Tax Guru – Ker$tetter Letter

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Archive for April 3rd, 2007

Sec. 179 For Storage Buildings?

Posted by taxguru on April 3, 2007


Subject: 179 / 208A question

Dear Kerry aka Mr.Tax Guru,
After reviewing your website page.   
I have an interplay of 179 and 280A question.
It is my understanding that most storage facilities are eligible for 179. If I sell autos or parts of autos and purchase a garage to store my autos/cars inside of  (storage not attached to house) would this qualify under 179 or would this be a 208A issue?


Your understanding about storage facilities is incorrect.  Only specialized agricultural ones qualify for Section 179 deductions.

A garage or warehouse does not qualify.

You need to be working with an experienced professional tax advisor before you get yourself into big trouble with IRS by trying to use Section 179 on unqualified assets.

Good luck.

Kerry Kerstetter



TaxCoach Software: Are you giving your clients what they really want?


Posted in 179 | Comments Off on Sec. 179 For Storage Buildings?

Interest On Home Equity Loans

Posted by taxguru on April 3, 2007


Subject: HELOC Tax Deductible?
Would the interest on the HELOC be tax deductible if I pull equity (about $47K) from my primary home and use that money to pay down my rental property or investment property?
Thank you,


There are a number of possible ways in which the interest on that loan could be deductible on your tax returns. 

For example, if you haven’t already exceeded the $100,000 limit on equity debt, the new interest could be claimed on Schedule A as personal residence mortgage interest.  It would not be deductible for AMT purposes.

Under the interest tracing concept, interest on any loan proceeds put into your rental properties could be deducted on the rental Schedule E.  This could yield a better tax savings than using Schedule A because it could reduce your AGI, which triggers a lot of other tax savings items.

Under the same interest tracing concept, loan proceeds put into investment property would enable the interest on that portion of the loan to be claimed on Schedule A as Investment Interest, subject to its annual deductible limits.

Your personal professional tax advisor should be able to help you deduct the interest in the most efficient manner.

Good luck.

Kerry Kerstetter



Posted in Uncategorized | Comments Off on Interest On Home Equity Loans

State Tax Returns Required?

Posted by taxguru on April 3, 2007


Subject: Residency Test?


Firstly, thanks so much for providing and maintaining your blog, I have learned much from it, as I’m sure countless other people have. Secondly, I was hoping you could help me with a question I have…

This year is the first time I will be filing taxes. I am from Memphis, TN and went to college in New York. I was a student in NY until I graduated in June of 2006, and then I was home (in Memphis) for three months, and then started my first job in NY in September until now. My license is from TN, and as far as I know my “official” address is in TN, but I work in NY, and I have bills coming to my apt in NY.

My question is as follows: Where am I resident of? Which state taxes do I file? What rules/tests does the IRS have regarding this?

Lastly, and on a different note (this one may be a little more difficult for you to answer), I wanted (well, my father wanted) to know since I was in school for a little bit more than half the year, can he claim me as a dependent? As far as I can tell, I pass the “qualifying child” tests. What would be the ramifications of this? And if he claims me as a dependant, am I required to file taxes? If not, should I anyway (I think im owed a refund.)

Thanks in advance for your time and effort!

All the best,



You really need to be working with a professional tax preparer.

If you worked in NY, which it looks like you did, you will need to file a part year resident return with the State of NY.  While you may have a TN license, it sounds as if you have taken up official residency in NY.  NY is one of the most aggressive states in the country at establishing tax jurisdiction over anyone possibly connected to that state.  Working and living there makes you a taxable New Yorker and there’s no way you are going to escape that obligation.

You and your father need to do some number crunching to see if he paid for more than half of your living costs during the full year of 2006 in order to claim you as his dependent.  If he does that,. you will not be able to claim a personal exemption for yourself, which could cause you to owe some tax money.  Either way, you need to file both Federal and State tax returns.

Again, a professional tax advisor, who can look at the actual numbers (possibly your father’s tax preparer), can give better advice on how to handle your 2006 tax returns.

Good luck.

Kerry Kerstetter


Netflix, Inc.


Posted in Uncategorized | Comments Off on State Tax Returns Required?

QuickBooks Reports

Posted by taxguru on April 3, 2007


Subject: Quickbooks Update/Conversion


I just got through reading your information on “Quicken vs. Quickbooks” and it was very helpful. I am a business administrator at a church just south of Nashville and we recently upgraded from Quickbooks 2002 to Quickbooks Pro 2007. We have used Quickbooks for 15 years.

Everything went great except the reports for one of our accounts will not convert over. It tells us that we will have to recreate all of the reports. We have four accounts in Quicken; Budget, Savings, Reserve and a construction pledge account. All of the reports transferred over with no problem except for the budget account. We have spent hours on the phone with Intuit support and they have not really been helpful. About the only thing we can get out of them is that since our reports are set up on a cash basis instead of an accrual basis they will not convert over. This is not really accurate since the other three accounts are all set up on a cash basis and all of the reports converted over just fine. 

The budget account is our largest account and has the most reports that are set up so this will be a major pain to redo all of the reports.

Any thoughts you might have on this? Have you seen this before and if so do you know a solution?



I don’t have any easy solutions for this kind of problem. Having been through very similar situations myself – especially going from Quicken to QB – I do want to share my experiences. 

First, I only work with Cash basis reports and have in fact been quite frustrated with the way in which most Intuit reports start off as Accrual and make us modify them to reflect Cash.

The first time I had the kind of problem you mentioned, I ended up spending hours and hours researching online tech support, user forums and having phone calls with Intuit.  The end result was the same as you had; the reports had to be set up from scratch in the newer program. However, when I did that, it only took about 15 minutes to set up the new report, and it turned out to be much more useful than the original one in the older program.

Needless to say, I was kicking myself for wasting so much time trying to iron out the automatic conversion process when it took so little time to just set up a new report from scratch.  Now, when I encounter similar problems, I just automatically design a new report form scratch to give the same info I want.  These usually only take about five minutes to do.

I’m sure this wasn’t the answer you were hoping for; but if you were to just set up your reports, starting with the pre-configured ones in the new version of QB you are using, you will find that it takes much less time than you thought it would.

Good luck.

Kerry Kerstetter


Thanks for your response Kerry…That is what I figured and we will start making the new reports. We, like you, spent way too much time
trying to solve the problem when we could have recreated the reports by now.
God bless…




Posted in QB | Comments Off on QuickBooks Reports