Key Real Estate Provisions in the Signed One Big Beautiful Bill Act

So TCGA temporarily suspended the deduction for interest on home equity indebtedness unless the borrowed funds were used to buy build or substantially improve the home that secured the loan and it reduced the acquisition indebtedness cap from a loan of 1 million or 500,000 to seven 50 and 3 75 for debt incurred after December 15th, 2017. The one big beautiful bill makes these limitations permanent locking in the $750,000 cap on acquisition debt and continuing to disallow interest deductions on home equity loans used for personal expenses. Thus only interest on loans used to improve or acquire the taxpayer's primary or secondary residence remains deductible and also as long as it's under the cap. Additionally, beginning in 2026, mortgage insurance premiums will be treated as qualified resident's interest making them permanently deductible. Under these revised rules, miscellaneous itemized deductions, those are gone permanently. So prior to the enactment of TCGA, certain miscellaneous itemized deductions were allowed as a deduction against taxable income to the extent they exceeded 2% of a taxpayer's adjusted taxable income.

The T-C-T-C-J-A made these deductions non deductibles for certain taxpayers, specifically individuals for taxable years beginning after December 31st, 2017 and before January 1st, 2026. The one big beautiful bill makes these expenses permanently. So as the planning note now that 2% portfolio deductions are permanently non-deductible for certain taxpayers, certain taxpayers may want to consider structuring or restructuring alternatives that may allow them to otherwise minimize portfolio deductions. So an example of this could be the use of subsidiary REITs by real estate debt funds not engaged in our business. With that said, I will hand it over to Michelle to talk about bonus depreciation.

Michele Rosenman: Hey, good morning everyone. My name's Michele Roseman. I'm a tax director here at EisnerAmper, so I'm going to talk about some of the depreciation related provisions in the bill. So the extension of 100% bonus depreciation under the Tax Cuts and Jobs Act. Additional first year depreciation was allowed on qualified property equal to an applicable percentage of the adjusted basis of the qualified property prior to 2022. The applicable percentage was a hundred percent of the adjusted basis of qualified property. However, for properly placed in service after 2022, the applicable percentage was reduced to 20% each year and it was scheduled to be fully phased out after 2026. The one big beautiful bill permanently extends a hundred percent bonus depreciation for qualified property acquired and placed in service after January 19th, 2025. It eliminates the phase out schedule previously enacted under the T-C-G-J-A-A for real estate. Qualified property generally includes property with a recovery period of 20 years or less, such as certain furniture and fixtures and land improvements.

It also includes qualified improvement property, which are improvements made by the taxpayer to interior portion of a building, which is non-residential rail property. If that improvement was placed in service after the date such building was first placed in service, it doesn't include any improvement for which the expenses are charitable to the enlargement of the building, any elevator, escalator, or the internal structural framework of the building. Taxpayers also have the option to elect a 40% transitional bonus or 60% for certain property for the first taxable year ending after January 19th, 2025. This could help taxpayers who don't want to take the full a hundred percent write off immediately. It's important to note that states have varying rules regarding bonus depreciation. Some of them explicitly decouple from bonus depreciation, which requires the taxpayers to add back the federal deduction. Some other states conform on a rolling basis to the bonus depreciation.

As a result, this may create timing differences between federal and state taxable income. Taxpayers operating in multiple jurisdictions have to carefully track these differences. The one big beautiful Bill Act also adds new RC section 1 68 N, which permits a hundred percent depreciation for non-residential real property that qualifies as qualified production property or QPP for the taxable year in which such property is placed in service. For purposes of this provision, PP is property that is used by the taxpayer as an integral part of a qualified production activity is placed in service in the US or any possession of the us. The original use of which commences with the taxpayer construction of which begins between January 20th, 2025 and December 31st, 2028, and which is placed in service before January 1st, 2031. Depreciation claims on QPP is subject to the RC section 1245 recapture upon sale. If at any time during the 10 year beginning on the date that it was placed in service by taxpayer, it stops to be used as an integral part of a qualified production activity. Importantly, QPP specifically excludes any non-residential rail property used for offices, administrative services, lodging, parking, sales activity, research activities, software engineering activities, or other functions that are not related to manufacturing, producing or refining tangible personal property.

