Michael Gray, CPA's

Real Estate Tax Letter

Michael Gray, CPA's Real Estate Tax Letter

August 14, 2015

© 2015 by Michael C. Gray
ISSN 1930-0387

A monthly report focusing on tax issues for the homeowner and real estate investor.

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September due dates will soon be here.

The extended due dates for calendar-year corporations, partnerships and trusts is September 15. Be sure to get the information for your extended return to your tax return preparer right away. If you need us to prepare your tax return, call Dawn Siemer on Monday, Wednesday or Friday at 408-918-3161 for an appointment.

The third quarter federal estimated tax payment due date for individuals, calendar-year trusts and most calendar-year corporations is September 15. California doesn't have a third quarter estimated tax payment due on September 15 because the first two payments are "front-loaded." In some cases, taxpayers will "catch up" on unpaid California estimated tax payments on September 15.

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October due date is coming for individual income tax returns.

In case I get snowed and don't get out an October newsletter before October 15, remember that is the due date for extended individual income tax returns. Get the information to finish your tax returns to your tax return preparer right away. If you need us to prepare your tax return, call Dawn Siemer on Monday, Wednesday or Friday at 408-918-3161 for an appointment.

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New tax legislation enacted.

President Obama signed the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 on July 31, 2015.

The legislation includes some important tax provisions.

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Unmarried couple gets to deduct more residential mortgage interest.

The Ninth Circuit Court of Appeals (jurisdiction includes California), reversed the Tax Court relating to the limitation for residential mortgage interest. The Tax Court upheld the IRS in limiting the deduction to $1 million of acquisition indebtedness plus $100,000 of home equity debt for residences co-owned by more than one taxpayer. The Ninth Circuit ruled that limitation applies on a per-taxpayer basis. (For this rule, a married couple is considered to be one taxpayer.)

The taxpayers in this case, Bruce Voss and Charles Sophy, were registered domestic partners who are residents of California. Under federal tax law, registered domestic partners are single, unmarried taxpayers. Under California tax law, registered domestic partners are taxed the same as married taxpayers.

This decision creates an opportunity for co-owners who aren't married to each other who are jointly obligated on a mortgage to file amended returns applying the mortgage interest limitations on a per-taxpayer basis. Note the limitation will be different on the California income tax return. See your tax advisor for details.

(Voss, 2015-2 U.S.T.C. 50,427.)

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New regulations issued for partnership allocations for changes of interests.

The IRS has issued final regulations that explain how income and deductions of the partnership may be allocated to the partners when partnership interests change during a taxable year. In the past, partnerships had to choose between a cut-off method and a varying interest method. Under the final regulations, either method can be used when more than a change of interest happens during a tax year.

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Gifts from non-resident aliens can be subject to U.S. Gift Tax.

I recently attended an estate tax planning symposium. One of the speakers reminded us that nonresident aliens (individuals who are not U.S. citizens and live outside the U.S.) can be subject to U.S gift tax when they make gifts of real estate or personal property located in the United States. There is no exclusion except for the annual $15,000 exclusion per donee, per donor. We most often see this for gifts of real estate. Cash can also be personal property. It's best that transfers of cash be made outside the U.S., such as by opening a bank account outside the U.S. (which will also be subject to foreign bank account reporting, but not U.S. gift tax). Gifts exceeding $100,000 (cumulative for the year) also have to be reported by the donee on Form 3520. If a nonresident alien wants to make a gift to a U.S. person, he or she should get professional advice from a tax advisor familiar with the rules.

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Property tax appeals filing deadline is coming.

The deadline for filing appeal for a California property tax appeal in Alameda, Inyo, Kings, Orange, Placer, San Francisco, San Luis Obispo, Santa Clara, Sierra and Ventura counties is September 15, 2015. The deadline for other counties is November 30, 2015.

See http://www.boe.ca.gov/proptaxes/pdf/filingperiods.pdf

For a video about filing appeals, see http://www.boe.ca.gov/info/AssessmentVideo/Index.html

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California State Board of Equalization OKs exchange of tenant in common interests.

The California State Board of Equalization has ruled that the exchange of tenant in common interests in an apartment building for equivalent tenant in common interests in a shopping mall was a valid § 1031 like-kind exchange, despite a later transfer of the replacement property to an LLC. The transfer happened seven months after the exchange. The Board found the step-transaction doctrine didn't apply in this case because there was "independent economic significance" during the time between the exchange and the transfer.

