Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Gifting via Debt Forgiveness

Posted by taxguru on September 2, 2015

From a Client:

Subject:  Accounting for Girls’ Inheritance "Forward"

Kerry:

Our plan is to loan our daughter and her husband $140,000. Annual payments will be their annual "gifts".  Their loan will be secured by a mortgage on their land and secured by a note @ zero interest. Their closing is soon.

Problem? Or problems?

 

My Reply:

You are on the right track here.  I’m assuming you are trying to work with the annual tax free gifting exclusion, which is currently $14,000 per donor (giver) per donee (recipient).

You just need to be sure to call the $140,000 a loan in your books and on your kids’.

Each calendar year, you can forgive $56,000 of principal as gifts from you and your wife to your daughter and to her husband.  A letter explaining this each year would be perfect documentation, as would recording it as such in your personal books.  This assumes there haven’t already been other large gifts that would count towards the $14,000 annual limit.  If so, you can just reduce the debt forgiveness by enough to keep the year’s total at no more than $14,000.

Some other relevant trivia:
The gifting limits are done on a calendar year basis.

You don’t need to wait a full year from the date of the loan to make the first debt forgiveness gift. It just needs to be before midnight on December 31, 2015.  Technically, you can give the second one on January 1, 2016.  However, if you do that, you won’t be able to give any more large gifts for the rest of 2016 and stay under the annual limit.

Every few years, the annual limit is bumped up by $1,000 when the cost of living warrants it.  It was last raised to $14,000 as of 2013.  When it is increased to $15,000 in the next year or two, you can increase your annual gifts accordingly.

I hope this info isn’t too confusing and is useful for your gifting plans.  Let me know if you have any questions.

Kerry

Follow-Up:

Thanks. Perfect advice.

TaxCoach Software: Are you giving your clients what they really want?

Posted in Gifting | Comments Off on Gifting via Debt Forgiveness

State Tax Rates Vary Widely

Posted by taxguru on September 1, 2015

The different tax rates levied by the various States have long been part of the tax planning analyses I have done for clients.  Occasionally, this has resulted in shifting some operations and income into lower tax States in order to save thousands of dollars a year in taxes.

 

Taxpayers Fleeing Democrat-Run States for Republican Ones – From Americans for Tax Reform

 

The Tax Foundation has just released a very comprehensive study of the effective tax burdens on several different kinds of business in each of the American States, plus DC.  They even contrast the tax rates for newer businesses versus more mature ones. The report is free to download and is an interesting tool for those considering the possibility of reducing their State tax burdens. 

The  article explaining the report

The report itself – 128 page PDF

 

TaxCoach Software: Finally! Plain-English Tax Planning That Builds Your Business!

Posted in StateTaxes | Comments Off on State Tax Rates Vary Widely

More IRS Cover-Ups

Posted by taxguru on August 29, 2015

Judge tells IRS it can’t hide White House emails

IRS must say if White House sought taxpayers’ information: Judge

This judge shouldn’t hold her breath waiting for cooperation from IRS. They have been as helpful and honest as Hitlery Clinton has been with the multiple investigations into her crimes.

Posted in Crooks, IRS | Comments Off on More IRS Cover-Ups

Can the IRC be made Idiot-Proof?

Posted by taxguru on August 26, 2015

While everyone knows that is impossible, that’s Trump’s goal, according to this clip from yesterday’s episode of NewsBusted.

 

 

 

The full episode of NewsBusted.

My excerpt.

Posted in humor, NewsBusted, Trump, video | Comments Off on Can the IRC be made Idiot-Proof?

New IRS Due Dates

Posted by taxguru on August 24, 2015

As is often the case with the bozos in Congress, they love to slip various tax items into unrelated legislation.  Such was the case with the recently signed Surface Transportation and Veterans Health Care Choice Improvement Act of 2015. 

As part of this new law, some long running due dates for certain kinds of tax returns will be changing in the next year. 

The ones that will likely be most widely felt among the practitioner community are:

Partnerships – Form 1065 (or an extension request) will be due a month earlier than previously, March 15 instead of April 15.  This is no surprise and continues a recent trend to give some distance in time between the due dates of tax returns for pass-through entities and the due dates for individual tax returns (1040s) so that we aren’t scrambling to do all of the tax returns on the same day.   

C Corporations – Form 1120 (or an extension request) will be due four and a half months after the end of the tax year, instead of the long standing three and a half month timeframe.  However, there is an odd exception in the law just for corporations with tax years ending June 30.  Their returns (or extensions) will still be due by September 15, three and a half months after the end of the year.  As a long time believer and advocate of a non-December tax year for corporations, that will mean a lot of due date changes for our clients, except for the several June 30 ones.

 

Longer Statute of Limitations (SOL)
This highway bill also modified the definition of “Substantial Understatement of Income” that allows IRS an SOL of six years to audit tax returns if the cost bases of assets that were sold were overstated. 

I am often asked how long tax related records need to be retained.  This new provision extends the time you should keep records of assets that were sold to at least six years after the tax returns reporting their sales were filed with IRS.

 

Forbes had some good recaps of these new changes:

IRS Audit Period Just Doubled From Three Years To Six Years For Many

Many IRS Tax Return Due Dates Just Changed, FBARs Too

 

For a number of years now, my favorite tax reference source has been The TaxBook.  They recently posted this very informative three page PDF recap of the tax aspects of this highway bill. 

Highway Bill Contains New Tax Law Changes

TaxCoach Software: Are you giving your clients what they really want?

