By Eliezer Gross, CPA

Wiss is a full‐service accounting firm that provides more than annual tax compliance or updates on the latest tax law changes. Our clients frequently seek guidance during every stage of their business: startup, growth phase, succession planning, and exit. Here’s how Wiss has solved some of the challenges our clients face in the real estate industry.

The Challenge: Real Estate Acquisition

Clients in the growth stage of their business who make real estate acquisitions often ask how to properly build the ownership structure so that tax savings opportunities are provided for each owner/family member.

The Outcome

Wiss reviewed each owner’s tax return and analyzed their tax projections to determine the appropriate ownership structure by individual and/or trust. Clients typically rely on their CPAs for tax structuring, and Wiss provided an additional layer of analysis.

The Challenge: Consolidating Operations

Managing a family-owned real estate business can be quite complex, as there are many moving parts. Simple tasks, such as running the business in an efficient and cost-effective manner, can be daunting.

The Outcome

Wiss advised the client to combine their payroll on a single entity, which yielded an immediate annual savings of approx. $50k to operating costs. We also advised the owners to restructure their compensation by consolidating their management fees to provide additional tax savings to the owners. The restructure provided increased after-tax compensation to the owners, as well operational flexibility for the future.

The Challenge: Exiting a Business

Selling a property in a real estate portfolio and ultimately exiting a real estate business can be quite complicated and can lead to unintended or undesirable tax consequences.

The Outcome

Wiss consulted on various exit strategies with estate planning in mind. As an alternative to paying tax on selling appreciated property, Wiss guided the client through a tax-free Section 721 transaction. The client contributed their appreciated real estate in exchange for a partnership interest controlled by a publicly traded Real Estate Investment Trust (REIT).

Wiss assured the client would be protected from any adverse tax consequences for an agreed-upon period. The agreement allowed the client to redeem its partnership interest in exchange for REIT stock. Under current tax law, the redemption is potentially tax-free based on the step-up rules should the redemption occur at death. In addition, such a conversion can be a valuable estate planning tool. This can be a viable alternative for clients to diversify their assets and be relieved of property management responsibilities.

Running a business can be tough, and these are just a few examples of how Wiss can help you every step of the way. We’ll manage your risk, look out for any unintended tax consequences, and help your operation run as smoothly as possible. Wiss is your partner for growth.