All right, reinstatement of depreciation, amortization and depletion add back for our C-section one three J in 2017. As part of the Tax Cuts and Jobs Act, Congress significantly restricted the ability to deduct business related interest expense with the amendment of Section 1 63 J, the revised provision limited the deduction to 30% of adjusted taxable income or a I plus business interest income. The original calculation of a TI for these purposes included the add back of depreciation amortization such that a TI was more of a concept of earnings before interest taxes to depreciation, immunization or ebitda. However, the add back of depreciation amortization expired for years beginning after December three one, 2021. This unfavorable change has resulted in many more taxpayers having their interest deduction limited or being subject to higher limitations, which has brought about significant tax liabilities to higher leveraged taxpayers. The one big beautiful bill act permanently restores it depreciation, amortization depletion add back to taxable income when computing a taxpayer's a TI for tax years beginning after December three one 2024.

However, the bill excludes subpart F for Gil T, which is now called net CFC tested income and R C-section 78 gross supplement from a TI calculations effective for tax years beginning after December 31st, 2025. Restoration of the add back for depreciation, amortization or depletion increases the taxpayer's a TI and the amount of business interest expense taxpayer may be able to deduct without limitation under RC section 1 63 J. This increased business interest expense limitation may be relevant for real estate entities that are weighing the cost versus benefit of an electing real property trader business election and through RC section 1 63 J such an election may no longer be necessary or beneficial given the potential larger perspective A TI threshold. The Real Property Trader business election allows real property trade businesses to avoid the 1 63 J interest expense limitation. However, in exchange for this exemption, the electing real property trader businesses are required to use the alternative depreciation system for certain real property assets which results slower depreciation deductions. Real property trader businesses would need to carefully analyze the impact of the reinstated EBITDA calculation to determine the most advantageous approach going forward. Considering the trade-offs between interest expense deduction and depreciation. Businesses with significant interest expense might still find the real power trader bid selection beneficial as it allows full deduction of interest potentially offsetting storage depreciation deductions. But if a business has substantial depreciation deductions, especially from qualifying proven property that wouldn't be eligible for the bonus depreciation, the benefits of avoiding the interest limitation might not outweigh the reduced depreciation deductions.

Okay, the one big beautiful bill Act also raises the expensing limit under our C-section 1 79 from 1 million to two and a half million and the phase out threshold from and a half million to 4 million effective for property place and service in tax years beginning after December 31st, 2024. Although several states don't confer to bonus depreciation rules, as I noted earlier, many states conform to the federal RRC section 1 79 expensing provisions. Additionally, the RC section 1 79 deduction cannot exceed the taxpayer's aggregate active trader business income, so it can't create a taxable loss. Any dis out amount due to this limitation may be carried forward to future years now. Good to move it over to Don.

Donald Zief: Thank you, Michele. Thank you Michele. Don Zief and and I'm a senior tax assaulted at EisnerAmper. So the increase in the salt deduction cap, probably everybody knows by now that the salt deduction cap is limited to $10,000 and that limits deduction for individuals for state and local income taxes as well as real estate taxes, personal property taxes, and certain others. So this cap has now been raised to $40,000 for 2025. However, pursuant to certain phase out provisions, it can go back down to $10,000. Once the taxpayer's modified gross income reaches $500,000 for married filing joint, for example, the $40,000, it's reduced 30% for every dollar over that amount until it reaches $10,000. That doesn't reduce any more. So the example here, x-rays are fairly well, so assume a taxpayer has a modified adjusted gross income, $600,000, that's a hundred thousand dollars over the 500,000 will limit 30% of that a hundred thousand is 30,000. The $40,000 cap minus 30,000, you're once again backed down at $10,000 as under current law, but it can't go down any further. Now that $40,000 annual deduction cap and the modified adjusted gross income thresholds increase 1% each year starting in 2026 through 2029, and then in 2030, unless there's additional legislation, the sold cap reverse back to $10,000.

