Tax Guru – Ker$tetter Letter

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Archive for December, 2013

Tax Breaks Drop in 2014

Posted by taxguru on December 31, 2013

Our rulers in DC  love to tinker with the tax code and add special temporary tax breaks so that the tax environment is in constant evolution.  As these news items explain, several temporary tax breaks expire at midnight tonight. 

Congress letting billions in tax breaks expire at year’s end

Congress letting 55 tax breaks expire at year’s end

What they don’t mention is the fact that the Section 179 expensing election maximum deduction drops from $500,000 for 2013 to just $25,000 in 2014. 

If recent history is any guide, there will most likely be an early 2014  push by our rulers in DC to reinstate many of these expired tax breaks retroactively to the beginning of the year.  Of course, there is no guarantee that this will happen; so don’t make plans assuming it will.  As always, the actions and inaction of our supreme rulers in DC do nothing but add to the uncertainty about the business and tax environments. 


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


Posted in 179 | Comments Off on Tax Breaks Drop in 2014

Posted by taxguru on December 27, 2013

Brokers take the credits given to studios for location filming and sell them to wealthy people and companies looking to shave their state tax bills. –  Another example of unintended consequences when our rulers establish tax policies without thinking ahead as to how they will be dealt with in real life, as opposed to the Fairy Tale world they live in. 



As city cycling grows, so does bike tax temptation –  While people continue to be gunned down in the streets of Chicago, its rulers can’t resist thinking up more ways to take more money out of the private sector.  Does this story remind anyone else of George Harrison’s timeless TaxMan song, especially this part?

If you drive a car, I’ll tax the street
If you try to sit, I’ll tax your seat
If you get too cold I’ll tax the heat
If you take a walk, I’ll tax your feet



Posted in Credits, TaxHikes | Comments Off on

Posted by taxguru on December 25, 2013

IRS vendors owed $589 million in back taxes, report says – Incompetence or collusion? Both are everywhere throughout the BHO Regime.



Posted in IRS | Comments Off on

Where do BHO and Joe BiteMe get their Christmas presents?

Posted by taxguru on December 25, 2013

This week’s episode of NewsBusted has the answer to that.



Posted in NewsBusted, video | Comments Off on Where do BHO and Joe BiteMe get their Christmas presents?

BHO Regime openly using IRS to attack his enemies…

Posted by taxguru on December 12, 2013

From the WSJ:

IRS Targeting: Round Two. The first time around, targeting conservatives was a secret. Now, not so much.


Posted in IRS | Comments Off on BHO Regime openly using IRS to attack his enemies…

1031 Exchanges out of California

Posted by taxguru on December 9, 2013

As I discussed previously, the PRC is trying to keep tabs on real estate investors who use IRC Section 1031 to defer their profits to non-California property.

While all of the forms and procedures are not yet established, the FTB just posted this update on how this is supposed to work, effective for disposals after 12/31/2013.


Posted in 1031, Calif, CapGains | Comments Off on 1031 Exchanges out of California

Defining “Placed Into Service”

Posted by taxguru on December 8, 2013

One common mistake taxpayers often make in regard to claiming Section 179 and depreciation deductions is the proper timing of it.  Many believe that they can simply pay for new equipment in the last month of their tax year (December for calendar year taxpayers) and claim the deductions on that year’s tax returns, even though the items aren’t received or used until the next tax year.  That issue led to this interesting recent email exchange from a reader. 


Subject: What constitutes service for Section 179?

Dear Kerry,

Thought this might be something good to blog about, so I am sending you a question we receive mixed responses on…

We have recently agreed to purchase a piece of Large Medical Equipment. The agreement has been signed in December, and partial installation will occur in December with the full installation to complete in January.

We will begin training on the system in December. Can you help me understand the definition of “placed into service?” 

Officially, we will begin web-based training and didactic training in December on how to use the system, and a portion of the system will be installed. The product will not be fully installed until January, but essential parts (training, install) will begin in December.

Since the training process and installation begins (essentially starting the “use”) in December, will the equipment expense qualify for the Section 179 in 2013?



My Reply:

As much as I love to stretch the laws as much as possible in favor of the taxpayer, I wouldn’t feel comfortable deducting the cost of this new equipment on a 2013 tax return.

Placed into service generally means using the equipment itself for the business purposes, which would mean doing the analysis or tests on patients, or whatever the equipment is intended for.

Training on the actual operational equipment might be a closer step to a valid Placed in Service test; but the equipment not being operational and doing the training only on simulators just doesn’t cut it.

You’re just going to have to wait until your 2014 to deduct the cost of this equipment.

Good luck. I hope this helps.

You’re correct that this is a good topic to include in my blog. Thanks for writing.

Kerry Kerstetter



Thanks…interesting caveat…this type of equipment can take 1-2 months to install, and additional time to train all staff and doctors to finally “use on a patient.”

“Using” or “placed into service” really seems to be the key terms to understand. The company must train (aka: place into service) on the device prior to someone actually “using it” on a patient, and they will not begin training until it is purchased. So, in a fair world “use”, in my opinion should be the actual beginning of the training process. What a crazy world…

Thanks for writing back!



My reply:

I wouldn’t feel comfortable trying to defend against IRS the beginning of installation and training as “placed into service.” However, if you and your professional tax preparer do choose to take such a stand, please keep me posted over the next few years as to whether IRS accepts your interpretation.

Good luck.



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



Posted in 179, Deductions | Comments Off on Defining “Placed Into Service”

Big Brother is Watching Us…

Posted by taxguru on December 8, 2013

IRS using Google Maps to spy on taxpayers



The Latest IRS Power Grab. The left wants the disclosure of private information about conservative donors. – Of course info on donors to left wing groups is still to be completely private and confidential. Typical double standard by the DemonRats, who have to cheat every chance they have.



Posted in IRS | Comments Off on Big Brother is Watching Us…

2014 IRS Standard Mileage Rates

Posted by taxguru on December 6, 2013

IRS has released their standard mileage rates for 2014 in plenty of time for those who use them as a guide for employee reimbursements to make the appropriate adjustments.

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 56 cents per mile for business miles driven
  • 23.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations


Posted in Deductions, IRS, Vehicles | Comments Off on 2014 IRS Standard Mileage Rates

IRS Attacks on BHO Critics Continue

Posted by taxguru on December 6, 2013

Obama dismisses IRS targeting of conservatives – He considers himself a king and can use whatever governmental agencies he wants to silence his opponents. Nobody else in DC has the guts to try to stop him from abusing the powers of the presidency.


IRS Floats Rule Changes to Tip 2014 Elections – Of course, these will only be enforced against right wing groups. Left wing groups can continue to use their tax exempt status to do as much political activity as they want.



Posted in IRS | Comments Off on IRS Attacks on BHO Critics Continue