Page 6 - CooperatorNews NY April 2022

6 COOPERATORNEWS — APRIL 2022 COOPERATORNEWS.COM CooperatorNews.com From COOPERATORNEWS.COM Real Estate, Cryptocurrency, & Taxes Can You Buy a Condo With Crypto? BY A.J. SIDRANSKY Depending who you ask in the world of That gain is subject to tax, either a short-term finance, cryptocurrency is either the future, or long-term capital gain, depending on how or a passing fad. Either way, even still in its long you have held the instrument.” infancy, ‘crypto’ is attracting more and more investors—especially among younger millen- nials and Gen-Z internet natives—and its ap- plications are expanding. As mentioned in the crypto assets may be pegged on the contract previous article in this series, that expansion date, but the gain or loss is realized on the date even includes some inroads into the world of the cryptocurrency is converted to dollars real estate. While cryptocurrency cannot be and the sale actually occurs. You are liquidat- used directly to purchase real estate—it must ing crypto to buy real estate. You use after-tax be converted to cash or equivalents first—it is cash for the purchase, so it establishes the ba- quickly becoming an instrument in the pur- chase process. Importantly, the conversion of not date of contract. It’s in no way like a 1031 funds held in crypto coin into cash and cash exchange—and it can’t ever be.” equivalents triggers a taxable event. But what might be the implications of that event? Taxable Event “The sale of crypto currency is a taxable they can accept crypto coin for payment of event,” says CPA John Jilleba, a partner with maintenance or common charges, or whether Jilleba and Libock, an accounting firm located they can choose to invest reserve funds in in Westwood, New Jersey. “Section 1001 of cryptocurrency. the IRS code says when you buy or sell prop- erty, there is a determination of gain or loss. If Cassin in New York City and an expert on the you sell cryptocurrency for a loss, there’s no use of cryptocurrency in real estate transac- tax, but there is a gain if you sell it at a profit. tions, states categorically that a co-op or con- Furthermore, Jilleba explains, “There’s no effect on the tax liability relative to the con- tract or closing dates. The value of a buyer’s sis. The tax is calculated based on date of sale, Beware Your Tax Status Another question for co-op corporations and condominium associations is whether Steven Ebert, an attorney with Cassin & Smart Tech & Privacy Protection Simple Tips for Securing Your Devices BY SCOTT MCKINLEY According to a recent poll of 1,000 consumers conducted by telecommunications company Frontier, privacy concerns around smart home tech devices are on the rise. Sixty percent of respondents to the poll reported being “very” or “extremely” concerned about the security of their smart home tech, with password exploitation, identity theft, and even having their loca- tion tracked among their topmost worries. All smart-home devices —from TVs and speakers on down to light fixtures and kitchen ap- pliances—can be vulnerable to hacking and other types of outside exploitation. The question is, how can residents make sure their devices are connected properly to protect their privacy and hopefully ease some of those very valid concerns? Upgrade Those Passwords Even though one type or brand of smart device may have different capabilities and initial setup instructions from another, the first step in protecting the privacy of any device is securing the home’s Wi-Fi network connection. Given that nearly all smart devices require a stable internet connection, the first thing a homeowner should do before even touching a device is check their Wi-Fi router. Most Wi-Fi routers come set with a default password, which should immediately be changed to a stronger password to make it more difficult for hackers to access the home’s network and exploit the smart devices attached to it. Another key step in securing smart devices is enabling multi-factor authentication in the device’s settings. Multi-factor authentication is a protective measure that requires the user to provide two or more verification factors to gain access to the specific device. Examples of multi- factor authentication include notifications from another device like a smartphone, tablet, or computer requesting either a separate password, or even a fingerprint from the person trying to access the smart device. Only 7.9% of NYC Homes Have 4+ bedrooms 2nd Lowest in U.S., According to New Report BY COOPER SMITH According to a recent report by HireAHelper looking at which U.S. cities have the largest homes, more and more homeowners and home-seekers prefer larger houses with more rooms. Responses to a Pew survey cited in the report suggest that this pref- erence is due to an increasing number of families adapting to lifestyle changes imposed by pandemic-related restrictions—more employees working from home, parents man- aging online schooling for their children, and more family dinners prepared from the kitchen—and want the space to accommodate these and other specialized family tasks. That survey conducted in the summer of 2021 is comparable to a similar survey conducted in 2019, before the pandemic hit. To identify the cities with the largest homes, researchers calculated the percentage of existing homes in each city with four or more bedrooms and ranked them accordingly. The latest survey found that people are now more likely to prefer owning a home in a community where “houses are larger and farther apart, but schools, stores, and restaurants are several miles away.” Fur- ther, fewer people are willing to own smaller homes that are “closer to each other, but schools, stores, and restaurants are within walking distance.” How New York Ranks According to HireAHelper’s report, in New York City, only 7.9% of homes have four bedrooms or more, compared to 21.6% of all U.S. homes. Out of all large U.S. cities, NYC has the second smallest share of homes with 4+ bedrooms. On the opposite end of the spectrum, Colorado Springs, Colorado took the #1 spot as the large U.S. city with the largest homes, with 32.7% of its homes boasting four bedrooms or more. continued on page 7 continued on page 7 do cannot accept payment of co-op maintenance fees or condominium common charges in cryptocurrency. “It’s too problematic,” he says. As for other uses, like holding cryptocurrency in reserve funds, Ebert explains in more depth: “Section 216 of the IRS code deals with a qualified housing co-op,” he says. “It has a series of limits on what instruments can be used to hold reserve funds. Approved instruments are gen- erally bank-type assets and qualifying stock from the National Co-op Bank. That’s it. Condos,” he notes, “are taxed differently, and might have a little more flexibility. The question for them is what do their governing documents permit? Generally, condominiums have restrictions simi- lar to co-ops, so it’s unlikely they can hold cryptocurrency as an investment. “The purpose of a condominium association or co-op corporation is to organize, manage, and run the community,” continues Ebert. “If the community doesn’t care about certain tax sections and rules and regulations that apply to it, the community can allow investing reserve funds in crypto investments. They might, or would, lose their rights under section 216 relative to certain tax-deductible expenses. This was the case some years ago under the 80/20 commer- cial income rule. Some buildings had so much potential to make real income from commercial space in the building that they walked away from the tax benefits that limited that commercial income. That law was changed some 15 years ago. The bigger question for a co-op or condo is whether they have the support of owners, and are willing to lose some benefits under the tax code.” Ebert also points out that it might be more difficult for a co-op to make that choice than a condo. “By default, co-ops have more rules against them than condos. They want to qualify un- der section 216. Governing documents are the big control, and then there’s the tax code. They must also consider what risk there might be to board members. Is investing in crypto sound business judgment? Board members run the risk of going from managing the affairs of the community to being investment counselors for the community. This could also affect reserve requirements, and create issues with mortgagees holding the underlying permanent mortgage in the case of a co-op.” In the final analysis, co-op and condo board members must always act with prudence with respect to the community. Crypto is not in that equation quite yet. n