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LIST OF SUBSTANTIVE CHANGES AND ADDITIONS

PPC’s Guide to Real Estate Taxation

Twenty-first Edition (June 2015)

Highlights of this Edition

The following are some of the important update features of the 2015 edition of PPC’s Guide to Real EstateTaxation.

¯ Expired Internal RevenueCode Provisions. Various tax provisions expired at the end of 2014 butmay beextended to 2015. These items include the increased Section 179 deduction; additional first-year bonusdepreciation; 15-year recovery period for qualified leasehold improvements, retail improvements andrestaurant property; and several tax credits. These expired provisions have been highlighted in this editionof the Guide.

¯ Guidance on Accounting Method Changes Required to Comply with the Tangible PropertyRegulations. The Guide has been updated for coverage of revenue procedures issued in 2015 thatsupersede existing guidance on making accounting method changes. Also, a qualified small taxpayerexception allows certain taxpayers to make the required accounting method change to comply with thetangible property regulations without filing Form 3115.

¯ CourtRuling inHowardHughesCase.The impactof a recentTaxCourt rulingwasdiscussed thatprovidesinformation on the definition of a qualified homebuilder for purposes of the completed contract method.

¯ Recent IRS Guidance and Court Decisions That Impact Real Estate Professionals and Transactions.Revised discussions for recent IRS guidance and court decisions that impact real estate professionals andreal estate transactions.

¯ Choice of Business Entity. Several new appendixes were added that provide summarized details fordetermining the most beneficial type of entity to use when starting a real estate business.

Chapter Substantive Changes and Additions Reference

CHAPTER 1

Overview 1. Revised discussion for recent trends in real estate valuesand businesses and the implications for tax practitionersadvising clients in light of these developments.

Section 102

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Chapter ReferenceSubstantive Changes and Additions

CHAPTER 2

Form of Ownership 1. Reformatted chapter to make the discussion more conciseand added the following new appendixes:

Throughout

· SE and FICA Tax Treatment of Pass-through Incomeand Owner Wage Payments

Appendix 2B

· Major Advantages and Disadvantages of Each Entity Appendix 2C· Summary of Available Corporate Entities Appendix 2D· Summary Comparison of Various Partnership/LLC Enti-

tiesAppendix 2E

· Comparison of Forms of Concurrent Ownership inCommon Law States

Appendix 2F

CHAPTER 3

Acquisition of Real Estate 1. Expanded the discussion regarding the holding period ruleof special use valuation property.

Section 302

2. Updated discussion for new accounting change methodprocedures for taxpayers implementing cost segregationstudies.

Section 303

3. Noted June 2014 revisions to the Circular 230 rulesregardingwritten tax opinions that include cost segregationstudies prepared by practitioners.

Section 303

4. Updated the discussion for the expiration of the higher limitfor Section 179 deductions starting in 2015.

Section 303

CHAPTER 4

Subdivision andDevelopment

1. Updated transaction cost guidance for tax treatment ofsuccess-based fees and alerted readers to a safe harborelection available for these fees.

Section 401

2. Expanded the discussion regarding the treatment ofcommon improvement costs made to land.

Section 402

3. Updated the discussion on rules addressing partnershiptransactions involving contracts accounted for under along-term contract method.

Section 405

4. Included recent TaxCourt casedecisionwhere the taxpayerdid not meet the definition of a qualified homebuilder forpurposes of the completed contract method.

Section 407

5. Noted the issuance of proposed regulations dealing withtaxpayer-initiated accounting method changes.

Section 411

6. Added a new sample election for real estate developers touse thealternativecostmethod for common improvements.

Appendix 4A

CHAPTER 5

Operations and Leasing 1. Updatedguidance for recent revenueprocedures related tothe tangible property regulations, including those govern-ing dispositions and partial dispositions of MACRS prop-erty.

Section 505

2. DiscussedaChiefCouncil Advice that lumpsumreimburse-ments for improvements were not deemed to be rentalincome to a lessor.

Section 506

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Chapter ReferenceSubstantive Changes and Additions

3. Includeda tableof theelectionsavailableunder the tangibleproperty regulations and the procedural requirements formaking these elections.

Appendix 5H

CHAPTER 6

Limitations onReal Estate Losses

1. Updated guidance for final regulations providing that basisin debt is derived from any bona fide indebtedness of theentity that runs directly to the interest holder.

Section 601

2. Mentioned a recent Chief Council Advice in which the IRSfound that the guarantor of LLC debtmay be at risk for suchdebt even if the guarantor does not waive rights ofsubrogation and reimbursement.

Section 602

3. Discussed recent IRSguidanceon real estateprofessionalswhobring together buyers and sellers qualifying for the realestate professional relief provision.

Section 608

4. Explained a recent Chief Council Advice for taxpayerselecting to combine rental real estate activities under thesingle activity election of Reg. 1.469-9(g).

Section 608

5. A recent court case is included that clarifies the originalreturn filing requirement of the single activity election ofReg. 1.469-9(g).

Section 608

CHAPTER 7

Dispositions of Real Estate 1. Expanded installment sale discussion for ineligible transac-tions.

Section 707

2. Discussed the BalsamMountain ruling regarding the abilityto deduct a contribution of a qualified real property interest.

