Happy 4th of July!

We know the past couple of months have been challenging for us all, but hopefully this independence day weekend will help bring some joy into the lives of you and your loved ones. Stay safe and have a great weekend!

As always, we’re here to answer any portfolio questions or discuss your planning needs. Click here to contact us or simply call us at (800) 477-5525 to set up an appointment with one of our investment advisor representatives or financial planners.

Happy Fourth Of July from the Naples Asset Management Company Team!

IRS Announces CARES Act RMD Relief

If a retiree took a required minimum distribution but is having second thoughts in the wake of COVID, they are now able to roll it back.

The Internal Revenue Service announced Tuesday that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts can take advantage of the CARES Act RMD waiver for 2020.

The 60-day rollover period for any RMDs already taken this year has been extended to August 31, 2020, to give taxpayers time to take advantage of this opportunity.

The IRS described the change in Notice 2020-51 (PDF). The Notice also answers questions regarding the waiver of RMDs for 2020 under the Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act.

The CARES Act enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA, to skip those RMDs this year. This includes anyone who turned age 70 1/2 in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined-benefit plans.

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In addition to the rollover opportunity, an IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31, 2020.

The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

The notice provides two sample amendments that employers may adopt to give plan participants and beneficiaries whose RMDs are waived a choice as to whether or not to receive the waived RMD.

The RMD waiver provided by the CARES Act is similar to the 2009 RMD waiver provided by section 201 of the Worker, Retiree, and Employer Recovery Act of 2008.

Understanding Tax-Deferred Exchanges

rainbow over NYCA new education piece designed for Accredited Investors, on Understanding Tax-Deferred Exchanges was released today by DST Investments, LLC.

To view or download, click here.

DST Investments, LLC is a Registered Investment Adviser (RIA) that specializes in only DST Transactions.  DST works to solve portfolio and 1031 business problems, takes a consultative approach to every client engagement, and find actionable solutions that will help the client achieve the best business or portfolio outcome.

Taking a fiduciary approach to DST transactions allows us to pursue a course of action that will better align the interests of the client.   For more information, contact Al DiNicola, MBA  adinicola@dst.investments

Can a Second or Vacation home qualify for 1031 Exchange?

Back in February of 2008, the IRS established guidelines for determining whether a vacation home qualifies for a 1031 Exchange. 

Revenue Procedure 2008-16 sets forth the safe harbor guidelines as follows:

RELINQUISHED PROPERTY

  • The holding period for the vacation home is at least 24 months immediately before the exchange;
  • For each of the two 12-month periods, the vacation home is rented to another person at a fair rental for 14 days or more; and
  • The homeowner limits his use of the vacation home to not more than 14 days or 10% of the number of days during the 12-month period that the vacation home is rented at a fair rental value.

REPLACEMENT PROPERTY

  • The holding period following the exchange is at least 24 months;
  • For each of the two 12-month periods, the vacation home is rented to another person at a fair rental for 14 days or more; and
  • The homeowner limits his use of the vacation home to not more than 14 days or 10% of the number of days during the 12-month period that the vacation home is rented at a fair rental value.

When contemplating an exchange, one of the most common questions real estate investors ask is: Will my mixed-use vacation property be eligible for an exchange?

Thankfully, the answer to this question is “yes.”Instead, like other revenue procedures issued by the IRS, is a guideline intended to supplement the agency’s interpretation of Section 1031.  If taxpayers follow this procedure, the IRS should not challenge the vacation home’s eligibility as relinquished property. Abiding by this document will mean avoiding a legal challenge, but this doesn’t mean going outside the bounds of 2008-16 will necessarily result in a failed transaction.

What Rev. Proc. 2008-16 is saying is that the IRS will not challenge the “holding requirement” of Section 1031 if taxpayers follow its guidelines. The potential issue that could be presented by vacation homes is the holding requirement. That is, there could be a dispute over whether such property satisfies the requirement that relinquished property must be “held for” investment.  If taxpayers disobey Rev. Proc. 2008-16, the holding requirement may still be met, but the issue can only be resolved on a case-by-case basis. It is not a quantitative requirement, as we know, but a qualitative one, and it demands an individualized analysis by the court. The language and appearance of the procedure may seem authoritative, but accountants should be aware that it is not a set of strict rules.

Despite the confusion the above may seem to cause, the guidelines are straightforward: For vacation homes used as relinquished property, taxpayers should own the property for at least 24 months prior to the exchange. For replacement property to be used as a vacation home, it should also be held for a minimum of 24 months.These ownership periods are referred to as “qualifying use” periods, which operate just before the exchange (for relinquished property) or just after it (for replacement property). In other words, if a taxpayer owns a relinquished property vacation home for five years, only the 24 months immediately preceding the exchange constitute the qualifying use period.Taxpayers must rent the home at a fair market value for at least 14 days in each of the two 12-month time segments which make up the 24-month qualifying use period.

