles for Real Property2-14
  • § 2:2 : “Check-the-Box” Era2-16
    • § 2:2.1 : Background: “Kintner Regulations”2-16
    • § 2:2.2 : “Check-the-Box” Regulations2-19
      • [A] : Determination of Whether Separate Entity Exists2-19
      • [B] : Definition of a Corporation2-19
      • [C] : Definition of a Partnership2-19
      • [D] : Elections Relating to Entity Status2-19
      • [E] : Default Classification System2-20
      • [F] : Sixty-Month Limitation on Changes in Classification2-21
      • [G] : Existing Entities2-21
    • § 2:2.3 : Tax Consequences of Changes in Classification2-21
      • ? : Example 2-32-24
    • § 2:2.4 : Four “Classification” Tests As a “Reasonableness” Standard2-24
      • [A] : Continuity of Life2-25
      • [B] : Centralized Management2-25
      • [C] : Limited Liability2-26
      • [D] : Free Transferability2-28
  • § 2:3 : Section 704(b) Allocations; Capital Account Maintenance2-28
    • § 2:3.1 : Regulations Construing Section 704(b)2-29
      • [A] : Anomalies Arising Out of Strict Adherence to the Capital Account Distribution Requirements Where Preferences Have Not Been Fully Satisfied2-33
      • ? : Example 2-42-33
      • ? : Example 2-52-34
      • [B] : Corrective Mechanisms for Addressing Anomalies Arising Out of Strict Adherence to Capital Account Distribution Requirements Where Preferences Have Not Been Fully Satisfied2-35
      • ? : Example 2-5A2-35
    • § 2:3.2 : “Substantiality Test”2-36
      • ? : Example 2-62-38
      • ? : Example 2-72-39
      • [A] : Substantiality Under the Code-Wide Economic Substance Doctrine2-40
    • § 2:3.3 : “Substantial Economic Effect” Requirement and Nonrecourse Debt2-41
      • [A] : Minimum Gain and the Minimum Gain Chargeback Requirement2-42
      • ? : Example 2-82-42
      • ? : Example 2-92-43
      • [B] : Application of Minimum Gain Chargeback Rules Where Book Value Differs from Tax Basis2-43
      • ? : Example 2-102-44
    • § 2:3.4 : Relationship Between Minimum Gain and the Alternate Test for Economic Effect2-44
    • § 2:3.5 : Adjustments to Capital Accounts Under Specified Circumstances2-44
      • [A] : Application of the Capital Account Adjustment Provisions2-46
      • ? : Example 2-112-46
      • ? : Example 2-122-47
      • ? : Example 2-132-48
    • § 2:3.6 : Carry-Over of Capital Account upon Transfer of an Ownership Interest2-50
    • § 2:3.7 : Allocation of Partnership Tax Items Where Partnership Interests Vary During the Tax Year2-51
  • § 2:4 : Adjustments Under Section 704(c)2-52
    • § 2:4.1 : Traditional Method2-54
      • ? : Example 2-142-55
      • ? : Example 2-152-55
    • § 2:4.2 : Traditional Method with Curative Allocations2-56
      • ? : Example 2-162-56
    • § 2:4.3 : Remedial Allocation Method2-58
      • ? : Example 2-172-59
  • § 2:5 : Determination of the Partner’s Basis in the Partnership2-61
    • § 2:5.1 : General Rules2-61
    • § 2:5.2 : How a Partner’s Share of Partnership Liabilities Affects Partner’s Basis in the Partnership2-62
      • ? : Example 2-182-62
      • ? : Example 2-192-62
    • § 2:5.3 : Allocation of Recourse Liabilities for Purposes of Basis Formation2-63
      • ? : Example 2-202-64
      • ? : Example 2-212-65
      • ? : Example 2-222-66
      • ? : Example 2-23: Partner Loan/Wrapped Debt2-67
    • § 2:5.4 : Allocation of Nonrecourse Liabilities for Purposes of Basis Formation2-67
      • ? : Example 2-242-70
      • ? : Example 2-252-71
      • ? : Example 2-262-71
      • [A] : Reverse Section 704(c) Gain2-72
      • ? : Example 2-272-73
      • [B] : How the Chosen Section 704(c) Allocation Method Affects the Tier Two Allocation of Nonrecourse Liabilities2-73
      • ? : Example 2-282-74
      • ? : Example 2-292-75
      • [C] : The Effect of Section 704(c) on the Tier Two Allocation of Nonrecourse Liabilities in a Workout Environment Involving Distressed Real Estate2-77
  • § 2:6 : Tax Implications of Contributions to a Partnership2-77
    • § 2:6.1 : General Rule: Contributions to a Partnership Do Not Produce Gain2-77
      • [A] : Exception: Gain Where Encumbered Property Is Contributed to a Partnership and a Deemed Distribution Occurs2-77
      • ? : Example 2-302-78
      • [B] : Exception: Gain Experienced by Existing Partners Where Nonrecourse Debt Is Reallocated As a Result of a Contribution Made by a New Partner in Exchange for an Ownership Interest in the Partnership2-78
      • ? : Example 2-312-79
      • [C] : Exception: “Non-Qualified Liabilities”2-80
      • ? : Example 2-322-81
      • [D] : Exception: Partnership Treated As “Investment Company”2-82
      • ? : Example 2-33: Pre-TRA 972-83
      • ? : Example 2-34: Post-TRA 972-83
    • § 2:6.2 : “Mixing Bowl” Gain2-85
      • [A] : Gain Under I.R.C. Section 704(c)(1)(B)2-85
      • ? : Example 2-352-86
      • ? : Example 2-362-86
      • [B] : Gain Under I.R.C. Section 7372-87
      • [C] : For Purposes of I.R.C. Sections 704(c)(1)(B) and 737, Built-In Gain Follows Property Disposed of in an Installment Transaction As Well As Property Received Pursuant to a Contract Contributed by a Partner2-88
      • [D] : Order in Which Mixing Bowl Provisions of I.R.C. Sections 704(c)(1)(B) and 737 Are Applied Where Both Sections Are Implicated in a Distribution2-90
      • ? : Example 2-37: Order in Which the Section 704(c)(1)(B) and Section 737 Mixing Bowl Provisions Are Applied in the Context of Tenants-in-Common Who Have Converted to Partnership Status2-90
    • § 2:6.3 : Disguised Sales of Property2-94
      • [A] : I.R.C. Section 707(a)(2)(A): Contribution of Property to a Partnership Coupled with a Related Direct or Indirect Allocation and Distribution to the Contributing Partner2-94
      • ? : Example 2-382-95
      • [B] : I.R.C. Section 707(a)(2)(B): Contribution of Property Followed by Distribution of Money to Contributing Partner2-96
        • [B][1] : Exception Relating to Guaranteed Payments2-96
      • ? : Example 2-392-97
        • [B][2] : Exception for Reimbursement of Preformation Capital Expenditures2-97
      • [C] : Contribution of Encumbered Property2-98
      • ? : Example 2-402-99
      • [D] : Implications of the “Disguised Sale” Provisions on Exit Strategies for Negative Capital Account Partners2-99
      • ? : Example 2-412-101
      • ? : Example 2-422-102
    • § 2:6.4 : Disguised Sales of Partnership Interests2-105
      • [A] : Background2-105
      • [B] : Basic Approach2-105
      • ? : Example 2-432-106
      • [C] : Two-Year Presumption2-107
      • [D] : Exceptions and Presumptions Against Sale2-108
      • [E] : Exceptions for Guaranteed Payments, Preferred Returns, Operating Cash Flow Distributions and Qualified Reimbursements2-108
      • [F] : Treatment of Liabilities Assumed by Partnership2-108
    • § 2:6.5 : Contributions of Services2-108
      • [A] : Background and Judicial History: Receipt of Profits Interest in a Partnership for Services2-108
      • [B] : Receipt of Profits Interest in Partnership by Service Partner: Revenue Procedure 93-272-109
      • [C] : Revenue Procedure 2001-43 As Applied to the Issuance of Profits Interests in a Partnership2-112
      • [D] : Regulations Permitting Historical Partners to Increase Their Capital Accounts upon the Admission of a Service Partner2-113
      • ? : Example 2-442-113
      • ? : Example 2-452-114
      • [E] : Proposed Regulations Under I.R.C. Sections 83 and 721 Providing for Equivalent Treatment for Both Transfers of Profits Interests and Transfers of Capital Interests to Service Providers2-114
        • [E][1] : No Gain or Loss Recognized by the Partnership2-117
      • ? : Example 2-462-117
      • ? : Example 2-472-119
          • [E][1][a] : A Partnership Interest (Whether a Capital Interest or Profits Interest) Is Property Within the Meaning of I.R.C. Section 832-120
          • [E][1][b] : Timing of a Partnership’s Deduction Is Governed by I.R.C. Section 83 and, Therefore, Geared to the Year in Which the Service Partner Recognizes Income2-120
          • [E][1][c] : Computation of Increase in Service Partner’s Capital Account As a Result of the Recognition of Income Associated with the Receipt of a Partnership Interest2-121
      • ? : Example 2-48: Treatment of Substantially Vested Profits Interest2-125
      • ? : Example 2-49: Treatment of Substantially Vested Capital Interest2-126
          • [E][1][d] : Allocation of Partnership Items to a Section 83(b) Electing Service Partner Who Receives a Nonvested Partnership Interest2-126
      • ? : Example 2-49A2-127
          • [E][1][e] : Forfeiture Allocations in the Event a Section 83(b) Electing Service Partner Who Received a Nonvested Partnership Interest Later Forfeits Such Interest2-127
          • [E][1][f] : Anomalies Associated with the Forfeiture by a Services Partner of a Nonvested Interest in the Partnership2-128
      • ? : Example 2-502-128
      • ? : Example 2-512-129
      • ? : Example 2-522-130
        • [F] : Consequences to the Employee of Partnership Status2-132
    • § 2:6.6 : Gain Resulting from a Partnership Distributing Appreciated Property to a Partner in Satisfaction of a Guaranteed Payment2-133
  • § 2:7 : Sale of an Interest in a Partnership: Tax Impact on Seller2-134
    • § 2:7.1 : Seller’s Basis2-134
    • § 2:7.2 : Amount Realized by Seller2-134
      • ? : Example 2-532-134
    • § 2:7.3 : Character of Gain Realized on Disposition: Sale Versus Redemption2-135
      • ? : Example 2-542-136
    • § 2:7.4 : Tax Year of Partner Who Sells His Entire Interest in a Partnership2-137
      • ? : Example 2-552-137
    • § 2:7.5 : Holding Period Issues2-137
