Tax Guru – Ker$tetter Letter

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Archive for December 30th, 2009

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.

 

 

 

Posted in 179 | Comments Off on Sec 179 – Cash Same As Loan

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

 

Posted in Gifting | Comments Off on Gifting based on calendar year