Written Information Security Plan Required For Businesses

Massachusetts Data Breach Notification Law Signed

On January 10, 2019, Massachusetts Governor Charlie Baker approved new legislation regarding data breach notification that will significantly impact businesses that own or license personal information about Massachusetts residents. The new data breach notification law introduces new requirements and mandates for notifications in the event of a data breach. According to the new Massachusetts law, titled Chapter 93H of Massachusetts General Law Part I, Title XV:

“(A) breach of security is the unauthorized acquisition or unauthorized use of unencrypted data or, encrypted electronic data and the confidential process or key that is capable of compromising the security, confidentiality, or integrity of personal information, maintained by a person or agency that creates a substantial risk of identity theft or fraud against a resident of the Commonwealth.”

Among one of the most important facets of the law is the requirement that breach notifications state whether the individual or company maintains a Written Information Security Program or “WISP”. The law states, in part:

“Every person that owns or licenses personal information about a resident of the Commonwealth shall develop, implement, and maintain a comprehensive information security program that is written in one or more readily accessible parts and contains administrative, technical, and physical safeguards…”

The Impact on Businesses

This means that your company, whether it be one-person, an SMB, or an enterprise, must have a WISP to comply with the law. If your company suffers a security breach and does not have a WISP, the penalties could be severe.

One of the benefits of having a WISP is that it promotes better security awareness among employees. When employees have been trained to comply with WISP, there will be another line of defense against the all-too-common and increasingly expensive scenario of data breach attacks.

Resources to Help You Comply with the Law

Check out the links below to help you develop and implement a WISP policy for your organization and be in compliance with the new law:

• Massachusetts WISP Compliance Checklist
• Massachusetts Data Breach Notification Law
• A Small Business Guide: Formulating A Comprehensive Written Information Security Program
• Sample Written Information Security Program

(Warwick, Rhode Island) – March 20, 2019 — DiSanto, Priest & Co., a premier accounting firm serving a wide range of businesses, business owners, and high net worth clients today announced it was ranked No. 4 on Accounting Today’s Fastest Growing Firms in the U.S. 2019, a ranking of the 20 fastest growing national accounting firms. DiSanto, Priest & Co. grew 32.74% in 2018 to an estimated $15 million in revenue.

“Being named a fastest growing firm is a true honor for our entire DiSanto, Priest & Co. team,” noted Emilio Colapietro, Managing Partner. “We believe that our commitment as an independently operated professional services firm to the Southern New England marketplace, coupled with our focus on privately held businesses, our industry specialization, as well as our continued investment in our people and technology, have allowed us to be successful as is evidenced by this recent ranking. We remain dedicated to delivering superior client service with a personal touch and are most thankful for our clients’ continued loyalty and confidence in our firm and team.”

DiSanto, Priest & Co. has consistently been ranked as one of the top New England-based accounting firms according to Accounting Today. Additionally, DiSanto, Priest & Co. has been recognized as one of the Best Places to Work by Providence Business News for seven years in a row as well as receiving The American Institute of CPAs’ 2014 Public Service Award for Firms in recognition of its charitable work in communities throughout Rhode Island and Massachusetts.

About:

DiSanto, Priest & Co. serves as a business advisor for today’s leading privately-held companies, with teams dedicated to serving the manufacturing, distribution, retail, real estate, construction, professional services, technology, commercial fishing, and precious metals refining industries. As a firm purposely built to serve privately-held businesses, it provides the full array of tax planning, tax compliance, assurance, accounting support, and wealth advisory services to the owner-operators of those closely-held entities. Learn more at www.disantopriest.com.

The implementation of the Tax Cuts and Jobs Act in late 2017 has significantly impacted the way companies depreciate their assets. If you own real estate or a business, or if you operate in the real estate or construction industries specifically, you need to learn more about the recent, potentially major changes to the depreciation and expensing rules for business assets.

Section 179

Section 179 of the IRS tax code allows businesses to deduct the purchase price of qualifying equipment and/or software purchased or financed during the tax year. For tax years beginning after December 31, 2017, the allowable IRC Section 179 deduction has almost doubled from $510,000 to $1 million. The maximum asset spending phaseout has also increased from $2.03 million to $2.5 million.

