Well Fargo – Commercial Real Estate Chartbook–All Sectors Seem Strong?Posted on March 11th, 2013
Yes, I know its Sunday…but it is tax season and let’s face it, I am up early anyway so I might as well catch up on some news that is worth sharing and give you something to do while having that first cup of coffee!
Attached is a good analysis of the real estate market courtesy of Well Fargo. Have mixed feelings about the long term “stability” of low interest rates as you hear so many mixed signals coming from the Fed. But the fact of the matter is rates are low and the markets have been taking full advantage of that fact. If you have driven around Houston lately, every corner is now an upscale multi-family project – either just finishing or just starting. And with the current and expected boom in the energy industry, Houston should be well poised for expansion in commercial real estate also. It will be interesting to see how the impact of a post-Chavez Venezuela will have on Houston’s international trade/business along with Mexico opening up their government controlled oil industry.
Could the resurgence of our domestic energy capacity be to the next decade or two what IT was to the late 80’s and 90’s? It is a very exciting time and it will be interesting to see how energy reshapes our economy. I think we need to pay close attention – whenever there is turmoil (can you spell Government?) and emerging technology, there is opportunity. So now may not be the time to sit on the sidelines and be a spectator…
Enjoy the day and when Monday rolls around, remember, MGA is there to help you take advantage of business opportunities – from tax structuring and planning, due diligence, financial reporting, cost segregation and more. At MGA your goals are our single focus.
Tax Uncertainty – Not an Unfamiliar PlacePosted on November 8th, 2012
Now that the elections are over here is what we know: The Democrats control the White House and Senate, with the Republicans controlling the House of Representatives.
Are we experiencing deja vu?
In the House, Republicans retain control by a margin similar to the current one. While the President’s party retains control of the Senate, it does not have the 60 members necessary to become fillabuster proof.
So, Washington remains essentially as divided in 2013 as it is now – at least in terms of party affiliation – so there will need to be compromise to pass legislation.
In 2013 individual tax rates are scheduled to increase while many tax breaks expire. Additionally, several valuable tax provisions that expired at the end of 2011 have yet to be extended. So what does this mean? Without congressional action, most taxpayers will have higher tax bills after the first of the year.
As we all know after listening to the debates and endless talk shows during the campaign, the two parties have divergent views on how to address the expiring tax rates and breaks. Republicans generally want to extend 2012 rates for all taxpayers and eventually reduce rates as part of overall tax reform. The White House has been proposing retaining 2012 rates for only the middle and lower income earners as defined below:
• $200,000 for singles,
• $225,000 for heads of households,
• $250,000 for married filing jointly, or
• $125,000 for separate filers
The White House and Congress are also facing automatic spending cuts scheduled to go into effect in 2013 under the Budget Control Act of 2011. These cuts dramatically reduce spending for both domestic and defense programs.
To deal with the combination of expiring tax rates, tax breaks, and the scheduled spending cuts (“fiscal cliff”), the President is going to need to work with both parties, and both sides will likely need to be open to compromise
Looking into the Future
With Washington’s dissension level the last four years and a similar political balance, achieving compromise in 2013 will be a challenge. The potential impact of what will happen without new legislation is enormous. Hopefully, this will be enough incentive for Congress and the President to find a solution.
So What Now?
With the current tax uncertainty, you need to prepare for various scenarios that can be quickly implemented once tax legislation is passed – or alternatively, when it becomes clear that tax law changes won’t be passed this year.
MGA’s team of tax specialists is available to help navigate your best year-end tax strategies and alternatives.
Miller Grossbard & Associates, P.C.
Section 1031 transactions – Properly Identifying Replacement PropertyPosted on October 6th, 2012
We came across an interesting situation with a client involved in a Section 1031 exchange. This client met the time requirements of identifying replacement property and identified said property with the qualified intermediary (QI). When it came time to close the transaction, the client was acquiring an undivided interest in the identified property, not the entire property identified. So the question came up, did the client acquire the property identified if they only acquired an undivided interest and not the entire property?
IRS Regulation 1.1031(k)-1 lists two factors in the receipt of identified replacement property
(i) The taxpayer receives the replacement property before the end of the exchange period, and
(ii) The replacement property received is substantially the same property as identified.
