Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

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Archive for December, 2007

Posted by taxguru on December 31, 2007

Posted in comix, IRS | Comments Off on

Deals on New QuickBooks Software

Posted by taxguru on December 31, 2007

As I’ve often said, it is possible to save quite a bit of money on the more expensive software, such as QuickBooks and Microsoft Office, by buying them from eBay sellers.  I have saved substantial amounts of money that way over the past several years, including some times where I bought an earlier version of a program in order to be able to buy the newest version from the manufacturer at their much lower upgrade price.

The most expensive version of QuickBooks is their heavy duty Enterprise Solutions (ES), which used to come only in a 10 user version that cost $3,500.  I have been using ES for our books here since it first came out, but only because I received a free copy as part of my ProAdvisor membership. For accountants who are not ProAdvisors and who have clients using ES, it could get expensive being able to support them.  Luckily, Intuit recently started expanding the flavors of ES, offering versions for 5, 10, 15 and 20 simultaneous users, costing as much as $9,000 plus another $2,000 per year for their service plan. 

The best aspect to this product line expansion, from a purely selfish sense, has been the introduction of a special single user version for professional accountants that allows us to work with client files from any of the other larger programs.  It retails for only $849.   

I am discussing this now for an even more selfish reason.  As a beta tester for the 2008 program, Intuit sent me a free copy of this special accountant version of the newest Enterprise Solutions program.  Since I already had a copy as part of my ProAdvisor update, this redundant copy has been put up for sale on eBay by Sherry at a huge discount off of the retail price.  The auction expires next Sunday, January 6, 2008. 

 

Posted in QB | Comments Off on Deals on New QuickBooks Software

Which is more likely to be true?

Posted by taxguru on December 30, 2007


(Click on image for full size)

Posted in comix, TaxCuts | Comments Off on Which is more likely to be true?

Steroids used by accountants?

Posted by taxguru on December 30, 2007

Posted in comix, cpa | Comments Off on Steroids used by accountants?

Posted by taxguru on December 29, 2007

Wesley Snipes trial stays in Ocala, Fla. – It looks like his ridiculous Race Card strategy didn’t do the trick.

 

Posted in Morons, scams | Comments Off on

Posted by taxguru on December 28, 2007

Updates from IRS on the upcoming filing season:

Filing Season Opens on Time Except for Certain Taxpayers Potentially Affected by AMT Patch

Alternative Minimum Tax (AMT) – How It Affects Filing Season 2008

 

Posted in AMT, IRS | Comments Off on

Posted by taxguru on December 26, 2007

Posted in comix, TaxHikes | Comments Off on

Posted by taxguru on December 23, 2007

Posted in comix, TaxHikes | Comments Off on

Gift Splitting

Posted by taxguru on December 23, 2007

Q:

Sorry to bother you, but could you tell me if a husband and wife can EACH receive $12,000 (and stay within the legal limits) from the same donor, say one of the parents of the husband or wife?
 
Thanks!

A:

For gifting purposes, each person, including spouses, is subject to his/her own limits.  Thus, gift splitting between spouses has long been a standard tactic to essentially multiply the amount of wealth a husband and wife can transfer tax free to their kids and grandkids.

The annual maximum without requiring any need to dip into the million dollar lifetime exclusion is currently $12,000 from each donor (giver) to any one donee (recipient).  For example, say a married couple has a married daughter.  The father can give $12,000 to their daughter and another $12,000 to their son in law.  The mother can give another $12,000 to the daughter and another $12,000 to the son in law.  This makes a total of $48,000 that can be transferred tax free during each calendar year.  If there are grandkids, the older parents can also each give another $12,000 to each of their grandkids. 

Since gifts of any size or total amount are always tax free for the recipients, the potential gift or estate tax hit is on the donors (givers) if they give away too much.  Therefore, it is critical for them to work on any gifting and estate planning scenarios with their professional advisors.

There are also other aspects to consider, especially if the gifts are not of after tax cash.  Gifts of appreciated assets carry with them potential capital gains taxes on the recipients if and when they sell those items; so deciding exactly what is transferred is something that should be done with the assistance of professional advisors. 

FYI: Here is an excerpt from the QuickFinders Tax Planning For Individuals that covers this point.

Annual Gift Tax Exclusion

A taxpayer can give $12,000 per person (for 2007) to any number of recipients in a calendar year without paying federal gift tax. An unlimited amount can be given each year as long as no recipient receives more than $12,000. Gifts that qualify for this annual exclusion are never taxed­no gift tax is owed when the gift is made, and the gift is not taxed at death. If a gift is over $12,000, only the excess is a taxable gift. The annual exclusion is indexed for inflation and will change again when cost of living adjustments reach the next $1,000 multiple.

Present interest required. To qualify for the annual exclusion, a gift must be a present interest­the recipient must have all immediate rights to the use, possession, enjoyment and income of the property. The annual exclusion does not apply to a future interest­the recipient’s rights to benefit from the property begin at some future date. Most gifts to trusts do not qualify for the annual exclusion because they are gifts of future interests. Exceptions include gifts to a minor’s trust and gifts to a trust that includes a Crummey power.

Gifts from married couples. Each spouse has an annual exclusion. Couples can therefore transfer a combined total of $24,000 to a single recipient in 2007 and not exceed their combined annual gift tax exclusions.

Gift splitting. If a gift in excess of $12,000 is made by only one spouse, the couple can use both annual exclusions by filing gift tax returns electing to split gifts. A gift-splitting election applies to all gifts made by the couple in a calendar year and attributes one-half of each gift to each spouse.

Community property. Gifts of community property are considered for federal gift tax purposes as made half by the husband and half by the wife. This results not from gift splitting, but from federal recognition of the state’s community property rules. Thus, a gift-splitting election is not needed for community property gifts.

Qualified Transfers–Tuition and Medical Care

Direct payment of medical expenses or tuition for another person is not a gift for gift tax purposes [IRC §2503(e)]. Payment must be made to the school or medical provider and not to the beneficiary. The beneficiary of a qualified transfer does not need to be related to the taxpayer. A qualified transfer does not prevent the donor from making an annual exclusion gift directly to the beneficiary of the qualified transfer. Qualified transfers are not reported on Form 709.

Tuition. Tuition paid to primary, secondary, preparatory or high schools, and colleges and universities for another person qualifies for the tuition exclusion.

Payments for books, supplies, dormitory fees and board do not qualify. Tuition for part-time students qualifies.

Medical care. Medical payments can cover any type of expense deductible for income tax purposes, including payment of insurance premiums.

Transfers to QTPs

Contributions to a qualified tuition program (QTP) are not direct payments of tuition excluded from the gift tax as qualified transfers. However, these contributions are considered gifts of a present interest and are eligible for a special election spreading them over five years.

Good luck.  I hope this helps.

Kerry Kerstetter

 

Follow-Up:

Kerry,
 
Thank you very much. This helps a lot!!

 

 

Posted in Gifting | Comments Off on Gift Splitting

Nobody is safe from her tax schemes…

Posted by taxguru on December 22, 2007

Posted in comix, Hitlary | Comments Off on Nobody is safe from her tax schemes…