Also, their personal use of the home cannot exceed the greater of 14 days or 10 percent of the total days the home is used as a rental during each 12-month segment. These guidelines apply to both relinquished and replacement property. Thus, the IRS is making it clear that the holding requirement will not be contested should these guidelines be observed.DST Investments is a registered investment advisor that specializes in DST 1031 Consulting services. For a complimentary consultation, please visit us at www.DST.investments or email us at support@dst.investments.

 

 

 

 

DST Investments Launches News Service

DST Investments, a Registered Investment Adviser (RIA) which specializes in only DST transactions launched a dedicated news site to help accredited investors find educational materials and unbiased updates related to the DST Market Landscape.

DST Investments works to solve portfolio and 1031 business problems, as a fiduciary, and takes a consultative approach to those in need of a 1031 or DST transaction.   This allows us them to pursue a course of action that will better align the interests of the client

For more information, contact Al DiNicola, MBA  adinicola@dst.investments  or visit www.DST.investments.

 

Honoring Sacrifice

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Since the earliest ceremonies in small American towns following the Civil War, we have gathered on Memorial Day to honor and remember those who made the ultimate sacrifice in service to our nation. As in those early days of laying wreaths and placing flags, our national day of remembrance is often felt most deeply among the families and communities who have personally lost friends and loved ones.

Uncle Hubert 1943Since World War I, more than 645,000 men and women have given their lives in defense of our freedom here at home and around the world. 

This national holiday may also be the unofficial start of the summer season, but all Americans must take a moment to remember the sacrifice of our valiant military service members, first responders and their families. Memorial Day is a day of both celebration and grief, accounting for the honor of our heroes and reflecting on their tragic loss.

This Memorial Day, join us in remembering those who bravely sacrificed their lives for our country, including the many first responders of COVID. 

At NAMCOA we pay tribute to Honor, Duty and Sacrifice.  

IRS Provides Stimulus Check Details: Payments to Start Within Three Weeks

The Treasury Department and the Internal Revenue Service (IRS) announced Monday  that distribution of economic impact payments will begin in the next three weeks and will be distributed automatically, with no action required for most people.  However, some seniors and others who typically do not file returns will need to submit a simple tax return to receive the stimulus payment.

Who is eligible for the economic impact payment?

Tax filers with adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive the full payment. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible.  Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples. Parents also receive $500 for each qualifying child.

How will the IRS know where to send my payment?

The vast majority of people do not need to take any action. The IRS will calculate and automatically send the economic impact payment to those eligible.  For people who have already filed their 2019 tax returns, the IRS will use this information to calculate the payment amount. For those who have not yet filed their return for 2019, the IRS will use information from their 2018 tax filing to calculate the payment. The economic impact payment will be deposited directly into the same banking account reflected on the return filed.

The IRS does not have my direct deposit information. What can I do?

In the coming weeks, Treasury plans to develop a web-based portal for individuals to provide their banking information to the IRS online, so that individuals can receive payments immediately as opposed to checks in the mail.

I am not typically required to file a tax return. Can I still receive my payment?

Yes. People who typically do not file a tax return will need to file a simple tax return to receive an economic impact payment. Low-income taxpayers, senior citizens, Social Security recipients, some veterans and individuals with disabilities who are otherwise not required to file a tax return will not owe tax.

How can I file the tax return needed to receive my economic impact payment?

IRS.gov/coronavirus will soon provide information instructing people in these groups on how to file a 2019 tax return with simple, but necessary, information including their filing status, number of dependents and direct deposit bank account information.

I have not filed my tax return for 2018 or 2019. Can I still receive an economic impact payment?

Yes. The IRS urges anyone with a tax filing obligation who has not yet filed a tax return for 2018 or 2019 to file as soon as they can to receive an economic impact payment. Taxpayers should include direct deposit banking information on the return.

I need to file a tax return. How long are the economic impact payments available?

For those concerned about visiting a tax professional or local community organization in person to get help with a tax return, these economic impact payments will be available throughout the rest of 2020.

Where can I get more information?

The IRS will post all key information on IRS.gov/coronavirus as soon as it becomes available.  The IRS has a reduced staff in many of its offices but remains committed to helping eligible individuals receive their payments expeditiously. Check for updated information on IRS.gov/coronavirus rather than calling IRS assistors who are helping process 2019 returns.

IRS Provides FAQs on 2019 Federal Income Tax Deadline Extensions

The Internal Revenue Service (IRS) last week announced special federal income tax return filing and payment relief in response to the ongoing Coronavirus Disease 2019 (COVID-19) emergency.  Today the IRS released some answers to frequently asked questions related to the relief. Below are a few of the questions that are likely to be of interest to federal employees and retirees.