The Regulation does not define “substantially the same”, but offers an example using a taxpayer that acquired 75% of the identified property as meeting the test of “substantially the same”. Does that mean that only acquisitions of 75% or more of an identified property meet the definition of “substantially the same”? On the face of it, the 75% provides guidance, but I do not think that it is a “bright line” test and that anything below 75% would fail the “substantially the same”. What is the threshold at which the transaction does not meet the “substantially the same” test? Since there are no tax court cases on this subject, there is no real guidance.
But one approach that may make sense in a situation where you know or think you will only be acquiring an undivided interest in replacement property is to include that in your identification with the QI. IRS Regulation 1.1031(k)-1(c)(3) states that the identification requires the property to be unambiguously described. Unambiguous description includes the legal description, street address or “distinguishable name”.
So, would it make sense, when describing the replacement property to include in the description “or an undivided interest in the property described”?
Yes, I know, this is the kind of minutiae that only a tax person could get excited about. But with the increase in the use of Tenant in Common (TIC) structures in recent years to acquire undivided interests in properties to facilitate exchanges on disposition, we may start seeing the IRS taking a closer look at the “substantially the same” regulations.
As always, we try to advise you when there are situations that should be reviewed closer and to provide you with recommendations on approaches so that you can avoid an issue in the future.
We are here to answer your questions on 1031 exchanges, other real estate or business matters. At MGA, your goals are our single focus.
Important Tax Rule ChangesPosted on September 21st, 2012
As we move closer to year end, there are a number of tax rule changes that are about to take effect. While we have updated you previously on these expiring provisions, we thought it would be helpful to send a “reminder” as the scope of change is significant.
While our normal advice is to “defer income and accelerate deductions”, this year may warrant just the opposite approach. One particular area is capital gains – with the long term capital gains rate increasing from 15% to 20%. We recommend that you start reviewing your portfolio now with your investment advisor and begin looking at what trades may make sense to be executed before year end. In this regard you need to have two strategies ready – one if the capital gains rate does go up and a second strategy if the capital gains rate stays the same. The reality is that we will not have a good answer to which strategy may be most appropriate until after the Presidential elections.
So, with that overview, let’s get into the details.
Post-2012 Changes if EGTRRA/JGTRRA Sunsets Take Effect
Unless Congress acts, the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA, P.L. 107-16), other than those made permanent or extended by subsequent legislation, sunset and won’t apply to tax or limitation years beginning after 2012. In the case of Title V of EGTRRA, relating to estate, gift and generation skipping transfer taxes, the EGTRRA provisions sunset and won’t apply to estates of decedents dying, gifts made, or generation skipping transfers, after 2012. (Sec. 901(a) of EGTRRA) The Internal Revenue Code of ’86 will be applied and administered to tax or limitation years beginning after 2012, and to estates of decedents dying, gifts made, or generation skipping transfers, after 2012 as if the provisions of, and amendments made by, EGTRRA had never been enacted. (Sec. 901(b) of EGTRRA)
Thus, upon sunset of EGTRRA, the Code would revert to its status before EGTRRA’s enactment, except for those provisions made permanent or extended by subsequent legislation (e.g., the Pension Protection Act of 2006 (P.L. 109-280) repealed the sunset provisions of EGTRRA as they relate to pension and IRA provisions and qualified tuition plans).
Note that the sunset rules related to taxation of capital gains and dividends applies under Sec. 303 of the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA, P.L. 108-27), as modified by Sec. 102 of P.L. 109-222, not under EGTRRA, but are included in this discussion because they impact an important tax rate.
Here’s a capsule review of what’s in store after 2012 if the EGTRRA/JGTRRA sunsets go into effect.
Tax brackets (Code Sec. 1(f), Code Sec. 1(i)). Three fundamental changes occur:
- The 10% bracket disappears (the lowest bracket is 15%).
- The size of the 15% tax bracket for joint filers & qualified surviving spouses is 167% (rather than 200%) of the 15% tax bracket for individual filers.
- The top four brackets rise from 25%, 28%, 33% and 35% to 28%, 31%, 36% and 39.6%.
Taxation of capital gains and qualified dividends (Code Sec. 1(h)). Long-term capital gain is taxed at a maximum rate of 20% (18% for assets held more than five years). For lower-income taxpayers, the maximum rate will be 10% (8% for assets held for more than five years).
Dividends paid to individuals are taxed at the same rates that apply to ordinary income.
Coverdell Education Saving Accounts (CESAs), formerly called education IRAs (Code Sec. 530). A number of changes apply:
- The annual per-beneficiary contribution limit drops to $500.
