Tax consequences of lease inducements can vary widely both for the landlord and the tenant
Article Abstract:
Commercial property lease inducements are offered by lessors to attract tenants. Inducements, either cash payments, rent holidays, tenant improvements, or equity leases, have differing effects on recognizable income, with subsequent tax consequences that affect the true cost of the lease. Cash inducement payments are considered income for tax purposes, and should be amortized and capitalized over the life of the lease. The tax consequences of rent holidays are the equivalent to the receipt of a taxable cash payment. Tenant improvements made by a tenant to a lessors property are generally not regarded as income to the lessor, entitles the tenant rent deductions for the amount of improvements, and entitles the lessor to a depreciable basis equal to the realized rental income. If the improvements are bought and owned by the lessor, there will be no taxable income reported by the tenant. In an equity lease, the tenant acquires an interest in the limited partnership that owns the property and shares in the current tax benefits from the property and distributions of cash flow.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1989
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How best to design real estate joint ventures to provide investors with maximum tax benefits
Article Abstract:
Real estate joint ventures generally involve two types of partners: developers who acquire and develop real estate, and money partners that provide financing. The interest and objectives of both must be considered when structuring a joint venture. Sources of financing should be established early, and approaches should be considered that avoid a sale with recognition of gain while shifting the acquisition cost to money partners. Distributions and allocations provisions in real estate joint ventures are generally the same as those of syndicated limited partnerships. Special care must be given to tax planning when the joint venture involves foreign and tax-exempt partners. Rules of particular importance to real estate joint ventures include passive loss limitation rules, transferability of partnership interest, and partnership elections.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1990
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