    • § 2:7.6 : Related Party Issues2-137
      • [A] : Denial of Losses2-137
      • ? : Example 2-55A2-137
      • [B] : Gains Treated As Ordinary Income2-138
  • § 2:8 : Sale of an Interest in a Partnership: Tax Impact on Purchaser2-138
    • § 2:8.1 : “Inside” and “Outside” Basis Concepts2-138
      • ? : Example 2-562-138
    • § 2:8.2 : Section 743 Basis Adjustment in the Case of a 754 Election and in the Case of Certain Built-In Loss Property2-139
      • [A] : General Section 754 Context2-139
        • [A][1] : Section 754 Election in Combination with Section 708(b)(1)(B) Deemed Termination2-139
      • [B] : Mandatory Section 743 Basis Adjustment in the Case Where the Partnership’s Basis in the Assets Underlying the Transferred Partnership Interest Exceed the Assets’ Fair Market Value by More Than $250,0002-140
      • ? : Example 2-572-140
  • § 2:9 : Distribution by Partnership to Partner: Basis and Income Considerations2-142
    • § 2:9.1 : In General: Basis2-142
      • [A] : Nonliquidation Distributions2-142
        • [A][1] : Guaranteed Payments2-143
      • [B] : Liquidating Distributions2-143
      • [C] : Liquidating Distributions: The Potential Recasting of Tax-Motivated Distributions2-143
    • § 2:9.2 : Distributions of Multiple Properties: Basis Allocation2-144
      • ? : Example 2-58: Post-TRA 972-144
      • ? : Example 2-59: Post-TRA 972-145
    • § 2:9.3 : Section 734 Basis Adjustment Pursuant to a Section 754 Election or in the Case of a Substantial Basis Reduction Relating to an Asset Distribution to a Partner2-146
      • [A] : Basis Adjustments in a Section 754 Election Context2-146
      • ? : Example 2-602-148
        • [A][1] : Basis Strips Under Section 734(b)2-148
      • ? : Example 2-612-148
      • [B] : Mandatory Section 734 Basis Adjustment Where There Would Be a Substantial Basis Reduction Were Section 754 Elected2-149
      • ? : Example 2-622-149
    • § 2:9.4 : Tax Consequences of Payments Made to a Retiring Partner or to a Deceased Partner’s Successor in Interest2-151
      • [A] : In General2-151
      • [B] : Overview of Treatment of Amounts Paid to a Retiring Partner or a Deceased Partner’s Successor in Interest2-151
      • [C] : Payments with Respect to a Retiring or Deceased Partner’s Interest in the Assets of the Partnership2-152
      • [D] : Distributions with Respect to Unrealized Receivables or Goodwill Where Capital Is a Material Income Producing Factor and/or Where the Withdrawing Partner Is Not a General Partner, and Where, As a Consequence, the Payments Are Treated As a Payment Subject to Capital Gains Treatment with Respect to Partnership Property2-153
      • [E] : Payments with Respect to Unrealized Receivables and Goodwill Where Capital Is Not a Material Income Producing Factor and Where the Withdrawing Partner Is a General Partner and Where, As a Consequence, the Payments Are Not Treated As a Payment Subject to Capital Gains Treatment with Respect to Partnership Property2-153
      • [F] : Timing of the Recognition of Income2-154
  • § 2:10 : Pass Through of Gain Recognized on the Sale of Partnership Assets2-154
    • § 2:10.1 : In General2-154
    • § 2:10.2 : Substantial Omission of Income Arising from the Overstatement of Basis in an Asset Sold by a Partnership2-155
  • § 2:11 : Termination of a Partnership Under Section 7082-156
    • § 2:11.1 : Actual Termination Under Section 708(b)(1)(A)2-156
      • ? : Example 2-632-157
      • ? : Example 2-642-157
      • ? : Example 2-652-157
    • § 2:11.2 : Deemed Termination Under Section 708(b)(1)(B)2-157
      • [A] : Background to Section 708(b)(1)2-157
      • [B] : Deemed Terminations Under the 1997 Revised Regulations2-158
      • ? : Example 2-662-158
      • ? : Example 2-672-160
  • § 2:12 : Division of Two Partnerships Under Section 708(b)(2): No Termination Where Appropriate Continuity Exists in Newly Divided Entities2-161
    • ? : Example 2-682-162
    • ? : Example 2-692-162
    • ? : Example 2-702-163
  • § 2:13 : Merger of Two Partnerships Under Section 708(b)(2)2-165
    • ? : Example 2-71: Determining Which Partnership Survives2-167
    • ? : Example 2-72: Determining Which Partnership Survives2-168
    • ? : Example 2-73: Interests-Over Form Disregarded2-169
    • ? : Example 2-74: Purchase of Partner’s Interest in Merged Partnership2-169
    • ? : Example 2-75: Application of Sections 704(c)(1)(B) and 737 to Post-Merger Distributions2-171
  • § 2:14 : The Income Tax Consequences of Converting a Partnership into a Corporation2-175
  • § 2:15 : Noncompensatory Partnership Options2-177
    • § 2:15.1 : Background2-177
    • § 2:15.2 : Scope of Proposed Regulations2-177
      • [A] : Issuance and Exercise of Noncompensatory Options2-177
      • [B] : Accounting for Noncompensatory Options2-178
      • [C] : Characterization Rule2-178
Chapter 3: Limited Liability Companies
  • § 3:1 : Background3-4
  • § 3:2 : Two Types of LLCs3-6
      • ? : Example 3-1: Historical Example3-7
      • ? : Example 3-2: Historical Example3-7
  • § 3:3 : Strengths and Lingering—but Diminishing— Problem Areas of the LLC Format3-8
  • § 3:4 : General Tax Issues Associated with LLCs3-11
    • § 3:4.1 : Tax Matters Partner3-11
    • § 3:4.2 : Accrual Method of Accounting3-12
    • § 3:4.3 : Treatment of Member Distributions for Self-Employment Tax Purposes3-13
      • ? : Example 3-33-15
    • § 3:4.4 : Passive Loss Treatment3-16
    • § 3:4.5 : State Taxation of LLCs3-18
  • § 3:5 : Tax Issues Applicable to Conversion of a Partnership or a Corporation into an LLC3-18
    • § 3:5.1 : Income Tax Consequences of the Conversion of a Partnership into an LLC3-18
    • § 3:5.2 : Income Tax Consequences of the Conversion of a Corporation into an LLC3-21
      • [A] : C Corporation Consequences3-21
      • ? : Example 3-43-22
      • [B] : S Corporation Consequences3-23
        • [B][1] : Real Estate Held by an S Corporation: Conversion to an LLC Following the Death of the Owner3-25
      • ? : Example 3-53-25
    • § 3:5.3 : Transfer Tax Issues Associated with the Conversion of a Partnership or Other Entity into an LLC3-26
      • [A] : District of Columbia3-26
      • [B] : Maryland3-27
      • [C] : Virginia3-29
    • § 3:5.4 : Choice of Real Estate Partnership Converting to a Limited Liability Company or to a Limited Liability Partnership3-30
    • § 3:5.5 : Tax Issues Applicable to an LLC That Elects to Be Treated As an Association3-31
      • ? : Example 3-5A3-32
    • § 3:5.6 : LLCs May Qualify for Tax-Free Reorganization Treatment3-32
    • § 3:5.7 : State Law Continuity of Entity Converted to LLC Status3-33
    • § 3:5.8 : Other State Law Considerations—Tenant Rights of First Refusal3-33
  • § 3:6 : Single-Member LLCs3-35
    • § 3:6.1 : In General3-35
      • [A] : When Are Spouses Treated As a Single Member?3-35
      • [B] : Separate Liability for Period During Which Disregarded Entity Was Not a Single-Member LLC3-36
      • [C] : The Option to Use a Separate Taxpayer Identification Number3-37
        • [C][1] : Employment Taxes and Single-Member LLCs Prior to October 18, 2005, Proposed Regulations3-37
        • [C][2] : Employment Taxes and Single-Member LLC Responsibility Under the October 18, 2005, Proposed Regulations3-38
    • § 3:6.2 : Planning Opportunities Presented by Single-Member LLCs3-39
      • [A] : Utilizing Single-Member LLCs in Like-Kind Exchange3-39
        • [A][1] : Creating a Single-Member LLC to Receive Property Arising from a Like-Kind Exchange3-39
      • ? : Example 3-63-39
        • [A][2] : Qualifying for Like-Kind Exchange Treatment and Immunity from State Transfer Tax3-40
      • ? : Example 3-73-41
      • ? : Example 3-7A3-42
      • ? : Example 3-7B3-43
        • [A][3] : Federal Income Tax Issues Associated with the No Income/Transfer Tax Technique3-44
        • [A][4] : State Transfer Tax Issues Associated with the No Income/Transfer Tax Technique3-45
        • [A][5] : Utilizing Single-Member LLCs in a Bankruptcy Remote/Tax-Free-Exchange Environment3-46
          • [A][5][a] : Borrower Forming a State Law Partnership with a Disregarded Entity for Bankruptcy Remote Purposes3-48
      • ? : Example 3-83-48
      • [B] : Utilizing Single-Member LLCs in Involuntary Conversions3-49
      • [C] : Using Single-Member LLCs in the Context of Tax-Free Reorganizations3-49
        • [C][1] : In General3-49
        • [C][2] : Using a Single-Member LLC in a Statutory Merger (“A” Reorganization)3-50
      • ? : Example 3-93-50
      • ? : Example 3-103-51
        • [C][3] : Using a Single-Member LLC in an F Reorganization3-51
      • ? : Example 3-113-51
      • [D] : Using Single-Member LLCs As Stockholders of an S Corporation3-52
      • [E] : Stacking LLCs to Create Multiple Tiered Entities3-52
      • [F] : Utilizing Single-Member LLCs in the Context of Partnership Mergers3-53
      • [G] : Single-Member LLC Not Ignored for Gift Tax Purposes Where the Issue Pertains to the Valuation of a Gift of an Interest in the LLC3-55
    • § 3:6.3 : Income Tax Consequences of Converting a Single-Member LLC into a Multi-Member LLC (and Vice-Versa)3-56
      • ? : Example 3-123-56
      • ? : Example 3-133-57
      • ? : Example 3-14: One Member Using Cash to Purchase the Real Property Underlying the Liquidated Interest of the LLC’s Other Member3-57
      • ? : Example 3-15: Section 1031 Variation—One LLC Member Exchanging Real Property for the Real Property Underlying the Liquidated Membership Interest of the LLC’s Other Member3-58
