Tax Guru – Ker$tetter Letter

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Archive for February, 2014

Posted by taxguru on February 20, 2014

Obama Silences Complaining Employers With IRS –  The destruction of our constitutional rights continues, as Freedom of Speech is ruled illegal by the dictator in the White House.


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Busting the libs in the news

Posted by taxguru on February 20, 2014

While NewsBusted takes a break this week, check out these selected jokes from the past few week’s episodes.  Be sure to check out the full length episodes on their YouTube channel.



Posted in humor, NewsBusted, video | Comments Off on Busting the libs in the news

Depreciation recapture on residence sale…

Posted by taxguru on February 20, 2014

From a reader:

Subject: Q Sale of principal residence in 2013 which was rental property from 1986 t0 2002 – Do we have to recapture depreciation and pay capital gain on depreciation

Hello Mr. Kerstetter:

We have recently moved to a new area after the sale of our principal residence. Not knowing a lot of people in this area, I have tried to find someone who knows for sure if we will owe capital gains on the sale of our single family home, which we occupied from 2003 thru 2013. The home was a single family rental from 1986 to 2002, on which we took S/L depreciation.

I have asked potential tax preparers if they know the answer, and they have given a variety of answers, from “you will owe nothing as you sold for under $250,000 and you lived in it for 2 out of 5 recent years”, etc. Others indicate they will have to research the answer. As you are the tax guru, we would appreciate your view since we want to file tax return correctly by April 15th.

Thank you for your anticipated reply.


My reply:

Actually, the law is fairly explicit on this issue.

Any depreciation you claimed after May 6, 1997 will have to be recaptured and reported as income on your tax return.
The rest of the gain will be tax free.

Good luck.  I hope this info helps.


Follow-Up 1:

Mr. Kerstetter:

Thank you for your quick reply. From what I had read, I thought this might be the answer, but could not get a definitive answer from potential tax preparers, who I now hesitate to hire. Do you think I could accomplish an accurate return using Turbo Tax on my own? (I have used Turbo Tax in “uncomplicated years” previously.)

I called the I.R.S. for clarification last week and was on hold for 1 1/2 hrs — no one ever picked up the line.


My Reply:

I have never been a fan of DIY tax programs, except for the most basic 1040-EZ type of tax returns.  If any other schedules or forms are needed, such programs are actually dangerous.  It’s similar to giving you a scalpel and a copy of a medical book and assuming you can perform surgery on yourself or on a loved one.

DIY tax programs are the best illustration in the world of the old adage for computers, GIGO (Garbage In, Garbage Out).  Even the most expensive tax programs, such as the one I use (Lacerte), can’t do the job on their own.  They require knowledgeable users who know how to enter data properly to prepare a correct tax return with the lowest legal tax.

Any experienced preparer should be able to help you reduce your taxes by more than what his/her fee is, in addition to reporting the recapture gain properly.

In regard to locating a good tax preparer, you should check out the tips I have on my website.   You can also quiz potential preparers with the recapture rule we have been discussing.  It’s been the law since May 6, 1997; so anybody in the tax business should know it and have actual real world experience working with it.  If not, you should find someone else.

Good luck.



Follow-up #2:

Hello Mr. Kerstetter:

Thank you for your reply to my question. You would be surprised at the answers I have rec’d from potential preparers. After explaining my situation, I have asked “have you had to deal with this type of situation before?” and none of the respondents have said “Yes”.

I will visit your website as suggested, and will look for a preparer in this area I feel is competent.

Thank you again.


My final comment:

Actually, I am very surprised that so many preparers haven’t had to work with a provision of the tax code that has been in place almost 17 years now.

Maybe it’s because real estate taxation has been a kind of specialty for me; but I have seen it in tons of client cases; not just for converted rentals, but also for home office situations.

Good luck in locating a new experienced professional preparer.



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


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Posted by taxguru on February 18, 2014

The High Burden of State and Federal Capital Gains Tax Rates – Interesting study from the Tax Foundation. 


Hollywood asks California to cut taxes — for the film industry – And of course, they support high taxes for the rest of us.


Caddell Bombshell: GOP Establishment Wants the IRS to Go After the Tea Party – Why we won’t see the GOP do anything to stop BHO from using the IRS against the Tea Party. 


Calling Lois Lerner – NY Post wishing that she can at least be busted for lying to Congress.



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Posted by taxguru on February 13, 2014


If IRS doesn’t clean up its act, it will affect their ability to enforce the tax laws, as more people refuse to disclose facts on their returns that will be used against them. 

IRS scandal merely tip of iceberg of agency’s problems 

Way more than a smidgen: Voters say IRS corrupt – This poll has 64% saying IRS has been corrupt in its attacks on conservative groups. The other 36% were BHO Kool-Aid chuggers.


