Often clients will come to us wanting to sell a property, but feel trapped by the high capital gains taxes that they would incur by selling.
We have the pleasure of informing these clients that there is a special rule in the Internal Revenue Code that will allow them to defer capital gains by making a “1031 Exchange.” This allows the client to sell without having to deal with the tax implications immediately. (Under the right facts, the client may never have to deal with Capital Gains Taxes.)
Put simply, a 1031 Exchange allows you to “swap” one property for another. There are strict IRS requirements to get this benefit:
- The money from the first Closing must be held in escrow by a Facilitator. If any of this money comes to you, it may disqualify the entire Exchange.
- You must then identify a replacement property within 90 days of closing.
- You must close on the replacement property within 6 months of the first closing.
When it comes time for the second Closing, the Facilitator sends the money held in escrow to the Seller of the replacement property.
These time limits are extremely important. If you miss any deadlines, the transaction will be disqualified as a 1031 Exchange even if you do everything else right.
In addition, the second property must be of equal or greater value than the first property. This way, you are not earning any money on the sale of the first property-so you will not owe any capital gains taxes.
* * *
If you would like to participate in a 1031 Exchange, we can help. We have experience with both residential and commercial Exchanges, and work closely with a Facilitator who has years of experience as an escrow agent. Do not let capital gains taxes dissuade you from selling your property.
The Paton Law Firm
29 N. Farview Ave.
Paramus, NJ 07652
As an advocate against misguided government restrictions on freedom of speech, I was pleased the U.S. Supreme Court ruled unanimously on June 16, 2014 (Susan B. Anthony List v. Steven Driehaus) that the plaintiffs had standing to continue a First Amendment challenge of a 1995 Ohio law that allows for criminal penalties against those making false statements during political campaigns.
The dispute arose between Congressman Steven Driehaus and pro-life groups during his re-election campaign. The pro-life groups claimed that Driehaus’ vote for the Obamacare law was support for taxpayer-funded abortion. The Ohio Election Commission (“OEC”) found “probable cause” the statement was false. The Plaintiffs were then refused a reserved billboard site because the owner was scared of being sued. No further action was taken by the OEC or in a criminal court because Driehaus lost the election and withdraw his complaint, which raised the standing issue for the plaintiffs, although after the election Driehaus did file defamation claims against them.
The Supreme Court held that enforcement of the Ohio law caused a credible threat of harm to the plaintiffs’ political speech with Driehaus obtaining a probable cause finding (that could be viewed by voters as a final decision) without ever having to prove the falsity in a court of law. Additionally, a burden was imposed on the plaintiffs when they were forced to divert significant time and legal resources to respond to discovery requests before the OEC in the crucial days before Election Day. It was held the plaintiffs had standing to sue because “an allegation of future injury may suffice if the threatened injury is ‘certainly impending,’ or there is a ‘substantial risk’ that the harm will occur.” The law had been challenged in the lower courts as “unconstitutionally vague” and having a “chilling effect” on freedom of speech, but those courts held there was no “immediate threat” of injury.
This 1995 Ohio law makes it illegal to “post, publish, circulate, distribute or otherwise disseminate a false statement concerning a candidate in an election” and violators can be fined and/or sentenced to six months in prison (Ohio Election Law 3517.21). Complaints filed with the OEC must allege: (1) a statement to be false; (2) that the speaker knew the statement was false, or spoke with reckless disregard for the truth; and (3) that the statement was made with the intent of impacting the outcome of the election.
It’s shocking this Ohio law survived for two decades. While we all hope candidates remain truthful in campaigns, this law certainly restricts constitutionally protected political speech. No state should be allowed to set up arbitrary (as well as political or partisan) government “truth” panels to decide if campaign statements are false, especially if the law allows for criminal penalties. I don’t believe any government can fairly regulate whether campaign statements are true or false. Remember, the First Amendment case law grants political speech the highest protection possible.