- There’s a lower phase-out range for married filing jointly.
- A restricted definition of qualifying education expenses (e.g., only for higher education) goes into effect.
- There are no special rules for special needs beneficiaries.
- The rule allowing corporations and other entities to make CESA contributions sunsets.
- The rule permitting contributions for a tax year to be made as late as April 15 of the following year sunsets.
Exclusion for employer-provided educational assistance under Code Sec. 127. The exclusion ends after 2012 (so does the rule that allows the exclusion for graduate level education). Instead, under Code Sec. 132(j)(8), expenses paid by an employer for education or training provided to the employee is excluded from income only if it qualifies as a working condition fringe benefit.
Payments for teaching or research (Code Sec. 117(c)). The exemption from the payments-for-services rule for amounts received under certain Government health professions scholarship programs sunsets after 2012.
Above-the-line student loan interest deduction (Code Sec. 221). The deduction (1) phases out over lower modified adjusted gross income (AGI) ranges and (2) applies only to interest paid during the first 60 months in which interest payments are required.
Adoption credit under Code Sec. 36C and employer-provided adoption assistance exclusion under Code Sec. 137. All of the following rules sunset: increase to $10,000 (as inflation adjusted) for maximum credit and maximum exclusion, special needs adoptions deemed to have $10,000 (as inflation adjusted) eligible expenses for purposes of credit and exclusion, increase in the beginning and ending points of phase-out range for credit and exclusion, and allowing the credit against AMT. (See related change in individual provisions that expired after 2011, below.) Also the Code Sec. 36C credit will be available only for a special needs child.
Standard deduction (Code Sec. 63). The standard deduction for married taxpayers filing jointly (and qualified surviving spouses) is 167% (rather than 200%) of the standard deduction for single taxpayers.
Reduction in itemized deductions (Code Sec. 68). Most itemized deductions of higher-income taxpayers are reduced by 3% of AGI above an inflation-adjusted figure, but the reduction can’t exceed 80%.
Phase-out of personal exemptions (Code Sec. 151(d)). A higher-income taxpayer’s personal exemptions are phased out when AGI exceeds an inflation-adjusted threshold.
Parent’s election to include child’s unearned income on parent’s return (Code Sec. 1(g)(7)(B)(ii)). The parent includes child’s gross income in excess of an inflation-indexed figure, plus 15% (up from 10%) of the lesser of (a) the inflation-adjusted standard deduction for dependent child, or (b) the excess of the child’s gross income over the amount in (a).
Credit for employer-provided child care facilities (Code Sec. 45F). This credit sunsets after 2012.
Earned income tax credit (EITC) (Code Sec. 32). There are multiple changes: the beginning of phase-out range for joint returns drops; phase-out of the credit is computed with reference to modified AGI (rather than AGI); earned income for EITC purposes includes exempt income; and EITC is reduced by the AMT.
RIA observation: Note that other changes made to the EITC by the American Recovery and Reinvestment Tax Act of 2009 (ARRA, P.L. 111-05 ), also will expire on Dec. 31, 2012, unless extended by Congress. In general, these changes relate to higher EITC amounts for eligible taxpayers with three or more children, and increases in threshold phase-out amounts for singles, surviving spouses, and heads of households.
Credit for household and dependent care expenses (Code Sec. 21). Creditable expenses drop from $3,000 (1 qualifying individual) and $6,000 (2 or more) to $2,400 and $4,800, respectively. The maximum credit percentage drops from 35% to 30%, and the AGI-based percentage reduction begins at $10,000 (instead of $15,000).
Child credit (Code Sec. 24). The maximum credit drops from $1,000 to $500 and the credit is not allowed against AMT. Also, more restrictive rules apply to the refundable child credit.
Who must file individual income tax returns (Code Sec. 6012). Standard deduction (1) for joint filers (and qualified surviving spouses) is 167% (rather than 200%) of the standard deduction for single taxpayers, and (2) for marrieds filing separately is one half of the joint filer amount. This affects minimum gross income thresholds for married taxpayers (filing jointly or separately) and for qualifying surviving spouses.
Accumulated earnings tax rate (Code Sec. 532) and personal holding company tax rate (Code Sec. 541). Both rise from 15% to 39.6%.
Minimum withholding rate on supplemental wages under flat rate method (Code Sec. 3402). This rate rises from 25% to 28%. (For supplemental wage payments totaling more than $1 million for a calendar year, the rate rises from 35% to 39.6%).
