Service Animals and the ADA!

Under the Americans with Disabilities Act (“ADA”), a “service animal” is only a dog that is individually trained, works or performs tasks for individuals with physical, sensory, psychiatric, intellectual or other mental disabilities. The task(s) performed by the dog must be directly related to the person’s disability.

It is important for the hospitality industry to understand what qualifies are a service animal under the ADA. The ADA does not recognize comfort animals, therapy animals, or companion animals. An animal whose sole function is to provide therapy is not a “service animal” under ADA.

How to verify?

In situations where it is not obvious that the dog is a service animal, staff may ask only two specific questions: (1) is the dog a service animal required because of a disability? and (2) what work or task has the dog been trained to perform? Staff are not allowed to request any documentation for the dog, require that the dog demonstrate its task, or inquire about the nature of the person’s disability.

The ADA requires that service animals be under the control of the handler at all times. In most instances, the handler will be the individual with a disability or a third party who accompanies the individual with a disability. The service animal must be harnessed, leashed, or tethered while in public places unless these devices interfere with the service animal’s work or the person’s disability prevents use of these devices. In that case, the person must use voice, signal, or other effective means to maintain control of the animal.

For example, a person who uses a wheelchair may use a long, retractable leash to allow her service animal to pick up or retrieve items. She may not allow the dog to wander away from her and must maintain control of the dog, even if it is retrieving an item at a distance from her. Or, a returning veteran who has PTSD and has great difficulty entering unfamiliar spaces may have a dog that is trained to enter a space, check to see that no threats are there, and come back and signal that it is safe to enter. The dog must be off leash to do its job, but may be leashed at other times. Under control also means that a service animal should not be allowed to bark repeatedly in a lecture hall, theater, library, or other quiet place. However, if a dog barks just once, or barks because someone has provoked it, this would not mean that the dog is out of control.

There are specific rules under the ADA that are tailored specifically to hoteliers and public service accommodations. Please contact us, your business law attorneys for more information. Staying informed helps limit ingenuine service animals and support and welcome your guests and comply with ADA.

Source: ADA

1031 Like Kind Exchange Tips

1031 Like Kind Exchange Tips -Identifiying Properties 

With Real Estate being so hot, we have seen such an increase in 1031 Like Kind Exchange’s in the past few years.

Here are a few tips to consider when thinking about doing the exchange:

The Basic 1031 Identification Rule Is:

The Exchanger has only 45 days from the day of closing on its relinquished property to identify possible replacement property.

WARNING: Section 1031 and the IRS regulations thereunder have strict requirements for the identification of replacement property.

Identification of all replacement property must be made in writing, must be signed by the Exchanger, and must be delivered to the Qualified Intermediary on or before midnight of the 45th day.

The Exchanger may identify any type of investment or business real property in the USA, including a single-family rental, apartment building, hotel, office building, warehouse, vacant land, shopping center, etc.

The Exchanger/Taxpayer may not identify replacement property or amend its identification after the 45th day has expired.

Identifying Multiple Properties:

The Exchanger may identify more than one property, as follows:

(1) The Exchanger may identify as many as three (3) properties, regardless of their total value (known as the “3-Property Rule”) See Example # 1 below; OR

(2) The Exchanger may identify any number of properties provided their aggregate fair market value on the 45th day does not exceed 200% of the aggregate fair market value of all of the Exchanger’s relinquished property on the date of its transfer (known as the “200% Rule”) See Example #2 below; OR

(3) The Exchanger may receive, by the end of the Exchange Period, Replacement Property which the Fair Market Value of, is at least 95% of the aggregate Fair Market Value of all of the Replacement properties identified (known as the” 95% Rule”) See Example #3 below.

“The Exchanger is not required to acquire all the property it has have identified. Therefore, many gurus in our industry recommend that the Exchanger identify alternative properties should the closing on the Exchanger’s preferred property fail for any reason. Any property acquired prior to the 45-day Exchanger’s identification expiring, counts as an identified property.”

