Navigating the Gift and Estate Tax Maze
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/29/2004 09:59:00 PM Send this post:

 
Risky Retirement Plan

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/29/2004 03:15:00 PM Send this post:

 
IRS Says This Year's Average Tax Refunds up Almost $100 - This is something the DemonRats don't want people to connect to the Bush tax cuts, because those supposedly only benefited the evil super rich.



- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/28/2004 04:27:00 PM Send this post:

 
Kiss your taxless Net goodbye
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/27/2004 11:05:00 PM Send this post:

 
From MSN Money
10 big tax breaks for the rest of us


How the tax code rewards the soldier


Tax records you can toss



- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/27/2004 09:39:00 PM Send this post:

 
More Basic Economics
This is a good explanation of how damaging to the economy high tax rates are. Contrary to the static view of the economy espoused by so many people, tax rate changes do have very real and profound effects on economic behavior. Real life is a more dynamic situation with high tax rates acting as a direct disincentive to making money and low rates as a very powerful inducement for people to earn as much taxable income as possible.


- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/27/2004 05:44:00 PM Send this post:

 
Economics Lesson
The never ending diatribe by the DemonRats and their Fellow Traveler RINOs condemning tax cuts as irresponsible windfalls for the evil rich warrant another look at this restaurant example to illustrate the basic fact that tax rate cuts must, by definition, save those who pay the most taxes in the first place the largest amount of money.

Unfortunately, there is such a shortage of common sense, as well as economic literacy in this country that the Left's lies are so readily accepted as truth. It's no coincidence that the media's leftist leanings, and unbridled hatred of Bush, aid in making this misinformation campaign so successful in influencing so many people. Their not subtle insinuations that every dime of tax saved by an evil rich person is taken straight out of the pockets of poor blue collar workers is insulting to the max for those of us who understand what a load of donkey droppings that is.
(Thanks to Andrew Roth at MoveRight.org for the link to this new rendition.)


- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/27/2004 10:54:00 AM Send this post:

 
Call for Benefit Cuts Spurs Political Frenzy - The deadly "Third Rail" of politics has been grabbed hold of. While I doubt if anything substantial will be done to remedy the SS problems, it's at least a good move to put the issue out there for debate and discussion. Continuing to keep our collective heads in the sand and hoping the problems will fix themselves can no longer be enough.


Net Phone Calls Eyed for Taxation - With any new technology, the tax vultures are certain to be hovering around.


Tax Distribution Tables don't Account for Income Mobility - Just as the definition of who is rich is subjective and changes over time, the inhabitants of the various tax brackets change quite often. I have seen plenty of people move from the very top bracket to the lowest and all around. To claim that everyone is always in the same bracket for their entire lives, as many of our rulers and wannabe rulers would have us believe as part of their class warfare rhetoric, is ludicrous.


- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/26/2004 09:56:00 AM Send this post:

 
AMT Relief in the FY2005 Budget: A Bandaid for a Hemorrhage
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/25/2004 09:33:00 PM Send this post:

 
Changing Social Security
For my entire career, one of the biggest issues I have been addressing has been how to help people avoid becoming victims of the dishonest and financially unsound Social Security system. It has always been inevitable that the system would be changed to deny people all of the benefits they have been promised. This has already been done through taxation of benefits for many recipients (contrary to the original promise) and raising the age of eligibility for full benefits so that more people will die off before even recovering what they have paid in.

As I have always said, any free market company that offered a retirement plan similar to SS would be charged with fraud and run out of business. It's different when our rulers in DC pass laws forcing people to participate in what is no more than a government run Ponzi scheme.

My long running prediction that SS benefits will be denied to people who are considered to be wealthy (earning more than $25,000 per year), and thus not needing any assistance, still stands and is even becoming more open, as in this call by Alan Greenspan to reduce benefits. He doesn't mention anything about reducing the huge amounts of taxes required to be paid into the SS system. Everyone is expected to pay in more and more in current taxes for fewer and fewer potential benefits.

I'm not a big fan of plans such as this, to allow people to set aside a tiny portion of their SS tax for privately controlled investments, but still send the full 12.4% to our rulers in DC. What most people fail to realize is that, while the current SS tax rate of 12.4% doesn't seem like a lot when compared to the 15%, 25% and 28% income tax brackets most people fall in, that is very misleading. The 12.4% SS tax is assessed on the gross pay, while the income tax is charged against taxable income, after deductions and exemptions. This makes the effective tax rate, and the actual dollars charged, much higher for SS tax for most people than they are for income taxes.