Backup withholding rate on gambling winnings (Code Sec. 3402). This rate rises from 25% to 28%.
Backup withholding rate on reportable payments (Code Sec. 3406). This rate rises from 28% to 31%.
Voluntary withholding rate on certain federal payments (e.g., Social Security benefits) (Code Sec. 3402). The rate rises from 7%, 10%, 15%, or 25%, to 7%, 15%, 28%, 31%.
Voluntary withholding rate on unemployment benefits (Code Sec. 3402). This rate rises from 10% to 15%.
Collapsible corporation rules (former Code Sec. 641). The collapsible corporation rules are reinstated.
Estate tax (Code Sec. 2001 et seq.). The principal changes are as follows: The top rate is 55%. A 5% surtax on the wealthiest of estates phases out the benefit of graduated rates, with (1) a unified credit exemption equivalent of $1 million, (2) a reinstated Code Sec. 2057 deduction for family-owned businesses, and (3) a credit against State death taxes.
Generation skipping transfer (GST) tax (Code Sec. 2631). The GST tax is reinstated, with a top rate of 55%, and the GST exemption amount is set at $1 million (plus inflation adjustment).
Gift tax (Code Sec. 2505). The top rate increases to 55%.
Installment payment of estate tax (Code Sec. 6166). Installment payment rules are modified.
2012 AMT Rules if There is No Retroactive “Patch”
Far more restrictive AMT rules already are in effect for 2012, and will remain so unless Congress passes a “patch” that amends the rules effective retroactively as of Jan. 1, 2012. Congress has put a temporary patch on the AMT problem for a number of years, and most observers believe it will do so again for 2012 (and possibly 2013).
AMT exemption amount (Code Sec. 55(d)(1)). For individuals, the AMT exemption amounts for 2012 fall to $45,000 (joint filers & surviving spouses), $33,750 (unmarried individuals), and $22,500 (married filing separately). By contrast, the AMT exemption amounts for 2011 were $74,450 (joint filers & surviving spouses), $48,450 (unmarried individuals), and $37,225 (married filing separately). The AMT exemption amount was first increased on a temporary basis by EGTRRA.
Treatment of personal credits (Code Sec. 26(a)(2)). For 2012, individuals can no longer use most nonrefundable personal credits to offset the AMT.
The ability to use nonrefundable credits to offset the AMT as well as regular tax was originally enacted on a temporary basis in ’98 by P.L. 105-277.
Tax Rules That Expired at the End of 2011
A host of favorable tax rules for businesses and individuals expired at the end of 2011, but some of them may be extended, retroactively effective to the beginning of 2012. This has happened before. In fact, on August 2, the Senate Finance Committee favorably reported out a bill (the Family and Business Tax Cut Certainty Act of 2012) that would revive a number of already expired and soon to expire tax breaks
Following is a list of key tax rules that expired at the end of 2011, grouped by business and individual provisions.
Business Provisions That Expired After 2011
- Research credit under Code Sec. 41(h)(1)(B).
- 15-year write-off for specialized realty assets, including qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property under Code Sec. 168(e). Thus, for property placed in service after 2011, a 39-year write-off generally applies.
- 100% bonus first-year depreciation allowance for qualified property under Code Sec. 168(k)(1) and Code Sec. 168(k)(5) (but certain aircraft and long-production-period property can continue to qualify if placed in service before 2013).
- Increased $500,000 expensing election under Code Sec. 179, with $2 million investment ceiling.
- Election to expense environmental remediation costs under Code Sec. 198(h).
- Work opportunity tax credit (WOTC) for non-veterans under Code Sec. 51(c)(4).
- Credit for construction of new energy efficient homes under Code Sec. 45L.
- Energy efficient appliance credit under Code Sec. 45M.
- Enhanced charitable deductions for: contributions of food inventory under Code Sec. 170(e)(3)(C); contributions of book inventories to public schools under Code Sec. 170(e)(3)(D); and corporate contributions of computer equipment for educational purposes under Code Sec. 170(e)(6)(G).
