'How a Tax Benefit for Developers Could Backfire in the Pandemic' diff viewer (11/12)

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How a Tax Benefit for Developers Could Backfire in the Pandemic	How a Tax Benefit for Developers Could Backfire in the Pandemic
2020-06-24 11:34:43 UTC	2020-06-24 15:27:00 UTC (about 4 hours later)
Something remarkable is percolating in the commercial real estate market: Investors may end up losing millions in tax savings on gains from the sale of their properties because of the coronavirus pandemic.	Something remarkable is percolating in the commercial real estate market: Investors may end up losing millions in tax savings on gains from the sale of their properties because of the coronavirus pandemic.
Like-kind real estate exchanges, also known as 1031 exchanges (after the provision in the Internal Revenue Code), allow investors to sell a commercial property and pay no tax on the gains as long as the money from that sale is reinvested in other real estate. It could be a similar building, land or even air rights.	Like-kind real estate exchanges, also known as 1031 exchanges (after the provision in the Internal Revenue Code), allow investors to sell a commercial property and pay no tax on the gains as long as the money from that sale is reinvested in other real estate. It could be a similar building, land or even air rights.
The provision was preserved in the overhaul of the tax code that was signed in 2017 by President Trump, who made his wealth in real estate development, while investments in other areas, like art and classic cars, were stripped of their special tax status.	The provision was preserved in the overhaul of the tax code that was signed in 2017 by President Trump, who made his wealth in real estate development, while investments in other areas, like art and classic cars, were stripped of their special tax status.
To reap the benefit, real estate investors need to identify a replacement property 45 days after the sale of the original property and close on the purchase within 180 days. If the criteria are met, the investors can defer taxes on the gains from the sale of the property. The deferral can extend until the investor’s death, at which point the capital gains tax is wiped out.	To reap the benefit, real estate investors need to identify a replacement property 45 days after the sale of the original property and close on the purchase within 180 days. If the criteria are met, the investors can defer taxes on the gains from the sale of the property. The deferral can extend until the investor’s death, at which point the capital gains tax is wiped out.
If the criteria are not met, the investors face not only an enormous tax bill for the gains but additional taxes for deductions taken while they owned the building. That can amount to millions of dollars for some properties.	If the criteria are not met, the investors face not only an enormous tax bill for the gains but additional taxes for deductions taken while they owned the building. That can amount to millions of dollars for some properties.
As lockdowns complicated closing deals, the real estate industry lobbied the Treasury Department to get extensions on those dates, and it obliged in early April. The department said that if either the 45- or 180-day deadline fell between April 1 and July 14, it would be moved to July 15 — the new deadline, too, for filing income and other federal taxes for 2019 and the first half of 2020.	As lockdowns complicated closing deals, the real estate industry lobbied the Treasury Department to get extensions on those dates, and it obliged in early April. The department said that if either the 45- or 180-day deadline fell between April 1 and July 14, it would be moved to July 15 — the new deadline, too, for filing income and other federal taxes for 2019 and the first half of 2020.
But the guidance lacked clarity on some key issues underlying disaster relief for like-kind exchanges, and the extension could do more harm than good to certain sectors of the commercial real estate market, like retailing and entertainment, that are already under economic pressure.	But the guidance lacked clarity on some key issues underlying disaster relief for like-kind exchanges, and the extension could do more harm than good to certain sectors of the commercial real estate market, like retailing and entertainment, that are already under economic pressure.
The extension of the deadlines for like-kind exchanges has resulted in sales being postponed or canceled, purchase prices being reassessed and money from a sale staying out of reach of the property investor who might need it.	The extension of the deadlines for like-kind exchanges has resulted in sales being postponed or canceled, purchase prices being reassessed and money from a sale staying out of reach of the property investor who might need it.
“Usually, you think tax extensions are a favor to taxpayers,” said Kate Kraus, a partner at the law firm Allen Matkins in Los Angeles. This one “is all murky,” she said, adding: “The government seems not to have thought about the consequences of this.”	“Usually, you think tax extensions are a favor to taxpayers,” said Kate Kraus, a partner at the law firm Allen Matkins in Los Angeles. This one “is all murky,” she said, adding: “The government seems not to have thought about the consequences of this.”
The extension started like many others, with an interest group writing a letter asking for relief. In this case, the Real Estate Roundtable wrote to Steven Mnuchin, the Treasury secretary, who granted the request.	The extension started like many others, with an interest group writing a letter asking for relief. In this case, the Real Estate Roundtable wrote to Steven Mnuchin, the Treasury secretary, who granted the request.
“It seemed like a good-government, reasonable thing to do,” said Ryan McCormick, senior vice president and counsel at the group.	“It seemed like a good-government, reasonable thing to do,” said Ryan McCormick, senior vice president and counsel at the group.
Investors had already started the process of the exchange, he said, but it became difficult to travel because of pandemic lockdowns, and they were unable to do due diligence like an appraisal. “Taxpayers were seeking some additional time to work through that,” he said.	Investors had already started the process of the exchange, he said, but it became difficult to travel because of pandemic lockdowns, and they were unable to do due diligence like an appraisal. “Taxpayers were seeking some additional time to work through that,” he said.
