Page 75 - AMM-MAY2022-4

Continued from page 72
LIKE-KIND EXCHANGES
The budget proposes to limit the deferral of taxable gain from a like-kind exchange to $500,000 for single taxpayers and $1 million for married taxpayers.
DEPRECIATION RECAPTURE
The budget proposes to impose ordinary income taxes on recaptured depreciation (as opposed to the current-law 25 percent rate) for the recapture of depreciation deductions taken in taxable years beginning after December 31, 2022. The proposal would apply to taxpayers with incomes of $400,000 or more.
BASIS SHIFTING BY RELATED PARTIES THROUGH PARTNERSHIPS
As described in the Treasury Green Book, “the proposal would reduce the ability of related parties to use a partnership to shift partnership basis among themselves. In the case of a distribution of partnership property that results in a step-up of the basis of the partnership’s non-distributed property, the proposal would apply a matching rule that would prohibit any partner in the distributing partnership that is related to the distributee-partner from benefitting from the partnership’s basis step-up until the distributee-partner disposes of the distributed property in a fully taxable transaction.”
LOW-INCOME HOUSING TAX CREDIT
The budget would enable housing finance agencies to provide nongeographic basis boosts to private activity bond-financed Low-Income Housing Tax Credit projects.
PROVISIONS INCLUDED IN THE BUILD BACK BETTER ACT
Notably, the President’s budget does not include a
description of revenue proposals the House passed last November as part of the Build Back Better Act. Instead, these are assumed in the budget baseline. Among other provisions, these proposals would:
• Surtax on Ordinary Income and Capital Gains: Impose a 5 percent surtax on ordinary income and capital gains of taxpayers earning over $10 million in modified adjusted gross income (AGI) (i.e., adjusted gross income less investment interest expense) and an additional 3 percent surtax on taxpayers earning over $25 million in modified AGI.
• Application of Net Investment Income Tax on Active Income: Expand the current-law 3.8 percent net investment income tax to include net investment income (i.e., capital gains, interest, dividends, annuities, royalties, and rents) earned in the ordinary course of a trade or business by single filers earning over $400,000 and married couples earning over $500,000. It would not apply to any wages on which FICA is currently imposed.
• Treatment of Business Losses: Make permanent a provision limiting excess business losses that was otherwise set to expire at the end of 2026. Under current law, a non-corporate taxpayer is considered to have an excess business loss if their total business deductions exceed business income plus $250,000 for single filers and $500,000 for joint filers. Additionally, while current law allows excess businesses losses to be treated as a net operating loss, the proposal would modify this treatment and not allow losses to offset wages or portfolio income in future years. Losses, however, could be carried forward.
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AMM4 APARTMENT MANAGEMENT MAGAZINE - MAY 2022 75