Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Archive for November, 2006

Loophole or noose?

Posted by taxguru on November 30, 2006

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Football Lights

Posted by taxguru on November 30, 2006

 

Q:

 Subject: football lights

 I noticed your response to the Florida couple who bought a house and then the woods were cut down and football lights installed.

I would recommend they question their realtor and check their disclosure forms. Sellers (at least in CA) should have disclosed this change – I can’t imagine the neighbors didn’t know about it.  It might be why the sellers moved. It might also be grounds to sue the realtor and the rescind the sale.

 

A:

That is a very good point.  A change that large in the neighborhood doesn’t usually happen overnight without plenty of warning.  There are often environmental impact reports and neighborhood comment meetings.  It does sound as if the sellers weren’t very forthcoming about what they know of the impending changes.  If the Realtor was also aware of those plans, it seems s/he also has a potential liability if the buyer chooses to pursue legal action for misrepresentation and improper disclosure.

Thanks for writing.

Kerry Kerstetter
 

 

 

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Advertising on Blogs

Posted by taxguru on November 30, 2006

 

Q:

Subject: Query: Advertising on Your Blog?

I’m contacting you from Zecco.com, the new free financial trading portal.  We launched officially in October and are now seeking blogs on which to advertise.

If you’re interested, to initiate the process, I’d like to know some stats of your site. What is your monthly traffic? What is your current CPM revenue?  With this basic data we can start the ball rolling.

Thank you for your time and information.

 
By the way, if this isn’t something you’re interested in, would you consider an RSS feed in the future or perhaps blogging on the www.Zecco.com site (we do share advertising revenue with bloggers)?

Regards,

Trish Telesco
Zecco Research


A:

Trish:

I appreciate the offer to run ads on my blog.  Unfortunately, based on similar discussions with other potential advertisers, I have learned that I simply don’t have the detailed kinds of stats that you need.

You may want to use the Google AdWords service that I have, just as you have on your website.

You may also want to approach the suspiciously anonymous proprietor of the taxblogger.org website that has very obviously been developed for the express purpose of selling ad space.  I’m assuming that they are keeping much better records of traffic for the benefit of potential advertisers than I am currently set up to do.

I also appreciate the offer to blog for your website.  However, I barely have enough time to post the few things I want to for my own blog.

Good luck with your website.

Kerry Kerstetter

 

 

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Converting Rental To Residence

Posted by taxguru on November 30, 2006

 

Q:

Subject: Exchange question

What is the test of intent in an exchange. Suppose someone exhanges an apartment rental building for a single family home, their true intent is to eventually turn the home into a personal residence.  They have told numerous people city building officials that their intent is to remodel the home for their use as a personal residence.  Before they purchased this replacement property, they arrange with the broker and seller of the property to convert the property to a rental in order to qualify as a rental property under 1031 rules.  This seems like a scam the IRS would frown upon.


A:

You are absolutely right that somebody who announces right up front the intention to personally occupy the home is setting himself up for serious problems with IRS accepting that property as proper like kind for a 1031 exchange

Conversion from a rental to personal use is allowed, but it has to appear that the decision to do so took place after the completion of the exchange.  I have long advised people who have a long-term goal of exchanging into a rental home and later on converting it to personal usage to keep that plan to themselves. The more they announce that intention to other people, the more damage they are doing to their case for a valid 1031.  Loose lips sink ships, etc.

As a tax practitioner, I always keep in mind the way in which everything would play out in real life.  Any audit by IRS of a 1031 exchange would normally be a few years after the actual exchange took place.  If the taxpayer is already occupying that home when the audit occurs, it will be a much tougher case to make that it was acquired with the intention of being for rental usage.  That wouldn’t be an impossible argument to win; but each bit of evidence the IRS auditor could find indicating prior intent to occupy it, the more difficult it would be.  Obviously, the more people who had been told of this previous intent, the more damaging the evidence against the validity of the 1031 exchange.

The moral of the story is that anyone stupid enough to be bragging around about his intention to only appear to be acquiring a rental property probably deserves to lose the tax savings from a 1031 exchange.

Thanks for writing.

Kerry Kerstetter

 

 

 

 

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Section 179 For Vehicles

Posted by taxguru on November 29, 2006

Q:

Subject: Section 179 vehicle deduction
 
Hi Kerry, Thanks for the great web site!!!! I found it and have learned quite a bit from it.
 
Two questions I have regarding the deduction of vehicles weighing over 6k pounds:

  1. Can this deduction be used on the purchase of a “used” vehicle? Or is it only for new ones?
  2. If it is the purchase of a pickup with an open cargo area greater than 6 ft, does the $25k limit still apply?

Thanks in advance, I am planning on purchasing a commercial vehicle in 2007 and want to know the rules of Section 179.

 

A:

You really should be working with your own personal tax professional to see how to best utilize the Section 179 deduction for your particular case.

I have a page on my website devoted to the Section 179 deduction.

It includes answers to your questions:

Qualifying assets need to be new to you; not brand new.

The $25,000 maximum is only for SUVs.  Pickup trucks over 6,000 pounds aren’t subject to that limit.

Kerry Kerstetter


Follow-Up:

Thanks for the info Kerry,

And thanks again for the very informative web site!

Have a happy holidays

 

 

 

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Telephone Tax Refunds

Posted by taxguru on November 29, 2006

Seadog Bytes recently posted this creative reminder of the new credit we will be seeing on 2006 tax returns.

IRS Announcements:

For individuals

For businesses & tax exempt organizations

Because this sounds like some kind of scam, Snopes.com explains that it is in fact true.

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Accounting isn’t as creative as some people would like…

Posted by taxguru on November 29, 2006

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Discriminatory Money?

Posted by taxguru on November 28, 2006

 

Thanks to Matt Drudge for this latest financial news, where a Federal judge has declared that USA currency must be redesigned to make it easier for blind people to distinguish values.

 

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Posted by taxguru on November 28, 2006

Philanthropy Expert: Conservatives Are More Generous – This shouldn’t be news to anyone who understands human nature. By definition, Conservatives and Libertarians are extremely generous with their own money, while Liberals are only generous with other people’s money, via government confiscation.

The book in which this study is reported:

http://rcm.amazon.com/e/cm?t=taxfreeexchacorp&o=1&p=8&l=as1&asins=0465008216&fc1=000000&IS2=1&lt1=_blank&lc1=0000FF&bc1=000000&bg1=FFFFFF&f=ifr

Update: Thomas Sowell has an interesting look at this book’s subject.

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Posted by taxguru on November 28, 2006

The ABCs of Certification – A look at the often confusing alphabet soup of professional credentials.  I’m constantly having to explain to people what the ATA and ATP stand for. 

 

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