Next slide. Limitations on the sold pass through entity workaround. So the pass through entity taxes, this concept allows a pass through entity such as an LLC or a partnership to deduct the sole taxes at the entity level as a trader business expense, thereby lowering the amount of income that is passed through to the LLC member partner. This technique was approved by the IRS in notice 20 20 75. However, it's important to keep in mind that this offers relief from state and local income taxes only and not realist property taxes or personal property taxes, whereas the $40,000 cap, which I just talked about for sold, applies to all of the taxes. Now somehow incentive versions of the OBBB container provision that would've severely restricted the PTEP technique, but in the end, thankfully we're not adopted. One thing about the, now I just want to talk for a couple minutes about the excess business loss deduction that has made permanent limitation.

Now, just as a review, this limitation applies only to non corporate taxpayers and it's equal to trader business deductions over trader business gross income plus another $250,000 for married, final single, or $500,000 married finally joint and any excess is treated as a net operating loss and is deducted in the future years against other types of income. Now, the OBB does not contain a provision that was proposed in house and Senate bills that would've restricted the excess business losses from pass throughs to only offset business income instead of additional types of income such as wages, interest dividends, for example.

Finally, there's a technical change to the re provisions, but although it's technical, extremely important, a REIT can own a taxable REIT subsidiary as a C corp owned by the REIT to engage in activities A REIT cannot, such as providing special services to tenants, managing non-owned property and things of that nature. However, the value of all TRS is combined could not exceed 20% of the east growth assets. This has now been increased to 25% and so allows to read a little more leeway in providing non permitted activities through its trs. I'm now going to turn it back over to Michael.

Michael Torhan: Great, thanks Don. Good morning everybody. My name is Michael Torhan. I'm a tax partner here in the real estate practice. So the new tax law contains a provision to exclude interest from income for certain taxpayers. Specifically, the provision provides for our exclusion of 25% of interest received. Again, here are the keywords by a qualified lender on any qualified real estate loan. So what does that mean? Qualified lenders are generally regulated lenders, so we have banks, savings associations, regulated insurance companies, and then entities wholly owned by bank and insurance holding companies. And then qualified real estate loans are those loans that are secured by rural or agricultural real estate or leasehold mortgages on rural or agricultural real estate. Again, what is rural agricultural real estate mean? So that's real estate that's substantially used for the production of agricultural products in the trade of business of fishing or seafood processing or an aquaculture facility. This provision applies to tax per years ending after the date of the enactment of this law against tax years ending. You'll notice throughout this new tax, there's various effective dates. Sometimes they refer to taxpayers beginning after the date of the act. In this case, taxpayers ending after the date of the act is the key timing here, and I'm going to pass it off to John for the next section.

John Newkirk: Thank you, Michael. My name's John Newkirk. I sit here in the Birmingham office and I'm going to talk to you about some changes to energy credits as well as the low-income housing tax credit. So this bill, it introduced major revisions to several clean energy credits that were originally established under Biden's IRA. Generally, projects that began construction before 2025 will not be impacted for production tax credits or investment tax credits, although they may be affected by other ways with the bill depreciation or what have you. The bill slashes several tech neutral credits for wind, solars and eliminates others like hydrogen, the EV credit, and residential solar. Some others like geothermal credits, nuclear clean fuel, et cetera. They had some less clawbacks.

We now have a place in service deadline of December 31st, 2027, and this is for code section 45 Y, the clean energy production tax credit. This applies to any projects that began construction after July 4th, 2026, so there's a 12 month grandfather period there. The bill disallows for solar, solar electric heating and small wind residential property if it's rented or leased, and that's applicable after July 4th, 2025. Both section 45 Y and 48 E will phase out in 2032 except for solar and wind facilities that have that special place in service state. Go to the next section, 1 79 D, and this is mostly for ground up. Enter geo efficient construction projects on commercial building property. It's eliminated with this new construction deadline of June 30th, 2026, energy efficient home credit section 45 L. This is a big one in our arena of affordable housing or low income housing. It's often layered in, but it's effectively eliminated for if a qualified home is acquired after June 30th, 2026.