As I've described over the years, there are several ways in which one's business and financial affairs can be structured to minimize the amount required to be paid into the SS system. While it is usually more of a hassle than not doing those things, people who are holding their breath waiting for Bush or any of our rulers in DC to magically fix the entire mess are literally flushing thousands of dollars down the crapper each year they wait to take those steps on their own.


- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/25/2004 10:55:00 AM Send this post:

 
The immorality of taxes
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/24/2004 12:52:00 PM Send this post:

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/24/2004 11:49:00 AM Send this post:

 
Love Your Taxes, Says England's Catholic Church - I personally preferred the message that "if 10% is good enough for God, why do our earthly rulers need to take over 50% of everything we earn?"



Virginia Tax Reel. Richmond gets greedy, and John Kerry is watching.



- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/24/2004 10:43:00 AM Send this post:

 
IRS taking the gloves off - A little IRS PR to keep everyone in line for Tax Season.





Marriage Changes May Shake Churches' Tax Exemptions - It's not politically correct to oppose the left's agenda and the tax code could be used to punish anyone who doesn't fall into lockstep with them.


- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/23/2004 07:33:00 PM Send this post:

 
From Sunday WSJ
Unlike much of the Wall Street Journal's website, the Sunday section is supposed to be free and accessible by anyone, not just paid subscribers. Please let me know if this doesn't work out for non-subscribers.


How to Pick Right Kind of Tax Preparer


Dreaded Tax Law Could Ding You - More victims of the insane AMT. We're still waiting for the number of victims to reach that point of critical mass so our rulers will pull their heads out of their rectums and do something to fix this problem.


Selling Your Home Office


Do the Retirement Math - My personal preference is normally to grab the Social Security benefits ASAP.


Be Ready When Changes Come

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/23/2004 06:50:00 PM Send this post:

 
Behind The Chocolate Curtain - A recent profile in the local paper on my dad and his early years growing up at the Hershey orphanage. I actually learned about this article today after receiving a copy from him in the mail. The newspaper version also included a nice photo. {with a more reliable copy than is available from the newspaper, which changes the URL every day}
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/23/2004 08:25:00 AM Send this post:

 
Goodies cost - Another good big picture economics lesson from Walter Williams.


The Bush Paradox. Wasn't the era of big government supposed to be over?


The 6.2 Percent Solution: A Plan for Reforming Social Security


Tax fight simmers - RINOs doing what they can to help the DemonRats fight tax cuts.


A new world of higher taxes in Virginia?


'Perfect storm' hits taxpayers in Virginia


- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/22/2004 04:16:00 PM Send this post:

 
A Taxpayer's Rights: Gail Clarifies the Constitution - Good response from Gail Buckner to an idiot who fell for the tax protestor scam that taxes are voluntary.


- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/22/2004 03:52:00 PM Send this post:

 
Section 179 On Converted Assets
As one of the most lucrative tax deductions currently available, the Section 179 election to expense up to $100,000 of new (to you) business equipment continues to generate a lot of inquiries. I received the following email the other day that did allow me an opportunity to point out a key difference between the rules for normal depreciation and Section 179.

I wanted to thank you for this informative site. However, one issue regarding 179 seems unclear from Pub 946 regarding purchased vs. placed in service. For example, say a 6,500 lb truck was purchased for $30,000 in 1996 for personal use. Then, a taxpayer starts a business (sole prop) in March 2003 and has usage as follows: 80% business and 20% personal. Assuming FMV of $10k on March 1(placed in service date), it seems the taxpayer could deduct $8,000 as 179 expense in '03? What is your thought?

My reply:

Section 179 is only available in the first year the asset is purchased and placed in service. That would have been 1996 for your truck.

Your basis for five year depreciation in 2003 would be the $8,000 figure you mentioned ($10,000 FMV X 80% business use). However, this vehicle is not eligible for a Section 179 expensing.

This is an official IRS regulation - 1.179-4(e) and is not just my opinion.

Sorry to burst your bubble. I don't make the rules. I just make fun of them.

Good luck.