- Empowerment Zone tax breaks, including: the designation of an empowerment zone and of additional empowerment zones under Code Sec. 1391(d)(1)(A)(i) and Code Sec. 1391(h)(2); increased exclusion of gain on the sale of qualified business stock of an empowerment zone business under Code Sec. 1391(d)(1)(A)(i); tax-exempt bond financing under Code Sec. 1394; the 20% wage credit under Code Sec. 1396; liberalized Code Sec. 179 expensing rules; and deferral under Code Sec. 1397B of capital gains tax on sale of qualified assets sold and replaced.
- District of Columbia Enterprise Zone (DC Zone) tax breaks, including: the designation of DC Zone, the employment tax credit, and additional expensing under Code Sec. 1400(f); tax-exempt bond financing under Code Sec. 1400A(b); and eligibility for 0% capital gains rate for investment in DC under Code Sec. 1400B(b)(2)(A)(i).
- The inclusion of Puerto Rico as “within the U.S.” for purposes of determining a taxpayer’s domestic production gross receipts (DPGR) under Code Sec. 199(d)(8)(C).
- The exclusion from a tax-exempt organization’s unrelated business taxable income (UBTI) of interest, rent, royalties, and annuities paid to it from a controlled entity under Code Sec. 512(b)(13)(E)(iv).
- The ability of a regulated investment company (RIC) to designate all or a portion of a dividend as an “interest-related dividend” under Code Sec. 871(k)(1)(C) and Code Sec. 871(k)(2)(C).
- Inclusion of a RIC in the definition of a “qualified investment entity” under Code Sec. 897(h)(4).
- Lower shareholder basis adjustments for charitable contributions by S corporations under Code Sec. 1367(a).
- Reduced S corporation recognition period for built-in gains tax under Code Sec. 1374(d)(7).
- Exception under subpart F for certain income from the active conduct of a banking, financing, insurance, or similar business under Code Sec. 953(e)(10) and Code Sec. 954(h)(9).
- Look-through treatment for payments between related controlled foreign corporations (CFCs) under the foreign personal holding company rules under Code Sec. 954(c)(6).
A number of other, highly specialized or industry-specific provisions expired at the end of 2011, including: 7-year straight line cost recovery period for motorsports entertainment complexes under Code Sec. 168(i)(15)(D); the suspension of income limitations on percentage depletion for marginal wells under Code Sec. 613A(c)(6)(H)(ii); the Code Sec. 179E(g) election to expense 50% of the cost of advanced mine safety equipment; the Code Sec. 45N(e) credit for mine rescue team training credit; Code Sec. 45G(f) credit for railroad track maintenance; and the Code Sec. 181(f) election to expense production costs of qualified film and television products in the U.S. Still other expired provisions dealt with highly specialized energy related tax rules.
Individual Provisions That Expired After 2011
- Election to deduct State and local general sales taxes under Code Sec. 164(b)(5) in lieu of a state and local income tax deduction.
- Above-the-line deduction under Code Sec. 222 for qualified tuition and related expenses.
- Treatment of mortgage insurance premiums as deductible qualified residence interest under Code Sec. 163(h)(3)(E).
- Above-the-line deduction under Code Sec. 62 for up to $250 of certain expenses of elementary and secondary school teachers.
- Nonbusiness energy property credit under Code Sec. 25C.
- Tax credit for first-time District of Columbia homebuyers under Code Sec. 1400C(i).
- Refundability of adoption credit under Code Sec. 36C, and $1,000 increase in the maximum Code Sec. 36C credit and in the exclusion for adoption assistance programs under Code Sec. 137.
- Exclusion of 100% of gain on certain small business stock under Code Sec. 1202(a)(4). After 2011, an exclusion applies for only 50% of gain (60% for qualified business entity stock).
- Parity for exclusion from income for employer-provided mass transit and parking benefits under Code Sec. 132(f). The exclusion was $230 per month for each of these breaks in 2011; for 2012, the exclusion is $240 for qualified parking due to an inflation adjustment but falls to $125 for employer-provided transit and vanpooling benefits.
- Tax-free distributions (up to $100,000 annually for taxpayers 70- 1/2 and older) from individual retirement plans for charitable purposes under Code Sec. 408(d)(8).
- Special rules to encourage contributions of capital gain real property for conservation purposes under Code Sec. 170(b)(1)(E) and Code Sec. 170(b)(2)(B).
- Look-through treatment of certain RIC stock in determining nonresidents’ gross estates under Code Sec. 2105(d).
Tax Rules That Will Expire at the End of 2012
Still other beneficial tax rules for businesses and individuals will end on Dec. 31, 2012, because they were enacted on a temporary basis. Here’s a review of the key provisions.
