Man Saves $75,000 In Loose Change, Donates To Church
It took him 84 years to accumulate that much, but little things do add up.
Archive for March, 2003
Posted by taxguru on March 6, 2003
One of the reasons I’ve never been a big fan of playing the stock market is that, with its volatility, you need to check each day to see if you’re doing well or lost it all. It doesn’t impart much in the way of feelings of long term security.
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Posted by taxguru on March 6, 2003
Certified Exchange Specialist
After a few years of discussion and planning, the Federation of Exchange Accommodators, the professional organization of 1031 exchange facilitators, is kicking off its new certification program. The first certification exam is scheduled for two months from now, on May 16 in Washington, DC. There will be 120 multiple choice questions in a two and a half hour testing period. You can see more details and download an application for the exam on their new special website.
I’ve already asked Sherry if she is interested in taking the test and she answered just as I had expected. She hates tests and since her business is already very well established, she doesn’t see the need for some new letters after her name.
While I have always done very well in tests (acing the CPA on my first try), I doubt that I will be taking it. I already have more credentials than can fit on my letterhead and more work than I can possibly keep up with. However, there is an exam scheduled for October 2 in Las Vegas, a place neither of us has been to; so anything is possible.
KMK
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Posted by taxguru on March 6, 2003
Budget Simulator
I came across this simulation program for the Federal budget, where you can supposedly see the effects of changes in spending and taxation on the deficit. It looks like it may actually be very similar to the kinds of models actually used by our rulers in DC because it uses the same kind of unrealistic static based assumptions that have been proven wrong so many times that they aren’t worth anything.
Tax rate cuts are considered to be government expenditures, increasing the deficit. This, in spite of the fact that Reagan’s tax rate cuts caused a doubling of revenues and anyone with any appreciation for the real world realizes that static scoring is complete bunk and a waste of time. Only a dynamic look can reflect the fact that people do alter their behavior when tax rates are changed. Lower tax rates cause people to earn more taxable income, increasing the overall haul for the IRS. Any financial model that fails to consider that is no better than just fabricating numbers out of thin air, another popular technique used by our rulers.
KMK
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Posted by taxguru on March 6, 2003
Strange Formatting
If you’ve noticed the strange fonts and formats in my posts over the past few days, it’s due to a new program I just started using, called BlogWeaver. It works with my normal Blogger.com posting page, and is supposed to function just like Microsoft FrontPage (which I do use for the main web sites I control); but I am still trying to figure out how to better control the font settings. Hopefully, we will see more consistency over the next several days.
KMK
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Posted by taxguru on March 6, 2003
Not Ready For Prime-Time
I just completed a survey from Intuit on their online QuickBooks service and they asked why I wasn’t referring it to clients. Here is my answer:
Your data format is not backwards compatible and you are keeping clients captive. If someone decides to switch from online to desktop QuickBooks, everything I have seen says that the data from the online version cannot be imported into the desktop version. When you make it so that clients can switch back and forth without losing any of their data, I will gladly recommend your service.
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Posted by taxguru on March 5, 2003
Bruce Bartlett doesn’t think Stephen Moore was correct in his assessment of the new chairman of Bush’s Council of Economic Advisers. This is very strange because Bartlett and Moore normally see things in the same light.
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Posted by taxguru on March 5, 2003
Removing the second tax on corporate profits will have other positive benefits for investors.
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Posted by taxguru on March 5, 2003
Swap ‘Til You Drop
I often hear of people who think doing 1031 (aka Starker) exchanges on real estate is a waste of money because it just postpones and doesn’t actually eliminate the inevitable payment of capital gains taxes. It is not true that the tax will always eventually be due. It will be if you end up selling the property before you pass away. Likewise, if you gift the property to someone else, that person will also receive your cost basis and potential capital gain.However, if you pass away and leave the property in your estate, all of the accumulated gains are literally wiped off the books. Your heirs receive the property at a stepped up cost basis of its fair market value as of the data of death. Because inheritances are tax free to the recipients, your kids can sell inherited property and have no capital gain. In fact, they often end up with capital losses after counting the selling costs, such as Realtor commissions. We call this the ultimate escape from taxes. The phrase we like to use to describe this is “swap ’til you drop.”
This is definitely a big win-win deal for people whose estates are under the taxable threshold. For those people with estates subject to estate tax, there is room for some tax strategizing in terms of valuations to use on the 706. Since estate tax rates are higher than capital gains rates, lower values on the 706 generally reduce the overall tax hit.
There may or may not be a change in this escape from taxes. The currently phasing in changes to the estate tax is scheduled to eliminate the step-up basis in 2010 and require heirs to carry over the same cost basis as the decedents. That will only become real if our rulers in DC don’t mess with that law between now and 2010, which is not too likely to be the case.
KMK
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Tax Guru - Ker$tetter Letter 