As is often the case, my main reference for this was my handy QuickFinder book; specifically, the following from Page 10-13 of the 2004 1040 Quickfinder Handbook:

Note: The Section 179 election must be made in the first-year property is purchased and placed in service. The election does not apply to property converted from personal to business-use unless the property was also purchased in the same year. [Reg. §1.179-4(e)]

As I illustrate every day, I never shy away from a chance to point out examples of inconsistency and unfairness in the tax rules. In this case, I don't see any. This is very consistent with the long running ban on churning of assets between related parties in attempts to manipulate their depreciation bases. Just as it's never been legal to claim the Section 179 deduction for an asset that you purchased from your own closely held corporation (or vice versa), you can't claim it when you literally buy it from yourself, which is what you are doing when you convert an asset from personal to business use. You can claim normal depreciation based on the lower of its original cost basis to you or its fair market value when converted into business property.

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/22/2004 10:50:00 AM Send this post:

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/21/2004 11:52:00 PM Send this post:

 
Six signs you don't need a tax pro
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/21/2004 02:52:00 PM Send this post:

 
Remember; our rulers can do those things to others that wouldn't be right for normal people to do on their own.



- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/19/2004 08:06:00 PM Send this post:

 
The deficit is no reason to raise taxes now. - There seems to be no shortage of liars trying to blame the tax cuts for the current deficit. Those people are dead wrong and many of them know it, but will use any excuse to pummel Bush and influence brain-dead opposition. The recent tax cuts are directly responsible for the growth in current economic activity and have actually made the deficit lower than it would have otherwise been. Out of control spending is the cause of the deficit.




- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/17/2004 10:18:00 AM Send this post:

 
Deducting Investment Losses As Thefts
Another one of the many unfair double standards in the tax code is the treatment of capital gains and losses. Gains are fully taxable each year with no maximum amount to be added to other kinds of income. On the other hand, net capital losses have a ridiculously low limit on how much can be deducted each year against other types of income.

This limit has been $3,000, with no adjustments for inflation, for decades. I have worked with a number of clients who felt this injustice in a big way with the dot-com stock market bubble. They showed huge taxable gains for a few years, and then when the bubble burst, huge losses, which have to be parceled out at $3,000 per year. I seriously doubt if one client, who is in his seventies, will live long enough to be able to use the more than one million dollars in capital losses he suffered from the stock market meltdown. Another inequity in the tax code is that, when you pass away, all unused capital and other tax losses just disappear. They aren't passed on to the heirs.

To get around this idiotic limit on deducting just $3,000 of investment losses per year, some people came up with the idea of recharacterizing the losses as fully deductible thefts due to dishonest stockbrokers or corporate management. Services, such as this one, popped up to help people document this alleged theft for tax purposes. I remember writing about such services a number of years ago and hadn't even thought about them until this morning, when I received a faxed copy of a recent solicitation from 165 Services from a helpful CPA in Ohio, Dana Stahl.

I checked out this service's website again and see that they are still as vague about the details as they were when I last reviewed them a few years ago. I sent them a request for clarification of how the fee for their 100+ page report is determined; whether it is a flat amount, an hourly rate, or a percentage of the loss or the taxes saved. I have yet to hear back from them. My gut feeling is that they probably base their fee on the taxes saved by being able to deduct the full loss in the first year instead of the measly $3,000 that would be allowed on Schedule D. I will post an update if that is proven to not be the case.

If that is how these folks charge for their report services, I have doubts as to its legality with IRS. Their service seems to be quite similar to that of an appraiser who establishes values of assets used for tax calculation purposes, such as items donated to charities or assets in a person's estate. As indicated here on the IRS website, it has long been forbidden for appraisers providing such valuation services to base their fees on the values they calculate. Such an arrangement would entail the same kind of conflict of interest as if we tax preparers based our fees as a percentage of the refunds we show on the returns; another illegal action under IRS regulations.

Prohibited appraisal fee. Generally, no part of the fee arrangement for a qualified appraisal can be based on a percentage of the appraised value of the property. If a fee arrangement is based on what is allowed as a deduction, after Internal Revenue Service examination or otherwise, it is treated as a fee based on a percentage of appraised value.

I also have my doubts as to how far the concept of a theft can be stretched to cover stupid investment choices. Over my 28+ year career, I have seen plenty of churning of clients' accounts by stockbrokers who were more interested in earning commissions than in preserving the clients' wealth. However, as dishonest as the public impression is of stockbrokers, corporate executives, and mutual fund managers; most of the losses in the stock market are probably just from idiotic decisions by people falling for the glamour of get rich quick financial gurus. I'm not sure where you cross the line from being the victim of stupidity to one of an outright actionable (and deductible) theft. However, for the right fee, it seems like these folks will give you a report claiming that it was a theft.


- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/16/2004 08:04:00 PM Send this post:

 
Bush Touts Tax Cuts As Economic Fix - It's really becoming embarrassing to have so many news articles about "Kerry calling for tax hikes." His Marxist plan to screw over anyone earning more than $200,000 per year is so different from my capitalist free market philosophy that I may need to do as H. Ross Perot did and change my name from Kerry M. to K. Mark Kerstetter. Of course, that might make people think that I am in some way connected to that big discount store chain that competes with Wal-Mart. That still wouldn't be as bad as having people think I endorse the DemonRats' "hate the rich" class warfare.



- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/16/2004 03:37:00 PM Send this post:

 
Penny Wise - Pound Foolish
I don't know the person who sent me the following email; but I suspect he either received some very bad tax advice prior to selling his farm or chose not to ask for any until now, when it's pretty much too late to do much about it. I'm guessing the latter because not even the most incompetent tax pro would have said all of the erroneous things this person mentions in his email to me.

Saving a few hundred dollars by not consulting with a tax pro prior to the sale will most likely end up costing him well over $100,000. If no part of his farm qualified as his primary residence, he is really screwed tax-wise.

The email I received:

My wife and I have just sold our farm (in 2003) in Rhode Island for 1.2 million. My understanding is that we get to back out our basis in the property (about $400K) and we get to back out a $500K exemption. That leaves us paying 15% capital gains on the remaining $300K, which is $45K.

We are planning on starting a farm-based business (and need to purchase some equipment) within the next year at our new location in Vermont. Is there any way we can offset the capital gains hit? We've heard something about a "Section 179" regarding purchase of equipment. How can we minimize our capital gains hit using a new business? (Start-up expenses, Capital purchases, equipment, etc...?)

Also, how does the timing of all this work? Our understanding is that we don't have to pay the capital gains until 2 years from the sale (2005), but we need to buy our equipment now, should we wait to formalize our business as an LLC, until 2005? Can "start-up" expenses span more than 1 year? Or should we formalize our business now and settle the capital gains issue in 2004?

Your assistance would be most appreciated. Thanks.

My reply:

There are far too many issues than I can cover in a general free email like this. You really need to work with a tax pro. In fact, you should have worked with one before the sale and definitely before the end of 2003.

Some issues of concern from your email:

The $500,000 tax free profit is only for the primary residence portion of your property. You need to allocate your sales price and cost basis between the farm and residence portions of your property.

The Federal taxes on the other portion of the gain will include 25% on the depreciation recapture and 15% on the other portion of the gain. There will also be State tax to pay.

If the sale took place in 2003, the taxes are due by April 15, 2004. I'm not sure where you got the idea that you had two years to pay them. You may be able to defer some of the taxes by using the installment method if you financed part of the sale and won't be paid off until future years.

It would have been a great thing to offset your capital gain by investing in new business equipment and claiming the up to $100,000 Section 179 deduction. However that had to be done by December 31, 2003 to be of any benefit on your 2003 1040. Whatever you buy in 2004 won't make any difference on your 2003 tax return.

As I said earlier, it sounds as if you either received bad advice up front or failed to seek it out. You had best start working with a good tax advisor ASAP to see what s/he can do to minimize the damage on your 2003 tax returns.

Good luck.

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/16/2004 03:02:00 PM Send this post:

 
Highway Bill Runs Counter to Bush's Wishes - Will Bush finally veto a piece of overspending legislation?





The Economic Impact of Taxing Internet Access



Anti-Tax Brushfire. Last week's Oregon vote is just one example of a national tax revolt.



Confusing tax-cut rule affects dividend break - Our rulers never miss a chance to make the tax laws more complicated, guaranteeing us plenty of work.



- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/15/2004 03:08:00 PM Send this post:

 
Frustrated IRS to Seek New Technology Contractors - IRS has been trying for decades to upgrade its computer systems from what they currently have, which are literally from the Kennedy administration. About a decade ago, they flushed around $50 million down the crapper when they tried to use their own people to do the upgrades. They don't appear to be having much better luck with outside expert contractors.





- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/14/2004 04:09:00 PM Send this post:

 
Guilty plea to offshore accounts charge - As I said a few years ago, when this guy was running ads and appearing in 60 Minutes and Forbes Magazine profiles, touting his offshore tax avoidance scams, he was literally asking to be a prime target of IRS criminal charges. Anybody stupid enough to flout his illegal schemes so openly had to be taken down if IRS were to have any chance of retaining credibility against the offshore promoters.



- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/14/2004 03:08:00 PM Send this post:

 
Fake $5 bills spotted - Making money the new fangled way - with a copy machine.


Enforcing German Sex Tax Ticklish Business - Some headlines are just too good to pass up.


Education savings plans - One word of warning - the tax free status of these plans can be changed in the future; so don't be surprised. Our rulers have done it before (broken these kinds of promises) and will do it again. The longer time horizon you have for withdrawing from the savings account, the higher the risk you have of being shafted.


- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/13/2004 11:15:00 PM Send this post:

 
From MSN Money
Do it right: Your 15-point tax checklist



Get your tax refund now -- for a hefty price - Legal loan sharking. People who use this service are idiots on at least two counts. First, they intentionally give the Feds an interest free loan of their money during the year, and then they pay through the nose to get their own money back faster. Adjusting their W-4s to have less tax held out would be a much wiser move, and it's free.




Five ways to beat the AMT - One of the best ways I have seen is to move as many deductions from Schedule A to business schedules (C, E & F) - just another big tax benefit of being self employed instead of a W-2 wage slave.


- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/13/2004 04:17:00 PM Send this post:

 
The Virginia Republican tax divide



Tax-free Internet days numbered



After stars leave town, some of their pay stays - It's a politician's wet dream - being able to tax wealthy athletes and entertainers who can't vote in their jurisdiction.


- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/12/2004 02:04:00 PM Send this post:

 
Recent Cases Confirm That Bad Tax Planning = Bad Tax Results - People who go out and set up corporations and LLCs without proper professional guidance before and during their operation are asking for big trouble.




Hill GOP exploring deeper spending cuts than Bush proposed - It's ironic that members of Bush's own party have to act as a counterweight to his reckless spending. That's usually the job of the opposition party.




Offshore finance - Some info on how offshore banking and finance works.



- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/11/2004 02:28:00 PM Send this post:

 
Bush Criticizes Democrats Over Tax Cuts - He is absolutely right that, if our rulers in DC don't get off their butts and make the tax cuts permanent, there will be the biggest tax increases in history when the different provisions expire. Doing nothing to make them permanent is exactly the same as supporting higher and more punitive and confiscatory tax rates, which are, coincidentally, an integral part of the core platform of the JackAss Party.






- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/10/2004 06:35:00 PM Send this post:

 
Servicing the Spendaholics



Borrowing to Pay Debt - There are both opportunities and potential pitfalls when borrowing against a home's equity in order to pay off credit card debt.



Old bond could bring new riches - Patience has always been a more reliable means of achieving investment growth than gambling on overnight riches. However, this is an extreme case of that. One hundred dollars invested in a bond in 1871 is now worth an estimated $300,000. I've seen plenty of people investing for their kids' and grandkids' futures; but this is more for the great-great-great.... grandkids' benefit.




Granholm's solution: Raise cigarette taxes - Michigan nicotine addicts are in the cross-hairs once again.



$2.5 billion in tax refunds unclaimed - One of the most unfair double standards in the tax law is the fact that if you owe taxes, that debt will stay with you forever and beyond (your heirs). However, if you have a refund coming, you forfeit it if you don't file a tax return within three years. I have seen literally hundreds of thousands of dollars in such refunds forfeited by clients who were in no big hurry to file their tax returns. The fair thing would be to allow people to at least get their own money back without any interest on it. However, I long ago learned that the concepts of "taxes" and "fairness" are as alien to each other as are "politicians" and "honesty."



Where's Our Wartime Tax Increase? Liberals wrap their love of spending in patriotic garb.



Bush seeks $1 trillion debt boost - What is conveniently overlooked by the leftist media is the fact that the amount of the Federal government's debt never went down, even with the huge imaginary Clinton surpluses that they accuse Bush of squandering.




- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/10/2004 12:06:00 PM Send this post:

 
Dealing With Spam & Viruses
For the past few years, we have been trying to cope with the growing onslaught of spam popping into our email accounts by checking them via the free Mail2Web service before downloading them into our main Eudora email program. With almost 1,000 messages per day, this was taking us hours every day. With the huge virus worm that started zipping around the Internet last week, we started receiving almost triple that level of incoming mail, most of which had virus attachments. It was taking forever to clean things up via Mail2Web.

