“The fact is that not a single “flex” building in Southern California charges for parking. So, what is something worth when hundreds of millions of square feet of flex buildings don’t value or charge for parking?”
David Marino, EVP, Hughes Marino
David Marino, Executive Vice President, Hughes Marino, recently published “Another Tax Increase on Business That You Likely Are Not Prepared For,” a critical and timely piece about another impending tax increase-transportation expenses.
An excerpt “The federal government has slipped in a new tax increase on businesses that is going to catch financial executives unprepared and in conflict with their auditors in how to account for it. As of this year, parking expenses for employees, including an amount allocated to parking if not broken out in rent/lease payments, are nondeductible for tax purposes. The applicable tax code section is US Code Sec. 274(a)(4). The IRS clarifies in Notice 2018-99 that parking expenses are included as part of the nondeductible transportation expenses. This is the case even when employers or employees do not pay for parking as a separate expense from the landlord or other third party”.
“So how does a financial executive allocate a portion of a company’s rent cost to the value of employee parking received? In other words, if you pay $2.50 per square foot, per month in your current building, it is not like you actually paid $2.40 in rent and there is some phantom value to the parking of $0.10. But this is now what the IRS is forcing business owners and financial executives to do. So what is something reasonably worth that no one charges for, and the market assigns no value for, yet whereby you have to derive a value?.” David Marino, HM Blog, Oct 24, 2019.
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