Posted by taxguru on February 11, 2006
Q:
Subject: Exchange Question
If a Section 1031 exchange is set up, but cancelled when one of the partners cashes out, are there any IRS penalties?
Thanks.
A:
If an exchange falls apart before being finalized, the disposal will be reclassified as a fully taxable sale, which would generally result in high taxes and possible late payment penalties. There is no separate penalty on the failed exchange itself.
Kerry Kerstetter
Posted in 1031 | Comments Off on Penalties On Failed Exchange
Posted by taxguru on February 11, 2006
Q:
Subject: Schedule C
Hello.
What do you charge for an EBAY type Schedule C and SE?
Thanks,
A:
If you are asking this in order to compare with what other tax preparers charge, that is not possible. I have never used a flat rate or per schedule fee system. I have always charged based on my actual time spent, at my current billing rates. Clients who have their books in good order pay much less than those who have messy or non-existent accounting records.
If you are asking because you want me to prepare your tax return, that is also not possible. We are still in the pruning back phase of adjusting our work load and are not accepting any new clients.
If you haven’t already done so, please check out my info on selecting a new tax pro on my website.
Good luck.Kerry Kerstetter
Posted in Uncategorized | Comments Off on Tax Prep Fees
Posted by taxguru on February 11, 2006
Q:
Subject: 179 DepreciationI have a vehicle placed in service December 19, 2003. I used the full first year depreciation in the 2003 tax year. I am now considering trading it off and leasing a different vehicle. What are my tax consequences for the vehicle I trade off and for my new vehicle?Example; Would I owe back depreciation. I have a $12,000 payoff on my current vehicle.
A:
If you expensed the entire cost of your vehicle on your 2003 tax return, its adjusted cost basis on your books is zero. Whatever you sell it for will be taxable as depreciation – Sec. 179 recapture. Even if you don’t receive any money and the loan is paid off, you will have a sale for the $12,000 loan balance.
If you trade it in for the purchase of a more expensive business vehicle, the gain can be deferred by reducing the cost basis of the replacement vehicle.
Selling the current vehicle and then leasing a new one will not qualify unless you trade it in and the lease is treated as a purchase, such as with a one dollar buy-out at the end. If the buy-out is the vehicle’s fair market value at the end of the lease, that is not the same as a purchase.
You really should be working with personal tax pro to see what is the best strategy for you. I have almost always found that leasing vehicles is a much more expensive (rip-off) way to go than a normal purchase; so you should work with your personal tax advisor to see if that makes sense.
Good luck.
Kerry Kerstetter
Posted in 179 | Comments Off on Vehicle Swap
Posted by taxguru on February 11, 2006
Q:
Subject: Is an S corp transferable?Tax Guru,Upon the sale or transfer of the business (assuming that it is an s corp. in the first place); do the new shareholders have to sign a new IRS 2553 or does it just remain in effect?Thanks for the advice
A:
The original 2553 remains in effect until either formally revoked or if the corp fails to qualify for S status by violating one of the restrictions.
Assuming the new owners are not one of the ineligible types, and the total number of shareholders is still less than 100, the original S election will continue to be in effect. The new owners will be obligated by the original 2553 even though they have not signed it. This mean that they will have to include their pro-rated share of the corp’s income on their 1040s.
If the sale of stock is effective mid-year, how you allocate the income or loss to be reported on the K-1s is negotiable between the buyers (old shareholders) and sellers (new shareholders) and should be spelled out in the sale agreement so that there is no messy dispute when the 1120S is prepared.
I hope this helps. A tax pro can help work with your particular situation.
Kerry Kerstetter
Posted in Uncategorized | Comments Off on Transferring An S Corp
Posted by taxguru on February 11, 2006
Q:
Subject: RE: tax questionI have a question for you, if I have lived in my home less than 2 yrs and I sell it and take the money and put in to the new home will I pay capital gaines tax on that money. I am married
A:
You can see all of the residence sale rules here on my website.
You can see that what you do with the sale proceeds has no effect whatsoever on your possible tax obligation.
You should work with your own personal tax advisor to see if you qualify for the pro-rated tax free exclusion.
Good luck.
Kerry Kerstetter
Posted in Uncategorized | Comments Off on No Residence Reinvestment Requirement
Posted by taxguru on February 10, 2006
Hurricane Victims Have More Time to Claim Losses on Prior Year Returns – Victims of Hurricanes Katrina, Rita or Wilma wishing to claim disaster-related losses on their 2004 federal income tax return will have until October 16, 2006, to make this choice, a six month extension of the original deadline.
Posted in Uncategorized | Comments Off on
Posted by taxguru on February 10, 2006
Posted in Uncategorized | Comments Off on What may work for possums, won’t help with IRS
Posted by taxguru on February 10, 2006
(Click on image for full size)
Posted in Uncategorized | Comments Off on Friendly Tax Collectors?
Tax Guru - Ker$tetter Letter 