I noticed some people in the Lucianne.com discussions mention the MailWasher program for dealing with this. After doing some checking around the net to ensure that it was in fact reliable and not going to create more problems, as many such utilities do, I downloaded the program and tried it out. I was hooked immediately on how much more efficiently it allows us to review what tins are in our email accounts and to remove them before they ever make it to our computers.

I actually noticed that I had downloaded a copy of MailWasher back in March 2002, but had never installed it. I wonder why not. (can anyone say Tax Season?)

The program is free. However, I went ahead and sent them the $30 registration fee, which I always do for programs that I appreciate using. People, especially small one person operations, who design useful computer programs, deserve to be rewarded and encouraged. MailWasher has already saved me many times that amount by allowing me to clean up and stay on top of our email accounts in a fraction of the time it was taking with Mail2Web.
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/10/2004 11:28:00 AM Send this post:

 



Any doubt who will end up with the short end of the stick?




- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/09/2004 06:43:00 PM Send this post:

 
Proud to pay taxes
There are still plenty of people who believe it is unpatriotic to arrange things so as to minimize one's taxes. Those people are free to pay as much in taxes as possible and bask in the warm patriotic feeling of allowing our rulers to spend their money for them.




- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/09/2004 12:36:00 PM Send this post:

 
It does take a special type of personality to be attracted to our profession; which is why there will always be too few of us to handle the ever increasing volume of work.




- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/08/2004 02:12:00 PM Send this post:

 
Not all oldies are goodies - Many people do try to claim Kelly Blue Book values for vehicles donated to charity when nobody in their right mind would pay that much for their clunkers.



A Primer on Bush's New Savings Accounts - These are still figments of Bush's imagination and not real yet; so don't be in a hurry to sign up for any of these new accounts.



- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/07/2004 10:06:00 PM Send this post:

 
8 types of income the IRS can't touch - In addition to the types he mentions, there are other kinds of income that are tax free to the recipients, including inheritances, gifts and life insurance pay-outs.



- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/07/2004 12:37:00 PM Send this post:

 
Guide to Web-Based Tax Software - An even crazier idea than using an in-house software program.


Surprise! Some taxes go up.



Stop the Medicare Ad Blitz, Taxpayer Group Says - First they expand the incompetent bankrupt program and then they spend millions more to ensure that as many people as possible will use it.



- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/06/2004 04:15:00 PM Send this post:

 
Tax laws grown far too complex - Amen.


- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/06/2004 01:10:00 PM Send this post:

 
Real Estate Gurus
For decades now, late night TV has been filled with infomercials for so-called real estate gurus hawking their get rich quick schemes. I've written about these charlatans before and the fact that almost all of them make most of their money selling their books, tapes and seminars and don't do much actual real estate investing. Back in the Bay Area, I used to do tax returns for some of them; so this isn't just conjecture on my part.

I recently came across some good discussions of these people.

John T. Reed has a very detailed review of several of the hucksters on his website, including Robert T. Kiyosaki, who is also the subject of this skepticism from Jessica Swesey.


- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/05/2004 06:06:00 PM Send this post:

 
By ballot initiative, Oregonians reject massive $800 million tax increase, similar to one rejected last year. - Why the rulers hate it when their subjects have direct influence over such decisions.
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/05/2004 03:56:00 PM Send this post:

 
Basis of Inherited Property
I received the following email:

On your web page http://www.tfec.com/faq/depreciation.htm you mention the following:

"When you pass away, the property receives a new stepped up tax cost basis
for your heirs, effectively wiping out the capital gains (including all
depreciation recapture) that accrued during your lifetime. "

Can you site an IRS publication, ruling, opinion, etc. that I can read to
confirm and understand fully the implications of this statement?

Thank you.

My reply:

That concept has long been part of the tax code.

For example, you can see it on Page 9 of Publication 551, which you can download from the IRS website:

Inherited Property
Your basis in property you inherit from a decedent is generally one of the following.
1) The FMV of the property at the date of the individual’s death.
2) The FMV on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation.

The basis and accumulated profit that the decedent had is no longer relevant.

I hope this helps.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/05/2004 03:14:00 PM Send this post:

 
Corp Fiscal Years
I received the following email:

http://www.taxguru.org/corps/taxyear.htm

Great article and great website.
Thanks for putting in the time to build and maintain it.