Michael Jackson estate embroiled in tax fight with IRS –  Another example of the abuses of this insane form of grave robbery known as the Estate Tax, which has its roots in the Communist Manifesto.  Asset valuation is very subjective, as the huge disparity in this case –  $7 million vs $1.125 billion –   proves.  Unfortunately, as in all tax matters in this country, the starting point is that anything the IRS says is considered to be gospel and anyone who wants to dispute it has to spend a ton of time and money in an almost impossible uphill battle to prove otherwise.  


House Republicans fighting Treasury Dept. effort to limit political activities of tax-exempt groups –  Who knows how successful they can be when the GOP leadership is unwilling to do anything about BHO’s flagrant abuses of his power. 


Rep. Dave Camp: 100 Percent of Groups Audited by IRS Were Conservative – No surprise to anyone who hasn’t drunk the BHO Kool-Aid. 


Vulnerable Dems want IRS to step up – It’s not just BHO using the IRS to stifle opponents. That supposedly impartial agency as become a very powerful and ruthless attack arm of the DemonRat Party. 


Gym memberships add Obamacare tax – The new taxes continue to pile up. 


IRS Commissioner Warns of ‘Extensive Wait Times’ for Phone Assistance – Another indicator that free tax advice is worth every penny. Remember that IRS has a huge conflict of interest when giving advice.  They want us all to pay in as as much as possible.  It has also long been the case that IRS does not stand behind any of their phone advice.  The safest approach is to work with a professional tax advisor who shares your goals of paying the least tax legally required.  That kind of advice is well worth the cost, and you can hold the advisor accountable. 


Rush is Right –  I’ve been catching up on recent podcasts of the Rush Limbaugh Show and he has been having some excellent analyses of our current situation, such as these.

BHO and his Fellow Travelers can literally buy votes by stealing money from the Evil Rich and giving it to easily swayed sheeple.

How Popular Could I Be If I Could Give Away Other People’s Money?

Obama Shows Us How to Give Away Other People’s Money and Soak in the Love


A Predictable GOP Fold on the Debt Limit –  This is one area where I have always disagreed with Rush.  He hammers the GOP leadership for not doing their constitutional duty by standing up to BHO’s illegal actions; but he refuses to accept the fact that only a third party, such as the Libertarian Party, will be able to ever do anything to slow the growth of Big Government.


Stalinist Lawlessness: Companies Must Swear to IRS They Didn’t Fire Employees Because of Obamacare – IRS is given even more power to micro-manage decisions by private sector businesses.


With his flagrant disregard for the US Constitution, I have long warned about the possibility of BHO ignoring the 22nd  Amendment and running for a third term.  Since nobody in the GOP has the guts to stand up to a black DemonRat, he would get away with it and will most likely be able to buy more than enough votes to win.  There is already a growing push among the Dims and their allies in the media to nullify the entire Constitution as an antique relic of the past and no longer relevant to the modern world.  Rush takes this a little further and wonders if BHO will just call off the 2016 Presidential election altogether and stay in the White House as long as he wants to.  Nobody would dare kick first black president out of the White House.

How Far Can Obama Go?

Obama’s Lawlessness? Nobody Cares

Impeachable Offenses No Longer Matter



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Posted by taxguru on February 6, 2014

From Fred Thompson:

A new poll shows that only 13% of Americans think the government should do something about income inequality. Now, now… the government’s already doing its best to make everyone equal… equally poor.


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Escalating IRS Abuses

Posted by taxguru on February 6, 2014

With the current Liar In Chief denying any corruption in his Regime, the chances of the IRS voluntarily agreeing to curb their abuses of power and obey the law have fallen to zero.  Once again, any relief from IRS harassment will depend on the willingness of the GOP to stand up to BHO.  In other words, it’s going to continue to be a bumpy ride for those of us voicing opposition to the unconstitutional policies of the BHO Regime.   

Although the MSM is continuing its job of covering up the BHO Regime’s crimes, there are some news outlets brave enough to cover the IRS story.


GOP leaders urge new IRS boss to scrap rule they claim would muzzle free speech – FoxNews 


Boustany Criticizes IRS over Inappropriate Proposed Rules for Political Nonprofit Groups – From CCH 


New evidence undercuts White House claims about IRS motivation. – From WSJ 


IRS planned secret new rules to justify targeting tea party groups two years ago, reveals bombshell email – From UK’s Daily Mail 


IRS rules change seen as limiting free speech for nonprofit organizations – Washington Times 


‘Not even a smidgen of corruption’: Obama downplays IRS, other scandals – BHO’s entry in the contest to unseat Bill Clinton as the most blatant liar to reside in the White House.  From FoxNews. 


Embattled IRS plans employee bonuses for 2013 work to ‘boost morale’ – and keep up the good work harassing the opposition. From Washington Times. 


Mitch McConnell: Obama, IRS Fight to Keep Conservative Nonprofits from Forming – From Breitbart 


Cruz Grills Holder on IRS Scandal Investigation – American Thinker 


Posted in Crooks, IRS | Comments Off on Escalating IRS Abuses