      • ? : Example 3-16: Section 1031 Variation—One LLC Member Exchanging Real Property for the Real Property Underlying the Liquidated Membership Interest of the LLC’s Other Members3-58
      • ? : Example 3-17: Outside Party Using Cash to Purchase the Real Property Underlying the Liquidated Membership Interests of a Preexisting LLC’s Two Selling Members3-58
      • ? : Example 3-17A: Outside Party, in Conjunction with a Single-Member LLC, Purchases All of the General and Limited Partnership Interests of a Real Estate Holding Limited Partnership3-59
      • ? : Example 3-18: Section 1031 Variation— Outside Party Exchanging Real Property for the Real Property Underlying the Liquidated Membership Interests of a Preexisting LLC’s Two Selling Members3-60
      • ? : Example 3-19: Section 1031 Variation— Outside Party Exchanging Real Property for the Real Property Underlying a Two-Member LLC That Has Become a Wholly Owned Second-Tier LLC by Virtue of Its Prior LLC Members Transferring All of Their LLC Interests to a New First-Tier LLC3-61
    • § 3:6.4 : State Income Tax and Sales Tax Issues Applicable to Single-Member LLCs3-61
      • [A] : Taxation of Single-Member As a Nonresident May Raise Problems in the Member’s State of Residence—District of Columbia Example3-61
      • [B] : State Taxation of Nonresident LLC Members3-63
        • [B][1] : Maryland Example3-63
      • ? : Example 3-19A3-63
        • [B][2] : Virginia Example: State Tax Withholding of Nonresident LLC Member3-64
        • [B][3] : New York Example: Taxation of Interests in Partnerships, LLCs, and S Corporations Conveyed by Nonresident Owners3-64
      • [C] : Single-Member LLC Treated As State Law Partnership3-64
      • ? : Example 3-203-65
    • § 3:6.5 : Piercing the Veil of the Single-Member LLC3-66
      • [A] : The Single-Member LLC in a Bankruptcy Setting3-68
      • [B] : IRS Levy Against Single-Member’s Share of SMLLC Profits3-71
    • § 3:6.6 : Using Single-Member LLCs to Avoid Ancillary Probate3-71
      • ? : Example 3-213-72
    • § 3:6.7 : Single-Member LLCs and Allocation of Debt for Section 752 Basis Formation Purposes3-73
      • [A] : Background and General Rule3-73
      • [B] : Application of General Rule to Disregarded Entities3-74
      • ? : Example 3-223-75
    • § 3:6.8 : Series LLCs3-76
      • [A] : Background3-76
      • [B] : Delaware Series LLC Statute3-77
      • [C] : Tax Status of Series LLC Units3-78
      • [D] : Unresolved Liability Issues3-80
  • § 3:7 : Foreign Entity Single-Member LLCs3-80
    • § 3:7.1 : Special Classification System3-80
    • § 3:7.2 : Definition of “Eligible Entity” As Used in the Special Foreign Entity Classification System3-81
    • § 3:7.3 : Definition of “Limited Liability” As Used in the Special Foreign Entity Classification System3-81
Chapter 4: Passive Loss and At-Risk Limitations
  • § 4:1 : Passive Loss Provisions4-2
    • § 4:1.1 : Background4-2
    • § 4:1.2 : Overview of Passive Loss Provisions4-2
    • § 4:1.3 : “Material Participation” Provisions4-3
      • [A] : Material Participation by a Trust Through the Activities of Its Trustees4-4
      • [B] : Material Participation by a Trust Through the Activities of Fiduciaries Other Than Trustees4-5
      • [C] : Where LLC Members Demonstrate That They Are Actively Involved in Management of the LLC, the Per Se Limited Partner Provisions Under the Passive Loss Rules Will Not Apply4-6
    • § 4:1.4 : “Activity Concept”4-7
    • § 4:1.5 : Aggregating “Activities”4-7
    • § 4:1.6 : Treatment of Passive Losses from Rental Activities4-9
    • § 4:1.7 : Relief Provisions for Real Estate Professionals4-11
      • [A] : Real Property Trades and Businesses4-12
      • [B] : Real Estate Professional As Employee4-12
      • [C] : Management of Rental Real Estate4-12
      • [D] : Material Participation in a Rental Real Estate Activity4-13
      • ? : Example 4-14-13
      • [E] : Determining Material Participation in Real Property Trades or Businesses4-14
    • § 4:1.8 : Self-Charged Interest Rules4-15
      • [A] : Background4-15
      • [B] : The Final Self-Charged Interest Regulations4-15
      • ? : Example 4-24-16
      • [C] : Self-Charged Rules Applicable to Related Entities4-16
      • ? : Example 4-34-17
  • § 4:2 : At-Risk Limitations4-17
      • ? : Example 4-44-19
    • § 4:2.1 : Hubert Enterprises, Inc. v. Commissioner— Deficit Restoration Obligation Not Taken into Account for Purposes of Calculating the Amount at Risk4-20
Chapter 5: Real Estate Investment Trusts
  • § 5:1 : Introduction5-2
  • § 5:2 : Definition of Real Estate Investment Trust (REIT)5-3
    • § 5:2.1 : Management5-3
    • § 5:2.2 : Transferable Shares5-3
    • § 5:2.3 : Domestic Corporation5-3
    • § 5:2.4 : REIT Cannot Be a Financial Institution or an Insurance Company5-3
    • § 5:2.5 : Minimum Ownership Requirement of 100 Persons5-3
    • § 5:2.6 : Not-Closely-Held Requirement5-4
      • [A] : The Up-REIT5-5
      • ? : Example 5-15-5
        • [A][1] : Tax Issues Associated with Up-REIT Conversion Rights5-7
      • [B] : The Down-REIT5-8
      • ? : Example 5-25-8
    • § 5:2.7 : Section 856(c) Requirements5-9
  • § 5:3 : Section 856(c) Source of Income, Asset, and Other Requirements5-10
    • § 5:3.1 : Election5-10
    • § 5:3.2 : 95% Income Test5-10
    • § 5:3.3 : 75% Income Test5-12
      • [A] : Determining When Income from Services Is “Customary” and, Therefore, Treatable As “Rent”5-13
      • [B] : Foreign Currency5-15
    • § 5:3.4 : Assets Tests5-15
      • [A] : Relief Provisions Instituted by the AJCA of 2004; Associated Monetary Penalty Provisions5-17
        • [A][1] : Definition of Straight Debt Exception Liberalized by AJCA5-17
        • [A][2] : AJCA Safe Harbor Definition of Outstanding Securities That Do Not Apply in Determining Whether the Single-Issuer Ten-Percent Securities Test Has Been Exceeded5-17
        • [A][3] : AJCA Rules Setting Forth Consequences of Failing to Meet Certain REIT Requirements5-18
          • [A][3][a] : In General5-18
          • [A][3][b] : De Minimis Exception to Failure to Meet REIT Requirements5-18
          • [A][3][c] : Non–De Minimis Requirements for Failure to Meet REIT Requirements and Penalty Payment5-19
      • [B] : Pre-AJCA Relief Provisions5-19
  • § 5:4 : Treatment of Wholly Owned Subsidiaries5-19
    • § 5:4.1 : Qualified REIT Subsidiaries5-19
    • § 5:4.2 : Taxable REIT Subsidiaries5-20
  • § 5:5 : Taxation of REITs and Their Beneficiaries5-20
    • § 5:5.1 : Special Method for Determining a REIT’s Taxable Income5-20
    • § 5:5.2 : Deductibility of Dividends Paid5-21
    • § 5:5.3 : Disallowance of Dividends Received Deduction5-21
    • § 5:5.4 : Other Adjustments in Determining a REIT’s Taxable Income5-21
  • § 5:6 : Distribution Requirement As Prerequisite to Special Method of Determining Taxable Income5-21
    • § 5:6.1 : Treatment of Distributions of Stock to REIT Shareholders Where Shareholders Have an Elective Right to Receive Cash or an Equivalent Amount of REIT Stock5-22
  • § 5:7 : Taxation of REIT Shareholders for Dividend Distributions Other Than Capital Gains Dividends5-23
    • § 5:7.1 : Dividend Treatment Under the JGTRRA5-24
  • § 5:8 : Taxation of Capital Gains5-24
    • § 5:8.1 : Special Treatment of REIT Capital Gains Dividends Distributed to Foreign Owners5-24
  • § 5:9 : Income from Prohibited Transactions: 100% Taxation5-25
    • § 5:9.1 : In General5-25
      • [A] : Safe Harbor Rules for REITs5-27
    • § 5:9.2 : Assignment of REIT-Held Mortgage to New Lender Followed by Satisfaction of Mortgage Not a Prohibited Transaction5-30
  • § 5:10 : Stapled REITs5-31
  • § 5:11 : Section 704(c) Considerations5-32
  • § 5:12 : Use of REITs by Businesses Having Substantial Capital Tied Up in Land5-32
Chapter 6: Disposition and Restructuring of "Distressed" and "Awkwardly Held" Real Estate
  • § 6:1 : Introduction6-3
  • § 6:2 : Tax Consequences to Seller of Real Estate Encumbered by Nonrecourse Debt Taken Over by the Buyer: The Crane and Tufts Cases6-3
      • ? : Example 6-16-3
      • ? : Example 6-26-3
  • § 6:3 : Tax Consequences to Owner of Property Encumbered by Recourse Debt Taken Over in Foreclosure6-4
      • ? : Example 6-36-4
      • ? : Example 6-3A6-5
  • § 6:4 : Discharge of Indebtedness Through Modification of Debt Instrument6-5
    • § 6:4.1 : Determination of “Issue Price” Under Section 12746-5
      • ? : Example 6-46-6
      • ? : Example 6-56-7
      • [A] : Partnership Issues Associated with Discharge of Indebtedness6-7
        • [A][1] : Substantial Economic Effect6-7
        • [A][2] : Guaranties6-8
    • § 6:4.2 : Debt Modification Provisions6-10
      • [A] : Background6-10
      • [B] : 1996 Debt Modification Final Regulations6-11
      • [C] : Testing for Significance Under the Final Regulations6-12
        • [C][1] : Yield6-12
        • [C][2] : Changes in Timing of Payments6-12
        • [C][3] : Substitution of a New Obligor6-13
        • [C][4] : Change in Collateral6-13
        • [C][5] : Reporting Requirements for Discharge of Indebtedness6-14
  • § 6:5 : Consequences of a Debt Modification to the Lender6-15
      • ? : Example 6-66-15
  • § 6:6 : Ameliorative Effect of Section 108 on Discharged Debt6-16
      • ? : Example 6-76-16
      • ? : Example 6-86-17
      • ? : Example 6-96-18
      • ? : Example 6-106-21
  • § 6:7 : Special Relief Provision for Certain Debts Discharged After December 31, 19926-21
      • ? : Example 6-116-23
  • § 6:8 : Tax Consequences to Mortgagee or Promissory Note Holder of Property Reacquired or Foreclosed upon by Purchaser’s Default6-24
    • § 6:8.1 : Repossession of Property by Seller6-24
      • ? : Example 6-126-24
