I.R.C. § 168

Tax Treatment Of Lease Terms Part 2: Tenant Allowances

Tenant construction allowances are a common detail in commercial real estate leases. Because landlords need tenants to fill their commercial spaces, and tenants need to customize these spaces for their business, a tenant allowance is a vital lease term which significantly pushes forward and finalizes a commercial real estate leasing transaction. An allowance must be structured accordingly to avoid undesired tax consequences.

I.R.C. § 110 provides landlords and tenants with a safe harbor which ensures that a tenant is not required to recognize income for a tenant allowance in leases which are for 15 years or less of a retail space. Otherwise, the tenant treats a tenant allowance received from the landlord as ordinary income, while depreciating assets over their useful life, typically resulting in much more income than expenses.

Tax Treatment Of Lease Terms Part 1: Lease Inducement Payments

The relationship between commercial landlord and tenant is often fraught with complications which often arise from a failure to understand the legal consequences of some formal or informal arrangement within the landlord-tenant relationship. To understand, avoid, and, at the very least, minimize these consequences, commercial tenants and landlords should avail themselves of the experience and knowledge of a qualified tax professional.

A common arrangement between landlords and tenants is a lease inducement payment, made by or on behalf of the landlord to entice a tenant to sign a lease agreement. Lease inducement payments may be:

  • cash;
  • moving expenses;

Finally! Congress Enacts Tax Extends Part 6

The Consolidated Appropriations Act of 2016, enacted Dec. 18, 2015, extends a long list of expired tax provisions into the future. Unlike in past extension legislations, Congress extended many provisions permanently. The Joint Committee on Taxation estimates that the total cost of the tax provisions in the bill will be $622 billion over 10 years. Without Congress extending these various provisions, millions of Americans were in danger of losing these beneficial tax breaks by 2017.

Energy tax incentives: Provisions for energy expenses extended through 2016 include:

  • § 25C, which provides a 10% credit for qualified nonbusiness energy property. The law also updates the Energy Star requirements.

Finally! Congress Enacts Tax Extends Part 5

The Consolidated Appropriations Act of 2016, enacted Dec. 18, 2015, extends a long list of expired tax provisions into the future. Unlike past extension legislation, Congress extended many provisions permanently. In more traditional fashion, some of the others were extended for five years, and many for two years. The Joint Committee on Taxation estimates that the total cost of the tax provisions in the bill will be $622 billion over 10 years. Without Congress extending these various provisions, millions of Americans were in danger of losing these beneficial tax breaks by 2017.

Here are some provisions for individual taxpayers that were extended by Congress for two years:

Finally! Congress Enacts Tax Extends Part 4

The Consolidated Appropriations Act of 2016, enacted Dec. 18, 2015, extends a long list of expired tax provisions into the future. Unlike past extension legislation, Congress extended many provisions permanently. In more traditional fashion, some of the others were extended for five years, and many for two years. The Joint Committee on Taxation estimates that the total cost of the tax provisions in the bill will be $622 billion over 10 years. Without Congress extending these various provisions, millions of Americans were in danger of losing these beneficial tax breaks by 2017.

The following incentives for real ­estate investment have been made permanent:

Finally! Congress Enacts Tax Extends Part 3

The Consolidated Appropriations Act of 2016, enacted Dec. 18, 2015, extends a long list of expired tax provisions into the future. Unlike past extension legislation, Congress extended many provisions permanently. In more traditional fashion, some of the others were extended for five years, and many for two years. The Joint Committee on Taxation estimates that the total cost of the tax provisions in the bill will be $622 billion over 10 years. Without Congress extending these various provisions, millions of Americans were in danger of losing these beneficial tax breaks by 2017.

Congress made permanent various provisions with incentives for businesses. Some are as follows:

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