In our world, if the unit is leased after that date, then it will no longer qualify for the 45 L credit to delve into depreciation here. So section 1 68 E three B six provision for five-year property on certain energy and clean energy facilities will be terminated and both section 25 D and 25 C. That's the residential clean energy credit and the energy efficient home improvement credit. Both of those will have their place in service deadline moved up to December 31st of this year. Previously it was set to be in 2034 for 25 D and 2032 for 25 C.

Okay, the EV credit, which I'm sure you've probably seen some of this on Twitter, but the deadline buy an electric vehicle and qualify for the credit has moved up to September 30th, 2025. This is for pre-owned credits, the new cars and as well as commercial commercial cars. So if you need a cyber truck, you better go get it before September 30th. The same with the EV charging stations. That 30 C credit that placed in service deadline has moved up to June 30th of next year. Okay, shifting over to the low income housing credit, this bill has permanently increased the 9% allocation by 12%. This is pretty big for us and our developers, a lot of our clients. Basically this means that the states will receive a larger pool of credits. They had it temporarily at 12 point a half percent boost from 2018 to 2021, but now this is permanent, so this is good.

Another really big change in the past bond deals with affordable housing have had to meet a 50% test, so half of the project has to be funded by these private activity bonds or tax exempt bonds that's been lower to 25%. So this really gives everyone a little more flexibility and the states will have more flexibility on which projects they fund these to. These are less competitive, so they're already popular compared to the 9% credit. But this is good for our developers too because they can have more complex financing structures involved without having to meet those 50% test. And then the new market tax credit has been made permanent. We see this some in affordable housing, if it's layered in, it has to be maybe a mixed use situation where there's a retail space in the affordable housing, mixed use development, something like that. So that is now made permanent and won't need reauthorization. With that, I think I'll turn it back over to Michael.

Michael Torhan: Great, thanks John. So now I'll talk a little bit about another change that was made in this new tax law and that's in regards to the method of accounting for long-term contracts. So before I read through what the changes long-term contracts are essentially contracts where a taxpayer has a contract to develop some kind of property that isn't completed in the same year. So if somebody is building some kind of equipment or property for sale and somebody signs up for a contract for that item, it's not completed in the same year. It's generally what's called a long-term contract and there's different methods as to how do you account for these contracts. Under the tax law, two of the main methods are percentage completion and completed contract percentage completion. As the name implies, you pick up income over the life of the contract based on how much of the total cost is incurred each year as compared to the completed contract method.

Again, as the contracts are completed, the income is picked up right on completion. So the main change was made in regard to certain real estate contracts. Specifically the new provision allows the completed contract method to be used for residential construction contracts. What are residential construction contracts? Lemme read through the definition. Any contract where 80% or more of the total contract costs are attributable to again, a series of activities. So building construction, reconstruction, rehab, installation of integral components to or improvements of real property, and again, those activities relating to dwelling units and to improvements to real property relating to such dwelling units. So it's ultimately kind of the real property itself and it's dwelling units where people live. So prior to these new provisions, the completed contract method was limited to home construction contracts. Again, it was another defined term. So what I just defined is residential construction contracts.

Home construction contracts had the same definition except those additional limiting factor only buildings containing four or fewer dwelling units were eligible. So again, home construction contracts, which were eligible for the completed contract method, you could only have four or fewer dwelling units, whereas again, residential contracts don't have that limitation. So residential construction contracts were not eligible for the completed contract method. They had to follow the percentage completion method or there's another hybrid method out there. But again, the changes that four fewer dwelling unit threshold is effectively eliminated under this because you can now use completed contract method even if there's more than four dwelling units in the property. This change applies to contracts entered into in taxable years, beginning after the date of the enactment. Right, so before I mentioned that effective date is really critical kind of throughout this new law here. It applies when your tax year begins after the date of the enactment, right?

Since the law was just enacted a couple of weeks ago, January for calendar or taxpayers, the effective date of this is going to be 2026. Again, one of the key errors was this has been discussed over prior, at least the last decade if not longer, is in regard to condo development. The IRIS had issued some proposed regulations quite a while ago that were never finalized whether condominiums were similar to townhouses or not. This change in the law kind of solidifies what the law is, and so effectively, generally speaking, residential condominium development will now qualify for the completed contract method.