      • ? : Example 6-136-25
    • § 6:8.2 : Foreclosure and Sale to Mortgage Holder6-27
    • § 6:8.3 : Potential for Cancellation of Indebtedness Income Being Realized on Satisfaction of a Corporate Debt with Corporate Stock or on Satisfaction of a Partnership Debt with a Partnership Interest6-28
  • § 6:9 : Difficulties Associated with a Section 355 Spin-Off of Real Property Used by a Business6-28
      • ? : Example 6-146-30
      • ? : Example 6-156-30
  • § 6:10 : Workout Options Involving Distressed Real Estate6-31
      • ? : Example 6-16: The Effect of I.R.C. Section 704(c) on the Tier Two Allocation of Nonrecourse Liabilities in a Workout Environment6-31
  • § 6:11 : Transfer of a Partnership or LLC Interest in Satisfaction of a Partnership Debt: Cancellation of Debt Implications6-35
      • ? : Example 6-176-37
  • § 6:12 : Priority of Federal Tax Liens As Against Other Real Estate Liens6-37
  • § 6:13 : Avoiding the Tax Levy6-38
  • § 6:14 : Special Relief Provisions Applicable to COD Income Incurred During 2009 and 20106-39
    • § 6:14.1 : In General6-39
    • § 6:14.2 : Reacquisition6-40
    • § 6:14.3 : Applicable Debt Instrument6-40
    • § 6:14.4 : How the Election Is Made; Partial Elections6-41
    • § 6:14.5 : Application of the Election in the Case of Pass-Through Entities6-41
    • § 6:14.6 : Avoidance of Section 752 Income in the Case of an Election to Defer COD Income6-42
      • ? : Example 6-186-42
      • ? : Example 6-196-43
    • § 6:14.7 : Regulations Governing Deferred COD Income As Applied to Partnerships and Partners6-44
Chapter 7: Exchanges of Like-Kind Property and Involuntary Conversions
  • § 7:1 : Like-Kind Exchange Provisions7-4
    • § 7:1.1 : Property to Which Like-Kind Provisions Apply7-4
      • [A] : Personal Use Property Excluded7-6
      • [B] : Revenue Procedure 2002-22—Distinguishing Tenancy-in-Common Interests Eligible for Section 1031 Treatment from Ineligible Partnership Interests7-7
        • [B][1] : Background7-7
        • [B][2] : Non-Tax Considerations7-8
        • [B][3] : Revenue Procedure 2002-227-9
    • § 7:1.2 : Operation of the Like-Kind Exchange Rules7-12
      • ? : Example 7-17-12
      • ? : Example 7-27-13
      • ? : Example 7-37-14
      • ? : Example 7-47-15
      • ? : Example 7-57-15
      • [A] : “Held for Productive Use” Requirement7-17
        • [A][1] : “Held for Productive Use” Requirement As Applied to the Property Being Relinquished7-17
      • ? : Example 7-67-17
        • [A][2] : “Held for Productive Use” Requirement As Applied to the Property Being Acquired7-21
      • ? : Example 7-77-21
      • ? : Example 7-87-21
      • ? : Example 7-97-24
        • [A][3] : Interplay with Partnership Tax Provisions Where Property Being Exchanged Is Built-In-Gain Property7-27
      • [B] : Borrowing That Occurs Prior to an Exchange7-27
      • ? : Example 7-107-27
      • ? : Example 7-117-28
      • [C] : Section 1031 Treatment of Partnership Property Subject to a Mortgage Exchanged in Year One for Replacement Property Subject to a Mortgage Received by the Partnership in Year Two7-30
      • ? : Example 7-127-31
      • ? : Example 7-137-31
    • § 7:1.3 : Deferred Like-Kind Exchanges: Background7-32
    • § 7:1.4 : Statutory Requirements for Deferred Like-Kind Exchanges7-33
      • [A] : Identification of the Replacement Property; Multiple Replacement Property7-33
      • [B] : Qualified Intermediaries7-34
      • ? : Example 7-147-36
        • [B][1] : What Constitutes a “Disqualified Person” Under the Qualified Intermediary Rules?7-38
      • ? : Example 7-157-39
        • [B][2] : Application of the Attribution Rules Under I.R.C. Section 267(b) to the “Disqualified Person” Provisions7-39
      • ? : Example 7-167-40
        • [B][3] : Application of the Attribution Rules Under I.R.C. Section 707(b) to the “Disqualified Person” Provisions7-41
        • [B][4] : Financially Troubled Qualified Intermediaries7-41
          • [B][4][a] : Bankruptcy Considerations7-41
          • [B][4][b] : Substitution of a New Qualified Intermediary for a Qualified Intermediary Experiencing Financial Difficulties7-41
          • [B][4][c] : Revenue Procedure 2010-14 Provides Safe Harbor Procedure for When and How to Recognize Gain Where the Qualified Intermediary Defaults on Its Obligation to Complete the Exchange7-42
      • [C] : Arrangements to Secure the Obligations of the Qualified Exchange Intermediary7-43
      • [D] : Qualified Escrow Agreements and Trusts; Security Agreements7-44
      • [E] : Interest and Growth Factors7-45
      • [F] : When Proceeds from a Failed Deferred Exchange Are Recognized7-45
      • [G] : Sequential Sale of Exchange Properties for Single Replacement Property7-46
      • ? : Example 7-177-46
      • [H] : Limited Access by Exchangor to Exchange Proceeds Held by Qualified Exchange Intermediary7-47
    • § 7:1.5 : Like-Kind Exchanges Between Related Persons7-48
      • ? : Example 7-187-48
      • ? : Example 7-197-48
      • ? : Example 7-207-49
      • ? : Example 7-217-53
    • § 7:1.6 : Utilizing Single-Member LLCs in Like-Kind Exchanges7-54
    • § 7:1.7 : Reverse Like-Kind Exchange7-54
      • [A] : Practice Prior to Revenue Procedure 2000-377-54
      • ? : Example 7-227-54
      • [B] : Revenue Procedure 2000-37 Safe Harbor Provisions7-55
      • ? : Example 7-23: Parking the Replacement Property in a Reverse Tax-Free Exchange7-55
      • ? : Example 7-23A: Reverse Tax-Free Exchange Using Parked Replacement Property Where the Purchaser of the Relinquished Property Is a Related Party7-56
      • ? : Example 7-24: Parking the Relinquished Property in a Reverse Tax-Free Exchange7-57
        • [B][1] : Revenue Procedure 2004-51 Modifies the Safe Harbor Provisions of Revenue Procedure 2000-377-60
      • ? : Example 7-25: Parking Recently Owned Replacement Property in a Reverse Tax-Free Exchange7-60
    • § 7:1.8 : Using Proceeds from the Sale of Relinquished Property in the Context of a Section 1031 Exchange to Construct Improvements on the Replacement Property7-60
    • § 7:1.9 : Depreciation of Replacement Property in a Tax-Free Exchange7-64
    • § 7:1.10 : FIRPTA Withholding and Section 1023 Tax-Free Exchanges7-65
      • [A] : In General7-65
      • [B] : Exceptions7-65
      • [C] : Procedural Aspects of FIRPTA Withholding Exception in the Case of Tax-Exempt Transactions7-67
      • [D] : The FIRPTA Withholding Exception and I.R.C. Section 1023 Exchanges7-68
      • ? : Example 7-267-68
      • ? : Example 7-277-69
    • § 7:1.11 : Potential Gain from Disposition of Section 1250 Property in a Section 1031 Exchange7-69
      • ? : Example 7-287-69
    • § 7:1.12 : Revenue Procedure 2008-16: Safe Harbor Requirements for Exchanges of Dwelling Units7-70
      • [A] : Relinquished Property Safe Harbor Requirements7-70
      • [B] : Acquisition Property Safe Harbor Requirements7-70
      • [C] : Personal Use7-71
      • [D] : Fair Rental7-71
  • § 7:2 : Involuntary Conversions7-71
    • § 7:2.1 : Overview7-71
    • § 7:2.2 : Like-Kind Rule As Applied to Conversions of Real Property7-72
    • § 7:2.3 : Tax Treatment of Gains Arising from an Involuntary Conversion7-73
      • ? : Example 7-297-74
    • § 7:2.4 : Ascertaining Whether the “Similar” or “Related” in Service or Use, or “Like-Kind” Requirements Are Satisfied7-75
    • § 7:2.5 : Tax Treatment of Losses Arising from an Involuntary Conversion7-77
Chapter 8: Construction, Improvement, and Leasing of Real Estate; Associated Deductions, Depreciation, and Credits
  • § 8:1 : Capitalization of Costs of Constructing and Improving Real Property8-3
    • § 8:1.1 : General Principles8-3
      • [A] : Section 179 Deduction for Depreciable Personal Property8-5
    • § 8:1.2 : The INDOPCO Case8-7
    • § 8:1.3 : Capitalization Issues Involving Environmental Remediation8-10
      • [A] : Deductibility of Remediation Expenses Under Revenue Ruling 94-388-10
      • [B] : Examples of Capitalized Restoration and Remediation Expenditures8-11
        • [B][1] : Infestation Control8-11
        • [B][2] : Asbestos Removal8-12
        • [B][3] : Groundwater Remediation on Newly Purchased Property8-14
    • § 8:1.4 : Exception to Exempt Organization UBTI Rules for the Sale or Exchange of Certain Brownfield Sites8-15
    • § 8:1.5 : The Service’s Follow-Up to INDOPCO; Capitalization of Costs Involving Intangible Property8-15
      • [A] : Acquired Intangibles8-17
      • [B] : Created Intangibles8-17
    • § 8:1.6 : Special Statutory Capitalization Exception Applicable to Remediation Expenditures at Certain “Brownfield” Sites8-18
    • § 8:1.7 : Amortization of Qualifying Start-Up Expenditures Under Section 1958-20
    • § 8:1.8 : Section 199 Deduction for Income Attributable to Domestic Production8-22
      • [A] : Background8-22
        • [A][1] : Qualified Production Activities Income8-22
        • [A][2] : Domestic Production Gross Receipts8-22
        • [A][3] : Pass-Through Entities8-23
      • [B] : Interim Guidance Under Notice 2005-14 As Substantially Amplified by June 2006 Final Regulations8-23
      • [C] : Construction of Real Property8-23
        • [C][1] : Sale, Disposition or Exchange of Real Property Derived from “Construction Performed in the United States”8-24
        • [C][2] : Definition of “Construction Performed in the United States”8-24
        • [C][3] : Definition of “Infrastructure”8-26
        • [C][4] : Definition of “Substantial Renovation”8-26
        • [C][5] : Regular and Ongoing Business Requirement8-26
        • [C][6] : Gross Receipts from Leased Real Estate Not Eligible for Section 199 Deduction8-26
