Although this is a very difficult time for property owners, there are multiple ways Real estate professionals can take advantage of the CARES Act in the current environment that we are in.
Net Operating Loss Carryback
The CARES act allows corporations and individuals to carry back NOL’s arising in 2018, 2019, & 2020 for five years. In addition, the Act retroactively eliminates the 80% taxable income limitation enacted as part of the TCJA in 2018. Prior to the CARES Act, taxpayers were not entitled to carryback a Net Operating Loss. This is a great opportunity to take advantage of carrying back a loss, if available, and apply for a refund of taxes paid in a prior year.
Qualified Improvement Property
The CARES Act has changed Qualified Improvement Property to 15 year property which was previously 39 years under the Tax Cuts and Jobs Act (TCJA). This allows property owners to take advantage of 100% bonus depreciation to accelerate the deduction on certain property placed in service for 2018 and future years. This can be done with an Amended Return or Change in Accounting Method. This change can result in a Net Operating Loss that can lead to refund of prior taxes paid. Please see more details on a previous link sent out here:
QIP Newsletter
1031 Exchange & Opportunity Zone
Individuals or Entities that have a 1031 exchange in process will get an extension on either the 45 Day or 180 deadline if they fall between April 1
st
and July 15
th
to July 15
th
. Opportunity Zone deadlines have also been extended between April 1
st
and July 15
th
to July 15
th
. We will keep you posted on further extensions as the IRS releases more information.
Moratoriums on Evictions
Due to state and local variances, any suspension of eviction proceedings, the mechanisms of any suspension, application of suspension to residential and/or commercial tenancies, and duration of the moratorium will require examination on a case-by-case basis for the applicable state and city.
CALIFORNIA:
California’s
executive order
bans the enforcement of eviction orders for renters affected by COVID-19 through May 31. Tenants must declare in writing, no more than seven days after the rent is due, that the tenant cannot pay all or part of their rent due to COVID-19. Tenants would remain obligated to repay full rent in a timely manner and could still face eviction after the enforcement moratorium is lifted.
NOTE: City/local government orders regarding evictions take precedence over statewide orders during this pandemic period.
CITY OF LOS ANGELES:
Currently, the Local Emergency Period Expiration Date is May 15, 2020.
Landlords may not evict residential or commercial tenants in the City of Los Angeles during this local emergency period if the tenant is able to show an inability to pay rent due to circumstances related to the pandemic.
Tenants are still obligated to pay lawfully charged rent. Residential tenants have 12 months following the expiration of the local emergency period to repay any missed rent. Commercial tenants have 3 months following the expiration of the local emergency period to repay any back due rent.
If you are a tenant or landlord in the City of Los Angeles and have questions, please contact Los Angeles Housing and Community Investment Department at 1-866-557-7368 or ask a question
here
.
For City of Los Angeles updates, please visit:
OTHER LOCALITIES:
For guidance on moratoriums and eviction rules in place for other localities, please visit the links below to view their specific ordinance:
Economic Injury Disaster Loans and Loan Advance (EIDL)
Real estate owners may apply for the EIDL Loan if they have incurred a reduction in rents and have employees. The forgivable grant is calculated as $1,000 per employee, capped at $10,000. EIDL enables owners to receive up to 2 million dollars of loan amount at a maximum interest rate of 3.75% payable over 30 years. Contact one of us for further details and assistance on the application or see our prior newsletter here:
EIDL Newsletter
Paycheck Protection Program (PPP)
Real estate professionals whom operate management companies and have employees on payroll are eligible for the PPP Loan. Contact one of us for further details and assistance on the application or see our prior newsletter here:
PPP Newsletter
Your Mortgage Payments
If you are impacted by COVID-19, some financial institutions will offer mortgage-payment forbearances of up to 90 days, which allow you to reduce or delay your monthly mortgage payments.
We encourage all property owners to contact their lenders directly to learn more about the relief options available to them.
Estate Planning & Promissory Notes
The current environment creates potential planning opportunities. The lifetime gift and estate tax exemption has increased to $11.58 million ($23.16 million for married couples) for 2019. With property values likely appraising at significantly lower values than in recent years, now is the time to consider gifting assets to reduce or eliminate gift and estate taxes. Also, the Applicable Federal rate (AFR) is at an all-time low, consider refinancing existing intra-family notes or utilizing a low-rate note or GRAT to transfer property.
We hope you and your family continue to stay safe and well. We are grateful that everyone at MGGGY is still able to connect with you during this unprecedented time. Please don't hesitate to let us know if you have any questions and concerns. We are here for you.
CC mgggy newsletter release 2020-09