Posted in Due Dates, NewTaxLaws | Comments Off on New IRS Due Dates

More IRS Security Problems

Posted by taxguru on August 23, 2015

Imagine that.  Our most highly personal and confidential financial information is still not totally secure in the hands of our good buddies at the agency we all love, IRS.  Big Brother is letting us all down here.

From FoxNews:
IRS says thieves stole tax info from additional 220,000

From IRS:
Additional IRS Statement on the "Get Transcript" Incident

IRSInfoRelease(2015-08-24)

Posted in Crooks, IRS | Comments Off on More IRS Security Problems

Lois Lerner was loyal DemonRat Soldier

Posted by taxguru on August 14, 2015

in the fight against those who would dare to criticize her Lord & Savior, King Barack Hussein O.

Lerner, in newly released emails, calls GOP critics ‘evil and dishonest

Senate report: IRS’ Lerner also targeted Bristol Palin

IRS finds yet another Lois Lerner email account

Posted in Crooks, IRS | Comments Off on Lois Lerner was loyal DemonRat Soldier

Calif FTB threatening audits…

Posted by taxguru on August 3, 2015

In its latest Tax News newsletter, the California Franchise Tax Board stated the following.

We noticed a large number of taxpayers who claim unreimbursed employee business expenses (EBE) on Schedule A that appear questionable.

In August, we will increase the number of audits for taxpayers deducting EBE on personal income tax returns, starting with the 2011 and 2012 tax years.

There appears to be a bit of scare strategy at work here.  Normally, FTB doesn’t do many actual audits of items on income tax returns.  Instead, as with most other States, they just let IRS do the bulk of the examination work and then use the IRS results to make changes to the State tax returns.   They are explicitly encouraging people who don’t think they will survive an examination to file amended tax returns and do their job for them.

Your clients can file amended tax return(s) if their business expenses do not qualify.

Notice that they mention going back to 2011, highlighting the fact that the Statute of Limitations for California income tax returns has long been Four (4) years, compared to the long-standing Three (3) years with IRS.

Also, notice that the focus of this concern is just deductions on Schedule A of individual income tax returns.  It doesn’t mention any problems with expenses claimed on business forms (i.e. Schedule C) or corporate tax returns (hint hint).

Posted in audits, Calif | Comments Off on Calif FTB threatening audits…

Clinton Tax Returns & Questionable Donations

Posted by taxguru on July 31, 2015

One of the benefits of the extremely lengthy presidential campaign season in this country is the ability of the general public to take a peek into the private tax returns of those candidates who choose to make theirs available for viewing.

As has been all over the news today, the Clinton campaign has posted download links for several of Bill & Hitlery’s individual income tax returns here on her website.  They have the Federal individual income tax returns for the years 2007 through 2014.  No copies of State income tax returns are included.

I’m not planning to spend the time dissecting each of those tax returns in great detail.  However, I do feel a need to point out that these 1040s reveal only a tiny fraction of the income that the Clinton Family has received over the past years because they do not show the other entities that they use to funnel income and expenses through, such as the infamous Clinton Crime Foundation and Clinton Global Initiative that have brought in hundreds of millions of dollars in “donations” (aka bribes) from all over the world and which have been used fro the personal benefit of the Clintons.

What is another Clinton stretching of the truth (aka Lie) is the claim of how much they have donated to charity for those years.  From her website:

“Since 2007, we have … made $14,959,450 in charitable contributions.”

Looking at the details on the tax returns, most of those “charitable contributions” were actually made to themselves via their foundation that has been exposed as a Clinton Family slush fund that gives practically nothing to real charities.

From the copies of the tax returns I downloaded:

2014 – $3,000,000 (out of a total charity deduction of $3,022,700) was to the Clinton Foundation

2013 – $3,057,000 (out of a total charity deduction of $3,078,000) was to the Clinton Foundation & Global Initiative

2012 – $1,800,000 (out of a total charity deduction of $1,825,650) was to the Clinton Foundation

2011 – $1,400,000 (out of a total charity deduction of $1,400,000) was to the Clinton Foundation

2010 – $1,000,000 (out of a total charity deduction of $1,000,000) was to the Clinton Foundation

2009 – $1,000,000 (out of a total charity deduction of $1,000,000) was to the Clinton Foundation

2008 – $550,000 (out of a total charity deduction of $550,000) was to the Clinton Foundation

2007 – $3,019,000 (out of a total charity deduction of $3,083,100) was to the Clinton Foundation

Totals for Eight Years:
      $14,826,000  (99.11%)  of $14,959,450  total donations were paid to the Clinton Foundation and Global Initiative  

I realize that, of all the crimes that the Clintons have committed, this pales in comparison; but it is the one area that my skill-set makes easiest for me to detect.

Posted in Charity, Clinton, TaxReturns | Comments Off on Clinton Tax Returns & Questionable Donations

Perjury is no reason to fire the head of the IRS…

Posted by taxguru on July 28, 2015

Add to the list of things bHo won’t do:

Chaffetz asks Obama to fire IRS chief Koskinen for ‘obstruction’ of congressional probes

 

As with Lois Lerner, Koskinen is more likely to receive an award from bHo than a dismissal notice.

Federal Judge Threatens To Hold IRS Commissioner, DOJ Lawyers in Contempt of Court over Lerner

IRS gets lashing from judge for refusing to release Lerner emails, other documents

The Curious Case of Lois Lerner’s Physically Damaged Hard Drive

Posted in Crooks, IRS | Comments Off on Perjury is no reason to fire the head of the IRS…

 
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