    • § 8:1.9 : Energy Efficiency Incentives8-27
      • [A] : Credit Available to Contractors for the Construction of New Energy-Efficient Homes8-27
      • [B] : Energy-Efficient Commercial Building Deduction8-29
      • [C] : Energy-Efficient Commercial Building Deduction: Partially Qualifying Property8-30
        • [C][1] : In General8-30
        • [C][2] : Permanent Rule8-31
        • [C][3] : Interim Rule8-31
  • § 8:2 : Tax Issues Applicable to Leasing of Real Estate8-33
    • § 8:2.1 : Depreciation Provisions Relating to Real Estate8-33
      • [A] : General Rule8-33
        • [A][1] : Additional First-Year Depreciation—Generic Provision8-34
      • ? : Example 8-18-37
        • [A][2] : Fifteen-Year Depreciation for Qualified Leasehold Improvement Property8-37
        • [A][3] : Additional First-Year Depreciation—New York Liberty Zone Property8-38
          • [A][3][a] : Description of Qualified New York Liberty Zone Property8-39
          • [A][3][b] : Substantial Use8-40
          • [A][3][c] : Original Use8-40
          • [A][3][d] : Acquisition of Property by Purchase8-40
          • [A][3][e] : Placed-In-Service Date8-40
        • [A][4] : Depreciation of Exchange Property Received in a Tax-Free Exchange Under I.R.C. Section 10318-40
      • [B] : Deductibility of Leasehold Improvements Paid for by Landlord8-41
      • [C] : Deductibility of Leasehold Improvements Paid for by Tenant8-41
      • [D] : Lessor Does Not Recognize Income on the Recovery of Property Improved by the Tenant8-42
    • § 8:2.2 : Capitalization of Lease Acquisition Costs8-42
    • § 8:2.3 : Allowances and Set-Offs Provided by Lessor8-43
      • [A] : Construction Allowances Paid by Lessor to Lessee8-43
      • [B] : Reduction Provided by Lessor As a Rent Set-Off8-45
      • ? : Example 8-28-45
    • § 8:2.4 : Rental Income: Passive Loss and Income Provisions8-47
      • [A] : Effect of Passive Loss Provisions on Rental Income from Pass-Through Entities8-47
      • [B] : Whether Rental Income Will Be Treated As Passive for Purposes of the S Corporation Passive Income Provisions8-48
    • § 8:2.5 : Prepaid and Deferred Rent8-49
    • § 8:2.6 : IRS Advanced Ruling Guidance on Leveraged Leased Transactions8-51
    • § 8:2.7 : Rehabilitation Credits8-53
      • [A] : In General8-53
      • [B] : Rehabilitation Credits Involving Certified Historic Structures8-55
      • [C] : Exclusion of Rehabilitation Credits in the Case of Property Used by Certain Tax-Exempt Organizations8-57
    • § 8:2.8 : Cancellation of Lease Payments Made by Landlord to a Tenant8-57
Chapter 9: Capital Gains Treatment and Installment Sale Provisions
  • § 9:1 : Definition of a Capital Asset9-3
  • § 9:2 : Pre-TRA 97 Law Regarding Capital Gains Rates9-3
  • § 9:3 : Taxation of Capital Gains9-3
    • § 9:3.1 : Post-TRA 97/Pre-JGTRRA9-3
      • ? : Example 9-19-4
    • § 9:3.2 : The Impact of the JGTRRA on Post-TRA 97, Five-Year Property for Which a Post-2000 Election Was Made9-5
    • § 9:3.3 : Section 1245 Gain Under TRA 979-5
      • ? : Example 9-29-5
      • ? : Example 9-2A9-6
    • § 9:3.4 : Gain Attributable to Income in Respect of a Decedent9-6
  • § 9:4 : Capital Gains Rates After JGTRRA Compared to Ordinary Income Rates After JGTRRA9-6
  • § 9:5 : Exclusion of Gain on Sales by Non-Corporate Taxpayers of Qualified Small Business Stock Acquired in an Original Issue After February 17, 20099-7
  • § 9:6 : Determining When Appreciated Predevelopment Property Is “Dealer Property” or Property Held for Investment9-8
  • § 9:7 : Section 1237—Statutory Exception to Dealer Status9-13
      • ? : Example 9-39-16
  • § 9:8 : Denial of Capital Gain Treatment in the Case of a Sale or Exchange Between Related Persons9-16
    • § 9:8.1 : Section 1239: Denial of Capital Gains in the Case of Depreciable Property9-16
      • [A] : Does Section 1239 Apply in the Case of a Related-Party Sale of a Personal Residence That Would Otherwise Be Exempt from Tax Under I.R.C. Section 121?9-17
    • § 9:8.2 : Section 707(b)(2): Denial of Capital Gains Treatment in Certain Partnership Contexts9-18
  • § 9:9 : Zero Percent Capital Gains Rate for Certain District of Columbia Enterprise Zone Transactions9-18
  • § 9:10 : Zero Percent Capital Gains Rate for Gain Arising from the Sale of Qualifying Assets Located in Renewal Communities9-19
  • § 9:11 : Capital Gain Rates Applicable to Gain from the Disposition of Real Estate Owned by Nonresident Aliens9-20
    • § 9:11.1 : Exception: REIT Capital Gain Dividends Not “Effectively Connected Income”9-21
  • § 9:12 : Installment Sale Provisions9-21
    • § 9:12.1 : Installment Sale Provisions As They Apply to Timing of Gain Recognition by Seller9-21
      • ? : Example 9-49-22
      • ? : Example 9-59-22
      • [A] : Installment Sale Treatment Denied in the Case of Sales for Readily Marketable Debt9-23
      • ? : Example 9-69-23
      • [B] : Installment Sale Treatment of Contingent Payments9-23
        • [B][1] : Contingent Sales in Which the Maximum Selling Price Is Determinable9-24
      • ? : Example 9-79-24
        • [B][2] : Stated Maximum Selling Price Cannot Be Determined As of the Close of Taxable Year, but There Is a Maximum Period Within Which Payments May Be Received9-25
      • ? : Example 9-89-25
        • [B][3] : Neither Stated Maximum Selling Price Nor Fixed Period of Time Present in Contingent Sale Contract9-26
        • [B][4] : Election Out of the Installment Method9-26
      • [C] : Installment Sale of an Asset Subject to a Debt9-27
      • ? : Example 9-99-27
      • ? : Example 9-109-27
      • ? : Example 9-119-28
      • [D] : Installment Sale Treatment Not Available Where Depreciable Property Is Being Sold to a Controlled Entity9-28
        • [D][1] : Disfavored Treatment of Sales Between Related Parties Where the Property Would Be Depreciable in the Hands of the Acquirer9-28
        • [D][2] : Installment Sale Treatment Not Available for Sale of Depreciable Property to a Controlled Entity9-29
      • [E] : Consequences of the Disposition of an Asset Subject to an Installment Sale by a Related Person Within Two Years Following the Sale9-30
      • [F] : Installment Sale Treatment Not Available with Respect to Depreciation Recapture Income and Inventory9-31
      • ? : Example 9-129-31
  • § 9:13 : Determining a Partner’s Holding Period in a Partnership Interest for Purposes of Computing Capital Gains on the Disposition of Such Interest9-32
      • ? : Example 9-139-32
    • § 9:13.1 : Limitations to Employment of Installment Method in the Case of a Sale Between Related Parties9-33
Chapter 10: Charitable Gifts of Real Estate
  • § 10:1 : Income Tax Deduction10-3
    • § 10:1.1 : Qualified Appraisal10-3
      • [A] : Reporting Requirements Under the AJCA10-6
      • [B] : Rules Pertaining to Qualifications of Appraisers and to Appraiser Overstatements of the Value of Property10-6
    • § 10:1.2 : Ceiling Limitations10-7
    • § 10:1.3 : Other Limitations10-8
      • ? : Example 10-110-9
    • § 10:1.4 : Contributions Made Through IRAs10-10
  • § 10:2 : Charitable Gifts of Real Estate Subject to Debt or Recapture; Bargain Sales10-10
    • § 10:2.1 : Charitable Gifts of Real Estate Subject to Debt10-10
      • ? : Example 10-210-10
    • § 10:2.2 : Charitable Gifts of Real Estate Subject to Recapture10-11
    • § 10:2.3 : Bargain Sales of Real Estate10-11
      • ? : Example 10-310-11
      • ? : Example 10-410-12
  • § 10:3 : Deferred Charitable Gifts of Real Property10-12
    • § 10:3.1 : Mortality Tables10-12
      • [A] : IRS Revision of the Tables in May 200910-12
      • [B] : Effect of the Revised Tables on Charitable Remainder Trusts10-13
      • [C] : Effect of the Revised Tables on Charitable Lead Trusts10-13
    • § 10:3.2 : Charitable Remainder Trusts10-13
      • ? : Example 10-510-16
      • ? : Example 10-610-16
      • ? : Example 10-710-17
      • [A] : Unrelated Business Taxable Income Issues Affecting Charitable Remainder Trusts10-20
      • [B] : Revenue Procedure 2005-24: Creating a Safe Harbor for Charitable Remainder Trusts Created in Jurisdictions Where the Surviving Spouse of the Grantor May Elect Against the Grantor’s “Augmented Estate”10-24
      • [C] : UBTI Issues Associated with Charitable Gifts of Stock in S Corporations Holding Real Estate10-25
      • [D] : Additional Issues Associated with the Contribution of Encumbered Property to a Charitable Remainder Trust10-25
      • [E] : Other Problem Areas Associated with Charitable Remainder Trusts10-26
      • [F] : Private Foundation Rules and Charitable Remainder Trusts10-27
      • [G] : Grantor’s Spouse As Income Beneficiary of a Charitable Remainder Trust10-28
      • ? : Example 10-810-29
      • [H] : Termination of Charitable Remainder Trust During Life of Income Beneficiary10-29
        • [H][1] : Lump-Sum Payment to Income Beneficiary10-29
        • [H][2] : Disclaimer by Income Beneficiary10-30
      • [I] : Gift Tax Issues Associated with a Charitable Remainder Trust10-31
      • [J] : Contributions to a Charitable Remainder Trust Where the Remainder Entity Is a Private Foundation10-31
      • ? : Example 10-910-32
      • [K] : Division of a Charitable Remainder Trust10-32
      • [L] : Partial Acceleration of Principal to Charitable Remainder Entities After the Deaths of Some of the Non-Charitable Annuitants10-32
    • § 10:3.3 : Charitable Lead Trusts10-33
      • [A] : Background and Reasons for Employing a Charitable Lead Trust10-33
      • ? : Example 10-1010-35
      • [B] : Categories of Charitable Lead Trusts10-35