Next, I'll talk about changes to the qualified opportunities zone program rate, the QLC program, and there's a lot of changes here. There's been a permanent extension to the program. A brief refresher about seven years ago, the QZ program was introduced and the QZ program high level allows taxpayers to defer capital gains, so the taxpayers a capital gain. They're able to invest that into some kind of development in the QOZ program, they were able to defer those capital gains until December 31st, 2026, which is actually coming due next year. They were also potentially able to get either a 10 or 15% step up in their basis in the investment going from zero to 10 or 15% of the deferred gain. So effectively taking a haircut on the gain that had to be recognized and probably the biggest benefit, any future appreciation on that development could potentially avoid federal taxation if all the requirements are met.

So that program was supposed to effectively and for new investments right after next year, this new tax law effectively extends that and makes the program permanent. And I'll kind of walk through each of the changes in the new program as it relate to the old program. So I mentioned there's repeals, the sunset on the election previously there were zones that were designated that were going to expire that will expire in 2028. Those a 10 year period for those zones that are originally designated by the states. The new program provides that there's going to be a rolling 10 year designation period. There's this new term called decennial determination date. So effectively starting July 1st, 2026, and then every 10 years after that, there's going to be a new designation period. So all the states will have the ability to designate the zones and the similar kind of timelines is a 90 day period that they have to designate by.

There's certain extensions and then those are approved, but those new designations are going to be in effect again from the applicable start date, right? So starting with the following January 1st again, so July 1st, 2026 is going to be the annual determination date. Once those are approved, those designations are going to begin January 1st, 2027, right? So it's the January one of the subsequent year, and those are going to remain in effect for 10 years, at which time there's going to be a new set of zones that are designated, right? So every 10 years you're going to have new zones. What's interesting is there appears to be some overlap. So the existing zones are still in effect until around 2028. Those are designated in 2018. So there will be some overlap between the existing zones and the new zones.

There was a special rule for Puerto Rico originally that all low income community tracks were designated as QZ, so that was specifically repealed In this new tax law, there is a narrow definition of what it means to be a low income community in the new law. So there is going to be a smaller set of tracks that are eligible for designation. So that's something to keep in mind for anybody considering investing in a zone or looking at property that's in a zone today. There's no guarantee that it will still be designated in a couple of years when the new designations come out. So that's something to be mindful of or the zones that were previously designated that are just not low income communities anymore. So that's something to definitely keep a close eye on. The rule that contiguous tracks were eligible for designation, they're no longer eligible for designation either.

So like I mentioned, one of the main benefits for QOC investors was the deferral of gains, right? So taxpayers that had capital gains were able to invest into a qualified opportunity fund a qf, and those were deferred until December 31st, 2026. So that's the first rule we see around the screen, right? If you deferred gains by investing into a QF prior to January 1st, 2027, those are recognized in taxable income on the earlier of, again, the date you either sell or exchange that investment because effectively you've exited the investment or December 31st, 2026. So that December 31, 26 was a fixed date and time historically under the new program, which is going to apply for any gains that are invested into qfs after December 31, 26, so starting in 27, if you invest into a QF, the year of taxable inclusion, again, it's the earlier of, so it's the same kind of if you sell or exchange investment, you have to pick up that income on that date or the date that's five years after the date you made the investment. So now there's going to be a rolling recognition date for investment. So there's no longer this fixed date of when everybody has to pick up the gain. Now there's a rolling five-year period, so if you invest on January 5th of 27, on January 5th of 32 is when your gain is going, your deferred gain is recognized again, assuming you didn't sell or exchange your investment earlier. So that is a big change.