EXAMPLE #1 – 1—3 PROPERTY RULE:
Mr. and Mrs. Trembling (Exchangers) sell their investment property that they have owned for 17 years for the sum of $695,000.00. They, within 45 days of the relinquished transaction, e-mail to their Qualified Intermediary a list of three (3) properties for the following amounts: Property # 1: $1,200,000.00; Property #2: $500,000.00; Property # 3; $400,000.00.

As long as the Exchangers purchase property of equal or more value than their relinquished property ($695,000.00) any tax they may have owed will be deferred. There is NO dollar amount limitation on the properties they have identified. The only limitation they have using this rule is that they can only identify 3 properties.

EXAMPLE #2 – 200% RULE:
Mr. and Mrs. Anderson (Exchangers) sell their investment property that they have owned for 3.5 years for the sum of $500,000.00. Within the 45-day time limit, they e-mail to their Qualified Intermediary, the following list of possible Replacement Properties: #1: $150,000.00; #2: $300,000.00; #3: $250,000.00; #4: $100,000.00; and #5: $199,000.00.

The Exchangers are allowed to identify any number of properties, but they cannot total together more than 200% of what they sold.

The 5 properties they identified combined total: $999,000.00, which is under the $1,000,000.00) they would be allowed to identify and therefore their Identification is valid. They do not have to purchase all of these properties, but if they want to defer all of their gains, they must obtain at least $500,000.00 of replacement property.

EXAMPLE #3 – 95% RULE:
Mr. Thomas Franklin (Exchnager) sells his investment property for the tidy sum of $800,000. He identifies the following properties as possible replacement properties: #1: $600,000; #2:$ 300,000; #3: 900,000; #4: 700,000 and #5: $200,000.

The total valuation of all the properties together is: $2,700,000.

He cannot use the 200% rule because he has identified more than 200% of his relinquished property’s selling price ($800,000 x 200% = $1,600,000). But he can still use the 95% rule. He must purchase 95% of the valuation price of the properties he identified. That would be: $2,565,000 ($2,700,000 x 95% = $2,565,000). If he purchases less than the 95%, his 1031 exchange will be disqualified.

After reviewing the above 3 Rules for Identification, most Exchangers select the 3 Property rule, because it is a lot easier. It has no dollar amount restrictions, but the exchanger is limited to only 3 properties for identification purposes.

Source: Stephen Wayner of Liberty 1031.

DISCLAIMER: We always recommend that the taxpayer consults with their tax and/or legal counsel on all matters dealing with the Internal Revenue Serice.

Post-Hurricane Scams Targeting Real Estate Owners!

ATTENTION all Real Estate Owners!

BEWARE OF SCAMMERS
There have been talks of some individuals attempting to take advantage of real estate owners post-hurricane recovery situations. Insurance, debris removal, and tree removal scammers are actively working in storm affected areas.

Do not sign anything regarding an “assignment of benefits” from a potential contractor.

If you have any questions regarding reviewing paperwork to be signed, please reach out to your Real Estate or Business Law Attorney.

 

#GulatiLaw

Big Moves in the Hotel Industry

Marriott plans to remove plastic straws Worldwide by July 2019!

Marriott International today announced that it has adopted a plan to remove disposable plastic straws and plastic stirrers from its managed and franchised properties by July 2019. The move will impact 6,500 properties across 30 brands around the world, and could eliminate the use of more than 1 billion plastic straws per year and about a quarter billion stirrers. The company says that its timeline gives hotel owners and franchisees time to deplete their existing supply of plastic straws, identify sources of alternate straws (which hotels will offer upon request), and educate staff to modify customer service.

Here are Gulati Law we strive to protect our enviroment, and are also following the same plan.

Not so Fun Fact: According to Google, over 100 million marine animals are killed each year due to plastic debris in the ocean. Currently, it is estimated that there are 100 million tons of plastic in oceans around the world.

