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HAWAII REAL ESTATE AND ESTATE PLANNING

At Zahaby Law Offices we handle simple through complex and sophisticated real estate, estate and business matters in Honolulu and on Kauai, Maui and the Big Island.  We are dedicated to being accessible, efficient, responsive, professional and always acting with caring and aloha.  We offer our services to start-up businesses, families and established developers, real estate brokerages and local business institutions.
REAL ESTATE:  Timeshare Deeds, Acquisitions and Sales of Real Property, Real Estate and Corporate Litigation Analysis, Arbitration and Expert Testimony, Brokerage Agreements, Condominium Development, including formation of projects and obtaining Public Reports, Conveyancing, Development (Residential and Resort Communities, primarily), Easements and Licenses, Encroachments and Party Walls, Escrow, Finance (Documentation, Commercial Real Estate Loans), Land Use and Zoning, Leased Fee Conversions and, Sales Contracts, Leasing - commercial and office, Standard Form documents,Title Matters.
ESTATE PLANNING:  Living Trusts and Wills (Ask about our Free Estate Planning for Cancer Patients and Shriners Hospital Donations), Irrevocable Trusts, Charitable Trusts, Special Needs Trusts, Medicaid Planning, Retirement Trusts, Self-Directed IRAs, Health Care Directives and Final Wishes, Family Limited Partnerships, Limited Liability Companies, Business Succession Planning, Asset Protection, Insurance Trusts, etc.
BUSINESS PLANNING:  Creation and Maintenance of LLCs, C-Corporations & S-Corporations, Hawaii Registered Agent Services, Asset Protection Planning, Compensation Planning, and Tax and Business Planning for Physicians, Business Owners, Professionals, and Low/High Net Worth Individuals, Basic Tax Preparation.

ADVERSARIAL PRACTICE & DISPUTE RESOLUTION:  This firm strongly believes in a collaborative law process for resolution of all disputes.  We encourage mediation or Ho'oponopono and we no longer agree with the judicial process for resolution of civil disputes.  Civil litigation is not effective, is costly and may even be physically harmful to the average civil litigant.  We offer services as mediator, arbitrator or counselor pursuant to a collaborative law agreement.  All court filing inquiries other than uncontested divorce or stipulated settlements will be referred to other law firms.

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Wednesday, May 16, 2012

What is Stepped Up Basis? Often Mentioned, Rarely Understood!
Stepped Up Basis
Basis refers to the amount generally used for tax purposes to calculate gain or loss on a sale of an asset. In simple terms it is the price paid for the asset, plus the cost of post acquisition improvements, less depreciation allowed or allowable (if you didn't claim depreciation you were entitled to, it is still applied to reduce basis).

Stepped Up Basis is an increase in the basis of an asset, such as at death of the owner, usually to the fair market value of the asset.

Example: You purchased raw land for $100,000. Five years later you build a fence around the land and pave a drive, all for a cost of $20,000. Your tax basis is $120,000. No depreciation was allowed or allowable. On your death the land was worth $300,000. The basis of the land is stepped up to $300,000. If instead you gave the land to your children before death their tax basis would be $120,000, called "carry over basis". Even though the land had appreciated to $300,000 by your death, because you had given it away before death. This basis "step up" will eliminate any capital gains inherent in the asset.

Basis step up becomes more complex if the asset is owned by an entity. If the land was owned by a corporation you in turn owned, you would get a basis step up in the stock of the corporation, but there would be no basis step up for the underlying land. If you owned 50% of a partnership or limited liability company that owned the land, the partnership or the limited liability company (taxed as a partnership) would have to make a special election under the partnership tax law provisions (Section 754) to adjust the basis in the land.

In the year 2010 the estate tax is scheduled to be repealed and with it will disappear (really, be modified) the above basis adjustment. This is an increase in the adjusted tax basis (cost to purchase, less depreciation if applicable, plus improvements if applicable) of an asset to the fair market value of the asset at death. In 2010, if the executor chooses for the estate to be subject to the estate tax, the assets in the estate will all be stepped up (assuming they are appreciated) in this manner without limit. If in 2010 the estate is subject to the carryover basis rules the step up in tax basis may be limited to $1.3 million for bequests to anyone other than a spouse and an additional $3 million step up on bequests to a spouse (or trust qualifying for similar treatment).
9:53 am hst 

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