Tuesday, December 21, 2010

In The End, New Tax Bill Helps Investors

The tax bill signed by President Obama will be a boon to commercial/investment real estate. No question about it.

Though it could have been better (re-instating the death tax was clearly a mistake in my opinion), the moves will help quell the near-term fears of many business people, will spur more jobs and physical plant investment, and more. Among the better decisions: not messing with capital gains taxes and extending the 15-year depreciation for qualified leasehold improvements.
Plus, by cutting Social Security payroll taxes and estending jobless benefits, along with mortgage insurance deduction, people will have more money in their pockets. Thus, increased consumer spending will benefit retailers, which will help the retail real estate market and eventually, industrial real estate. Maybe yes, maybe no. An interesting theory. Everything put together does trend toward the positive, though.

I'm not alone in my assessment. In a Globe Street article, Dennis Heskey, senior adviser at AlixPartners, says leaving the capital gains taxes the same rate through 2012 helps the REIT market. REIT investments are a dividend play and this has the potential to help the REIT market, he says.

Adds Harvey Berenson, managing director in the Business Tax Advisory group at FTI Schonbraun McCann Group in New York City, says the extention of the 15-year depreciation for qualified leasehold improvements will encourage investment in rental property.

Overall, there is less uncertainty. There still are other problems looming, but uncertainty about tax implications -- at least for the next 24 month -- helps lessen fears of investors overall. And as Martha Stewart might say, that's a good thing.

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