The other benefit, like I mentioned earlier, was that 10 and 15% basis step up, right? The 10 and 5% kind of two components to the 15 earlier that has not been replaced with one 10% basis step up, and that's applicable where investments are held for at least five years. So previously you had either a five or seven year holding period and you could get that 10 or 15% step up. The new program just provides for a single 10% step up and it's a five year hold for that. There is an exception to this general rule. We'll talk a little bit more in an upcoming slide on rural investments. So there's a lot of new benefits for investments into rural areas. So that 10% basis step up is 30% if the investment is in a qualified rural opportunity fund. Again, we'll talk about what that means in the upcoming slide, but that is clearly the deferred gain rather than taking a 10% haircut. So if you invested a million dollars of deferred gain, and if you meet that first requirement, you only have to pick up income on 900,000. Again, if it's an investment into a qualified rural opportunity fund, that million dollars goes down to 700,000.

So like I mentioned, there's a lot of enhancements for investments into rural areas Under this new law, like I mentioned, the 30% basis step up replaces the 10%. If you invest into a qualified rural opportunity fund. What's a qualified rural opportunity fund? So that's a QF that holds at least 90% of its assets and QC property. So this is the same rule that we've always had. So qfs need to hold 90% of their assets in a QOZ property, and that's tested twice a year. It's the average of a semi-annual test. You need to meet this 90% threshold and that what is QOZ property? So here it's QOZ business property. So that means you directly own qualifying QOZ property and in this case substantially all of the use of it during substantially all of the holding period of it is in A QOZ comprised entirely of a rural area. So this is effectively saying 90% of the directly owned property would need to be in a zone that's comprised entirely of a rural area. We'll talk about what rural area means in a second, or if you're not owning property directly in the qf, this is very popular in the original program, I'm sure it'll continue to be very popular. You could also own stock or partnership interest in other entities.

What anybody familiar with the program, it's a two tier structure. You have a separate entity that actually owns the property. So again, the 90% test here can be met if that stock or partnership in thrust again, is in a QZ business that has property in rural areas. So it's very similar to the rule. If you own the property directly, the other tier has to own the property that's in the rural area. What is, we'll skip to rural area for a second. The term rural area for all these purposes is defined as any area other than cities or towns that have population of greater than 50,000 inhabitants and any urbanized areas that are contiguous and adjacent to such cities and towns. So effectively it's any city or town with a population of more than 50,000 or any areas right next to them. Those are not rural areas, so by process of exclusion, anything other than those would qualify as rural areas.

Another key benefit for investments into rural areas is if you own property in A QSE that's comprised entirely of rural area, the substantial improvement requirement is only 50%. Again, we talk a lot about owning property, like I mentioned above, right from the 90% test or in the other tier, it's a 70% test. Good property is either property that's original use, so it's a brand new ground of development or if you buy existing property that you're going to improve historically, and the general rule is that you have to improve a hundred percent of the depreciable basis. So if you buy a property for a million dollars and 600,000 is eligible to the depreciable property, historically you would've had to spend $600,000 plus a dollar because you need to effectively more and double your depreciable basis if you qualify under this rural area rule. In that same example, instead of having to spend 600,000 on the property, you'd only have to spend 300,000 on that property to qualify. So the required investment into rural area is less if you're looking to qualify under that substantial improvement rule.

So I want to talk a little bit about determination of QOZ property. So historically, QOZ business property, in addition to meeting those different requirements, either the original use requirement or the substantial improvement requirement, the property needed to be acquired for purchase by either the QF or one of those subsidiary entities after December 31st, 2017. Under the new law, this definition is slightly changed. Any property that you acquire after December 31, 26, you need to acquire it after the applicable start date. And again, recall, the applicable start date goes back to those designation periods, and so the start date is always the January 1st after the new designations are made. So effectively there's going to be a rolling period for when property needs to be acquired under the new law.

The other benefit I previously mentioned, and again, this is probably one of the major benefits, is that 10 year basis step up. Like I mentioned, if you invest a million dollars into a project, if you hold the investment for 10 years and if it appreciates to 10 million, you have $9 million of extra appreciation. If you meet all the requirements that $9 million, it's eligible to be excluded from federal income tax via this basis to fair market value. Step up the QZ laws provide that. You get to step up your investment to the fair market value. Again, historically, it was based on the fair market value and when you sell it under the old law, there was a time period where everybody would have to sell their investments by just because of how the dates were. Effectively, the program would end at some point in about 30, 20 or 30 years.