I enjoyed reading a Cato Institute (a libertarian think tank in DC) amicus brief challenging the law. The entertaining political commentator P.J. O’Rourke drafted the brief with attorney Ilya Shapiro (see brief at: http://object.cato.org/sites/cato.org/files/pubs/pdf/sba-list-merits-filed-brief.pdf), and here are excerpts from the introduction:
“I am not a crook.” “Read my lips: no new taxes!” “I did not have sexual relations with that woman.” “Mission accomplished.” “If you like your healthcare plan, you can keep it.”
While George Washington may have been incapable of telling a lie, his successors have not had the same integrity. The campaign promise (and its subsequent violation), as well as disparaging statements about one’s opponent (whether true, mostly true, mostly not true, or entirely fantastic), are cornerstones of American democracy. Indeed, mocking and satire are as old as America, and if this Court doesn’t believe amici, it can ask Thomas Jefferson, “the son of a half-breed squaw, sired by a Virginia mulatto father.” Or perhaps it should ponder, as Grover Cleveland was forced to, “Ma, ma, where’s my pa?” . . . After all, where would we be without the knowledge that Democrats are pinko-communist flag-burners who want to tax churches and use the money to fund abortions so they can use the fetal stem cells to create pot-smoking lesbian ATF agents who will steal all the guns and invite the UN to take over America? Voters have to decide whether we’d be better off electing Republicans, those hateful, assault-weapon-wielding maniacs who believe that George Washington and Jesus Christ incorporated the nation after a Gettysburg reenactment and that the only thing wrong with the death penalty is that it isn’t administered quickly enough to secular-humanist professors of Chicano studies.
Many campaign statements cannot easily be categorized as simply “true” or “false.” According to Politifact.com, President Obama’s claim that “if you like your health-care plan you can keep it” was true five years before it was named the “Lie of the Year.” . . . There is no lie that can be told about a politician that will not be more damaging to the liar once the truth is revealed. A crushing send-up on The Daily Show or The Colbert Report will do more to clean up political rhetoric than the Ohio Election Commission ever could.”
I can list many political charges I hear in campaigns about which thoughtful people can disagree. Is abortion murder? Does gun control reduce crime? Is the death penalty a human rights violation? Is fracking harmful to the environment? Does raising the minimum wage reduce entry level jobs? I have friends that can argue over these questions for hours. If one of these politically debatable issues was the subject of a complaint to the OEC, it would be forced to interject its own biases and political views into its decision, which could remarkably lead to a criminal prosecution and jail sentence. If this law existed in New York with our rough and tumble campaigns, you could be sure political partisans would file frivolous complaints with the commission attempting to harass and wound opposing candidates if a probable cause finding could be obtained, with the complaint then dropped after Election Day.
I believe the Ohio law (and similar laws in other states) violates the First Amendment of our Constitution. The decision about the truth of a candidate’s campaign statements must be left to the voters. This case was sent back to the federal district court, which will hopefully strike down this unconstitutional law soon.
James Maisano, Esq.
I try to surf through several key legal blogs each week and wish to share a few posts I found interesting and helpful to my practice:
1) We all need “deep thought” to do our finest work but are limited by counterproductive multitasking at the office:
2) Attorneys need to be careful about check scams that wind up in our email inboxes:
3) Here are 5 closely watched US Supreme Court cases for 2014:
4) Twitter advice for attorneys and other business people:
5) Make sure your social media bios are updated regularly:
6) Small firm are better at social media than big firms:
James Maisano, Esq. (914) 636-1621 Jim@JamesMaisanoEsq.com www.JamesMaisanoEsq.com
I received an email last night from O’Connor Davies (http://www.odpkf.com), which provides an important update about possible changes to New York State law for the estate tax. The changes would add a gift tax and may be approved in this year’s NYS Budget (it could pass by April 1). Therefore, if you were thinking about making a gift this year, you may want to make it very soon. Please see the email below from O’Connor Davies.James Maisano, Esq. (914) 636-1621 Jim@JamesMaisanoEsq.com www.JamesMaisanoEsq.com
New York State Proposed Budget Bill for Estate and Gift Tax Reform
Time may be running out to take advantage of the lack of a gift tax in the State of New York. Governor Cuomo has proposed a change in New York State’s estate tax law in an attempt to bring New York’s estate taxes in line with Federal tax law. As part of the estate tax law changes, gifts made after March 31, 2014 will be subject to the New York estate tax.
In essence, the new budget bill proposes a comprehensive overhaul of the estate, gift, generation skipping transfer and trust income tax laws which includes:
- Increasing the New York State estate tax exclusion over the next five years to coincide with the applicable Federal exclusion—increasing the current amount ($1,000,000) to $2,065,500 on April 1, 2014, $3,125,000 in 2015, $4,187,500 in 2016 and $5,250,000 in 2017* and adjusted for inflation with the Consumer Price Index thereafter.
- Decreasing the top estate tax rate from 16% down to 10% by April 2017
- Adding back gifts made by New Yorkers after March 31, 2014 to their New York gross estate on their death.
- Repealing the New York State Generation Skipping Transfer Tax
- Taxing distributions of accumulated income to New York beneficiaries of non-resident trusts and exempt resident trusts
The net effect of the change in law means that assets gifted after March 31, 2014 would be subject to New York’s estate tax to the extent their inclusion exceeds the exclusion threshold. Essentially, this is a reinstatement of the gift tax on wealthier New Yorkers upon their demise.
Although the time period is brief and this proposed budget bill has yet to be finalized, if you are affected by the proposed new rules, you may wish to contact your tax advisor about making gifts prior to April 1, 2014. Any gifts made under the current New York law will not be included as part of a your New York gross estate and will pass without a payment of gift taxes to the extent you have not exceeded the Federal estate and gift tax exemption of $5,340,000.
For more information, the proposed budget bill can be found by going to Parts 1 and X of this document.
* Exemptions amounts are subject to change pending passage of 2014-2015 executive budget.
One issue where my legal and political views align is the use of eminent domain to take private property for private use. I am a vociferous opponent of this misuse of eminent domain and remain outraged that the Supreme Court sanctioned this property owner abuse in the now infamous case, Kelo v. City of New London, 545 U.S. 469 (2005). In Kelo, the Supreme Court held that New London could legally take non-blighted private property by eminent domain, and then transfer it for a dollar a year to a private developer solely for the purpose of increasing tax revenues. In reaction to Kelo, several states enacted laws to restrict the power of eminent domain when used to take private property for private use. I will never vote to allow eminent domain to be used to steal private property from Westchester homeowners for private development as a county legislator.
The last clause in the 5th Amendment to the Constitution states, “nor shall private property be taken for public use, without just compensation.” It is my view that the founding fathers never imagined this clause could be utilized to take private property for private use. At the time of the passage of the Bill of Rights and for the following 150 years, eminent domain was used only for clear public purposes such as building a bridge, highway, public park or government building. I do not believe the original intent of the eminent domain clause was ever to allow the raising of taxes through private development as a “public use.”
Therefore, I was interested to read an excellent post on one of my favorite legal blogs, The Volokh Conspiracy, that discussed the photos above, which show that the private property taken from the homeowners in New London still sits vacant to this day. It was supposed to be used for a Pfizer office building along with luxury condos, hotels, a conference center and retail stores. The plan fell apart, and the geniuses that ran New London left the city with vacant property producing zero tax revenue. Although, I must note the planned development was a sweetheart deal for Pfizer and developer for which they only had to pay $1 per year – what a disgraceful example of misguided corporate welfare. Here is the post, please visit the link and read it. Join me in opposing any such future abuses of property owners in our state and county.www.JamesMaisanoEsq.com