Posted by taxguru on January 24, 2008
Bush Revises Stimulus Deal to ‘Rebate All of It’ – This would be a dream come true for most of us. Unfortunately, it’s just another parody by Scott Ott.
Under the terms of the revised measure, the Bush administration will ask Congress to “rebate all of it” and introduce legislation to repeal the 16th amendment to the Constitution, which instituted the federal income tax in 1913.
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Posted by taxguru on January 18, 2008
A Dutchman was explaining the red, white and blue Netherlands flag to an American.
“Our flag is symbolic of our taxes. We get red when we talk about them, white when we get our tax bills, and blue after we pay them.”
The American nodded. “It’s the same in the USA only we see stars too!”
Courtesy of a recent Crosswalk.com email newsletter.
Posted in humor | Comments Off on Tax Colors
Posted by taxguru on January 7, 2008
From The Late Show’s Top Ten Signs You’re at a Lame New Year’s Eve Party:
#4: A minute after midnight, everyone starts doing their taxes
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Posted by taxguru on November 28, 2007
Q:
Subject: Exchange QuestionMy wife and I live in the front house. When does the rental back house cease becoming a 1031? Does not receiving rent make it no longer a 1031(for how long)? Is there a statute of limitations for it to qualify as exempt? I don’t want to pay a capital gain tax on it when I sell this 2on1 Calif. property.Tx,
A:
This is the kind of thing you really need to be handling with a professional tax advisor to ensure that you are doing things properly.
From your very short description, it sounds like you have what’s called a mixed use property; part residential and part rental. For IRS purposes, it is treated the same as two separate properties, with the personal residence portion of interest and property taxes deducted on your Schedule A and the expenses for the rental portion on Schedule E. The actual allocation of joint expenses may not be 50/50 if the two halves of the property are not equal in size and/or value. An experienced tax pro can help you come up with an appropriate allocation between the two halves. The cost basis of the property also needs to be allocated between the personal residence and rental portions, with deprecation claimed on the rental portion, which will reduce its cost basis (aka book value).
In regard to the treatment of a sale of the property, the portion of the sales price that is allocated to your primary residence will be treated as a Section 121 possibly tax free sale, as I have explained on my website.
The portion of the sales price allocated to the rental half will not be eligible for the tax free exclusion, and will need to be set up as a Section 1031 exchange if the taxable gain warrants it.
If I’m reading into your question properly, and you are asking how long it will be until the rental portion of the property can become eligible for the tax free Section 121 treatment, the answer is never, as long as it is being rented. If the tenants leave and you convert the rental part to be an extension of your own primary residence, the clock can start on the personal use test, which is generally two years.
You didn’t say how you acquired this current property. As an added twist, if you acquired it via a 1031 exchange, you will have had to own it for at least a full five years prior to its sale in order to be able to utilize the Sec. 121 tax free exclusion. Again, an experienced tax pro can assist you with this rule.
I hope I hit on your situation. Working directly with a professional tax advisor will result in more usable numbers for your precise situation than the generalities I have to use.
Good luck.
Kerry Kerstetter
Posted in 1031, humor, realty | Comments Off on Selling mixed use property
Posted by taxguru on October 18, 2007
A little joke courtesy of Pastor Tim’s Clean Laughs:
*IRS Call*
When the minister picked up the phone, Special Agent Struzik from the IRS was on the line.
“Hello, is this the minister?”
“Yes, this is.”
“I’m calling to inquire about a member of your congregation, a Dr. Shipe. Do you recognize the name?”
“Yes, he is a member of our congregation. How can I be of service?”
“Well, on last year’s tax return, the doctor claimed that he made a sizable tax-deductable contribution to your church. Is this true?”
“Well, I’ll have to have our bookkeeper verify this information for you. How much did Dr. Shipe say he contributed?”
“Twenty five thousand dollars,” answered Agent Struzik. “Can you tell me if that amount is true?”
There is a long pause. “I’ll tell you what,” replied the minister…….
“Call back tomorrow. I’m sure it will be.”
Posted in humor | Comments Off on Verifying Donations?
Posted by taxguru on October 4, 2007
From FunnyBone:
A Visit To The IRS
A man, called to testify at the IRS, asked his accountant for advice on what to wear. “Wear your shabbiest clothing. Let him think you are a pauper.”
Then he asked his lawyer the same question, but got the opposite advice. “Do not let them intimidate you. Wear your most elegant suit and tie.”
Confused, the man went to his rabbi, told him of the conflicting advice, and requested some resolution of the dilemma.
“Let me tell you a story,” replied the rabbi. “A woman, about to be married, asked her mother what to wear on her wedding night. ‘Wear a heavy, long, flannel nightgown that goes right up to your neck.’
But when she asked her best friend, she got conflicting advice. ‘Wear your most sexy negligee, with a V neck right down to your navel. The man protested: “What does all this have to do with my problem with the IRS?”
“No matter what you wear, you are going to get screwed.”
Posted in audits, humor, IRS | Comments Off on Appropriate attire for an IRS audit?
Posted by taxguru on April 22, 2007
From a reader:
Subject: Taxing Day
Kerry,
With all the stuff you’ve been putting up on taxes, I’m surprised you haven’t linked to this site.
My Reply:
That’s very funny. I hadn’t heard it before.
Being a one-man operation, I do often rely on tips from readers; so thanks for sending me that link.
Kerry
Posted in humor | Comments Off on Celebrating Tax Day?
Posted by taxguru on April 20, 2007
From Jay Leno on 4/18/07:
There was a scary moment yesterday for Newt Gingrich. At first Newt got worried when he heard the IRS this year was cracking down on cheaters. Then he realized guys who cheat on their taxes, not their wives.
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Posted by taxguru on April 20, 2007
Posted in humor | Comments Off on IRS Guys Are Smiling
Tax Guru - Ker$tetter Letter 