Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Archive for December, 2009

S Corp Vehicle Purchase

Posted by taxguru on December 31, 2009

Q:

Subject:  Section 179

Can the two shareholders of an s-corporation take a loan to purchase a company vehicle and be able to get the 179 deduction?  The lender will not lend to the company but will personally to the 100% shareholders.
Time is of the essence to buy today or tomorrow
Thanks

A:

That is a very similar situation to the one I discussed in one of my earliest vidcasts regarding an LLC. 

LLCs and S corps are very similar for tax purposes, so this should help you.

As always, you should be working with an experienced professional tax advisor to make sure you set everything up properly.

Good luck.

Kerry Kerstetter

 

 

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Sec 179 – Cash Same As Loan

Posted by taxguru on December 30, 2009

These last few days of the year are historically very busy at car dealers, as people try to get their hands on a new business vehicle before New Year’s Day and thus qualify for the lucrative Section 179 deduction, especially for heavier (over 6,000 pounds) vehicles.

Amazingly, there are still a lot of people who believe that the Section 179 deduction is based on the amount of actual cash paid out for the new business equipment, as in this vidcast.  This is just one more of an endless stream of emails from small business owners who think they can handle their own tax affairs. Anyone working with an experienced tax pro would know that the Section 179 deduction is the same whether you pay cash for the full price or take out a loan for the full amount, or use a credit card. 

Likewise, credit card charges as of 12/31/09 are treated the same as 2009 cash payments for tax purposes.  These are almost always missed by taxpayers acting under the misguided assumption that they can come out ahead by avoiding the cost of a professional tax preparer.

 

 

 

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Deducting Forfeited Down Payment

Posted by taxguru on December 30, 2009

Q:

Subject:  Forfeited Earnest Money – Tax Help

Hello Kerry/Tax Guru,

I am an avid follower of your blog for all the tax help – I made a down payment on a condo in FL as part of an investment in Jan of ’06. However due to the slump of the real estate, the value of condo is really down that its worth like 40% of the original value. I hired a lawyer to negotiate with the developer on the price, but the developer recently filed for bankruptcy and it looks like at this stage the earnest money is forfeited.

Is there anyway I can use this as capital gains loss for my ’09 filing – It’s a huge amount (41,500), so it is kind of a big blow on my investments.

Thanks in advance for all your help!

 

A:

It sounds as if you would have a capital loss for the amount of your down payment if you will be receiving no property or claim on property for that money and no part of the down payment in cash as part of the bankruptcy settlement.

You should be working with a professional tax advisor, who can explain the rules regarding deducting an uncollectible debt, especially in regard to the proper timing of that deduction.

If the bankruptcy case is still ongoing and there is a chance of your receiving something back from your down payment, you will have to wait until that is completed before you can claim the loss on Schedule D, which can possibly take several years.

If that kind of uncertainly is part of the equation, it may be possible to lock your loss up as being in 2009 if you were to sell your claim to the down payment to an unrelated party before 1/1/10 for a nominal amount, such as one dollar.  You would then have a valid completed disposition to report on Sch. D.

Again, your own personal tax pro should be able to offer more specific assistance for your situation.

Good luck.

Kerry Kerstetter

 

Posted in CapGains | Comments Off on Deducting Forfeited Down Payment

Gifting based on calendar year

Posted by taxguru on December 30, 2009

Q:

Subject:  Question about gifting

My dad passed away this year and my mom is now interested in gifting to have some money in my name only. The non taxable amount this year I know is $13,000. Does the 2009 contribution need to be written out (dated before dec 31st) or do we have until April and the end of the tax season to have the gift given? I know after Jan 1st she can gift again for 2010. I believe this is how it works according to an accountant friend of mine. Do you know if these gifts are excluded from the 5 year look back rule which applies to turning over ownership of a house?

Thanks

A:

For Gift Tax purposes, gifts are totaled up on a strict calendar year basis from January 1 through December 31.  The Gift Tax return (709), if applicable, is due on the same schedule as 1040s are, April 15 plus extensions.

So, to be a valid 2009 gift, you do have to receive the actual money before midnight New Year’s Eve.

The look-back rules in regard to impoverishment planning for elderly Medicaid eligibility are state specific; so you all need to be working with an elderly law specialist in your area.

Good luck.  I hope this helps.

Kerry Kerstetter

 

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Posted by taxguru on December 27, 2009

War Against the Wannabe Rich – Punishing success with Marxist “progressive” tax rates has long been the cornerstone of tax policy in this country and will only get worse with an openly Marxist administration and Congress in charge of our lives.

 

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Using LLCs

Posted by taxguru on December 26, 2009

Just as with other kinds of entities, there are pros and cons for using LLCs.  As with any entity choice, there is no such thing as a cut and dried selection process.  It requires an intelligent judgment from an experienced professional tax advisor after asking a lot of questions, as I explain in this vidcast.

 

 

TaxCoach Software: Finally! Plain-English Tax Planning That Builds Your Business!

 

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Gift Tax History

Posted by taxguru on December 26, 2009

Q:

Hello Kerry,

I was wondering if you could help me out with a few questions. I have been doing quite a bit of extensive searching for the maximum gift exclusions for years 1994, 1995, and 1996 and haven’t been able to get anywhere. Was wondering if maybe you might know what these numbers would be? I found your website during the many searches I’ve done.

Thanks so much for your help in advance.

A:

It was $10,000 for each of those years, as you can see in the attached chart, which was part of the more extensive history of the gift tax that you can download from here.

Good luck. I hope this helps.

Kerry Kerstetter

Business Plan Pro

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Timing of Sec. 179 Deduction

Posted by taxguru on December 26, 2009

Q:

Subject: Section 179 question

I found your organization via Google, and the information is very helpful!
I own a Dental Laboratory, and want to purchase a $33,000 cad cam system.  My question:  can I take advantage of a year-end purchase incentive by the manufacturer, and have the purchase documents dated December 2009, but take advantage of the section 179 deduction in 2010?  I won’t begin using the new equipment until January.
 
Thank you for your help!

 

A:

You seem to have the opposite situation than most people present; when they want to claim Section 179 in the year prior to actually using the equipment.

If you don’t actually place the new equipment into service until 2010, you shouldn’t have any problem setting it up on your 2010 tax return’s depreciation schedule and claiming Section 179, subject to the other limitations that could affect the actual deduction.

Your own personal professional tax advisor should be able to give you more specific advice on this.

Good-luck.

 Kerry Kerstetter 

 

 

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Posted by taxguru on December 23, 2009

Santa Harry’s Sleigh Full of New Health Taxes – Another look at some of the new taxes we will have to cope with thanks to our new socialized health care system.

 

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Posted by taxguru on December 21, 2009

Comprehensive List of Tax Hikes in Reid-Obama Health Bill UPDATED – As always, much more work for us in the tax profession.

 

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