Wednesday, December 31, 2014

Mortgage Forgiveness Debt Relief Act is Extended

Thousands of Americans have a reason to celebrate this year end of 2014. On December 16, 2014, President Obama signed a bill passed by Congress at the 11th hour that extended the Mortgage Forgiveness Debt Relief Act ("Relief Act") to cover any mortgage debt of a homeowner's primary residence that was cancelled or forgiven after the residence went through a foreclosure sale or a short sale. However, the bill only extends the Relief Act retroactively and is set to expire on December 31, 2014.

The Mortgage Forgiveness Debt Relief Act was last updated on January 2, 2013 and expired by the end of 2013. Therefore, any homeowner who went through a short sale or foreclosure sale during the year 2014 originally expected that any mortgage debt forgiven by the lender would be a taxable event. Homeowners who still owed $100,000.00 in mortgage debt after a short sale or foreclosure sale in 2014 would be liable for income tax of about $28,000.00.

This is welcome relief especially for many homeowners in New York City where mortgage debt easily exceeds $500,000.00 stemming from the period of easy credit to purchase real property with little to no money down. It is unknown whether Congress will grant an extension of the Relief Act through the end of 2015 or even on a more permanent basis.

Wednesday, June 11, 2014

New York State Estate Tax Has Changed

Effective April 1, 2014, exemption from New York State estate tax will be revised gradually upward over the next few years until the exemption is equal to the federal estate tax exemption. Prior to April 1, 2014, exemption from New York State tax was applicable only for estates equal or less than $1,000,000.00. This was the rule since 1997.

For decedents dying on April 1, 2014 through March 31, 2015, the excluded amount from New York State estate tax will be $2,062,5000.00.
For decedents dying on April 1, 2015 through March 31, 2016, the excluded amount from New York State estate tax will be $3,125,000.00.
For decedents dying on April 1, 2016 through March 31, 2017, the excluded amount from New York State estate tax will be $4,187,500.00.
For decedents dying on April 1, 2017 through December 31, 2018, the excluded amount from New York State estate tax will be $5,250,000.00.
For decedents dying on January 1, 2018 and thereafter, the excluded amount will be equal to the federal estate tax exemption.

For estates that are between 100% and 105% of the above exclusion amount, exemption of estate taxation will be phased out based upon a formula. Estates that exceed 105% of the above exclusion amount will not benefit from any estate taxation exemption. The entire estate will be subject to taxation.

The new law effective April 1, 2014 also repeals the New York State generation-skipping transfer tax.

Three-Year Look Back on Gifts
For gifts made between April 1, 2014 through December 31, 2018, such gifts will be clawed back and deemed part of the estate for the purpose of calculation of estate taxes if the donor dies within three years of making the gift at issue. The three-year look back rule does not apply if (1) the gift was made when the decedent was not New York State resident, (2) the gift was made before April 1, 2014, or (3) the gift was made on or after January 1, 2019.

Wednesday, March 26, 2014

Offer of Renewal of Rent Stabilized Lease Is Not Deemed Automatically Renewed

The Rent Stabilization Code sets forth that "Where the tenant fails to timely renew an expiring lease or rental agreement offered [by the landlord] pursuant to this section, and remains in occupancy after expiration of the lease, such lease or rental agreement may be deemed to have been renewed upon the same terms and conditions, at the legal regulated rent. . . had the offer of a renewal lease been timely accepted." Rent Stabilization Code § 2523.5(c)(2). Therefore, a landlord in a rent stabilized apartment would expect that if he timely delivered a notice of renewal to the tenant prior to the expiration of the lease term and the tenant remains in possession without signing the renewal, the landlord would be entitled to hold that the renewal lease to be deemed renewed for the year under the law, especially if the tenant remains in possession and pays the newly increased monthly rent.