Posted by taxguru on January 20, 2005
Feds To Lotto Winner: Pay Up – In a sane world, where people are responsible for their actions, this wouldn’t even be debatable. Someone who recently skipped out on $45,000 of debts should have no hesitation in making good on those debts from the $60 million lottery check he received.
Social Insecurity? – Thomas Sowell takes on the DemonRats’ asinine argument that there is no Social Security crisis.
It’s time to reform Social Security – George Will
You’re too stupid to manage your own money – The DemonRat philosophy in a nutshell.
Quiz: Are You Ready To Sell Your Own Home? – It’s not as easy as it often appears to be.
A Word to the Wise For Timeshare Buyers – I have no hesitation n proclaiming that buying timeshares at full retail price is the biggest rip-off in the real estate market. It’s not such a bad deal, however, when you pay only $1,000 on the secondary market for an interest that someone else paid over $20,000 for. Just don’t be the idiot paying the $20,000, regardless of what freebies the promoters give you.
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Posted by taxguru on January 20, 2005
Q:
Subject: primary residence held in LLC
Question:
If I have my primary residence placed in an LLC will there be any capital gains due when I sell it after living there 2 yrs or more??
A:
The tax free exclusion for gains from primary residence sales of up to $250,000 per person is only available for homes owned by individuals.
Properties owned by other entities, such as corporations, partnerships and LLCs, are not eligible for any such tax free sale because only individuals (human beings) can have primary residences under the tax code.
On the books of the other kinds of entities, the property is normally treated as an investment, business or rental property and the only way to defer taxation of any gain is via a 1031 like kind (aka Starker) exchange.
If you are serious about being involved with LLCs and real estate, you really should be working with a tax pro or you could easily find yourself owing a lot of unexpected taxes.
Good luck.
Kerry Kerstetter
Posted in 1031 | Comments Off on Can LLCs Own Primary Residences?
Posted by taxguru on January 19, 2005
Q:
I don’t know whether you respond to specific questions/individuals but in trying to do some research came across your site. I have gotten two different responses to a tax question so thought I would give you a try.
I did a 1031 exchange this year–sold a condo I had rented for years and bought a home in a resort area in Delaware that will be rented on a weekly basis. In order to rent this home it had to be fully furnished–can this furniture and everything purchased to set up the kitchen for use be deducted in one year as a Section 179 expense?? I am a real estate agent so I know all my losses this year are not limited and since I didn’t settle on this till June I did not have a lot of rental income on it.
Thanks for any insight you can give.
A:
It depends on how you are going to show the new rental property on your tax return.
If you are going to show it on Schedule E as a regular rental property, you can’t claim Section 179 for the furnishings.
However, if you show it on Schedule C as a short-term rental property (average stay of seven days or less), you will be able to use Section 179 for the furnishings.
This special rule, which I usually call the “motel exception,” and many tax pros overlook, makes the activity not considered to be a passive one and thus not subject to those deductible loss limitations. You do need to be actively involved in the operation of the property to be able to claim the losses.
Another big benefit of this approach is to generate self employment losses on the rental Sch. C to offset self employment income from other business activities, such as real estate sales.
Good luck. I hope this helps.
Kerry Kerstetter
Posted in 1031, 179 | Comments Off on Section 179 & Rental Properties
Posted by taxguru on January 19, 2005
Tax cuts will be meaningless if this were to come true:
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Posted by taxguru on January 19, 2005
Q:
Dear Sir,
I saw your advice on the net and really appreciate the work you have posted. I have a question I am hoping you can help with. I purchased a used BMW for the depreciation deduction at the end of 2004 to use in my
business, a vocational school, transporting books from the publisher to our school. It was 5,840 pounds, but when I added the necessary roof rack to carry the inventory it meets the 6,000 pound requirement. This works for the IRS
requirement, right?
Thank you in advance for your time.
A:
If the new rack becomes permanently affixed to the vehicle, you can add its weight to that of the vehicle to see if it is more than 6,000 pounds. If it’s a removable stick-on rack, you will have a tougher time proving that its weight should be counted along with the vehicle’s.
This is no different than what some car dealers do when they sell their “tax upgrade packages” with various other features, such as towing equipment and racks installed to push the weight of an SUV or truck over that magical 6,000 pound threshold.
Kerry Kerstetter
Posted in Uncategorized | Comments Off on Increased Vehicle Weight
Posted by taxguru on January 19, 2005
Q:
Hello
I am currently using QuickBooks Pro 99. My office manager thinks we should upgrade to 2005. Any real advantages? Everything seems to work
fine on this old version. We are a 2 million dollar graphic design firm. If you have time – any comments would be helpful
Regards
A:
I wholeheartedly agree that it’s long past time for you to upgrade.
While you rarely see huge differences in each year’s new version of QB compared with the previous year’s, when you jump six years forward, you will see dozens of very useful improvements that will make the upgrade very worthwhile.
It is also the case that Intuit officially abandons all versions of QB that are more then three years old, as another incentive to motivate hold-outs like you to upgrade. QB 99 was dropped by Intuit years ago. QB 2002 is scheduled to be orphaned in April of 2005.
Good luck. I hope this helps.
Kerry Kerstetter
Followup Q:
Thank you for your quick reply. You have made Laura, our office manager very happy.
Do you think we will have trouble pulling the data from 99 to 05 since – as you correctly pointed
out – our version is old and not support. I really appreciate your insight.
A:
You shouldn’t have any problem rolling your data from the 99 program to any newer version, including the newest 2005. I’ve done hundreds of such conversions, often skipping several years, and have never had any problems.
Good luck.
Kerry
Posted in Uncategorized | Comments Off on Upgrading QuickBooks
Posted by taxguru on January 18, 2005
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Posted in Uncategorized | Comments Off on Eliminate The Middlemen in DC
Posted by taxguru on January 18, 2005
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Posted by taxguru on January 18, 2005
IRS says “Survivor” winner didn’t report his million dollar prize – Let’s see if Richard Hatch can survive this challenge, from IRS and the Federal government. Not reporting his well publicized winnings was just plain stupid.
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Posted by taxguru on January 18, 2005
With Social Security’s well documented record as the worst performing investment, opponents of change have a lot of nerve claiming that people will be worse off by investing that money themselves.
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