Under the new law. Since the program is permanent, the definition of what that basis to fair market value step up has changed. And so your step up is going to be based off of when the investment is sold. Effectively, if the investment is sold before the 30th anniversary of when you made the investment, you effectively step up to fair market value on sale. So anytime before the 30th anniversary. So if you invest on January 5th, 2027, anytime before January 5th, 2057, that's 30 years, you get to step up to the fair market value if you continue to hold after January 5th, 2057. In that example, the basis step up is limited to the fair value on the 30th anniversary, right? So if you hold for another five years, your stop up is limited to what the value was on the 30th anniversary. So if it continues to appreciate there may be some income that is not shielded under this program, there is some income that may be required to be recognized at that point.

I also wanted to talk about there are various new reporting requirements and penalties under the new tax law. Historically, there have already been various reporting requirements. Qfs had to file extra data and forms with the return each year. So there's additional items that qfs now need to report. So in addition to the historic information, some of the key items are the number of residential units that are held need to be reported now, as well as employees of the businesses need to be reported or other indications of the employment impacts. So there's really an emphasis on reporting of the impacts of these investments. That's at the fund level and the QC businesses, which is those subsidiary entities. Those need to report to the qfs any information that the qfs need to do their own reporting in there, various penalties that are imposed as well if you don't report these items. And a lot of these kind of penalties followed information reporting penalties similar to information reporting such as 10 90 nines. Again, a lot of these kind of penalties have been codified and increase in some cases for failure to report on these points.

So I'm going to open it up to a little bit of q and a while I wait for the questions to populate. Again, wanted to also thank everybody for joining today. Again, we're here to be a resource. I know we covered a lot in the last 45 minutes. Please reach out to your Eiser Amper team or to any of the members on this call to discuss the implications of all these changes on your particular businesses. We have a link below on the webinar in case you want to contact us, and we'll get back to you again, thank you again. And then we could open it up for some q and a.

So there was a question here about property. It looks like this is specifically for the bonus depreciation. If, if the purchase closed after the effective date, right, the January 19, but the PSA, right, the purchase sale agreement was dated prior to it, or if it was dated late last year, how does that qualify for the a hundred percent bonus depreciation? There is a specific provision about a written binding contract in the law, and so that's going to be a key determining factor. It's not a simple answer. When the PSA was signed, you really need to look at what point was that, number one, a contract, and number two, a written binding contract. So there is some analysis there. So simply closing on a purchase of a property after the effective date of that provision, so after January 19, does not automatically mean that you get a hundred percent bonus. So there are certain nuances that need to be looked at for that item.

There's another question about is accelerated depreciation deduction really a timing issue? And is it subject to recapture as order income? Depreciation is generally timing, right? So if you think about depreciation, if you buy a piece of property and you depreciate a million dollars, right? If you buy something for a million dollars, you depreciate, let's use 500,000, and then you sell it for 2 million. Economically speaking, you've made a million, right? It went from a million to two. Your taxable income is 1.5 at that point though, right? So the 500,000 of loss you're able to take is now additional taxable income when you sell the property, right? So there is timing. The question is more so on character, right? Straight line depreciation has historically been always, it's always an order introduction. When you recapture straight line depreciation, generally that's subject to the 25%. It's UNRECAPTURED 1250, gain accelerated depreciation is a little bit more complicated.

Generally speaking, accelerated depreciation does get recaptured as ordinary income. However, your recapture is always limited to the actual gain that you recognize on each particular property. So you need to look at, again, if the property has less gain, if you buy a piece of equipment for a thousand dollars and you take a thousand dollars of bonus, you have a thousand dollars write off. But if you only sell that property for $500, you only have to pick up $500 of ordinary income as a recapture. Obviously, you don't have to pick up more recapture than gain in that circumstance. So again, the question kind of requires a little bit more of an analysis to really see what's recaptured as ordinary versus not. And I think that's all the time we had. I'll just pass it over to Astrid to close up.

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