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.

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.

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.

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.