#GoGreen #SavethePlanet

Source

Non-Tax Reasons to do a Section 1031 Tax Deferred Exchange

The majority of our clients and referral sources are aware that doing a Section 1031 tax deferred exchange allows Taxpayers the privilege of deferring the payment of their federal capital gains taxes, depreciation recapture taxes and state income taxes (if any) on the property they held for investment or on the property that they used in their trade or business.  

So, deferral of payment of taxes is a major reason astute Taxpayers use Section 1031 of the Internal Revenue Code.  But there are numerous Non-Tax reasons to do a 1031 exchange.  I will try to cover some of these reasons in this 1031 information missive.  Let’s begin:  Non-Tax reasons to do a Section 1031 Exchange:

1. Taxpayers may want to sell a property that they have fully depreciated and exchange into a more expensive property that can have additional depreciation.

2. Taxpayers may want to exchange a property that is not producing income into a piece of property that does produce an income stream.  A typical example would be the exchanging of a piece of raw acreage into a replacement property, such as an office building, that would produce a positive cash flow.   A lot of retirees do this type of exchange, because they are looking for an additional income stream in their retirement years.

3. Taxpayers’ “Property of Their Dreams,” becomes available and so they exchange an investment property they are not particularly fond of for the “Property of Their Dreams.”

4. Taxpayers exchange a property that is not producing a satisfactory cash flow for another that will produce a larger cash flow.

5. Taxpayers want to diversify their investments.  They might own one large property.  They could sell the large property (relinquish it) and purchase (replace) with numerous investment properties.   They may want to diversify because they would like to have properties in various different states, so that if one state has an economic problem, the rest of their assets are not affected.  Or they might want to own different types of property.  For example, they could exchange a large office building and replace it with a small strip shopping center, an office condominium, and other property–all being different types of real estate.  Remember–the property sold (relinquished) must be “like kind” to the property purchased (replaced).   In the case of real estate, all investment real estate is “like kind” to any other type of investment real estate.

6. The Taxpayers may want to exchange a property that is not appreciating at the rate they would like for another property that has a better possibility for increased appreciation.

7. The Taxpayers may decide to do a 1031 exchange because the present property they own may be harder to sell in the future and the replacement property may be easier to dispose of in the future.

8. The Taxpayer decided to relocate to another state and would like to have all of their investments within a reasonable distance from where they live.   This becomes especially important to the Taxpayer who must manage and oversee their investments personally.

9. Consolidation is an important concern to many of our clients.   They own a number of investment properties and managed them for a number of years.  They have decided that it would be better to own fewer, but more expensive investments.   This could decrease the Management responsibilities, as a larger/more expensive property is more conducive for hiring a management company to take care of the investment.

10. Multiplication and Leverage–no I’m not talking about 3 x 3 = 9.  Many Taxpayers are hoping that through their investments, their net worth will appreciate.  For example:  A Taxpayer who owns a piece of property valued at $500 that will appreciate 10% in a year, will have an investment worth $550 at the end of the first year (appreciation of $50 that year).  A Taxpayer who exchanges that $500 (I am presuming there is no debt on the property to make this example easy to understand) for a $2,000 investment (that would be 25% down–$500–with the remaining $1,500 in borrowed money) would have at a 10% appreciation factor, a $200 appreciation that year.  We know which is more–$200 is more than $50.  So, through multiplication and Leverage–the Taxpayer’s net worth can appreciate at a much quicker pace.

11. Reduced Management Responsibilities–I know I have intimated this reason above, but it is a very important reason that many Taxpayers transact a 1031 exchange.  They exchange the property they presently own and replace it with one with less management headaches, or replace it with a property that they don’t have to manage at all, such as a Tenant-in-Common/Delaware Statutory Trust type of property–that is professionally managed by others.

12. Exchange out of a property they own a partial interest in–and exchange into a property they will own just by themselves.  That way they no longer have to get an approval to do anything to or with the property from their “co-owner.”

