Crunching the Numbers: Anchin’s Robert Gilman Tackles Hot Topics in Real Estate Tax

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An elderly man or woman has a $10 million property and thinks he might die in the next year. He has several kids. What’s the best option?

The benefit of giving it away now, especially if you own 100 percent of the building, and you were to give it away to 10 grandkids is that each of them are getting less than majority interest, so there are advantages to take away from discounts. [But] if the individual were to die, even if he was giving it to 10 individuals, you have to value it as if they had a majority interest, so you lose out on those discounts.

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So there could be advantages to giving it away before death. There could also potentially be some disadvantages, depending on where their basis is. So if they had taken a lot of money out of the property, there are certain circumstances where it’s beneficial to have it in their estate when they die.

How will the Obamacare 3.8 Medicare tax increase (on all passive income, like interest dividends and real estate investments, if you make more than a certain amount) impact real estate professionals?

A lot of times a real estate owner puts money into real estate deals they aren’t operating, so it’s deemed to be a passive investment. So normally if you had earned, say, $100,000 from a real estate deal that you were deemed to be passive in, you would be subject to the 3.8 percent tax.

If you’re a real estate professional or owner, even if you had an investment that was deemed to be passive, there are ways to treat that as being nonpassive (or active), because you’re a real estate professional and you are not subject to the tax. We are monitoring a lot of our clients to make sure that they qualify as a real estate professional.

Bill De Blasio will be the next mayor. How could that affect taxes? 

In dealing with many different elections and speaking with clients, there are always campaign promises that don’t come to fruition. Most people think with this new mayor the rates for the wealthy are going to increase. But the rates for city residents were going up anyway. I think that’s going to continue. But again, we’ll see.

How is the rebirth of Downtown impacting your business? 

We have a lot of clients involved in some major projects downtown, and we’re seeing some positive activity. There are a lot of incentives for moving downtown, and we are making sure that our clients and their tenants are aware of that. These larger projects downtown, building a building and starting out with no tenants—your business will only be as good as how many tenants [you have]. We have seen a lot of activity with some of these buildings that are going to be completed in 2014, ’15, ’16, where they are getting tenants now because [the tenants] want to get in on the early side of these incentives.

How do you feel about the often-decried tax structure for real estate in New York?  

The rates are definitely higher in New York than some of my clients that may own buildings in the South, so when you see the amount they are paying in real estate taxes, you’re like, “This is crazy.” But the income is greater here.

The revenue is here, and as the economy comes back, New York City is always the place businesses like to come to. So while the real estate taxes are higher, if the revenue bases keep increasing, our clients are going to be making more money.

There are organizations that are on top of this, like [the Real Estate Board of New York], making sure that it’s still a viable place to own real estate. Real estate is not like an operating business. With certain businesses, it doesn’t matter where you are. A manufacturer can manufacture in New York, New Jersey or Florida—it doesn’t make a difference. If you’re a real estate owner and you own in New York, it’s not like you can move it to New Jersey.