(Appeal of Rago Development Corp. et al., 2015-SBE-001, June 23, 2015.)

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Does your group need a speaker?

We are seeking opportunities to speak before groups. Topics include recent tax developments, tax issues relating to real estate, how estate planning has changed recently, tax issues relating to alternative investments using retirement accounts, and marketing topics such as "How I created a public access television show broadcast on eleven Bay Area stations." To make arrangements, call Michael Gray at 408-918-3161.

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Please share your good experiences with Michael Gray, CPA.

As you know, more and more people are going to the internet to find information about service providers. We hope you will share some good words about experiences that you have had with our firm<. Some of the sites where you can share your experiences include yelp.com, siliconvalley.citysearch.com, and Google+.

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Financial Insider Weekly broadcast schedule for August and September.

Financial Insider Weekly is broadcast in San Jose and Campbell on Fridays at 9:30 p.m., Pacific Time. You can watch it on Comcast channel 15 for San Jose and Campbell. The show is broadcast as streaming video at the same time at www.creatvsj.org.

Here are the scheduled interviews for August and September:

August 14, 2015, Nancy Ross, Bauer Shepherd & Ross & Associates, "How a collaborative approach can make divorce a less painful process"
August 21, 2015, Janis Carney, attorney at law, Carney Elder Law, "Senior Estate Planning"
August 28, 2015, Janis Carney, attorney at law, Carney Elder Law, "Caring for seniors today: challenges in getting quality care"
September 4, 2015, Janis Carney, attorney at law, Carney Elder Law, "Paying for long-term care for seniors in California"
September 11, 2015, Robert E. Temmerman, Jr., attorney at law, Temmerman, Cilley & Kohlmann, LLP, "I'm an executor. Now what?"
September 18, 2015, Robert E. Temmerman, Jr., attorney at law, Temmerman, Cilley & Kohlmann, LLP, "I'm a trustee. Now what?"
September 25, 2015, Peggy Martin, ChFC, CLU, The Family Wealth Consulting Group, "Legacy planning"

Financial Insider Weekly is also broadcast as follows:

Back episodes available at https://www.youtube.com/user/financialinsiderweek.

Let me know any ideas that you have for topics or guests. Guests will usually have to be located in or near the Silicon Valley in California.

Hope you can watch or record the show. Please tell your friends about it!

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Questions and Answers

Michael Gray regrets he can no longer personally answer email questions. He will answer selected questions in this newsletter.

Dear readers:

Many of your questions relate to the sale of a principal residence. We have an article at our web site, "Could your residence be the ultimate tax shelter?" (www.realestateinvestingtax.com/residence.shtml) where you should be able to find the answers to most of these questions.

Many other questions relate to short sales and foreclosures. See our article on that subject at www.realestateinvestingtax.com/shortsale.shtml.

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Follow me on Twitter, Facebook, LinkedIn and Google+!

If you enjoy Twitter, please follow me at www.twitter.com/michaelgraycpa. I would especially appreciate retweets of our messages announcing episodes of Financial Insider Weekly.

you can also follow me on other social media sites, Facebook, LinkedIn, and Google+.

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If you have employee stock options, have you subscribed to Michael Gray, CPA's Option Alert at no charge or obligation?

To learn more, visit stockoptionadvisors.com/subscribe.shtml

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Check out my blog.

I have also started a blog at michaelgraycpa.com. Check it out!

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Do you know about our other newsletters?

For general tax developments, tax planning ideas, business development ideas and book reviews, subscribe to Michael Gray, CPA's Tax & Business Insight at taxtrimmers.com/subscribe2.shtml.

Have employee stock options? Subscribe to our free newsletter, Michael Gray, CPA's Option Alert! To learn more, visit stockoptionadvisors.com/subscribe.shtml.

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Michael Gray, CPA
2190 Stokes St., Suite 102
San Jose, CA 95128
408-918-3162

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Michael Gray, CPA
2482 Wooding Ct.
San Jose, CA 95128
(408) 918-3162
FAX: (408) 938-0610
Hours: 8am - 5pm PDT Monday - Friday

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