WASHINGTON, DC – National Association of Realtors is reporting that late last week, the Treasury Department and the Internal Revenue Service issued final regulations regarding the new 20 percent deduction on qualified business income. As Americans begin preparations for the 2018 tax filing season, real estate professionals have been uncertain about the true impact of the 2017 Tax Cuts and Jobs Act on their respective businesses. Friday’s ruling from Treasury and the IRS, however, signaled a significant victory for the real estate industry and for many of the National Association of Realtors®’ 1.3 million members.

“Friday’s ruling is a result of several months of advocacy and collaboration between NAR, our members, and the administration,” said NAR President John Smaby, a second-generation Realtor® from Edina, Minnesota and broker at Edina Realty. “These final guidelines will allow real estate professionals to benefit from the Section 199A 20 percent pass-through deduction, a move that will empower Realtors® to expand their operations and provide improved services to consumers and potential homebuyers across the country. The National Association of Realtors® is grateful for the openness and transparency encouraged by Treasury and the IRS, and we thank them for their hard work to ensure the real estate community was heard throughout this rulemaking process.”

A central component of the new tax law is a reduction of the corporate tax rate – from 35 to 21 percent. However, since nine out of ten American businesses are structured as pass-through entities rather than corporations, the Section 199A provision provides critical tax deductions for small businesses and self-employed independent contractors, which is how many real estate professionals are classified.

Within the 247-page rule issued last Friday, three major provisions for real estate professionals stood out as critical victories for members of the National Association of Realtors®.

Most importantly, the regulation clarifies that all real estate agents and brokers who are not employees but operate as sole proprietors or owners of partnerships, S corporations or limited liability companies are eligible for the new deduction, which can be as high as 20 percent. This includes those whose income exceeds the threshold of $157,500 for single filers and $315,000 for those filing a joint return.

Second, the rule simplifies the process that owners of rental real estate property must follow to claim the new deduction. As written in the Tax Cuts and Jobs Act, only income that is from a “trade or business” qualifies for the 20 percent write-off. However, because this distinction was not clearly defined by Congress when crafting the law, various court rulings and prior IRS guidance have caused confusion among tax professionals in determining which rental properties were merely investments and which could accurately be considered a business enterprise.

NAR strongly urged Treasury and the IRS to simplify the rules in order to give millions of rental real estate owners certainty surrounding their ability to qualify for this new deduction. Friday’s final regulations included a bright-line safe harbor test requiring at least 250 hours per year spent on maintaining and repairing property, collecting rent, paying expenses and conducting other typical landlord activities.

Finally, within the proposed regulation released last August, those who had exchanged one parcel of real estate under Section 1031 for another parcel were unfairly denied deduction eligibility. However, NAR and multiple additional trade groups concerned with commercial real estate were vocal in highlighting this shortcoming. In a positive resolution to the situation, Treasury and the IRS recognized the initial ruling was misguided and corrected the policy in Friday’s final guidance.

“NAR maintained consistent and coordinated communication with Treasury and the IRS throughout this rulemaking process. The finalized ruling, which represents a tremendous win for real estate professionals across the country, is a direct result of that engagement,” said Shannon McGahn, NAR Senior Vice President of Government Affairs. “We are thrilled to see our members emerge from this process so favorably, and we thank Treasury and the IRS for all of their hard work in ensuring consistency and clarity within these policies as America’s 1.3 million Realtors® begin filing their 2018 tax returns in the coming weeks.”

The National Association of Realtors® is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

PHOENIX, Arizona – CBRE has completed the sale of a 21,702-square-foot retail building located at 24930 S. Ellsworth Rd. in Queen Creek, Ariz. The property, which is on a long-term lease to Tractor Supply Company, traded for nearly $5.3 million. The buyer was in a 1031 exchange and obtained new financing in escrow.

Joseph R. Compagno with CBRE’s Phoenix office represented the Ariz.-based seller. Erik Barbic with Sherman & Boone Commercial represented the California-based buyer, Houser Holdings AZ, LLC.

“We received offers from eight buyers throughout the marketing period who were in search of new single-tenant investment opportunities,” said Compagno. “The buyer was approaching the end of their 1031 exchange in California and needed a long-term investment. The tenant’s long-term lease on the property combined with its highly desirable location in Queen Creek ultimately helped close the deal.”

Built in 2016, the nearly 3.98-acre property is leased to Tractor Supply Company, a publicly traded farm supply chain with 1,700 stores in 49 states. The building is situated at a rapidly expanding intersection at Ellsworth and Riggs roads.

More than 200 exhibitors from around the world set to participate

PIMA COUNTY – The Kino Gem and Mineral Show, which is one of the largest in Pima County, returns to Kino Sports Complex Jan. 31 – Feb. 17.

The show features more than 220 exhibitors displaying unique wares, such as rough rocks and gemstones from around the world including rough or polished stones, minerals, fossils, geodes, and other stones. In addition, several exhibitors will have jewelry, beads, woodcarvings, leather goods, pottery, rugs and more. The countries represented in this year’s event include Morocco, Brazil, China, Pakistan, Mexico, Germany, Australia and several others.

The show will open daily from 10 a.m. – 6 p.m. for both wholesale and retail trade. A food court serving food and alcoholic beverages will be open during this time. In addition, visitors can enjoy free admission and parking. Visitors should use the Kino Stadium main parking lot, located next to the show. Free gem show shuttle service will also be available from this location. Additional parking is available in the parking lots along Milber St., west of Country Club Rd.

For more information on the exhibitors, visit www.as-shows.com or contact Jim Gehring at 407.716.0858. For details about the shuttle route, visit www.gemride.com.