Estate Tax

Use of Homestead Property and the impact on estate administration

May 8, 2017 | by Chepenik Trushin LLP

The importance of a Semicolon – Does property partially used as primary residence and partially for business purposes qualify as Homestead?

Does property partially used as primary residence and partially for business purposes qualify as homestead under Article X, Section 4 of the Florida Constitution? Surprisingly, the answer apparently rests on a semicolon.

This question was addressed in 2003 by the Florida Court of Appeal for the First District in Davis v. Davis, 864 So. 2d 458 (Fla. 1st DCA 2003). The facts of this case are as follows: Mr. Horace Davis lived with his wife Carolyn on a contiguous piece of property measuring less than 160 acres outside of municipality in an unincorporated portion of Nassau County. The property included the couple’s residence and on a portion separate from the residence, Mr. Davis operated a mobile home park generating profit through rent. Mr. Davis died in 2000 having written a will.

FIRPTA – Be Aware!

August 1, 2016 | by Chepenik Trushin LLP

FIRPTA: Increased Withholding and Other Changes

Most professionals have familiarity with the Foreign Investment in Real Property Tax Act (“FIRPTA”), especially those that have foreign clients investing in U.S. real estate. On December 18, 2015, the President signed into law the Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”). The PATH Act significantly alters FIRPTA withholding for foreign persons disposing of investments in U.S. real estate. Realtors, accountants, closing agents and title companies need to familiarize themselves with the changes.

The PATH Act increases the FIRPTA withholding rate from 10 percent to 15 percent on certain dispositions and distributions of United States Real Property Interests (“USRPIs”).^[1] Similarly, the withholding rate for the transfer of a partnership interest or the beneficial interest in a trust or estate has been increased from 10 percent to 15 percent.^[2] The new withholding rate applies to all such dispositions that take place after February 16, 2016.^[3] However, the new FIRPTA rules allow for a 10 percent withholding rate where the amount realized on the disposition of property being used as a residence is between $300,000.00^[4] and $1 million.^[5] In other words, if a foreign person sells his or her personal residence for $999,000.00 the amount to be withheld shall be $99,900.00. However, if the foreign person sells his or her personal residence for $1,000,100.00, the amount to be withheld on the sale shall be $150,015.00. The amount withheld is offset by the gain on the disposition of the USRPI and is refundable to the extent the amount withheld exceeds the underlying tax liability.^[6] The increased FIRPTA withholding rate is not an actual increase in tax, but a means of ensuring compliance with U.S. tax law. An exemption found in the old rule remains in place, providing that a foreign person is not subject to FIRPTA withholding where the property sold is used as a residence and the amount realized does not exceed $300,000.00.^[7]

Unintended Consequences: How Not Having an Estate Plan Will Affect Prince’s Legacy

April 27, 2016 | by Chepenik Trushin LLP

Music legend Prince’s mysterious death continues to cause speculation as all of the details regarding his estate plan, or lack thereof, have yet to emerge. Prince reportedly amassed a fortune worth at least $300 million and his estate is expected to have an equally impressive future income stream. The estate stands to profit from the posthumous records sales that have soared since the star’s death, as well as “a trove of unreleased recordings” rumored to be in what Prince called, “the vault.” However, the future of Prince’s estate and legacy will depend on whether he created an estate plan.

Proper estate planning guarantees that your wishes are honored after death and the failure to do so may lead to unintended consequences. In Prince’s case it means that his sister, Tyka Nelson, is likely to inherit a large portion of his estate. Reportedly, Prince had a strained relationship with his sister, who at one point was allegedly addicted to crack cocaine and resorted to prostitution to support her children. It is unlikely that Prince intended for a substantial portion of his estate to pass on to her without a mechanism to distribute assets over time. Nevertheless, without the proper estate planning documents in place, this is the likely outcome as Tyka has indicated that the rock star died without a will. Continue Reading

What All Realtors Should Know When Representing a Foreign Buyer

February 8, 2016 | by Chepenik Trushin LLP

Recently, the Financial Crimes Enforcement Network (“FinCEN”) promulgated new rules which require certain U.S. title insurance companies to identify the natural persons behind companies used to pay “all cash” for high-end residential real estate in Miami-Dade County, Florida.

According to the 2015 Profile of International Home Buyers in the Miami Association of Realtor Business Areas, foreign real estate buyers account for 36% or $6.1 billion of total sales volume in the South Florida real estate market. Florida remains the top state for international buyers accounting for 21% of all foreign purchases in the United States. Miami in particular continues to have the most foreign buyers accounting for 74%, which is more than double than the national figure of 35%.

As a result, it is more important than ever for realtors with foreign buyer clients to have their clients engage an international tax attorney to ensure that the ownership of the property is structured with tax efficiency. Foreign persons purchasing U.S. real estate without consulting an international tax attorney may be putting themselves in precarious tax positions if the tax implications are not considered. Below is a high level discussion of some of the key issues.