        • [B][1] : The Grantor Charitable Lead Trust10-36
        • [B][2] : The Non-Grantor Charitable Lead Trust10-36
      • [C] : Problem Areas Associated with Charitable Lead Trusts10-37
        • [C][1] : The Private Foundation Provisions10-37
        • [C][2] : Risk Areas Where the Charitable Lead Recipient Is a Private Foundation Created by the Grantor10-38
        • [C][3] : Issues Associated with the Contribution of Mortgaged Real Property10-39
    • § 10:3.4 : Remainder Interest in Personal Residence or Farm10-40
      • ? : Example 10-10A10-43
    • § 10:3.5 : Sequential Gifts of Undivided Interests in Real Property10-43
  • § 10:4 : Qualified Conservation Contributions10-43
      • ? : Example 10-1110-45
      • ? : Example 10-1210-46
      • ? : Example 10-1310-46
      • ? : Example 10-1410-47
    • § 10:4.1 : Combining a Gift of a Conservation Easement with a Charitable Remainder Trust10-47
      • ? : Example 10-1510-48
    • § 10:4.2 : Conservation Easements Involving Waivers of High-Density Development10-48
    • § 10:4.3 : Preservation of Certified Historic Structures10-51
      • [A] : Background10-51
      • [B] : Standards for Façade Easements Under the Pension Protection Act of 200610-52
      • ? : Example 10-1610-53
      • [C] : Valuation of Façade Easements10-53
    • § 10:4.4 : State Law Considerations10-56
    • § 10:4.5 : Qualified Appraisals in Support of Conservation Easements10-56
  • § 10:5 : Charitable Contributions to Supporting Organizations10-57
    • § 10:5.1 : Background10-57
    • § 10:5.2 : The Perceived Problem Areas10-59
    • § 10:5.3 : The Congressional Response10-60
    • § 10:5.4 : Notice of IRS’s Likely Regulatory Response10-63
    • § 10:5.5 : Impact of PPA and Expected IRS Proposed Regulations on Contributions to Non-Functionally Integrated Type III Supporting Organizations10-65
Chapter 11: Asset Protection
  • § 11:1 : Overview11-2
  • § 11:2 : Tenancy by the Entirety11-3
    • § 11:2.1 : The Delaware Statutory Tenancy by the Entirety Trust Adds a New Level of Opportunity to Tenancy by the Entirety Planning11-4
  • § 11:3 : Under “Homestead Exemption,” Many Jurisdictions Treat Family Personal Residences As Immune from the Claims of Creditors11-6
    • § 11:3.1 : Implications of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 on the Homestead Exemption and Tenancy by the Entirety Ownership11-8
      • ? : Example 11-111-9
  • § 11:4 : Transferring Real Property to a Limited Partnership or Limited Liability Company11-10
    • § 11:4.1 : In General11-10
    • § 11:4.2 : Charging Orders11-10
  • § 11:5 : Employment of Offshore Asset Protection Trust Combined with Transfer of Assets to Partnership or LLC11-16
    • § 11:5.1 : In General11-16
      • [A] : Portnoy Case: Resolving Conflicting Policy Claims As to Trust Situs11-17
    • § 11:5.2 : Trust Characteristics11-19
    • § 11:5.3 : Trust Protector11-19
      • [A] : Anderson Case11-20
    • § 11:5.4 : “Duress” and “Flee” Clauses; Choice of Trustee11-23
  • § 11:6 : Creditor Obstacles Presented by Offshore-Sited Trusts11-25
  • § 11:7 : Choice of Offshore Jurisdiction11-26
  • § 11:8 : Ethical Issues; Fraudulent Conveyances11-28
  • § 11:9 : Gift and Estate Tax Considerations11-30
      • ? : Example 11-211-30
      • ? : Example 11-311-31
  • § 11:10 : U.S. Income Tax Considerations Relating to Offshore Trusts11-31
  • § 11:11 : Domestic Asset Protection Trusts11-31
    • § 11:11.1 : In General11-31
    • § 11:11.2 : Description of the Alaska and Delaware Domestic Asset Protection Trust Legislation11-33
  • § 11:12 : Will Domestic Asset Protection Trusts Withstand Judgments from Other Jurisdictions?11-37
    • § 11:12.1 : Potential Responses to Constitutional Challenges11-37
      • [A] : Court in Non-Asset-Protection State May Lack Jurisdiction11-37
      • [B] : Court in Non-Asset-Protection State May Be Obligated to Defer Jurisdiction to the State in Which the Asset Protection Trust Is Located11-38
      • [C] : Application of the Law of the Domestic Asset Protection Trust Jurisdiction by Court in a Non-Asset-Protection State11-39
      • [D] : The Full Faith and Credit Issue11-39
      • [E] : Bankruptcy Considerations11-40
  • § 11:13 : Gift and Estate Tax Implications of Asset Protection Trusts11-42
Chapter 12: Exempt Organization Ownership of Real Estate
  • § 12:1 : Unrelated Business Taxable Income12-2
  • § 12:2 : Exceptions to the Exclusion of Real Property Rent from UBTI12-2
    • § 12:2.1 : Excessive Personal Property Rent and Rent Based on Net Income Exceptions12-2
    • § 12:2.2 : Rent Received from a Controlled Corporation12-3
    • § 12:2.3 : Debt-Financed Income Exception12-3
      • ? : Example 12-112-4
      • [A] : Exemption from Debt-Financed Property Rules for Certain “Qualified Organizations”12-4
      • [B] : Exemption from Debt-Financed Property Provisions for a Qualified Organization Partnered with a Non-Qualified Organization12-5
        • [B][1] : Consistent Allocations Under the “Qualified Allocations” Test12-5
        • [B][2] : The “Fractions Rule”12-6
      • ? : Example 12-212-6
        • [B][3] : Exemption from Debt-Financed Property Rules for Property Located in the Neighborhood of Other Property Owned by the Exempt Organization12-7
        • [B][4] : Joint Ventures That Go to the Exempt Purpose of the Entity12-8
        • [B][5] : Exception to UBTI Rules for the Sale or Exchange of Certain Brownfield Sites12-10
  • § 12:3 : ERISA Issues12-12
      • ? : Example 12-312-13
      • ? : Example 12-412-14
  • § 12:4 : Property Used by Certain Exempt Organizations Not Eligible for Rehabilitation Credit12-14
      • ? : Example 12-512-15
Chapter 13: Estate and Gift Planning with Real Estate--General Principles
  • § 13:1 : Basic Tax Structure13-7
    • § 13:1.1 : Federal Gift Tax13-7
    • § 13:1.2 : Federal Estate Tax13-9
    • § 13:1.3 : The Marital Deduction13-11
      • ? : Example 13-113-12
    • § 13:1.4 : Amount Exempt from Estate Tax—Applicable Exclusion Amount13-13
    • § 13:1.5 : Estate Tax Rates and Exemption Structure13-14
      • [A] : The Changes Brought About by the Tax Relief Act of 2010 for Years 2010 to 201213-15
      • ? : Example 13-1A13-16
      • ? : Example 13-1B13-16
      • ? : Example 13-1C13-17
      • [B] : Repeal by Tax Relief Act of 2010 of the EGTRRA Carry-Over Basis Provisions; Limited Exception in the Event of an Election13-18
      • [C] : Why Full Estate Tax Repeal Did Not Come to Fruition Under the Tax Relief Act of 201013-19
    • § 13:1.6 : Mortality Tables13-22
      • [A] : IRS Revision of the Tables in May 200913-22
      • [B] : Effect of the Revised Tables on QPRTs13-22
      • [C] : Effect of Revised Table on Self-Cancelling Notes13-23
  • § 13:2 : Utilizing the Applicable Exclusion Amount in Estate Planning with Real Estate13-23
    • § 13:2.1 : Pre-EGTRRA/Post-TRA 97: Applicable Exclusion Amount Derived from Unified Credit Gradually Increased to First $1 Million of Estate Assets13-23
    • § 13:2.2 : Post-EGTRRA: Applicable Exclusion Amount Gradually Increased to the First $3,500,000 of Estate Assets in 200913-24
    • § 13:2.3 : Tax Planning with the Applicable Exclusion Amount in the Event That Portability Is Not Continued After 201213-24
      • ? : Example 13-213-25
      • ? : Example 13-313-26
      • ? : Example 13-413-26
      • ? : Example 13-513-26
      • [A] : Approaches to Funding the Credit Shelter Trust13-27
        • [A][1] : Disclaimers13-27
      • ? : Example 13-5A13-27
      • ? : Example 13-5B13-28
        • [A][2] : Fixed-Formula Clauses13-28
        • [A][3] : Clayton QTIP Trusts13-28
      • [B] : A QTIP Election Is a Nullity When Made Inadvertently in Connection with an Estate That Does Not Exceed the Applicable Exclusion Amount13-29
      • ? : Example 13-5C13-30
    • § 13:2.4 : Estate Tax Planning with an Estate That Does Not Exceed the Federal Applicable Exclusion Amount but Does Exceed a Lesser State Applicable Exclusion Amount13-30
      • ? : Example 13-5D13-31
      • [A] : The State-Only QTIP As a Means of Avoiding State Estate Tax on the Death of the First Spouse—Assuming the Discontinuance of Portability in 201313-32
      • ? : Example 13-5E13-33
      • [B] : Can Rev. Proc. 2001-38 Be Utilized to Create the Equivalent of a State-Only QTIP So As to Avoid State Estate Tax?13-34
      • ? : Example 13-5F13-34
      • [C] : Source of Payment of the Decoupled State Death Tax Following Death of First Spouse13-35
      • [D] : Payment of State Death Tax Out of State-Only QTIP Following Death of Second Spouse13-36
      • ? : Example 13-5G13-37
    • § 13:2.5 : Choosing a Trustee for the Credit Shelter Trust13-38
      • [A] : During Lifetime of Surviving Spouse13-38
      • [B] : Trustees for Credit Shelter Trusts That Continue Beyond the Death of the Surviving Spouse13-40
      • [C] : Private Trust Companies As a Trustee Organizational Structure for Families with Multiple Intergenerational Trusts13-42
      • [D] : Family PTCs and the Reciprocal Trust Doctrine:Proposed Revenue Ruling 2008-6313-43
      • ? : Example 13-6A13-44
      • ? : Example 13-6B13-44
      • ? : Example 13-6C13-45
    • § 13:2.6 : Choosing a Trust Situs for the Credit Shelter Trust13-47
    • § 13:2.7 : Dynasty Trusts, the Rule Against Perpetuities, and Real Estate13-48
  • § 13:3 : Historical: Additional Estate Tax Deduction for Closely Held Family Businesses—Available Through the Year 200313-49
    • § 13:3.1 : In General13-49
    • § 13:3.2 : Definition of “Qualified Family-Owned Business Interest”13-49
    • § 13:3.3 : Coordination with the Applicable Exclusion Amount13-50
