What Amendment 1 Means to Aventura Homeowners

As yet another follow up to my previous blogs about the Florida property tax cut proposal, I thought to share an article from our Central Florida neighbors, Orlando Sentinel. You will learn that many Florida cities are lobbying against the amendment because they will be forced to spend less, or should I say, budget responsibly.
Voting YES on Amendment 1 on Tuesday, January 29th is crucial to every homeowner, and every home seeker. This will help seniors finally make their downsizing move, those who need to find bigger places for their growing families but just would not afford the tax increase on a newly purchased home, as well as first time homebuyers who finally see home prices normalizing but are still threatend by high property taxes.
I will repeat my message from my previous posts on this matter that this is not the ultimate solution, but it is a start!
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Interest rates have been drastically improving! Call me for all your home financing needs!
Michael Heiblum (954)650-9462.

Accountant keeps Aventura Roots Strong

We have received articles from various professionals in and around the City of Aventura. In order to add to our business educational series, we requested an article from Barry Gurland, CPA of RSM McGladrey. Even after having an office in Aventura's Washington Mutual building for many years, he remains active in the City of Aventura and is a regular at Aventura Marketing Council events, lunches, and breakfasts. He is excited about this blog and the opportunity to contribute to our educational series.

How to avoid three common M&A tax traps

The record pace of mergers and acquisitions (M&As) during the past two years with the number of M&A deals in 2006 estimated at 25,000 dealmakers should plan carefully, because unforeseen tax issues can make an otherwise appealing merger much less palatable. According to a recent national survey on M&A activity, 70 percent of respondents said hidden or unrecorded financial liabilities threatened successful mergers or acquisitions. In that same study, nearly half of respondents cited incomplete tax planning as a significant risk in bringing two companies together.

Structure deals with an eye on taxes

To help minimize tax-related M&A headaches, experts say it's helpful to begin by thoughtfully analyzing how to structure a proposed transaction. In a taxable merger deal, a savvy buyer seeks to acquire only the assets of a target firm, largely because that's a good way to avoid assuming undisclosed tax or financial liabilities while gaining a sizable tax write-off against depreciated assets. Conversely, sellers often want to sell stock, because it's a straightforward transaction subject to taxation only once at a relatively low capital-gains rate.

Bridging gaps between the needs of buyers and sellers often requires creativity, says Bruce Shnider, a longtime M&A attorney and distinguished visiting professor at the University Of Minnesota Law School. For example, he says, parties can structure an M&A deal to allow the prospective seller to issue stock but enable the buyer to treat it as an asset acquisition for tax purposes. Under this arrangement, the buyer receives a "step up" in basis on acquired assets, providing a higher platform for depreciation and amortization deductions, as well as full disclosure on financial and tax liabilities. While the seller must treat any asset sale gains above the tax basis as ordinary income, the bulk of the transaction typically is taxed as capital gains.
In many situations, the amount of ordinary income is trivial, and the parties can adjust the purchase price to take that into account. In such a scenario, the seller enjoys the full benefits of selling stock, and the buyer enjoys the benefits of purchasing assets.

In a tax-deferred arrangement, a seller typically receives most or all of the sale's proceeds as stock in the purchasing company, and the seller will have no tax liability until selling the stock. Because the IRS has relaxed so-called "continuity of interest" regulations in recent years, sellers no longer have to hold stock in the new entity for an extended period. This choice, while complex, can work well in situations where the seller wants to cash out, and the buyer doesn't have a lot of cash for the purchase, Shnider says.

Address common tax traps

Once both parties approve the deal structure, key leaders can dig deeper into other potentially nasty tax traps. Some of these include:

State, local and transfer taxes. If the merging businesses have operational or sales presence in multiple states, this can raise significant issues. The United States alone has more than 7,500 taxing authorities in 45 states and the District of Columbia that impose sales-and-use taxes on the purchase of tangible goods. This means prospective buyers should look closely at how effectively the business has collected, reported and paid sales-and-use taxes to various jurisdictions. If the buyer cannot get good documentation that the seller has paid these liabilities in full, Shnider suggests reopening price negotiations to account for the potential cost or drafting an indemnification clause in the purchase agreement that makes the seller liable for all outstanding tax matters prior to close.

On property tax matters, experts say the buyer should verify any lien records and seek proof of payment for the most recent tax cycle. Even if payments are up-to-date, buyers may face a reassessment of property values after purchasing corporate property, which often leads to a tax increase.

Aggressive tax positions. In concert with a careful review of a target company's current tax liabilities, a prospective buyer should also take time to evaluate the target's overall tax posture. If questionable tax compliance practices go unchallenged, the buyer may risk failing future audits, leaving themselves open to potentially sizable tax liabilities. Note this major tell-tale warning sign: any existing target company correspondence with taxing authorities about unresolved payment issues.