13. Estate Planning is a major reason Taxpayers should do a Section 1031 exchange.  Although this 1031 Information Missive is titled Non-Tax Reasons–I just had to sneak this one in because, if done correctly, most Taxpayers will pay NO tax when doing a Section 1031 exchange and at the Taxpayers’ demise, their heirs will receive these assets at a stepped-up basis—-and it’s very likely that there will be no estate taxes.

Courtesy of: Liberty 1031

Commercial Developers- Environmental Update-Sand Skink Season

If you have property that you are planning on developing, or obtaining development approvals, before March of 2019, in Lake, Polk, Marion, Highlands, Putnam, and portions of Orange and Osceola counties that meet the 3 criteria established by the U.S. Fish and Wildlife Service (USFWS), i.e. location, soils, and above 80′ msl elevation, then you are required to conduct a survey for the Florida sand skink.

The survey is a two-tier approach. First, a pedestrian survey is conducted. This can be conducted any time of the year. If the results are negative, than a coverboard survey is initiated. You can only conduct the coverboard survey for sand skinks from March 1st through May 15th and the survey must occur over 4 straight weeks.

The USFWS requires the placement of 40 coverboards, 2’x2’x.50″, per acre. The boards are to be made of plywood or another similar rigid material. The coverboards should be allowed to acclimate for 7 days before the first sampling event. Each board is to be checked for signs of sand skinks a minimum of once a week for 4 straight weeks.

Following the completion of the survey, a report is prepared and submitted to the USFWS. The USFWS will issue a “Clearance Letter” if the survey was negative for the presence of sand skinks. The boards can be deployed at anytime.

Guest writer- Stillwater Enviromental

Title to Real Estate Property!

 

A deed is a legal instrument used to convey real property. There are three main deeds in Florida, or three methods of transferring property. They vary depending on the guarantee that is offered by the seller, the type of property, or reason for transfer.

1) General Warranty Deed

  • Most complete form of ownership, or highest level of protection to buyer
  • Guarantee that grantor (seller) has legal title

2) Special Warranty Deed

  • Provides limited warranty of title
  • Seller guarantees he/she has not adversely affected the title to the property during their ownership period
  • Common for transactions with trustees, or personal representatives, & foreclosures

3) Quitclaim Deed

  • No warranties or guarantees from seller
  • Most risky form of ownership
  • Conveys the interests of the grantor (seller) but grantor does not represent he/she has any rights to convey
  • Common to transfer property among family members or when dealing with a divorce
  • Common to clear defects in title

lisa-jones-sale-pending-orlando-001

In most real estate transactions, we recommend obtaining a general warranty deed in congruence with a title insurance policy to ensure you have complete equity, or ownership in your new property & proper protection for any unexpected encumbrances. However, every case is different and you should discuss your options with a Florida Real Estate Attorney.

Stay tuned for our next blog on – which Deed is right for you!

Putting Your Real Estate in a Florida Land Trust

A Florida land trust is a method for holding legal title to real property. The beneficiary owns the Florida land trust, has power of direction over the trust, and has control over the property that is in the trust (the person creating the land establishes the land trust and is often one of the beneficiaries). The trustee holds the title to the property for the benefit of the owners or beneficiaries.

There are two steps to putting your property in a Florida land trust (Consult your Florida Real Estate Attorney for assistance):

  1. Deed in Trust; and
  2. A Florida Land Trust Agreement.

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Below are some of the benefits of a Florida Land Trust:

  1. Allows for the private transfer of property – your name is not recorded in the public record like most property transactions
  2. Limits liability – trustee is free from liability, therefore you can allow for a corporation to be the beneficiary and then limit personal liability as trustee
  • Property held in land trust is also not encumbered by judgments made on beneficiaries
  • Work with your Florida Real Estate Attorney to structure your trust to best avoid personal liability
  1.    Avoid probate
  • It is common for land trust to be considered a “will substitute”
  • Contingent beneficiaries are mentioned in the trust
  • No Florida Documentary transfer tax is due when transfers are among beneficiaries (this is on a case-by-case basis).
  1.     Improves efficiency in transactions with multiple buyers or owners
  • Allows for only the trustee to sign documents to complete the transaction
  1.     Homestead Exemption
  • If beneficiary is a Florida resident, then trust may qualify for Homestead Exemption
  1. Tax benefits
  • No annual filing fees with state of Florida
  • No additional tax return or tax I.D.