Under the former tax law, qualified improvement property was not eligible for Section 179. However, under the TCJA all leasehold improvements, provided they are made to the interior portion of nonresidential rental property after the building has been placed in service, will be eligible for immediate Section 179 expensing. Any improvements to a building’s interior qualify if they are not attributable to the enlargement of the building, any elevator or escalator, or the internal structural framework of the building. Before the TCJA passed, certain types of building improvements did not normally meet the definition of qualified improvement property because they are improvements made to a structural component of a building. However, under the TCJA the qualifying property for Section 179 expensing has been expanded to include the following improvements to non-residential real property: roofs, heating, ventilation, air conditioning, and fire/alarm protection systems.

Bonus Depreciation

Prior to the TCJA, bonus depreciation was limited to 50% of eligible new property. However, the TCJA reform extends and modifies bonus depreciation to allow businesses to immediately deduct 100% of eligible property placed in service after September 27, 2017 and before January 1, 2023. When 2023 hits, the amount of bonus depreciation will decrease by 20% per year until the end of 2026. Qualified improvement property, which now includes restaurant and retail improvements, as well as tenant and building improvements, has been added as eligible property. Eligible property has also been expanded to include used property, which is a significant and favorable change from previous bonus depreciation rules. Additionally, the TCJA eliminates the requirement that the original use of the qualified property must begin with the current taxpayer. This means that businesses can take bonus depreciation on assets that are acquired from a previous user, as long as the current taxpayer did not previously use the acquired property and the property was not acquired from a related party. The TCJA also added qualified film, television, and live theatrical productions as types of qualified property that are eligible for 100% bonus depreciation. In addition, there is no limit to asset spending in a given year and no limit on the deduction amount that can be taken.

Things to Remember

Businesses must keep in mind that not all states allow bonus depreciation, and therefore, the deduction may need to be added back to income on the respective state return(s). Also, businesses do not have the option to select specific items for the deduction. In a given year, taking bonus depreciation on one asset requires the company to take bonus depreciation on all assets that fall into that respective asset class.

Looking Ahead

The TCJA will help businesses with cash flow issues in particular, because it could potentially reduce their taxable income in the year of the deduction, therefore lowering their tax liability. However, even if your business is not experiencing cash flow issues the TCJA can still be a boon. The TCJA is the biggest tax overhaul since the Tax Reform Act of 1986 and these specific depreciation and expensing changes can have a profound effect on your business taxes. You do not want to miss an opportunity to expense 100% of certain assets and improvements, especially if you are in the real estate or construction industry.

To learn how you can achieve the greatest benefit for your business today, contact John J. Rainone, CPA/MBA, CCFIP at 401-921-200 or jrainone@disantopriest.com.

Have you noticed that we need passwords for just about everything these days? Passwords are required for everything from online banking, healthcare patient portals, work software applications, online credit card management, and shopping, to social media. With our personal and sensitive information residing in so many online locations, and an increasing number of hackers at work, strong password management is critical to protecting your online security. We’ve put together a list of some tips you can implement today to keep your login credentials as secure as possible.

Don’t write down your username and passwords

We’ve all done it ourselves or have seen others do it, such as keeping sticky notes with username and password information stuck to a monitor or kept under a keyboard. We’ve all been tempted at one point or another to manage our passwords this way, but it’s just a bad idea. It’s an insecure method for maintaining sensitive information; you don’t want anyone untrustworthy coming across this information and then using it. If you decide that you absolutely need to write your passwords down just to remember them all, we recommend you keep them locked in a secure location.

Use a password manager

Most people have numerous passwords for many accounts which can make it a challenge to keep them all straight and, quite frankly, remember them all. There are many secure password managers (such as 1Password, LastPass, and Dashlane) that can help you generate complex passwords as well as securely store all of them. Depending on the password manager selected, your encrypted password vault is kept either locally on your computer/device, or it is stored in the cloud. These password managers typically require you to remember one complex password to access the password manager. Your password manager is only as secure as the password you create for it, so you should select a long complex password or passphrase. There are many password managers available and they are becoming increasingly popular. We recommend you research the various types of password managers available and then discuss your options with an information technology professional to determine whether a password manager is right for you.