While a seller may offer explanations of these unresolved payments, the buyer needs to recognize how that opens the door to potential tax liabilities, penalties and interest, which can add up to a material number, Shnider says.

Golden parachute provisions. Many companies offer executive pay agreements through which a change in control can accelerate vesting of deferred compensation or require the payout of a large severance package. Such "make-whole" provisions — if not properly managed — can deliver a nasty tax surprise.

For example, if a public company pays an executive $100,000 a year and awards that employee $299,000 in severance after a change in control, there is no tax liability. But, if the payout exceeds three times base pay, the company loses the ability to take a compensation deduction and faces a 20 percent "excess parachute" tax penalty. That problem becomes even more costly for companies with "gross-up" provisions, in which the business agrees to cover any excess income taxes that key executives incur.

Privately held firms can mitigate excess taxation of golden parachutes if shareholders vote to approve the payouts. However, this requires the target company to fully disclose the names of all executives eligible for such payments, as well as the specific compensation arrangements for each. It also requires each executive to sign a document waiving the right to any payments sparked by a change in control unless the shareholders approve the payments.
To manage this process, Shnider says it's important to identify key employees at a target company with sizable change-in-control compensation packages. By taking this step before a deal closes, the buyer and seller can review the list and identify creative ways to rework existing compensation packages to meet executives' needs.

"In a perfect world, these things should be identified earlier rather than later, because the tax consequences can really affect how much a buyer is willing to pay for all the parachutes and gross-ups," Shnider says. "Mergers and acquisitions is a strange and often unique world, and no matter how smart a company's executive team or in-house staff may be, they need to get the right outside help if they don't have a lot of M&A experience."

For More information contact
Barry T. Gurland
RSM McGladrey
100 NE 3rd Ave
Fort Lauderdale Florida 33301
954-356-5758

Aventura Votes!

As a follow up to my November 8th post about the property tax ballot, I wanted to share some pertinent information with all our readers in Aventura and its surrounding cities. We will have an opportunity to have our voices heard on January 29th, 2008, whether or not we are for or against the property tax reform. I was able to find a very clear explanation of what exactly Aventura, and all Florida residents, will be deciding. I want to emphasize that I do not think this reform is the ultimate solution, but I do oppose the notion to vote against it, with the hope that by doing so the State Government would be forced to come up with a better solution. My opinion is that we need relief now, and we are going to have the opportunity to make that happen January 29th. Once that is accomplished, we should continue to apply pressure for another, more appealing amendment. Lori Parrish at the Broward County Property Appraiser’s office highlights the main points of the property tax reform proposal, with the addition of an explanation of the proposal from The Florida House of Representatives, on the Broward County Property Appraiser’s website.

Click here for the explanation of the proposal

The Property Tax Issue

What does the property tax ballot mean to you?

The City of Aventura has been one of South Florida’s hottest real estate spots. It has become one of the most sought after places to live. Aventura boasts an “everything is at the tip of your finger” type of living, with everything from groceries, libraries, entertainment, the Aventura Mall, and more at walking distance from your home.
Aventura residents, and all Floridians are faced every day with the property tax issue. The debates over the property tax reform have been going on for over a year now, yet nothing has been done! Finally there will be a property tax ballot that all Florida residents will have an opportunity to vote on. This issue affects all Aventura residents, whether a homeowner or a renter, and the future homeowners and renters. The issue has been debated for way too long, and we all need something to be done. It may not be exactly what people want as a reform, but it's a start.
Here is how some housing industry groups feel about the forthcoming ballot.

South Florida Housing Politics

As we all know, Aventura, its surrounding cities, and Florida as a whole has had a big part in deciding the last two presidential elections. It seems as though, Aventura, and its parent state will probably be at the forefront of the upcoming election for the third straight elections. The Republicans have had the edge in the previous two, but with the current housing market, the next election seems to be shaping out for the Democrats. Check out Christopher Cooper’s article from the Wall Street Journal - click here to read more.

Why don’t the Republican presidential candidates put the housing issue at the top of their agenda? Why aren’t the candidates consulting with their Republican counterparts in the so called “swing states” for help on this growing topic? Republican Gov. Charlie Crist, our state Governor, is taking many steps to ease, and overturn the direction of the wave. He is trying to do so from many different attack strategies in regards to predatory lending laws (to protect the consumer), property taxes and property insurance rates, and more.



The Democratic presidential candidates on the other hand, have been focusing on the housing market, and will succeed in toppling the Republican controlled White House. That is, unless the Republican candidates can learn from their peers, such as Gov. Charlie Crist of Florida, our City of Aventura parent state.

Whether you are a Democrat, Republican, or Independent, as a City of Aventura, Florida resident, the housing issue and its many factors is a top priority for you!