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PISD & Qualification Issues

PISD & Qualification Issues. Michael Kotin Kay-Kay Realty Corp. 2008. Placed-in-Service Dates. Placed-in-Service Dates. Two Types of Developments:. Placed-in-Service Dates. Two Types of Developments: New Construction. Placed-in-Service Dates. Two Types of Developments: New Construction

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PISD & Qualification Issues

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  1. PISD & Qualification Issues Michael Kotin Kay-Kay Realty Corp.2008

  2. Placed-in-Service Dates

  3. Placed-in-Service Dates Two Types of Developments:

  4. Placed-in-Service Dates Two Types of Developments: • New Construction

  5. Placed-in-Service Dates Two Types of Developments: • New Construction • Acquisition / Rehab

  6. New Construction Placed-in-Service Dates

  7. New Construction By December 31st of year which is 2 years from allocation year. Placed-in-Service Dates

  8. New Construction By December 31st of year which is 2 years from allocation year. Example: if allocation received in 2008, PISD must occur before December 31, 2010. Placed-in-Service Dates

  9. New Construction By December 31st of year which is 2 years from allocation year. Defined statutorily by first certificate of occupancy in each building. Placed-in-Service Dates

  10. New Construction By December 31st of year which is 2 years from allocation year. Defined statutorily by first certificate of occupancy in each building. May vary from building to building. Placed-in-Service Dates

  11. New Construction By December 31st of year which is 2 years from allocation year. Defined statutorily by first certificate of occupancy in each building. Occupancy cannot predate PISD. Placed-in-Service Dates

  12. Acquisition / Rehab Placed-in-Service Dates

  13. Acquisition / Rehab Date chosen by Owner. Placed-in-Service Dates

  14. Acquisition / Rehab Date chosen by Owner. PISD election need not be made until filing due date of tax return for year units are placed in service. Placed-in-Service Dates

  15. Acquisition / Rehab Date chosen by Owner. Not dictated by Certificate of Occupancy. Placed-in-Service Dates

  16. Acquisition / Rehab Date chosen by Owner. Not dictated by Certificate of Occupancy Rehab need not be completed. Placed-in-Service Dates

  17. Acquisition / Rehab Date chosen by Owner. Not dictated by Certificate of Occupancy Rehab need not be completed. At least one unit in each building must be suitable for occupancy. Placed-in-Service Dates

  18. Acquisition / Rehab Date chosen by Owner. Not dictated by Certificate of Occupancy. Rehab need not be completed Tenancies may predate PISD. Placed-in-Service Dates

  19. Acquisition / Rehab

  20. Acquisition / Rehab Choice of PISD impacts:

  21. Acquisition / Rehab Choice of PISD impacts: • Aggregation period for expenses.

  22. Acquisition / Rehab Choice of PISD impacts: • Aggregation period for expenses. • Capitalization period for construction interest.

  23. Acquisition / Rehab Choice of PISD impacts: • Aggregation period for expenses. • Capitalization period for construction interest. • Applicable credit percentage.

  24. Acquisition / Rehab Choice of PISD impacts: • Aggregation period for expenses. • Capitalization period for construction interest. • Applicable credit percentage. • Start period for credits.

  25. Aggregation period for expenses: Acquisition / Rehab

  26. Aggregation period for expenses: Generally, rehab costs may be aggregated for 24 month period prior to PISD. Acquisition / Rehab

  27. Aggregation period for expenses: Generally, rehab costs may be aggregated for 24 month period prior to PISD. PLUS Acquisition / Rehab

  28. Aggregation period for expenses: Generally, rehab costs may be aggregated for 24 month period prior to PISD. PLUS Costs incurred through the end of the owner’s taxable year. Acquisition / Rehab

  29. Aggregation period for construction interest: Acquisition / Rehab

  30. Aggregation period for construction interest: Generally, may capitalize interest until property is placed in service. Acquisition / Rehab

  31. Aggregation period for construction interest: Generally, may capitalize interest until property is placed in service. For “automatic” credits associated with tax exempt bonds, no limitation to eligible basis / available credits. Acquisition / Rehab

  32. Aggregation period for construction interest: Generally, may capitalize interest until property is placed in service. For “automatic” credits associated with tax exempt bonds, no limitation to eligible basis / available credits. Best to delay PISD as long as possible in order to increase total eligible basis. Acquisition / Rehab

  33. Aggregation period for construction interest: Generally, may capitalize interest until property is placed in service. For “automatic” credits associated with tax exempt bonds, no limitation to eligible basis / available credits. Best to delay PISD as long as possible in order to increase total eligible basis. Careful to meet 50% test. Acquisition / Rehab

  34. Aggregation period for construction interest: Gut Rehab v Facelift Generally, may capitalize interest until property is placed in service. For “automatic” credits associated with tax exempt bonds, no limitation to eligible basis / available credits. Best to delay PISD as long as possible in order to increase total eligible basis. Careful to meet 50% test. Acquisition / Rehab

  35. Applicable credit percentage: Acquisition / Rehab

  36. Applicable credit percentage: PISD may be chosen by taxpayer after end of year. Acquisition / Rehab

  37. Applicable credit percentage: PISD may be chosen by taxpayer after end of year. Chosen after all monthly credit percentages for year have been published. Acquisition / Rehab

  38. Applicable credit percentage: PISD may be chosen by taxpayer after end of year. Chosen after all monthly credit percentages for year have been published. May choose the month with the highest published credit percentage. Acquisition / Rehab

  39. Start period for credits: Acquisition / Rehab

  40. Start period for credits: “Look back” applies no matter when in year units are placed in service. Acquisition / Rehab

  41. Start period for credits: “Look back” applies no matter when in year units are placed in service. “Look back” goes back to LATTER of: Acquisition / Rehab

  42. Start period for credits: “Look back” applies no matter when in year units are placed in service. “Look back” goes back to LATTER of: 1st day of taxpayer’s taxable year, or Acquisition / Rehab

  43. Start period for credits: “Look back” applies no matter when in year units are placed in service. “Look back” goes back to LATTER of: 1st day of taxpayer’s taxable year, or Acquisition date. Acquisition / Rehab

  44. Example

  45. Assumptions: Example

  46. Assumptions: One building project (for convenience). Example

  47. Assumptions: One building project (for convenience). Calendar year taxpayer. Example

  48. Assumptions: One building project (for convenience). Calendar year taxpayer. Property acquired July 15, 2008. Example

  49. Assumptions: Placed in service October, 2008: Example

  50. Assumptions: Placed in service October, 2006: Aggregation of costs through December 31, 2008. Capitalization of construction interest through October, 2008 at the latest (generally). Credit percentage for month of October, 2008 used. Credits may commence as early as August, 2008. Example

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