The Importance Of Real Property

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Statutory deferral when real property is transferred to a corporation with FMV higher than the tax basis. The law provides three exceptions where the transfer of Real property to a corporation with market value higher than the basis is not taxable; 1. The transferor owns more than 80% of voting stock of the corporation immediately after the transfer 2. The transferor and a group, simultaneously transfer real property to a corporation and own more than 80% of the corporate voting stock immediately after the transfer. 3. The transferor already owns 80% voting stock of the corporation and any additional transfers do not trigger gain. The above transfers only deferred the gain but did not exempt it, pursuant to § 351. Corporation takes…show more content…
IRC § 721, which dictates transfer of property to partnership, is comparable to §351 except it does not have an 80% or more ownership constraint, you could own 1% of partnership interest & the transfer would still be tax free. In addition, basis rules are like corporate rules upon transfer. The similarity ends from this point forward, in cases where property is subject to liability, the partner would adjust its basis in the partnership. Gain, if triggered due to partner’s liability decrease, termed deemed distribution, recognition of this gain could be circumvented by adjusting the transferor’s outside basis, hence no recognition of gain either by the partnership or the partner. In case of liquidating or non-liquidating distribution interplay of sections in partnership law avoids the recognition of gain, and in both cases basis is adjusted instead. Gain is only triggered when the transferor sells property received in both liquidating and non-liquidating scenarios. International investors investing in US real estate: With real estate investment returns hovering between 14% to 21%, combined with the relative safety of US markets and additional tax in Canada for Nonresident real estate investors, no wonder investment in US real estate is way up according to a recent report. Topping this list are Brazilian, Chinese, Canadians, Colombians and Middle Easterners who are investing heavily in Miami real estate,
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