There are a number of benefits associated with putting your property into a land trust. For example, Walt Disney actually acquired the property for Walt Disney World in Florida through the use of a land trust. This allowed for additional privacy, and reduced the chance that prices in the area would increase due to anticipation of Disney’s plans for the community.

Be sure to contact your Florida Real Estate Attorney to set up a land trust, as there are Florida Statutes that you must comply with. Your Florida Real Estate Attorney should draft a deed to the trustee, and a written land trust agreement. A disclosure form to the IRS must also be filed to note that the trustee is acting for the beneficiary, this is where you should get your Certified Public Accountant involved as well. Both your Florida Real Estate Attorney and Certified Public Accountant will work together in order to set up your asset structure.

FIRPTA CHANGES – The Increase in Withholding!

Prior to the PATH Act of 2015 (“Protecting Americans from Tax Hikes 2015”, effective 12/18/2015), if the seller of real property is a foreign person, Federal law required buyers to withhold 10% of the gross sale price and provide it to the IRS. With the implementation of the PATH Act, this 10% tax requirement has been altered. Effective February 16, 2016, the 10% withholding tax will be increased to 15%. Meaning, if you are a foreign person selling U.S. real property, 15% of the gross sales price of that property will go to the IRS in the form of a tax.

There are a number of exclusions that must be noted: first, if the transaction has a sales price of $300,001 to $1,000,000 AND the property is meant as the buyer’s principle residence (according to the IRS, a principle residence requires: “you or a member of your family must have definite plans to reside at the property for at least 50% of the number of days the property is used by any person during each of the first two 12-month periods following the date of transfer. When counting the number of days the property is used, do not count the days the property will be vacant”), then the 10% tax requirement remains. Second, for transactions of $300,000 or less, AND the property is to be the buyer’s principle residence, there are NO tax withholdings due to the IRS under Foreign Investment in Real Property Tax Act (hereinafter “FIRPTA”). Other circumstances that are exempt from paying this FIRPTA withholding tax to the IRS include: if a non-foreign affidavit is provided by the seller, if a withholding certificate is granted to the seller by the IRS, if the amount realized by the seller is zero (zero gain or compensation), and if the property is purchased by the U.S. government or a political subdivision. Therefore, all transactions where the property is NOT meant to be the buyer’s principle residence (at any sales price) will require the new 15% withholding to the IRS.

*NOTE: According to the IRS, a foreign person is a “…nonresident alien individual, foreign corporation, foreign partnership, foreign trust, a foreign estate, and any other person that is not a U.S. person. It also includes a foreign branch of a U.S. financial institution if the foreign branch is a qualified intermediary. Generally, the U.S. branch of a foreign corporation or partnership is treated as a foreign person”.*

Make sure your Hotel is ADA Compliant!

“Drive by” ADA lawsuits are once again on the rise. These professional plaintiffs and their unscrupulous lawyers know that most warranties on pool lifts installed in 2012-2013 have expired and that some pool lifts are in need of repair. Now it is more important than ever to be proactive with your ADA compliance.
hotel
These plaintiffs are hoping that you won’t take the time or spend the money to get the lifts repaired. Don’t be an easy target!  Get your pool lift inspected and repaired today. The money you spend now will save you even more money and the aggravation of a lawsuit in the future.  If your property is not ADA compliant, the question is not will I get sued, but when. We can refer you to vendors who provide ADA inspections, so don’t delay. Avoid a lawsuit now — make sure your pool lift and your entire property is ADA compliant.
Attorney Gulati is a proud Florida Ambassador of one of the largest organizations in the nation, Asian American Hotel Owners Association, representing thousands of hotel owners nationwide.
Complimentary Source: AAHOA

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