LEDFORD & ASSOCIATES

MICHIGAN LAW IN THE NEWS

Tags: Federal Law

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No Evictions Through June: CDC Extends Moratorium

The CDC has extended the Eviction Moratorium through June 2021.

Read more at Forbes

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What is "Stepped-Up Basis" and how does this affect you?

Pres. Biden has floated the idea of getting rid of something called "stepped-up basis". What is this and how does this affect you? 

When your parents pass and leave you the family house (or any asset), for instance, normally you would inherit that property at what it is worth today, regardless of the cost that your parents acquired it. 

So, for instance, if your parents purchased their home for $40,000.00 thirty years ago (the "basis"), and if, at their death (the last parent to die) the house is worth $200,000, and then, after inheriting it, you were to sell that house today (for, say, $205,000), you would only pay taxes on the gain from what it is worth at the time your last surviving parent died and what it sells for (gain=$5,000.00 in this example - see outline below). This is because the "stepped-up basis" automatically increases the "basis" from the original purchase price ($40,000.00) to what it is valued at upon the last owner to die ($200,000.00). 

If Biden does away with a "stepped-up basis," a policy/law that has been in place for many, many decades, you will inherit the property at the value your parents paid for the property (this is called the "basis" - $40,000.00). If you decide to sell (at $205,000.00) you will pay taxes on the difference between the original purchase price (the "basis" = $40,000.00) and what it sells for today ($205,000.00 = taxable value: $165,000.00). If you choose to try to keep the property, the IRS could still determine a value as of the date of the last to die and tax you on the gain (depending upon how the law and IRS regulation might be effected by such legislation). 

Here is what this looks like: 

Current Policy with a step-ups in basis: 

  • House original purchase price: $40,000 
  • Inherited House at Current Value - $200,000 
  • Sells for $205,000 
  • Taxable income = $5000
  • Taxes Due - 20% of $5000 = $1000 
  • Profit to you = $204,000 

Biden proposed Policy: 

  • Inherited House at original purchase price - $40,000 
  • Sells for $205,000 
  • Taxable income = $165,000 
  • Taxes Due - 20% of $165,000 = $33,000 
  • Profit to you = $172,000 

If your parent were to have sold this property prior to passing they would have paid no taxes because it was their primary residence. This will be, if Biden goes forward with this plan, a massively huge tax on the middle and lower classes, as well as forcing people to incur additional cost and time expenditures attempting to determine the original purchase price of the asset (houses are easier to track down this information than, say, stocks).

Paul A. Ledford, Esq.
Ledford & Associates

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The First Amendment doesn't guarantee you the rights you think it does

There's a lot going on in just a few sentences, and it's important to know when and how it applies to common situations -- and, equally as important, when it doesn't

Read more at CNN

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Landlords Fear Tenant Wins In Lease Disputes May Snowball

"While the four corners of the lease may not provide an out for not paying rent, experts say tenants may be able to make the argument that they don't need to pay rent if a co-tenancy portion of the lease is not fulfilled. Co-tenancy provisions are designed to help a tenant have some sort of a guarantee of the amount of foot traffic going by the store by requiring other stores to remain open. Mall owners routinely juggle hundreds of such provisions, but the forced closure of many malls and stores may trigger co-tenancy agreements, and could give tenants an argument as to why they are not required to pay rent. "If every other store [in a mall] is shut down, that provides a defense," Weiner said."

Read more at Law360

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Lawyers, advocates review surprise new CDC directive that stops evictions

The moratorium doesn't take effect until it's published in the Federal Register, which is scheduled to happen Friday.

Read more at The Detroit News

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