Tag Archive for David Ellis CPA

Dividing Property In Divorce Tax Traps – Part 3 In Series

Tax Aspects Of Dividing Property In A Divorce (Series – Part 3

(This valuable series on Dividing Property In A Divorce Tax Traps has been updated for the Tax Cuts And Jobs Act (TCJA) and the Cares Act. This series is provided by David Ellis of Ellis & Ellis CPAs in Pasadena, CA.) 

III. Section 1041 Specifics as to Type of Property

1. The Marital Residence

Perhaps the most common property division issue the practitioner will face when a couple divorces will be the division of the marital home. Often, which spouse, if any, will end up with the home will be the central issue in the property settlement.

Furthermore, non-monetary issues such as emotional attachments, or the preferred school district for couples who have children, frequently complicate matters.

Given the above, it is imperative that the practitioner be thoroughly familiar with the tax ramifications of dividing the residence.

  1. A qualifying single taxpayer can exclude up to $250,000 of gain on sale of principle Qualifying married couples filing jointly can exclude up to $500,000.[1]
    1. Taxpayer must have maintained the home as his/her principal residence for two out of the last five years.[2]
    2. Taxpayer must have owned the residence for two out of last five years
    3. Only one sale every two years qualifies for the exclusion. Taxpayer must not have used the exclusion during the previous two-year period before the current sale.[3]

Tax Trap Alert: Practitioners should familiarize themselves with the major exceptions and special cases IRC Section 121 and the related regulations and rulings address, including but not limited to the following:  

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Written by | Posted in Divorce And Tax • Tax Traps

Time Sensitive California Tax Update

Time Sensitive California Tax Update

We wanted to provide you with an update regarding tax legislation recently passed that may affect you. 

If you are a shareholder, partner, or member of an S corporation, partnership, or LLC, you may be able to reduce your federal income tax liability. 

The Tax Cuts and Jobs Act reduced the amount of the state tax deduction individuals may claim on their federal tax return to a maximum of $10,000. This limitation caused significant tax increases to taxpayers living in high property and high state income tax states (such as California). 

To assist business owners who are recovering from the global pandemic, California recently passed Assembly Bill 150 (AB 150). This bill allows qualified S corporations, partnerships, or LLCs to pay tax on their individual, trust, or estate owners’ share of the entity’s qualified net income at the entity level. Furthermore, the bill also allows these owners to claim a credit for the tax paid on their California personal income tax return. The effect of this is the following: 

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Written by | Posted in California Tax Update • Tax Planning