- The work opportunity credit for hiring qualified veterans under Code Sec. 51(c)(4)(B) won’t be available for individuals hired after Dec. 31, 2012.
- The 50% bonus first-year depreciation allowance for qualified property under Code Sec. 168(k)(1). The bonus depreciation break applies only for qualified property acquired and placed in service after 2011 and before 2013 (after 2012 and before 2014 for aircraft and long-production period property). Also ending is the Code Sec. 168(k)(4) election to accelerate AMT credits instead of claiming additional first-year depreciation.
- For tax years beginning in 2012, the maximum amount that can be expensed under Code Sec. 179 is $139,000, and the investment ceiling is $560,000. For tax years beginning in 2013, the maximum expensing amount is $25,000 and the investment ceiling is $200,000.
- The temporary payroll tax cut will no longer apply. The two percentage point cut in employee OASDI tax under FICA (from 6.2% to 4.2%) and in the self-employed OASDI tax rate under SECA (from 12.4% to 10.4%) expires at the end of this year. Thus, after 2012, the OASDI rates for employees and for the self-employed will revert to 6.2% and 12.4% respectively.
- The expanded Hope credit (American Opportunity Tax Credit, or AOTC) under Code Sec. 25A(i) comes to an end on Dec. 31, 2012. Under the AOTC, eligible taxpayers can claim a credit equal to 100% of the first $2,000 of qualified tuition and related expenses, and 25% of the next $2,000 of qualified tuition and related expenses (for a maximum tax credit of $2,500 for the first four years of post-secondary education). After 2012, the credit will fall to 100% of the first $1,000 (as inflation adjusted) of qualified tuition and related expenses, and 50% of the next $1,000 (as inflation adjusted) of qualified tuition and related expenses. Other, favorable credit rules that expire at the end of this year: increased AGI limits for qualification; refundability for a portion of the credit; and allowance of the credit for course materials.
- The refundable credit for unused AMT credit under Code Sec. 53(e) is coming to an end. For tax years beginning after Dec. 20, 2006, if an individual has a “long-term unused minimum tax credit” for any tax year beginning before Jan. 1, 2013, a taxpayer’s minimum tax credit can’t be less than a complex “AMT refundable credit” amount for that tax year.
- The Code Sec. 108(a)(1)(E) exclusion for discharge of qualified principal residence debt does not apply for debt discharged after Dec. 31, 2012.
Miller Grossbard & Associates, P.C.
Miller Grossbard & Associates, P.C. releases the 2012-2013 Tax Planning GuidePosted on September 18th, 2012
With continued uncertainty about tax laws and the economy, tax planning is more important than ever. You need to proactively look for ways to reduce your taxable income and take advantage of every tax break you’re entitled to – while they’re still available.
This is exactly what our 2012-2013 Tax Planning Guide is designed to help you do. We hope you find this complimentary copy helpful in identifying steps you can take to reduce your personal and business tax liability. You’ll also find a copy on our website, www.millergrossbard.com.
Miller Grossbard & Associates, P.C. continuously reviews tax and planning opportunities for clients’ consideration. We encourage you to review the information the guide provides and note strategies and tax law provisions that might apply to your situation or that you would like to know more about. We are available to visit with you regarding any questions you may have about these or other tax matters.
At Miller Grossbard & Associates, P.C., our professionals are thoroughly familiar with the latest tax laws and tax-reduction strategies, and are eager to help you take full advantage of them. So please contact us today at 713.622.3960 to schedule a time to talk about ways to lighten your tax burden and better achieve your financial objectives.
Miller Grossbard & Associates, P.C.
Miller Grossbard & Associates, P.C. named to INSIDE Public Accounting’s Best of the Best Firms List for 2012Posted on September 4th, 2012
Miller Grossbard & Associates, P.C. is proud to announce that it has been named to INSIDE Public Accounting’s Best of the Best Firms list for 2012.
Houston, TX. (August 31, 2012) – INSIDE Public Accounting’s annual Best of the Best recognition honors 50 firms for their overall stellar performance on more than 50 criteria. This year, more than 430 firms participated in the 22nd annual IPA Annual Survey and Analysis of Firms.
Paul Grossbard, Shareholder stated, “This is affirmation that the hard work and dedication of our staff continues to be recognized in the industry. This is our 6th recognition by Inside Public Accounting and something that we strive each year to achieve.”