      • ? : Example 13-713-50
    • § 13:3.4 : Eligibility Tests and Requirements13-51
  • § 13:4 : Estate and Gift Tax Issues Associated with Jointly Held Real Estate13-54
    • § 13:4.1 : Estate, Gift Tax, and Basis Treatment of Real Estate Owned Jointly by Persons Other Than Husband and Wife13-54
      • ? : Example 13-813-54
      • ? : Example 13-913-55
      • ? : Example 13-1013-55
      • ? : Example 13-1113-55
      • ? : Example 13-1213-56
    • § 13:4.2 : Estate Tax Treatment of Real Estate Owned Jointly by Husband and Wife13-56
      • ? : Example 13-1313-57
    • § 13:4.3 : Gift to a Spouse of a Joint Tenancy Interest in Real Property13-58
      • [A] : Tenancies Where Both Spouses Are U.S. Citizens13-58
      • [B] : Tenancies Where at Least One Spouse Is Not a U.S. Citizen13-59
    • § 13:4.4 : Gift to a Child of an Interest in Real Property Subject to a Mortgage13-59
      • [A] : Personal-Use Real Property: Parent Remains Liable on the Mortgage13-59
      • [B] : Gifts of Depreciated Real Property Subject to Debt13-60
        • [B][1] : In General13-60
        • [B][2] : Gifts of Real Property Subject to Recourse Debt13-61
      • ? : Example 13-13A13-61
        • [B][3] : Gifts of Real Property Subject to Nonrecourse Debt13-61
      • ? : Example 13-13B13-61
        • [B][4] : Gifts of LLC or Partnership Interests Where LLC or Partnership Holds Depreciated Real Property Subject to Nonrecourse Debt13-62
      • ? : Example 13-1413-62
    • § 13:4.5 : Disclaimers of Jointly Held Interests in Real Estate13-62
      • ? : Example 13-1513-63
    • § 13:4.6 : Disclaimers of Jointly Held Interests in Personal Property13-65
      • ? : Example 13-1613-66
    • § 13:4.7 : Estate and Income Tax Treatment of Community Property13-66
      • ? : Example 13-1713-67
      • [A] : Historical: Budget Proposal for 200113-70
    • § 13:4.8 : Alaska Community Property Trusts13-70
  • § 13:5 : Basis-Formation Planning in Case of Age or Health Disparities13-73
    • § 13:5.1 : Titling Assets in Name of Older Spouse or Spouse Who Is in Weaker Physical Condition13-73
      • ? : Example 13-1813-73
    • § 13:5.2 : Using Tax Basis Revocable Trusts13-74
    • § 13:5.3 : Limitation Provisions of Section 1014(e)13-78
  • § 13:6 : Reduction in Estate Tax for Certain Land Subject to Permanent Conservation Easement13-79
    • § 13:6.1 : Three Primary Criteria13-79
    • § 13:6.2 : Definitions13-80
    • § 13:6.3 : Limitations on Amount That Is Excludible13-81
      • ? : Example 13-1913-81
    • § 13:6.4 : Phasing in the Exclusion13-82
    • § 13:6.5 : Exclusion Does Not Apply to Retained Development Rights13-82
    • § 13:6.6 : Exclusion Applicable to Debt-Financed Property13-82
      • ? : Example 13-2013-83
    • § 13:6.7 : Exclusion Not Related to Family-Owned Business Exclusion13-83
    • § 13:6.8 : Coordination with Section 2055(f) Deduction13-83
    • § 13:6.9 : State Confirmatory Legislation13-83
  • § 13:7 : Transfers in Trust of Personal Residence with Retained Term Interest13-83
    • § 13:7.1 : Background13-83
      • ? : Example 13-2113-84
      • ? : Example 13-2213-84
    • § 13:7.2 : Uses of a Personal Residence Trust13-85
      • ? : Example 13-2313-87
    • § 13:7.3 : Personal Residence Trust Problem Areas13-87
    • § 13:7.4 : Regulatory Requirements of a Personal Residence Trust13-93
      • [A] : Personal Residence Trust13-93
      • [B] : Qualified Personal Residence Trust13-94
    • § 13:7.5 : Using a Personal Residence Trust in Connection with the Split Purchase of a Residence13-96
    • § 13:7.6 : “Estate Tax Inclusion Period” Issues Associated with a Personal Residence Trust13-98
    • § 13:7.7 : Where Subdivision Is Impracticable, Conveyance of Residential Property to a QPRT Without Deed Recordation13-99
    • § 13:7.8 : State Law Transfer and Recordation Tax13-100
    • § 13:7.9 : Sale of a Remainder Interest in a QPRT13-100
    • § 13:7.10 : May the Residence Held by a QPRT Be Rented?13-101
    • § 13:7.11 : Discounts Associated with Tenancy-in-Common Interests Transferred to Respective Spousal QPRTs13-102
    • § 13:7.12 : Structuring the QPRT As a Grantor Trust13-103
    • § 13:7.13 : Conveyance of QPRT Residence to QPRT Grantor by QPRT Remainder Persons After Expiration of Original QPRT Term13-103
  • § 13:8 : Transferring Interests in Real Estate Limited Partnerships or in Real Estate LLCs13-104
    • § 13:8.1 : Gifts to Grantor Retained Annuity Trusts (GRATs)13-104
      • ? : Example 13-2413-106
      • ? : Example 13-2513-107
      • ? : Example 13-25A13-110
      • ? : Example 13-2613-111
      • [A] : GRAT Planning After Walton v. Commissioner13-111
      • [B] : Amount of Back-Loaded GRAT Includible in Grantor’s Estate Where Grantor Dies During the Trust Term13-112
    • § 13:8.2 : Sales to Defective Grantor Trusts As an Alternative to the Employment of Gifts to GRATs13-114
      • [A] : Defective Grantor Trusts13-114
        • [A][1] : Borrowing Authority13-115
        • [A][2] : Life Insurance13-115
        • [A][3] : Reacquisition of Trust Assets13-115
        • [A][4] : Addition of Beneficiaries13-118
        • [A][5] : Foreign Trust13-118
        • [A][6] : Discretionary Distributions of Income to Grantor or Grantor’s Spouse13-119
        • [A][7] : Trustee Discretion to Distribute13-119
      • [B] : IRS Ruling Position on Grantor Trusts13-119
      • [C] : Revenue Ruling 2004-64: Gift and Estate Tax Implications of Reimbursement of Income Taxes to Grantor13-120
      • [D] : Published Interest Rates Under Section 127413-121
      • [E] : Revenue Ruling 85-1313-122
      • ? : Example 13-2713-123
      • [F] : Discounts for Sales of Fractional LLC and Limited Partnership Interests13-123
      • ? : Example 13-2813-123
      • [G] : Deferred Payout13-123
      • [H] : Crummey Withdrawal Powers: Should They Be Part of Defective Grantor Trusts Used in Intra-Family Sales?13-125
      • [I] : Sales to a Grantor Trust in Exchange for a Self-Cancelling Note (SCIN)13-127
      • [J] : Sales to a Grantor Trust in Exchange for a Private Annuity13-128
      • [K] : Comparison to GRATs13-129
        • [K][1] : No Risk of Throwback into Estate of Grantor13-129
        • [K][2] : Lower Interest Rate13-129
        • [K][3] : Backloading Permissible13-130
        • [K][4] : Deferral of Principal Payments13-130
        • [K][5] : Avoidance of “Estate Tax Inclusion Period” in Case of Sale to Defective Grantor Trust13-130
      • [L] : Unanswered Questions13-130
        • [L][1] : Considerations Relating to Reporting the Sale to the Defective Grantor Trust on a Gift Tax Return for the Year of Sale13-131
        • [L][2] : Possible IRS Response to Sale of Family Limited Partnership Interests to a Defective Grantor Trust—Karmazin v. Commissioner13-132
        • [L][3] : IRS Employment of the Step-Transaction Doctrine in Challenging a Sale of Family Limited Partnership or Family LLC Units to a Defective Grantor Trust—Pierre v. Commissioner13-135
      • [M] : Planning for the Termination of a Defective Grantor Trust Through Gift Transfers to the Trust That Are Incomplete for Gift Tax Purposes but That Provide the Trust with a Basis Increase for Income Tax Purposes13-137
      • ? : Example 13-2913-137
      • [N] : Financed Net Gifts As an Alternative to Sales to Defective Grantor Trusts13-138
  • § 13:9 : Deferral of Estate Tax in the Event of Illiquidity Due to Real Estate Holdings13-139
    • § 13:9.1 : Extension of Time for Payment of Tax Due to Hardship or Reasonable Cause13-139
    • § 13:9.2 : Extension of Time for Payment of Estate Tax Where Estate Consists Largely of an Interest in a Closely Held Business13-140
      • [A] : In General13-140
        • [A][1] : Application of Section 6166 to the Generation-Skipping Transfer Tax13-140
      • [B] : Interest in a Closely Held Business13-141
      • [C] : The Requirement That the Decedent Must Have Actively Carried on a Trade or Business: What Constitutes Active Management of Real Estate?13-142
      • [D] : Satisfaction of the Active Management Requirement in the Case Where the Decedent Held a Twenty Percent or Greater Interest in a Management Company Whose Employees or Agents Were Actively Involved in Managing the Decedent’s Real Estate13-145
      • ? : Example 13-3013-146
      • ? : Example 13-3113-147
      • ? : Example 13-31A13-147
      • [E] : Issues Associated with Decedent’s Ownership of a Holding Company That Controls an Active Business13-148
        • [E][1] : In General13-148
        • [E][2] : Passive Asset Issues13-148
      • [F] : Payment of Interest13-149
      • [G] : Acceleration of Deferred Tax Due to Disposition of the Closely Held Business13-149
      • ? : Example 13-31B13-150
      • [H] : Security Provisions13-151
      • [I] : Surety Bond13-151
      • [J] : An LLC Interest That Satisfies Prescribed Statutory Valuation Criteria May Be Used As Security for Deferred Tax Payments Under I.R.C. Section 616613-153
    • § 13:9.3 : Graegin Notes13-153
  • § 13:10 : Estate Administration Expenses Attributable to the Maintenance and Sale of a Personal Residence13-154
Chapter 14: Estate Planning with Real Estate--Valuation and Discounting Issues
  • § 14:1 : Background Revenue Ruling 59-60 Valuation Principles14-3
    • § 14:1.1 : Holman and the Willing Buyer/Willing Seller Paradigm in the Context of a Family Limited Partnership or LLC14-7
  • § 14:2 : General Valuation Provisions14-9
    • § 14:2.1 : Estate Tax Alternate Valuation Date14-9
      • [A] : For Decedents Dying After April 25, 2008, Alternate Valuation Date Available Only Where Reduction in Value Is Caused by Market Forces14-11
