New Section 199A: Structuring Real Estate Transactions to Take Advantage of the Qualified Business Income Deduction

Recording of a 90-minute CLE/CPE webinar with Q&A


Conducted on Tuesday, November 27, 2018

Recorded event now available

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Program Materials

This CLE/CPE webinar will provide counsel with tools to structure real estate transactions to take full advantage of the new qualified business income (QBI) deduction under IRC §199A. The panel will discuss the requirements and limitations of §199A, recent IRS regulations for §199A, and planning techniques to maximize tax savings for pass-through entities.

Description

One of the most significant features of the 2017 tax reform is the new 20% deduction available to non-corporate taxpayers for their QBI. As pass-through entities are typically the vehicles of choice for real estate transactions in the U.S., the QBI deduction as codified under IRC §199A represents a real opportunity for the industry.

Section 199A generally limits the deduction attributable to a pass-through business to the greater of: (1) 50% of the individual’s W-2 wages paid with respect to the qualified trade or business, or (2) the sum of 25% of such W-2 wages plus 2.5% of the tax basis immediately after its acquisition of the business’ qualified property.

To constitute QBI, rental income must be “effectively connected” with a U.S. trade or business, as that term is used in IRC §864(c). Whether income such as rent is “effectively connected” depends on whether the income is derived from assets used in the business (asset use test), and whether the activities of the business are a material factor in realizing the income (business activities test).

Real estate counsel must have a thorough understanding of §199A and its limitations when advising on entity structures and operations. Determination of a real estate entity’s eligibility for the deduction, and any actions needed to maximize the deduction, should be made at the deal structuring stage.

Listen as our panel analyzes the potential tax benefits and limitations of §199A in real estate transactions and outlines tax planning strategies to take advantage of the QBI deductions for real estate owner-operators.

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Outline

  1. Requirements of §199A and accompanying regulations
  2. Non-corporate entities that benefit from §199A: pass-through entities, REITs
  3. Defining QBI: rental and other business income
  4. Claiming the §199A deduction on individual returns
  5. Limitations on certain types of businesses or services
  6. Tax planning considerations

Benefits

The panel will review these and other relevant issues:

  • What are the potential tax benefits of §199A?
  • What are the entity requirements of claiming the deduction?
  • What is QBI and how is it calculated?
  • When can rental income be treated as QBI?
  • What are some tax pitfalls to consider when reforming an entity to take advantage of §199A?

Faculty

Capdevielle, Cliff
Cliff Capdevielle

Managing Attorney
Moskowitz

Mr. Capdevielle has been developing sophisticated tax planning strategies and resolving tax disputes for clients more...  |  Read More

White, Lorraine
Lorraine White

Partner, Tax Services
Grant Thornton

Ms. White has 20 years of tax experience and has served both publicly traded and privately owned companies. She has...  |  Read More

Other Formats
— Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. All formats include program handouts. To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

$297

Download

CPE Not Available

$297