But once the relief was granted, deals that were part of 1031 exchanges began to fall apart.	But once the relief was granted, deals that were part of 1031 exchanges began to fall apart.
Jatin Desai, chief financial officer and chief investment officer of Peachtree Hotel Group in Atlanta and a member of Tiger 21, a group of ultra-high-net-worth investors, said he had been approached before the pandemic to sell one of the company’s hotels in South Florida. The two sides reached a deal, which was set to close before the July 15 deadline.	Jatin Desai, chief financial officer and chief investment officer of Peachtree Hotel Group in Atlanta and a member of Tiger 21, a group of ultra-high-net-worth investors, said he had been approached before the pandemic to sell one of the company’s hotels in South Florida. The two sides reached a deal, which was set to close before the July 15 deadline.
“When we found out it was a 1031 buyer, we thought they’d close quickly,” he said. “But when the deadline was pushed out, the buyers said they were going to push out the closing.”	“When we found out it was a 1031 buyer, we thought they’d close quickly,” he said. “But when the deadline was pushed out, the buyers said they were going to push out the closing.”
The deal had a 90 percent chance of closing before, he said, but he gave it a 10 percent chance now.	The deal had a 90 percent chance of closing before, he said, but he gave it a 10 percent chance now.
Nationally, smaller real estate exchanges — worth less than $3 million — have come to a halt, and larger ones are being delayed, said Alex Madden, vice president of Kay Properties and Investments, an online marketplace for 1031 exchanges.	Nationally, smaller real estate exchanges — worth less than $3 million — have come to a halt, and larger ones are being delayed, said Alex Madden, vice president of Kay Properties and Investments, an online marketplace for 1031 exchanges.
He said the number of properties for sale nationally was down by 75 percent since mid-March. The ones that remain attractive are properties that he called “coronavirus resistant,” like drugstores and distribution facilities that serve companies like Amazon or FedEx.	He said the number of properties for sale nationally was down by 75 percent since mid-March. The ones that remain attractive are properties that he called “coronavirus resistant,” like drugstores and distribution facilities that serve companies like Amazon or FedEx.
Investors taking advantage of exchanges are expected to treat July 15 as their date to identify or close on a property. But if that date holds, it could create artificially inflated prices for those few “coronavirus resistant” properties.	Investors taking advantage of exchanges are expected to treat July 15 as their date to identify or close on a property. But if that date holds, it could create artificially inflated prices for those few “coronavirus resistant” properties.
Jay D. Stein, president of the Scottsdale, Ariz., office of Sandor Development, which invests in strip malls and free-standing drugstores, had a group of buyers signed up for four of his CVS stores that pulled out when the extension was passed. But he is optimistic that the new deadline and the continued uncertainty around commercial real estate could benefit him.	Jay D. Stein, president of the Scottsdale, Ariz., office of Sandor Development, which invests in strip malls and free-standing drugstores, had a group of buyers signed up for four of his CVS stores that pulled out when the extension was passed. But he is optimistic that the new deadline and the continued uncertainty around commercial real estate could benefit him.
“It’s very possible you can see the best product get into bidding wars, in early to mid-July,” Mr. Stein said. “Everyone is chasing the same stuff — high-credit quality properties with good cash flow.”	“It’s very possible you can see the best product get into bidding wars, in early to mid-July,” Mr. Stein said. “Everyone is chasing the same stuff — high-credit quality properties with good cash flow.”
~~Updated June ~~22,~~ 2020~~	Updated June 24, 2020
	Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles.
A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.	A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.
The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.	The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.
The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.	The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.	So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.	Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.	A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.	The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.	Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)	If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.	If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
Investors face other challenges in completing these deals, including financing. Buyers who need a mortgage could struggle to get bank financing because of falling property values or pay more for loans from private lenders. Mr. Stein said he had sold his CVS stores with the debt in place to save the buyer from having to obtain debt financing.	Investors face other challenges in completing these deals, including financing. Buyers who need a mortgage could struggle to get bank financing because of falling property values or pay more for loans from private lenders. Mr. Stein said he had sold his CVS stores with the debt in place to save the buyer from having to obtain debt financing.
Because the value of some properties has fallen in the pandemic, buyers who entered a contract on a property as part of an exchange do not want to pay the price they agreed to before the crisis hit.	Because the value of some properties has fallen in the pandemic, buyers who entered a contract on a property as part of an exchange do not want to pay the price they agreed to before the crisis hit.
“This replacement property now has tenants who are no longer paying rent — WeWork-type tenants, restaurants, tenants who may be going out of business,” Ms. Kraus said. “It’s a mess that you can’t clean up quickly.”	“This replacement property now has tenants who are no longer paying rent — WeWork-type tenants, restaurants, tenants who may be going out of business,” Ms. Kraus said. “It’s a mess that you can’t clean up quickly.”