Section 715

CHAPTER 8

Tax Depreciation andCredits

1. Included recent IRS guidance regarding changes to auto-matic accounting method procedures to comply with thetangibleproperty regulations (Rev.Procs.2015-13,2015-14and 2015-33).

Section 801

2. Expanded discussion of property eligible for additionalresearch or minimum tax credits, in lieu of bonus deprecia-tion, for 2015 and 2016 (long-production period property).

Section 801

3. Noted Stine case where placed-in-service date for a retailstore buildingwasbasedon thebuilding’s ability toperformits intended function, despite certificates of occupancy thatdid not permit customers in the building.

Section 801

4. Discussed recent IRS guidance on the availability of thelow-income housing credit when a tenant’s incomeexceeds required limits.

Section 811

CHAPTER 9

Personal Residences 1. Discussed recent IRS guidance related to the deductibilityof qualified residence interest for a property co-owned bytwo taxpayers.

Section 902

2. Included the discussion of a court decision regarding theinclusion of days spent performing repairs on a vacationhome as days of personal use.

Section 906

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Chapter ReferenceSubstantive Changes and Additions

CHAPTER 10

Estate Planning 1. Added a comment that holding an asset until deathmay bemore beneficial than gifting the asset.

Sections 1001,1006

2. Included an observation about financing charges to relatedparties to avoid the imputed interest rules.

Section 1001

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P.O. Box 115008Carrollton, TX 75011-5008Tel (972) 250-7750 (800) 431-9025 Fax (888) 216-1929tax.thomsonreuters.com

Dear Subscriber:

Enclosed is your copy of PPC’s Guide to Real Estate Taxation. We are sure the latest edition of this Guide will be anindispensable tool for your real estate planning engagements. Please take a fewminutes to familiarize yourself withthe contents and layout of the Guide. Time invested now will save you valuable time later.Our commitment is to provide youwith thebest possible guidance. To accomplish this, our authors andeditorial staffconstantly monitor legislative, judicial, and administrative developments.

The following are some of the important update features in this edition of PPC’s Guide to Real Estate Taxation:¯ Expired Internal Revenue Code Provisions. Various tax provisions expired at the end of 2014 but maybe extended for 2015. These items include the increasedSection 179 deduction; additional first-year bonusdepreciation; 15-year recovery period for qualified leasehold improvements, retail improvements andrestaurant property; and several tax credits. These expired provisions have been highlighted in this editionof the Guide.

¯ Guidance on Accounting Method Changes Required to Comply with the Tangible PropertyRegulations. The Guide has been updated for coverage of revenue procedures issued in 2015 thatsupersede existing guidance on making accounting method changes. Also, a qualified small taxpayerexception allows certain taxpayers to make the required accounting method change to comply with thetangible property regulations without filing Form 3115.

¯ CourtRuling inHowardHughesCase.The impactof a recentTaxCourt rulingwasdiscussed thatprovidesinformation on the definition of a qualified homebuilder for purposes of the completed contract method.

¯ Updated IRSGuidanceonQualifications for theReal EstateProfessional Relief Provision of IRCSec.469(c)(7).Recent IRSguidancediscussed the ability of real estate professionalswhobring together buyersand sellers qualifying for the real estate professional relief provision.

¯ Choice of Business Entity. Several new appendixes were added that provide summarized details fordetermining the most beneficial type of entity to use when starting a real estate business.

We hope you are pleased with PPC’s Guide to Real Estate Taxation. If so, you only need to file yourGuide accordingto the enclosed “Filing Instructions” andpay the invoice. If for some reason youdecide not to accept this publication,return it to us within 30 days of receipt, and we will cancel your subscription.

Thank you again for subscribing to PPC products.

Sincerely,

Blake T. Smith, CPASenior Director of Product DevelopmentTax Publications

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FILING INSTRUCTIONS

PPC’s Guide to Real Estate Taxation

Twenty-first Edition (June 2015)

YOUR SHIPPING PACKAGE INCLUDES:

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2. One shrink-wrapped package containing the text.

New subscribers also receive:

1. One binder with inserted cover and spine.

2. One shrink-wrapped package of tabs.

Existing subscribers also receive:

1. A list of Substantive Changes and Additions to be filed at the front of the Guide binder.

TO FILE PPC’s Guide to Real Estate Taxation:

1. If you already have the previous edition, remove the text from your binder and discard, but save the tabs.

2. Insert the new text into the binder. File the tabs behind the chapters listed below.

3. If anyparts of yourGuide aremissingor if youhavequestions about filing, call our customer service departmentat (800) 431-9025.

4. Your Twenty-first Edition of PPC’s Guide to Real Estate Taxation is now ready to use.

Placement of Tabs

Tab Description File Behind100—OVERVIEW Introductory Material200—FORM OF OWNERSHIP Chapter 1300—ACQUISITION OF REAL ESTATE Chapter 2400—SUBDIVISION AND DEVELOPMENT Chapter 3500—OPERATIONS AND LEASING Chapter 4600—LIMITATIONS ON REAL ESTATE LOSSES Chapter 5700—DISPOSITIONS OF REAL ESTATE Chapter 6800—TAX DEPRECIATION AND CREDITS Chapter 7900—PERSONAL RESIDENCES Chapter 81000—ESTATE PLANNING Chapter 9

FINDING LISTS AND INDEX Chapter 10CPE INFORMATION Finding Lists and Index

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