Best of the Best firms demonstrate long-term consistency and exceptional performance, regardless of outside factors. Many have been here before. Of the 50 firms named to the list this year, 29 were among the Best of the Best last year, and 22 were on the list in 2010. In any economy – up or down – clues for what to do, where to focus and how to practice can be found in the Best of the Best.
“By making our clients’ goals our single focus we are able to continue delivering value for each and every engagement. Being named to the ‘Best of the Best’ list ensures that our goals and our clients’ goals are aligned as one.” stated Russell Miller, Shareholder.
The IPA 2012 Best of the Best firms stand out as well-managed and well-executed examples of how to succeed. Best of the Best firms come in all sizes and are geographically dispersed. The largest firm to make the cut is $401.8 million and the smallest, at $5.3 million. Despite the economy, these firms turned in solid results.
“Best of the Best firms represent the top firms in the nation. Each firm demonstrates the right combination of vision, planning and execution to deliver superior performance,” says Michael Platt, principal of the Platt Group and publisher of the accounting trade publication, INSIDE Public Accounting. “Firms that earn this designation represent the best of what the accounting profession has to offer,” Platt says.
“The success of these firms is a tribute to their leadership and staff. Their performance defies economic trends by capturing the long-term goals that are needed in order to sustain growth and client service through both prosperous times and down times,” says Kelly Platt, publisher of INSIDE Public Accounting. “We salute all of these firms and recognize their overall management strategies as models that the profession can be quite proud of,” Platt concludes.
The 2012 Best of the Best firms can be found at:
Is It Heresy to Make Salespeople Pay Their Expenses? An HBR Management PuzzlePosted on July 7th, 2012
We have worked with clients in all industries, trying to find the “best” approach to giving salespeople the “right” incentives to meet organizational sales targets and goals. What we have determined, over time, is that the key is first determining what the Company actually wants – is gross sales the driving metric or is it profitability? Is it a focus on a particular industry or niche, or is it broad market penetration? Without the Company first identifying what is important to them (and this may change over time, depending on the life cycle of the company), it is hard to identify the “right” or “best” compensation plan.
One thing we have learned, is that a real salesperson is motivated by closing deals and making money. If they do not have that mindset, and are comfortable waiting for sales to happen, or living off their base, they should not be in outside sales. So, how do you motivate that real sales person to be successful? One way, is to put as few obstacles in their path – you want them focused on meeting the identified metrics and stay out of their way. But as this article very clearly addresses, when sales people are only focused on the sale, it does not necessarily mean more profitability for the Company.
So, what is the right answer? We will have to wait until the next installment to see what HBR thinks, but I will share my insight.
Not all sales are created equal. By that I mean, it is the profitability of the sale that generates the ability of a company to grow and prosper. What is the margin recognized on the sale, taking into account “soft” costs that were incurred in making the sale (the focus of the HBR article) and is the sale in the market that the Company is wanting to penetrate? My advice to clients is to track profitability by salesperson. Commissions should be on a sliding scale based on the profitability of each sale they generate. And a secondary bonus should be paid on the net profitability of that salesperson’s overall efforts – what is the net profitability generated by that sales person as a percentage of their total sales – the higher the profitability, the higher the bonus. And if profitability does not meet a benchmark, then no bonus and a discussion on how to improve results. This motivates the salesperson in the direction that the Company wants – growth, but not at the expense of profitability and sustainability.
There will always be exceptions to the above – strategic accounts, breaking into new market segments or industries, etc. These exceptions, to the extent possible, should be identified before hand as they should truly be exceptions. If every sale/relationship is viewed as an exception, then Company goals will not be met. And these exceptions should come with long-term expectations, so you know when you have achieved success and those sales/relationships fall under the “rule” vs. exception category. Otherwise, how will you know when your salespeople or the Company have met the goals set?
Just some business musings for a mid-summer weekend. I hope you had a great July 4th and enjoy the summer!
Lessons from Tax Season – Maximize value of Cost Segregation Reports and Loan CostsPosted on April 9th, 2012
As MGA has worked through various tax returns this season, we have come across three areas that we wanted to bring to your attention – opportunities to maximize deductions related to purchases of properties.