Be careful what you post on social media

Social media platforms are great for sharing personal information with friends, but they can also potentially expose your personal information to hackers. We love to post things about our favorite sports teams, our birthdays, our children’s birthdays, or share our pet’s name. It may seem harmless to share this information on social media, but hackers who are looking to crack passwords can look to these posts to help them figure out your passwords.

Use complex passwords or passphrases

Don’t use things that are widely known about you when selecting passwords. Also, avoid using common words and never incorporate your social security number into a password. The most secure passwords are comprised of special characters, upper case letters, lower case letters, and numbers.

Many people are starting to use a passphrase as their password. A passphrase can be something like, “My CPA is the best there is!!!” As you can see, a passphrase can be easy to remember, while also being more secure, as they incorporate spaces and are longer than the average password. As a rule, the longer (at least 12 characters) the password/passphrase and the more complex it is, the more secure it will be. Another positive of having a complex password/passphrase is that you won’t need to change the password as often.

Don’t use the same passwords or variations of the same password

Since it seems like we have passwords for everything, it can be tempting to use the same password for everything. This is not a best practice because once someone figures out your password, they can try to access your accounts on other websites that you frequent. If your passwords are the same, or very similar, it becomes all too easy for hackers to access your various accounts.

Change your passwords

The longer you keep your password the same, the higher the chances are that someone will be able to guess what it is. Also, if a hacker does discover your password, changing your password regularly prevents them from continuing to access your account. At a minimum, consider changing your passwords periodically for your more critical online accounts, such as online banking.

Don’t save passwords on your computer or electronic device when prompted

From time to time, while visiting a web page, you may be prompted to have the web browser save your login credentials for convenience reasons. While initially, it may seem like a great time-saving idea to have the computer or electronic device remember and autofill your login credentials, it is not a best practice. If a hacker accessed your computer or electronic device, they could very easily log in as you and access your personal/sensitive information. If login credentials are saved on your computer or electronic device, be sure to remove this information prior to disposing of, donating, or selling your computer or device.

Don’t let anyone watch you log into your accounts

Your login credentials should always be kept confidential. If people are around when you want to log into one of your accounts, wait until you are alone and in a secure environment before entering your login credentials.

Avoid using public computers

When accessing personal and sensitive information, use a device that you know and trust. When you utilize a public device, you have no way of knowing whether that device is truly secure. As an example, a public computer could have keylogger software installed on it which can monitor and record each keystroke typed on a keyboard and provide the information to a third party.

Use two-factor authentication when it is offered

With two-factor authentication, you need more than just a password to gain access to account information. It adds a second layer of security by combining something that you know (like a password) with something that you have (like a cell phone or ATM card) or something specific to only you (like a fingerprint or voice print). An example of two-factor authentication is an ATM. To access accounts at the ATM, you need your bank card as well as your PIN. Some banks are even using voice biometric technologies to verify user identity for added security. Due to the added layer of security that two-factor authentication provides, it is being offered more frequently and we recommend taking advantage of it whenever possible.

Identity theft and data breaches have become increasingly common in our data-driven world. Our personal and sensitive information is very valuable and a natural target for theft. By utilizing the above best practices, you will be well on your way to protecting yourself and preventing a hacker from targeting you.

If you have any questions or would like to discuss any of these security recommendations in more detail, please feel free to reach out to us.

IRS Provides a Trade or Business Safe Harbor under 199A for Rental Property

On January 18, 2019, the IRS issued long-awaited final IRC §199A regulations. In conjunction with these regulations, a proposed revenue procedure, Notice 2019-07, was also released to provide a safe harbor under which a rental real estate enterprise will be treated as a trade or business solely for purposes of IRC § 199A.

Trade of Business Requirement

The new IRC § 199A 20 percent deduction is available for “qualified business income” arising from a “qualified trade or business”. Since the issuance of the initial guidance on the deduction, taxpayers and practitioners alike were looking for guidance on when a taxpayer’s rental real estate activity is enough to meet the “qualified trade or business” standard.