I was told by another CPA that choosing a fiscal year that is different than the calendar year raises the potential for an IRS audit.

He also told me that you had to have permission to not use the calendar year, which didn't make sense to me.

Any comments?

Thanks

My Reply:

It sounds like you are working with a CPA who is either ignorant or lazy.

I have never seen or heard of an IRS audit triggered by the use of a fiscal year ending in a month different than December; and I have worked with literally hundreds of such corporations.

It is true that you need IRS's permission to change a fiscal year after an 1120 has been filed. However, until the first 1120 has been submitted, the fiscal year can still be at the end of any month; regardless of what was entered on the SS-4 applying for the FEIN. Again, I have worked with hundreds of corporations where we did this and IRS never had any problems.

The only potential problem can be when a small closely held corporation is set up on the Accrual basis of accounting and there are differences between how income and expenses are treated between the 1120 and the owners' 1040s. This is why I advise people to set up their corporations on the Cash basis and make sure everything is treated consistently on both the personal and corporate books.

I hope this clears this up for you.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/05/2004 12:20:00 PM Send this post:

 
Estate Planning
Finding the right person to be in charge of your estate after you pass on is a very important decision. However, it's best to be clear on what those responsibilities entail.



- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/03/2004 01:05:00 PM Send this post:

 
More IRA Questions - This is an area of taxation that has become increasingly complicated with new types of IRAs and new rules for eligibility and amounts. It will get much worse over the next few decades as the rules change even more and people become completely confused over how much of their withdrawals qualify for tax free status. Keeping track of the cost basis is the weak link in most retirement plans.

I am also still skeptical enough of our rulers in DC to not trust them to honor their promise to allow completely tax free withdrawals from Roth IRAs. I would even be willing to bet money that they will pull the same scam as they did on Social Security recipients and tax people who they consider to be evil rich. As another reminder, our rulers in DC still define the evil rich as single persons earning over $25,000 per year and married couples earning over $32,000 per year; so it's not just people like Bill Gates who be cheated out of their tax free Roth IRAs. That is why I'm not a big advocate of choosing Roth IRAs over conventional deductible ones. Forgoing a current deduction for some promised tax break decades down the road is a fool's bet. This is especialy true for kids and younger people who often have 50 or more years before retirement.




Taxing Times for Three Stooges - Good analogy of taxation philosophy by Neil Cavuto. Comparing our rulers to the Three Stooges is right on the money.


- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/03/2004 09:24:00 AM Send this post:

 
We're the most expensive government in history - Another good analysis by Stephen Moore of the true reason why the tax burden in this country is so high. For new readers who may wonder why a CPA focuses so much attention on the spending habits of our rulers, it's because, unlike most tax professionals who believe that tax laws just materialize in a vacuum, I have always understood that taxes are merely symptoms of out of control politicians who have abandoned any pretext of following the guidelines and restrictions as laid out by our founding fathers in the Constitution.



Many are questioning Bush's sincerity in regards to supporting conservative principles:

Angst on the right


What Is The President Doing?

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/02/2004 01:50:00 PM Send this post:

 
Bush-Bashing Conservatives Should Focus on Big Picture


What a pain in the class! - The DemonRats' reliance on Marxist class warfare has always been pathetic.




The President's budget - He must feel he's on the right track since it's being attacked from both sides - as too stingy from the DemonRats and too wild and reckless from us conservatives.




Restrain federal spending, expand personal wealth




Flat, Fair and Forever



- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/01/2004 05:13:00 PM Send this post:

 
The "Lesser Evil" argument for supporting the GOP:




- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/01/2004 04:51:00 PM Send this post:

 
Self-Employment May Mask U.S. Job Growth - As Martha Stewart would say, "it's a good thing" when more people are choosing to be more in control of their working world than just being W-2 wage slaves dependent on someone else.






- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/01/2004 02:22:00 PM Send this post:

 
1031 Exchanges and State Rules
I've added a section to the TFEC website on State rules regarding 1031 exchanges. It's for my own benefit as well as the growing number of investors we are working with who are using this technique to transfer their real estate investments from one state to another without having to pay any taxes on their profits. In fact, even though we are located in Arkansas, more than half of the exchanges we handle have one or more legs in other states.

Labels: 1031

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 2/01/2004 11:15:00 AM Send this post: