Unfortunately, our rulers’ resolve to fix the tax system in this country has always been as fleeting as…

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Upset Over Tax, Man Throws Coffee In Clerk’s Face – Shooting the messenger doesn’t accomplish anything constructive.

To Capitalize or Deduct Property Improvements? – Good article from the latest issue of Intuit ProConnection, includes sample doc file you can download and send to clients.

Working with Lacerte and QuickBooks

Having been a user of the Lacerte tax programs since 1985, I wasn’t a big fan of the company’s purchase by Intuit a few years back because I was afraid they would dumb the program down and merge it with Intuit’s ProSeries program.  Luckily, that hasn’t happened, and Lacerte has been maintained as its own separate division and style. 

At the time of the acquisition by Intuit, the one benefit I had been hoping to see was an easy way to import data from QuickBooks into Lacerte, a feature long available with ProSeries. It looks like that capability may finally be available for Lacerte with this new SmartMap feature. I haven’t tried it yet on an actual client’s data yet; but I should be able to give it a spin within the next few weeks. Since we require all corporate clients to use QuickBooks, this could be a big time save when it comes to tax return preparations, and a money saver for the clients, since we charge for all work based on time spent.  I’ll try to post the results of my work with this feature.

Q:

Subject: Questions for research project

 

Dear Tax Guru,

 

I’m a lawyer doing research on taxes.  I was reading your site a the part that says that an IRS agent can fine someone $10,000 for stating that “income taxes are not constitutional. These are all bogus arguments that will earn anyone mentioning them in the presence of an IRS employee an automatic $10,000 fine.”

 

What is your authority for this statement?  I find it difficult to believe this is true.  Please help?

A:

I was referring to the Frivolous Appeal (Section 6673) penalty, which is frequently assessed against people who waste the IRS’s and Tax Court’s time using the same kind of idiotic tax protestor arguments that have long been settled.

The actual amounts of each penalty occasionally vary from $500 to $25,000 per instance, depending on the mood of the IRS or Tax Court authority, as well the level of belligerence in the attitude of the idiot tax protestor they are dealing with at the time.

If you scan reports of Tax Court cases, such as in many of the tax blogs, you will see this penalty constantly referred to.  It is anything but rare.

I hope this helps.  

Kerry Kerstetter

 

IRS Announces 2007 Standard Mileage Rates

 Beginning Jan. 1, 2007, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:

• 48.5 cents per mile for business miles driven;
• 20 cents per mile driven for medical or moving purposes; and
• 14 cents per mile driven in service to a charitable organization.

 This info has been added to my Quick Reference page.

Q:

Subject: Capital Gains question

Good morning,

First, thanks for making a site where people can ask questions. Secondly, here is my question:

My wife and I moved from NY to Florida and purchased a home. We had no idea that within a few weeks, the woods was about to be plowed away and some 80 foot lights installed for a high school football field. Needlessless to say we want to move and we have only had the house for one month.

If we sell it now, do we have to have to pay capital gains?

Thank you for any help.

A:

If this truly was a surprise, and you are ready and able to make the case to IRS if they were to ask, that you wouldn’t have purchased that particular home if you had known about the developments next door, you shouldn’t have any problem qualifying for the pro-rated tax free exclusion of all or part of your profit.

However, the questions that pops into my mind is how much profit are you really expecting after owning the home for such a short time, especially after factoring in selling costs? Unless you bought the property at a bargain basement price, odds are high that you will be lucky to come out with a break even, and are more likely to end up with a non-deductible personal loss.

You need to consult with your personal professional tax advisor, who can crunch the numbers to see if there will be a profit to worry about; and if so, how long you will need to hold onto the home to cover the full amount of profit under the pro-rated exclusion calculation.

Good luck. I hope this helps.

Kerry Kerstetter

Follow-up:

Hi Kerry,

Thank you for the response. To be quite frank, I am not expecting a profit at all. In fact, i am expecting to take a loss. I just wan’t clear who it worked, but apparently I get taxed only on profit over what I paid, if in fact that happens?

Thank you,

My Reply:

That’s correct. I had a hunch you were worrying about a non-existent problem; qualifying for the tax free exclusion when there isn’t any profit.

As your personal tax advisor will remind you, the double standard of the tax code will hit you here. While any profit on the sale of a personal residence is potentially taxable, any loss is not deductible.

Good luck. Hopefully, you won’t have too large of a loss.

Kerry Kerstetter

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