New Safe Harbor for Real Estate Trade or Business

In response to the requests for more certainty, Notice 2019-07 was released and includes a proposed safe harbor under which a rental real estate enterprise may be treated as a trade or business solely for the purposes of IRC § 199A.

Under the guidance, taxpayers must either treat each property held for the production of rents as a separate enterprise or treat all similar properties held for the production of rents as a single enterprise. Commercial and residential real estate may not be part of the same enterprise. Taxpayers may not vary this treatment from year-to-year unless there has been a significant change in facts and circumstances.

Safe Harbor Requirements

To meet the safe harbor requirements, the taxpayer must satisfy the following factors during the taxable year:

• Maintains separate books and records to reflect income and expenses for each rental real estate enterprise
• For taxable years beginning prior to January 1, 2023, perform 250 or more hours of rental services per year with respect to each rental real estate enterprise
• For taxable years beginning after December 31, 2022, in any three of the five consecutive taxable years that end with the taxable year (or in each year for an enterprise held for less than five years), perform 250 or more hours of rental services per year with respect to the rental real estate enterprise
• Maintains contemporaneous records – including time reports, logs, or similar documents – regarding the following:
  • Hours of all services performed
  • Description of all services performed
  • Dates on which such services were performed
  • Record of who performed the services

These records are to be made available for inspection at the request of the IRS. The contemporaneous records requirement will not apply to taxable years beginning prior to January 1, 2019.

What rental services qualify?

Rental services, for purposes of the revenue procedure, include the following:

• Advertising to rent or lease the real estate
• Negotiating and executing leases
• Verifying information contained in the prospective tenant applications
• Collection of rent
• Daily operation, maintenance, and repair of the property
• Management of the real estate
• Purchase of materials
• Supervision of employees and independent contractors

These activities may be performed by owners, employees, agents, or independent contractors of the owners.

What activities do not count?

Time devoted to the following financial or investment management activities will not constitute rental activities and cannot be counted toward the 250-hour requirement:

• Arranging financing
• Procuring property
• Studying and reviewing financial statements or reports on operations
• Planning, managing, or constructing long-term capital improvements
• Hours spent traveling to and from the real estate

Excluded from the Safe Harbor

The proposed revenue procedure excludes two types of rental arrangements from the protection of the safe harbor. These include:

• Real estate used by the taxpayer (or owner or beneficiary of a pass-through entity) as a residence for any part of the year
• Real estate rented or leased under a triple net lease

Procedural Requirements

A taxpayer using the safe harbor must include a statement attached to their income tax return specifying that the requirements of the revenue procedure have been satisfied. The statement must be signed by the taxpayer or an authorized representative of an eligible taxpayer, and it must say, “Under penalties of perjury, I (we) declare that I (we) have examined the statement, and, to the best of my (our) knowledge and belief, the statement contains all the relevant facts relating to the revenue procedure, and such facts are true, correct, and complete”. The individual or individuals who sign must have personal knowledge of the facts and circumstances related to the statement.

Effective Date

The proposed revenue procedure may be applied generally to taxpayers with taxable years ending after December 31, 2017. Taxpayers may rely on it until final guidance is issued.

Self-Rental Rule Tweaked

It should also be noted that the final regulations continue to provide that rental activity that does not rise to the level of an IRC § 162 trade or business is nevertheless treated as a trade or business for purposes of IRC § 199A if the property is rented to a commonly controlled trade or business. In other words, self-rental activities do not have to rise to the level of a trade or business for the rental income to qualify as QBI. Common control under the final regulations means that the same person or group of persons, directly or by attribution under IRC §§ 267(b) or 707(b), owns 50 percent or more of each trade or business. Notably, the final rule was written to exclude self-rental income received by a C corporation from this special treatment.

A step-up in basis is the readjustment of the value of an appreciated asset, such as real estate, for income tax purposes upon inheritance. The value of the property is based on the fair market value on the date of the decedent’s death. While we love and miss the dearly departed, the assets they leave behind must be dealt with appropriately. It’s important for the beneficiaries to know that significant tax savings may be available to them, and are entitled to a step-up in basis.

