TAX ISSUES IN ACQUISITION AND DEVELOPMENT OF REAL ESTATE
COURSE NUMBER: PLANA6384
Meeting Times: January 23 – February 27, 2018
Location: 200 Fayerweather
Instructor: Dan Crowley
Telephone: (646) 471-5123
Email: email@example.com / firstname.lastname@example.org
Class assistant: Jonathan Dubin
- COURSE DESCRIPTION
This course provides students with an understanding of the impact of taxation on real estate investment and development and it provides an overview of tax rules applicable to the real estate and construction industries. It introduces planning techniques commonly used by individuals and business entities to minimize tax on real estate projects. Students will evaluate how strategy, asset type and choice of investment vehicle can change after-tax results.
- Classes will include in-person lectures supported by presentation materials
- In class discussion around topics and real-world problems in tax and accounting
- Guest lecturers may be invited to classes to present certain topics and material
- Project will be individual, but it is recommended that you work with others before the final submission
- Introduce the impact of tax to real estate returns
- Determine the elements relevant to efficiently structure the real estate deal
- Measure the before and after-tax profitability of real estate transactions
- COURSE REQUIREMENTS AND ASSIGNMENTS
- It is expected that each student will be in attendance and be prepared to actively participate in class discussions.
- Reading assignments and homework (as assigned periodically) must be finished in advance of class so that everyone will benefit from an in-depth discussion. Respect for the opinions of others and openness to new ideas is vital.
- All written assignments are to be completed to a professional standard. The assignments are due at the beginning of the assigned session. Late assignments will only be accepted in unforeseen situations (illness or other emergency).
- If you are unable to attend a class, it is your responsibility to inform the instructors prior to class and to make-up missed material prior to the next class.
- The use of excel is highly recommended. Basic knowledge of excel will help significantly.
- If you are unable to maintain the pace of the course, it is your responsibility to inform the instructor as soon as possible.
- Students are expected to uphold the highest standards of honesty and integrity as regards their work in this course. Candid feedback will be given by the instructors and students are expected to make accurate representations of her/his preparation, participation or performance in all work.
- All students are required to sit for the mid-term and final exam and complete the final project.
III. COURSE GRADING CRITERIA
The student’s final grade in this course will be based on participation, assignments, the final term project and two examinations. Grades will be based on the following estimated weightings:
- Project 20%
- Mid-Term 30%
- Final Examination 30%
- Homework and Participation* 20%
*Participation is measured by the completion of homework assignments, level of engagement during class through questions, comments and clarifications, as well as sharing of personal experience and insight. Assignments must be emailed or submitted in person prior to the start of the class when due.
Mid-term is based on the first half of class materials and is based on theory and understanding of materials. Final is cumulative and incorporates more problems and interpretation.
Students are expected to attend all classes. Due to the nature of the topics covered, absences and/or lateness could negatively impact learning, and therefore would indirectly result in a reduction of the final grade.
Students will be expected to complete readings in advance of class. Information will be posted at least one week in advance. The following textbooks are optional:
Principles Of Real Estate Accounting and Taxation Joel Rosenfeld; University Readers Inc. / Cognella. ISBN 978-1-60927-264-7
Real Estate Investment and Taxation, Steven Messner, Chuck Freedenberg, Robert L Ward, Victor L. Lyon / Prentice Hall / ISBN-10: 0137630530; ISBN-13: 9780137630530
Recommended material includes additional resources and websites will be posted.
Older versions of the textbooks (used) are permitted to be used in substitution, if desired.
- COURSE OUTLINE
1/23/2019 — Importance of Tax in Real Estate Transactions; Tax Policy Issues; Form of Ownership
- Overview of Course - Why are Tax and Accounting Important to Real Estate?
- General Tax Concepts: Worldwide vs. Territorial, Evasion vs. Avoidance; Entity vs. Aggregate; Business vs. Investment; State, Local vs. Federal; Types of Tax
- Real Estate Industry Tax Issues: Debt; Promote; Depreciation; Special Entities
1/30/2019 – Property Acquisitions and Entities
- Calculation of Taxable Income and Deductions (timing)
- Character of Income (impact of income by type)
- Tax Rates: Capital Gains, Passthrough Deduction; Corporate Double Tax
- Tax by Type of Entity: Check The Box; REITs, Investment and Taxpayer
- Overview of Partnerships and Allocations
2/6/2019 -- Property Development and Tax Basis
- Methods of Acquisition and Impact on Tax Basis
- Impact of Debt and Relationship of Entity Type
- Cost Segregation Benefits and Allocation of Costs to Asset Basis
- Capitalization and Development: Deductibility of Interest, Taxes, Direct and Indirect Costs
- Property Tax Issues and Revaluations
- Credits and Incentives
Operations - Leases, Depreciation and Losses
- Determination of Taxable Income and Comparison to Other Measures (NOI, GAAP, Cash Flow)
- Depreciation as Non-Cash Deduction and Impact on After Tax Returns
- Income Characterization as Passive, Active or Portfolio Income and Loss Limitations
- Interest Deductions and Depreciation
Mid Term Date Discussed in Class – Either 2/6 or 2/13
2/13/2018 -- Sale of Real Estate and Profit Recognition
- Calculate Gains or Losses on Sale (Ordinary and Capital Gain)
- Depreciation Recapture under Section 1231, 1250 and 1245
- Installment Sales, Partnership Contributions and Other Deferrals
- Nontaxable Exchanges: Like Kind Exchanges (Section 1031) and Involuntary Conversions
- Investor / Dealer Analysis
2/20/2018 – Taxpayer Types, Special Entities and Structuring Preferences
- Tax Preferences by Type of Investor
- Non-US Investors Inbound and Outbound
- Debt Related Issues (Foreclosures, Workouts and Special Structures)
2/27/2018 – Review and Final Exam
- Quick Overview of Class and Final Exam
Professor Note on Session Content
The real estate industry, tax regulations and accounting rules are constantly changing. Also, each group of students may want to focus more time on topics that are relevant to their background and career plans. In the event that the class is fully engaged in certain key topics, or based on the knowledge level of the class, the instructor may make updates or modifications to the syllabus while teaching the course. This may include, but is not limited to, additional or deleted readings, changes in assignments, new course requirements and revisions to grading policies.
FINAL EXAMS AND PROJECTS
Final and mid-term exams will be a mix of true/false, multiple choice, fill in the blank and problems. All exams will be open note and open books. Any reference material will be allowed but no communication tools should be used during exams.
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