Cost Segregation Studies
- When you purchase a property, certain of the closing costs – commissions, title, attorney fees, etc. – must be allocated to the property purchased. I would recommend that you send MGA the closing statement and let us record the acquisition for you as soon as you purchase, so that all costs associated with the acquisition are properly included in your purchase price – BEFORE YOU GIVE THE CLOSING STATEMENT TO THE COST SEGREGATION REPORT PROVIDER. Why? So that the closing costs are included in the purchase price that is used to allocate between the various classes of assets. Otherwise the closing costs get allocated to building at a 27 year life. MGA is going to do this step anyway, when we prepare your tax return, so you are not incurring any additional cost, but are getting an additional tax benefit.
- When you contract for the cost segregation study, make sure that they will do the allocation to land. We received several cost segregation reports this season that had no allocation to land, and had to request that the reports be revised. MGA cannot arbitrarily take the cost segregation and reallocate – that must be done as part of the report.
You may look at all closing costs the same – money out of your pocket! Well, from a tax perspective not all closing costs are the same, and those differences can create additional tax savings. Closing costs that are associated with the loans obtained on the property are treated as a separate category of costs and are amortized over the life of the loan. In most cases, while your amortizations are longer, the term of the loan is 5, 7 or 10 years. Loan costs get deducted ratably over the life of the loan. So, if you segregate loan costs from acquisition costs, you are getting a faster write-off of those costs. So, make sure you identify loan costs appropriately, and if you are using the same attorney to acquire the property and review the loan documents, you may want them to bill for those services separately!
You and MGA spent significant time this tax season obtaining partner data for new entities or where there was a transfer of ownership. This creates inefficiency (additional cost and time to complete returns) and, while I am not an attorney, potential exposure to you. We have seen the names and types of entity change from the original investor in the PPM to the person/entity who is the recipient of the K-1. Most of you have some qualification that a partner must meet – if the partner changes, are you getting the paperwork to support that the partner meets the qualifications? Let’s face it, this will never be a problem as long as the property is successful. But if there is a problem with a property, you will be surprised how quickly your investors will have very short memories.
Additionally, some of you are using IRA investors. You are required to pass through additional information disclosures to those types of investors on their K-1’s. So, knowing who your investor will be, is doubly important. And beware, some of your LLC investors are actually owned by IRA’s who are also subject to the additional information disclosures, so you need to ask very specifically if there are any connections to IRA’s. We are available to help develop a checklist of information to use – just give us a call.
OK, I have taken enough of your time this morning. But I did want to share with you some ideas and approaches to make your investments more tax efficient and hopefully save you from having issues down the line.
MGA appreciates your continued confidence and we look forward to continuing to work with you in the future!
Paul D. Grossbard
U.S. Rental Demand Lifts Housing SectorPosted on December 27th, 2011
Below is an article that I felt some clients might be interested in:
Wishing you all the very best in the coming New Year! MGA is here to assist you with your accounting, tax structuring/ planning and business advisory needs.
Paul D. Grossbard
Refinancing obstacles and Sugarplum Fairies…Posted on December 6th, 2011
So, mortgage rates are low and as I have written in the past, it does seem like a good time to refinance your mortgage if you can save a percentage point or more. Well, I took my own advice, and plunged into the refinance process. It is true, there is very low cost money available for qualified homeowners. The problem, as some of you have shared with me, is getting an appraisal to meet the 80% threshold to avoid PMI and T&I escrows. After having the appraisal done and redone, I could not meet the 80% threshold. So, having low cost capital available does not do much good if you cannot get your appraised value high enough!!! Luckily, I had a feeling this might be an issue so I let the lender know that I wanted the appraisal done first so I was not out any additional cost. So much for the capital markets being healthy and available to Main Street. If you are going to pursue a refinance (which I still think is a good idea at these historically low rates), be aware of the appraised value hurdle that will need to be overcome.
Is it just me or does it seem that business is just harder? I want to believe it is caused by the uncertainty in the markets, government regulations, and shifting dynamics of our economy and not that I am getting older! Hey, these years of being in business should add experience that makes navigating obstacles to building a business easier. Maybe that is true, but are there just more obstacles to be navigated?
Stepping back, I need to take a deep breath and think about the important things – the health and happiness of family and friends. In retrospect, I am not sure it matters whether business is harder today – keeping perspective on what is important may be harder. Hmm, something else to ponder in the wee hours of the morning.
So, as we move into this holiday season, I wish you, your family and those important to you, good health and happiness – let’s spend more time on the Sugar Plum Fairies than the obstacles in the road.
Paul D. Grossbard