Examples of Step-up in Basis

There are many different types of situations in which this may occur; here is a simple example:

A husband and wife jointly own a rental house. The rental house was originally purchased decades ago for $40,000 and the portion of the cost that was allocated to the building, $30,000, fully depreciated. Let’s say the husband passed away in 2018, when the rental property was valued at $320,000. At that time, the husband’s share of the fair value of the property, $160,000 (one half of $320,000) was transferred to the wife at a stepped-up basis. This would have added to the wife’s total cost basis in the rental property, thus greatly decreasing any taxable gain if she were to sell the property shortly thereafter. Also, after allocating a portion of the value of the property to land (which is not eligible for depreciation), say $40,000 of the $160,000, the remaining $120,000 would then be treated as a new asset and depreciated in full over the useful life of the property. This would provide deductions against the rental income generated by the property, thus reducing any taxable income.

Another example of a situation that would result in a step-up basis is when a property is passed on to the heirs of a decedent. Regardless of the original cost basis of the property, the stepped-up basis (equal to the fair market value at the time of the decedent’s death) is transferred to the respective heirs. Thus, if the property is sold for an amount equal to the stepped-up basis, then there would be no taxable gain for the heirs at the time of sale.

Obtain an Appraisal

TIP: A proper appraisal for any inherited property will greatly aid in providing adequate substantiation of the stepped-up basis being applied in the event of potential scrutiny by the Internal Revenue Service.  Any applicable appraisal should be performed to represent, as closely as possible, the fair market value as of the date of the death of the decedent.

For more information regarding Step Up in Basis, please contact Greg Fusco at 401-921-2000 or gfusco@disantopriest.com.

The ever-changing market of cryptocurrencies presents an array of new tax challenges and the IRS has been urgently training its examiners to handle them. As quickly as miners create cryptocurrencies and investors buy and sell them all over the world, taxable events can occur every step of the way. Users of “virtual currencies”, the IRS’s term for cryptocurrencies, should be aware of the tax implications early on in order to comply with federal and state tax law to avoid potentially significant penalties.

What do cryptocurrency users need to keep in mind when making transactions? 

Although substantial media attention and frequent discussions have centered on cryptocurrency for some time, the IRS still hasn’t provided guidance on every type of transaction relating to this new commodity. Although the word “currency” is in the name, virtual currencies are not treated as a form of currency for federal tax purposes. Instead, they are treated as property and must be accounted for and tracked similarly to any other capital asset. However, there are numerous types of cryptocurrency transactions and they don’t always follow the same guidelines.

As virtual currencies are purchased and sold, created by miners, exchanged for goods and services, and in some cases used as compensation through wages, users must maintain proper recordkeeping practices as transactions occur. Waiting until year-end to determine revenues, gains, and losses could be extremely burdensome, if not nearly impossible.

When goods and services are exchanged for virtual currency, taxpayers in receipt of virtual currency must include the fair market value (FMV) in US dollars on the day of the transaction in their gross income. On the other hand, those paying with virtual currency must recognize either a gain or loss at the time of the exchange depending on whether the FMV of property received is greater or less than their adjusted basis in the virtual currency. In fact, any time a virtual currency is exchanged for actual currency, other property, or services, a gain or loss should be recognized. However, the gains or losses may be either capital or ordinary, depending on whether the virtual currency is considered inventory or property held mainly for sale to customers in trade or business. Miners must recognize income at the FMV of the virtual currency received on the day it is mined. It is best to stay ahead of these tracking issues, and when in doubt, taking a conservative approach is best until further guidance has been issued by the IRS.

What about virtual currency held in foreign bank accounts? 

Taxpayers may choose to keep their virtual currency in a foreign account. At this time, it is not explicitly required by the Financial Crimes Enforcement Network (FinCEN) to report virtual currency on a Foreign Bank Account Report (FBAR) filing. However, the penalties for not properly filing an FBAR are significant enough that taxpayers should still consider the reporting implications of virtual currency held in foreign accounts. Non-willful violations can result in penalties of $10,000 per year, and willful violations can result in penalties of 50% of account balances or $100,000 for every year, whichever is more. Taxpayers can take a more conservative approach by reporting virtual currency in foreign accounts when the aggregate high balance in all foreign accounts of the taxpayer is above $10,000.

DiSanto, Priest & Co. continues to stay up-to-date on the tax implications of virtual currencies as guidance is released by the IRS. If you have questions regarding your virtual currency and the effects it may have on your tax return, please contact our Tax Department.

Want to read more about Blockchain and Cryptocurrency?
Don’t miss Part 1: The New Technology Quickly Changing our World and Part 2: The Coin Behind the Technology.

Cryptocurrency has been around since 2008. However, it went from being generally unheard of by most to a frequent topic of household conversation within a few months.  At the end of 2017 and the beginning of 2018, there was daily news coverage regarding cryptocurrencies caused by the significant spike in prices (upwards of a thousand percent) that increased the wealth of many coin holders.

What is a cryptocurrency?

A cryptocurrency is an electronic currency that is designed to be exchanged for goods or services (i.e., Bitcoin, Ethereum, Litecoin, and Monero are some of the most popular).  Each “coin” can be “mined” utilizing the power of graphics cards to perform complex calculations to solve algorithms. Once a solution is found, a block (as in blockchain) is complete, and a coin is rewarded to the computer responsible for finding the answer.  These calculations are verifying that the data batched into a block is accurate. The new block is then sent to all other computer systems on the block-chain network. The block cannot be altered because all systems possess the same information. We discussed blockchain technology in Part 1 here.

How can we use cryptocurrency?

The first transaction ever recorded with Bitcoin was used to order pizza in exchange for 10,000 Bitcoins (BTC).  This was long before Bitcoin reached a value of over $19,000. However, ordering pizza is not the only thing we can use cryptocurrency for.

A valuable function created from cryptocurrencies is an immediate exchange of funds globally. Transfers can happen almost instantaneously. For example, $99 million worth of Lite Coin was moved in a single trade on April 23, 2018, and the transaction took about two minutes and thirty seconds to settle.  The associated fees for this transaction cost about 40 cents. This process is substantially cheaper than other means of transferring funds from one entity to another. Typical funds exchange services can charge 10% or more for the service and take several days to settle.  

Cryptocurrency trading has become quite popular recently and there are risks involved as with any other investment. Smartphone apps have been developed, including Coinbase, to act as an easy to use interface to trade a variety of cryptocurrencies.  Prices are known to be extremely volatile and various online exchanges have been compromised where investors lose all the cryptocurrencies that they own. The most important distinction regarding blockchain and cryptocurrencies is that, while the blockchain is not a hackable system, the exchanges and your computer that holds your coin can be. Investors must take the necessary precautions when dealing with this new opportunity.

Up next!

We discuss the taxation of cryptocurrency and how it can affect investors and miners in Part 3.

Part 1

Part 3

Do you own a piece of real estate whose fair market value is greater than its basis?  Are you contemplating selling and buying another? A 1031 Exchange may be for you!

In a Section 1031 Exchange, also known as a “like-kind” exchange or a Starker exchange, the taxpayer does not recognize and pay tax on the gain on an exchange of like-kind properties so long as both properties are held for use in a trade, business, or investment purposes.

There are specific guidelines to follow to qualify for a Section 1031 exchange.  The first is the term “like-kind.” Luckily, like-kind is a broad term. For example, a rental property can be exchanged for raw land, and vice-versa.  A multi-family rental property can be exchanged for commercial property, a warehouse for an office building, residential apartment building for a storefront, etc. According to the IRS, so long as the properties being exchanged are of the same nature, character, or class, they would qualify (e.g., Real Property for Real Property, etc.).  Second, this provision applies to business or investment property only. You cannot exchange your primary residence for another home. For example, if you are moving from Rhode Island to another state, the sale of your home and purchase of a new home would not qualify for like-kind treatment.

Third, the IRS requires that the value of the property and equity purchased must be the same as or greater than the property given up in exchange.  To qualify for 100% deferral of the gain, an example would be a piece of property worth $500,000 with a $100,000 mortgage attached. It would have to be exchanged for another piece of property with a minimum value of $500,000 and a $100,000 mortgage retained.  This leads us to another rule: A taxpayer must not receive “boot” in the transaction to qualify for 100% deferral of the gain. Any boot received is considered taxable to the extent there is realized gain on the transaction. For example, you own a property worth $1,500,000, and you are exchanging it for a qualified property worth $900,000.  The $600,000 cash received in this instance would be considered “boot,” and you would pay tax on the amount up to the gain on the property.

Because simultaneously swapping properties is rare between two owners, you’ll engage in a “deferred” exchange where you enlist the help of a QI (qualified intermediary). Additionally, there are a few time constraints when conducting like-kind exchanges. You, as the property owner, have up to 45 days after selling and closing on your original property to identify up to three potential pieces of like-kind exchange property. The replacement property needs to be received and the exchange completed within 180 days from the sale of your original property or the due date of your income tax return (including extensions) for the tax year in which the relinquished property was sold – whichever is earlier. Please note that there are no extensions available for the 45-day and 180-day periods.

To add more to the like-kind exchange gamut, the recently enacted Tax Cuts and Jobs Act (TCJA) changed a rule related to like-kind exchanges.  For exchanges completed after December 31, 2017, the TCJA limits these like-kind exchanges to real property not held primarily for sale (real-property limitation.) Therefore, after December 31, 2017, personal property and intangible property no longer qualify. There are transition rules that only apply in certain circumstances.

All these rules and guidelines can confuse even the most astute investors. Many areas in the like-kind exchange arena can trip you up and therefore disqualify transactions from tax deferral.  If you are contemplating a like-kind exchange, please give us a call at (401) 921-2000 and we would be more than happy to assist you.

Blockchain – What is this new buzzword? I’ve heard colleagues, clients, and even politicians throwing it around, but according to Accounting Today, only 1% of today’s workforce considers themselves an expert. So why is it becoming such a hot topic? Who is it affecting? And what does it mean for your business? 

What is blockchain?

Blockchain is defined as “a digital database containing information (such as records of financial transactions) that can be simultaneously used and shared within a large decentralized, publicly accessible network” (Merriam-Webster definition). In other words, it’s a collection of transactions and data that is unchangeable and near-incorruptible.  This system is known as distributed ledger technology. Blockchain isn’t just about recordkeeping; it’s about how the records are both created and kept. Each transaction is called a block, and each block is recorded sequentially, creating a chain (hence the name). Transactions are created authentically with layers of verification that make it easy to track, trust, and store. The most well-known use of blockchain is through Bitcoin and other cryptocurrencies. But its application is so much more vast than that, and its potential future usage is far more significant than most people realize.

Who’s using it and how?

A considerable number of the big banks and technology companies around the world are starting to implement blockchain technology including J.P. Morgan Chase, IBM, and Microsoft to name a few. Beyond the big business applications, many startups are using this technology for everything from payment systems, to information sharing, smart contracts, and more. Even governments around the world are starting to invest in this technology; the Dubai government has plans to issue all government documents using blockchain by the year 2020. This global change and innovation is sure to have a huge impact on businesses large and small alike. A major sector where privacy is important is the medical field.  Blockchain is a solution where doctors, insurance companies, and hospitals can share patient medical files in real time if they are on the same network. The technology can maintain patient privacy while improving the quality of care received from a patient’s care provider.

Other thoughts

Is this technology safe?

Blockchain uses cryptography (secret code) which prevents records from being modified, altered, deleted, or destroyed. With this fast-paced electronic data stream, it makes it nearly impossible for a hacker to create an alternate chain more quickly than the actual valid chain.

The pace of technological change is continually accelerating. For example, as of the year 2000, the rate of technological progress was five times faster than the average rate of growth during the entire 20th century.

How can we help?

At DiSanto, Priest & Co. we’re keeping abreast of the latest technological innovations, including blockchain and its many applications. We understand that we live in a time of exponential technological advancement. With that rapid growth comes new rules and regulations for both tax and financial purposes. That’s where we come in! As your trusted advisor, we’re here to help you as we navigate through this new and exciting time.

Part 2