CALIFORNIA SB 1316 and NEW HAMPSHIRE SB 483
CALIFORNIA
Senate Bill 1316, which would eliminate like kind treatment on the state level for exchanges into out of state property, was heard this week by the Senate Appropriations Committee and sent to the "suspense file." This resulted from the perception that it is a revenue loser for the state of California. The bill may be voted upon at a later hearing, likely on or about August 13. The FEA continues to lobby to have the Committee hold the bill in hopes that it will not pass from the Committee to the Senate Floor before the deadline of the week of August 16.
The new law amends prior law which would deprive taxpayers Section 1031 tax deferral on a state level if they purchased replacement property in the name of a new entity, notwithstanding that the acquiring entity was a disregarded entity.
The typical situation would be that in which a taxpayer was required by a lender or TIC sponsor to acquire a replacement property in the name of a new single member LLC.
The State of New Hampshire began disallowing exchange treatment on those transactions in 2008 and began to audit previously closed transactions as far back as 2004, without notice either to taxpayers or to the professionals in the industry.
The new law makes it clear that exchange treatment will not be affected by taking title in the new entity as long as the entity is a single member LLC, revocable trust or other entity which is disregarded for federal income tax purposes.
The amendment eliminates the "claw back" efforts to 2004. Thanks are due FEA member George Foss and George's allies at the New Hampshire Association of Realtors including Robert Quinn and Lynne Merrill.
NEW HAMPSHIRE
The New Hampshire Governor has signed SB 483 into law in that state. The new law amends prior law which would deprive taxpayers Section 1031 tax deferral on a state level if they purchased replacement property in the name of a new entity, notwithstanding that the acquiring entity was a disregarded entity.
The typical situation would be that in which a taxpayer was required by a lender or TIC sponsor to acquire a replacement property in the name of a new single member LLC.
The State of New Hampshire began disallowing exchange treatment on those transactions in 2008 and began to audit previously closed transactions as far back as 2004, without notice either to taxpayers or to the professionals in the industry.
The new law makes it clear that exchange treatment will not be affected by taking title in the new entity as long as the entity is a single member LLC, revocable trust or other entity which is disregarded for federal income tax purposes.
The amendment eliminates the "claw back" efforts to 2004.