    • § 14:2.2 : Finality of Gift Tax Valuations14-12
  • § 14:3 : Employing Discounts in Real Estate Related Estate Planning14-13
    • § 14:3.1 : Background; Utilizing the Annual $13,000 Gift Tax Exemption and the Unified Credit14-13
    • § 14:3.2 : Family Limited Partnership or Family LLC and Employment of Discounts14-14
      • ? : Example 14-114-15
    • § 14:3.3 : Minority Discounts14-15
    • § 14:3.4 : Discounts for Lack of Marketability14-18
    • § 14:3.5 : Discounts Associated with Tenancy-in-Common and Joint Ownership of Real Estate14-21
    • § 14:3.6 : Valuation Issues Associated with the Inability of a Partner to Convey More Than an Assignee Interest in a Partnership14-21
    • § 14:3.7 : Other Estate Planning Areas in Which Valuation Discount Issues Arise14-23
      • [A] : Minority Discounts and QTIP Planning14-23
      • ? : Example 14-214-23
      • [B] : Fractional Interest Discounting in the Context of Community Property14-24
      • [C] : Discounts to Take into Account C Corporation Built-In Gain14-25
      • [D] : The Adverse Effect of Discounts Being Applied to Bequests Qualifying for the Charitable Deduction or the Marital Deduction14-28
    • § 14:3.8 : Issues Associated with Family Limited Partnerships and Family LLCs14-30
      • [A] : Transfer Tax14-31
      • [B] : Allocation of Income14-31
    • § 14:3.9 : Valuation Clauses14-31
      • ? : Example 14-2A14-32
  • § 14:4 : Valuation Issues Under Section 2704(b)14-38
    • § 14:4.1 : Background14-38
    • § 14:4.2 : Section 2704(b) and Marketability Issues As Applied to LLC Interests14-40
      • ? : Example 14-314-40
      • [A] : Nevada Restricted LLCs and Limited Partnerships14-42
    • § 14:4.3 : Section 2704(b) and Marketability Issues As Applied to Limited Partnership Interests: Withdrawal Issues14-42
    • § 14:4.4 : Section 2704(b) and Marketability Issues As Applied to Limited Partnerships: Limited Rights on Withdrawal14-43
  • § 14:5 : The Arguments Employed by the Service As a Means of Challenging Family Limited Partnership and LLC Minority Discounts14-44
    • § 14:5.1 : Facts of Technical Advice Memorandum 97-19-00614-45
    • § 14:5.2 : Facts of Technical Advice Memorandum 97-25-00214-46
    • § 14:5.3 : The Service’s Analysis of Technical Advice Memorandum 97-19-00614-46
    • § 14:5.4 : Questions Regarding the Service’s Holdings in Technical Advice Memorandum 97-19-006 and in Technical Advice Memorandum 97-25-00214-51
    • § 14:5.5 : The IRS’s “Gift Theory” As Set Forth in Technical Advice Memorandum 98-42-00314-52
      • [A] : Shepherd v. Commissioner; Senda v.Commissioner; Linton v. United States; and Heckerman v. United States14-53
      • [B] : Where the Donor’s Contribution of Stock to a Family Limited Partnership Preceded the Donor’s Later Gift of Partnership Units, the Tax Court, in Holman v. Commissioner and in Other Cases, Rejected the IRS’s Integrated Transaction Theory14-61
    • § 14:5.6 : The Courts Construe I.R.C. Section 2704(b)(2) and Related Vehicles for Challenging Family Limited Partnerships14-64
      • [A] : Kerr v. Commissioner14-64
      • [B] : Church v. United States14-66
        • [B][1] : Keller v. United States: Funding of Partnership Upheld Though Partnership Not Fully Formed at the Time of Contribution14-67
      • [C] : Strangi v. Commissioner (“Strangi I”) and Knight v. Commissioner14-68
    • § 14:5.7 : I.R.C. Section 2036(a)(1); Reichardt v. Commissioner; Harper v. Commissioner; Thompson v. Commissioner; Kimbell v. United States; Strangi III; and Their Progeny14-71
    • § 14:5.8 : Managerial Control and Section 2036(a)(2): The Tax Court Distinguishes Strangi III from Byrum14-79
    • § 14:5.9 : Managerial Control, Section 2503(b): Hackl v. Commissioner, Price v. Commissioner, and Fisher v. Commissioner14-89
    • § 14:5.10 : Summary: Pre-Kimbell II and Pre-Stone—The Service’s Successful Use of Section 2036 to Attack Family Limited Partnerships and LLCs in an Estate Tax Setting14-95
    • § 14:5.11 : Bona Fide Sale Exception to Section 203614-100
      • [A] : Stone, Kimbell II, Shurtz, Schutt, Mirowski and Black—Section 1036 Will Not Apply Where There Has Been a Bona Fide Sale by the Decedent for Adequate and Full Consideration14-100
      • [B] : Turner, Bigelow, Bongard, Korby, Strangi IV, and Progeny—Bona Fide Sale Exception to Section 2036 Will Not Apply Where the Transferee Partnership Is Not Engaged in a Valid, Functioning Business Enterprise14-121
    • § 14:5.12 : The Tantalizing Case of Kelley v. Commissioner14-131
    • § 14:5.13 : The Lillie Rosen Case and Its Progeny: The Reach of Section 2036 As Applied to Gifts of Interests in Family Limited Partnerships14-132
    • § 14:5.14 : The IRS’s Use of IRC Section 2703 As a Means of Limiting Discounts in the Context of a Non-Operating Family Limited Partnership or Family LLC14-136
  • § 14:6 : Special Valuation Rules for Farms and Certain Closely Held Businesses14-138
    • § 14:6.1 : Background14-138
    • § 14:6.2 : Requirements for Section 2032A Valuation Treatment14-140
    • § 14:6.3 : Recapture Provisions14-142
    • § 14:6.4 : Availability of Minority Discount in Conjunction with Section 2032A Special Use Valuation14-143
    • § 14:6.5 : IRS’s Appellate Settlement Posture with Regard to Family Limited Partnership Discounts14-145
Chapter 15: International Tax and Estate Planning
  • § 15:1 : Estate Tax: Real Property Located in a Foreign Country and Owned by a Non-Citizen Domiciliary of the United States15-3
    • § 15:1.1 : In General15-3
    • § 15:1.2 : Determining Domicile for Estate Tax Purposes15-3
    • § 15:1.3 : The Estate Tax Credit—Assets of the Decedent Located Abroad15-4
      • ? : Example 15-115-5
      • ? : Example 15-215-5
      • ? : Example 15-315-6
    • § 15:1.4 : Estate Tax Treaties15-6
    • § 15:1.5 : Canadian Situs Real Estate15-9
    • § 15:1.6 : Expatriation Rules15-9
      • [A] : Deemed Sale in the Case of a Covered Expatriate Who Relinquishes Citizenship on or After June 17, 200815-10
      • [B] : Notice 2009-85: Requirements for Individuals Who Expatriate After June 17, 200815-11
    • § 15:1.7 : The Need for Separate Testamentary Instruments15-17
  • § 15:2 : Estate Tax: Real Property Located in the United States and Owned by a Nonresident Alien15-18
    • § 15:2.1 : Estate Tax Situs Rules: Real Estate15-18
    • § 15:2.2 : Estate Tax Situs Rules: Stock and Debt Instruments15-19
    • § 15:2.3 : Estate Tax Situs Rules: Partnership Interests and Personal Property15-20
    • § 15:2.4 : Limitation on the Estate Tax Credit Available to Nonresident Aliens Who Possess U.S.-Situs Assets; Planning for Same15-21
    • § 15:2.5 : Gifts Made by Nonresident Aliens15-21
      • [A] : Controlled Foreign Corporations (CFCs)15-22
      • [B] : Passive Foreign Investment Companies (PFICs)15-23
      • ? : Example 15-3A15-25
    • § 15:2.6 : Transfer Tax Payable by Gift or Bequest Recipient on Gifts or Bequests Received from Covered Expatriates on or After June 17, 200815-26
  • § 15:3 : Income Taxation: The Non-Domiciliary Resident Alien15-27
    • § 15:3.1 : Income Taxation of Alien: Before and After Establishing Residency15-27
    • § 15:3.2 : Determining When an Alien Is a Resident for U.S. Income Taxation Purposes—The Substantial Presence Test15-28
    • § 15:3.3 : Election to Be Treated As a Resident Alien for Income Taxation Purposes15-30
    • § 15:3.4 : Income Tax Consequences of the Resident Alien Acquiring a Home in the United States15-30
  • § 15:4 : Income Taxation15-30
    • § 15:4.1 : Trusts Created by Inbound Nonresident Aliens with U.S. Beneficiaries15-30
    • § 15:4.2 : U.S. Income Tax Considerations Relating to Offshore Trusts15-31
      • [A] : Determining Whether an Offshore Trust Is a Foreign or Domestic Trust for U.S. Income Tax Purposes15-31
      • [B] : Potential Recognition of Gain on Transfer of Assets to a Foreign Trust15-34
      • ? : Example 15-415-36
      • ? : Example 15-515-36
      • ? : Example 15-615-37
      • ? : Example 15-715-37
    • § 15:4.3 : Transferor Treated As Owner of Foreign Trust Under I.R.C. Section 679 by Virtue of Commencing Residency in the United States Within Five Years of the Transfer15-38
    • § 15:4.4 : Unique Income and Gift Tax Issues of Foreign Trusts Created by Nonresident Aliens Where the Trust Is Not Subject to I.R.C. Section 67915-39
      • [A] : Income Tax Issues15-39
      • [B] : Indirect Gifts Treated As Taxable Distributions from a Foreign Non-Grantor Trust15-40
      • ? : Example 15-7A15-42
    • § 15:4.5 : Grantor Trust Status Denied in the Case of Certain Trusts Created by Nonresident Aliens15-42
  • § 15:5 : Estate Planning for the Non-Citizen Spouse15-43
    • § 15:5.1 : In General15-43
    • § 15:5.2 : Mechanisms for Creating the Q-DOT15-43
    • § 15:5.3 : Q-DOT Requirements15-44
    • § 15:5.4 : Taxation of Q-DOT Distributions15-44
    • § 15:5.5 : Security Requirements Applicable to Q-DOTs15-45
      • [A] : Where Q-DOT Valued at More Than $2 Million15-45
      • [B] : Where Q-DOT Valued at $2 Million or Less15-46
    • § 15:5.6 : Effect of Surviving Spouse Becoming a U.S. Citizen15-46
    • § 15:5.7 : Inter Vivos Gifts Made to Non-Citizen Spouse15-46
      • [A] : In General15-46
      • [B] : Tenancies Where at Least One Spouse Is Not a U.S. Citizen15-46
      • ? : Example 15-815-48
Chapter 16: Afterword
Chapter 17: Bibliography
Chapter 18: Table of Authorities
Chapter 19: Index to Tax and Estate Planning with Real Estate, Partnerships and LLCs

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