The answers to these questions provide responses to general inquiries and are not citable as legal authority,” the IRS said. “Accordingly, the Treasury Department and the IRS are continuing to consider additional IRB guidance on these issues addressed in these FAQs.”  See the end of this article for a link to the complete list of updated FAQs on the IRS website.

Who is eligible for the extension?

Any person with a Federal income tax return or payment due on April 15, 2020, is eligible for relief under the Notice. “Person” includes any type of taxpayer, such as an individual, a trust, an estate, a corporation, or any type of unincorporated business entity. The payment due refers to both 2019 Federal income tax payments (including payments of tax on self-employment income) and 2020 estimated Federal income tax payments (including payments of tax on self-employment income), regardless of the amount owed. The return or payment must be due on April 15, 2020 – this relief does not apply to Federal income tax returns and payments due on any other date.

Do I have to actually be sick, or quarantined, or have any other impact from COVID-19 to qualify for payment relief?

No, you do not have to be sick, or quarantined, or have any other impact from COVID-19 to qualify for relief. You only need to have a Federal income tax return or payment due on April 15, 2020, as described above.

What are the form numbers of the specific federal income tax returns whose filing deadlines have been postponed?

The Notice postpones the filing and payment of Federal income taxes reported on the following forms: 

Form 1040, 1040-SR, 1040-NR, 1040-NR-EZ, 1040-PR, 1040-SS 
Form 1041, 1041-N, 1041-QFT
Form 1120, 1120-C, 1120-F, 1120-FSC, 1120-H, 1120-L, 1120-ND, 1120-PC, 1120-POL, 1120-REIT, 1120-RIC, 1120-SF
Form 8960
Form 8991

With respect to Form 990-T, if that Form is due to be filed on April 15, then it has been postponed to July 15 under the Notice. For taxpayers whose Form 990-T is due on May 15, that due date has not been postponed under the Notice.

With respect to returns due on March 16, 2020, which include Form 1065, Form 1065-B, Form 1066, and Form 1120-S for calendar year taxpayers, the filing of those returns has not been postponed.

Individual Retirement Accounts (IRAs)

Does this provide me more time to contribute money to my IRA for 2019?

Yes. Contributions can be made to your IRA, for a particular year, at any time during the year or by the due date for filing your return for that year. Because the due date for filing Federal income tax returns has been postponed to July 15, the deadline for making contributions to your IRA for 2019 is also extended to July 15, 2020. For more details on IRA contributions, see Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).

Does this provide me more time to contribute money to my HSA or Archer MSA for 2019?

Yes. Contributions may be made to your HSA or Archer MSA, for a particular year, at any time during the year or by the due date for filing your return for that year. Because the due date for filing Federal income tax returns is now July 15, 2020, under this relief, you may make contributions to your HSA or Archer MSA for 2019 at any time up to July 15, 2020. For more details on HSA or Archer MSA contributions, see Publication 969, Health Savings Accounts and other Tax-Favored Health Plans.

I haven’t filed my 2019 federal income tax return yet, but I expect to file it by July 15. What do I need to do?

Nothing, except file and pay any tax due with your return by July 15. You don’t need to file any additional forms or call the IRS to qualify for this automatic Federal tax filing and payment relief. If you expect a refund, you are encouraged to file your return as soon as you can so that you can receive your refund. Filing electronically with direct deposit is the quickest way to get refunds. If you need more time beyond July 15 to file your return, request an automatic extension of time to file as described next.

What if I am unable to file my 2019 federal income tax return that would have been due on April 15 by July 15, 2020?

If you are an individual, you can request an automatic extension to file your Federal income tax return if you can’t file by the July 15 deadline. The easiest and fastest way to request a filing extension is to electronically file Form 4868 through your tax professional, tax software, or using the Free File link on IRS.gov. Businesses, including trusts, must file Form 7004.

You must request the automatic extension by July 15, 2020. If you properly estimate your 2019 tax liability using the information available to you and file an extension form by July 15, 2020, your tax return will be due on October 15, 2020. To avoid interest and penalties when filing your tax return after July 15, 2020, pay the tax you estimate as due with your extension request.

Does this apply to state income tax liabilities?

No, this relief applies only to Federal income tax payments. State filing and payment deadlines vary and are not always the same as the Federal filing and payment deadline. We urge you to check with your state tax agencies for those details. More information is available at https://www.taxadmin.org/state-tax-agencies.

Full List of Updated IRS FAQs

The IRS said these questions and answers will be updated periodically and “are designed to be a flexible tool to communicate information to taxpayers and tax professionals in this changing environment.” To view the complete list of FAQs, go to:  https://www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers