A quick reminder about sending investment portfolios offshore.
The U.S. taxes residents on worldwide income. From the Treasury Regulations:
In general, all citizens of the United States, wherever resident, and all resident alien individuals are liable to the income taxes imposed by the Code whether the income is received from sources within or without the United States.
Justin Fundalinski of Jim Saulnier & Associates, who I met while volunteering time for the betterment of the Financial Planning Association, asked me a procedural question about a fascinating situation he encountered regarding depreciation and disposition of residential rental real estate, causing pause. Tax questions that cause me to pause are the spice of life.
The tax code provides two primary advantageous ways of saving for your children’s education. We frequently get questions about the differences between the programs and about which program is best-suited for a family’s particular needs.
The Coverdell Education Savings Account and the Qualified Tuition Plan (frequently referred to as a Sec 529 Plan) are similar; neither provides tax-deductible contributions, but both plans’ earnings are tax-free if used for allowable expenses, such as tuition. Therefore, with either plan, the greatest benefit is derived by making contributions to the plan as soon as possible—even the day after a child is born—so as to accumulate years of investment earnings and maximize the benefits. However, that is where the similarities end, and each plan has a different set of rules. Read More
As year-end approaches, this is a good time to make sure you have taken your required minimum distribution (RMD) for 2015.
What is an RMD, you ask? The tax code does not allow IRA owners to keep funds in a traditional IRA indefinitely. Eventually, assets must be distributed and taxes paid. If there are no distributions, or if the distributions are not large enough, the IRA owner may have to pay a 50% penalty on the amount not distributed as required.
Generally, required distribution begins in the year the IRA owner attains the age of 70½. If 2015 is the year you reached 70½, you can avoid a penalty by taking that distribution no later than April 1, 2016. However, delaying the first distribution means you must take two distributions in 2016, one for 2015, when you reached age 70½, and one Read More
Listen to Presenter George Mentz discuss the top tax ideas for the Presidential Candidates, 2016, with insight on possible changes to the tax code and tax reform. Listen to this intense discussion about the candidates and to the key tax issues that can help working families become more productive and help make this country great again.
Until 1969, there was no legal requirement that an organization must file with the IRS to obtain tax-exempt status. This status was automatic if the organization could demonstrate that it met the requirements set forth in Section 501(c)(3) of the tax code. In other words, an organization claiming tax exempt status was presumed to be qualified unless the IRS determined to the contrary. However, in 1969, Section 508 was added to the tax code, specifying that no organization would be treated as tax-exempt unless it applied to the IRS for tax-exempt status. Thus Form 1023 was born as the tax-exempt status application.
Some exceptions were carved out, however. Three classes of organizations do not have to apply for tax exempt status: Read More
With careful planning, and provided the rules are followed, the tax code allows the home sale gain exclusion every two years.
Let’s assume you own a home, perhaps a second (vacation) home, or maybe are even thinking about buying a fixer-upper and flipping it. With careful planning, it is possible to apply the full home sale exclusion to all three of the properties.
Here is how it works. The tax code allows you to exclude up to $250,000 ($500,000 for married couples) of gain from the sale of your primary residence if you have lived in it and owned it for two of the five years immediately preceding Read More
Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. Under Section 1031 of the IRC, however, if you reinvest the proceeds from the sale in similar property as part of a qualifying like-kind exchange, the tax code provides an exception, and allows you to postpone paying tax on the gain. It is very important to note that the gain from a like-kind exchange is not tax-free; it is only tax-deferred. You will eventually pay the tax on the gain if and when you dispose of the new property acquired in the exchange.
To qualify under the Section 1031 nontaxable exchange, a trade must meet all six of the following conditions: Read More
What should partners who married under California’s Equal Marriage Law be concerned about or plan for in terms of taxes?
Same sex marriage is now recognized in California. This means, from a tax perspective, same sex married couples face the same issues as opposite sex couples. They are also eligible to take advantage of what we call the “biggest tax loophole of all time” – the double step-up in basis on community property.
This is a section of the tax code that stipulates when property is held as community property and one spouse dies, the appreciation on the property is not taxed to the Read More
Back in June 2014 I blogged about the new IRS Regulations governing tangible personal property. These regulations prompted a vigorous debate over the last 7 months between the most astute students of the US Tax Code as to what constitutes the need to file IRS Form 3115 – Change in Accounting Method for our business clients as a direct result of these new governing regulations.
Many practitioners make compelling points supporting the position that most ALL Read More
A minister occupies a unique niche in the United State tax code. He or she is considered an employee for income tax purposes, but self-employed for social security and Medicare. In addition, a minister is eligible for a housing allowance that is not subject to income tax, and has the choice to opt out of social security and Medicare.
Because of this unique tax treatment accorded ministers, it is important that the individual be properly qualified as a minister in order to receive this that treatment. One is not classified as a minister just by claiming to be one. The IRS has not directly addressed the issue of who is a minister. However, five factors have emerged that must be considered:
1. The person must be ordained, licensed, or commissioned by a local church or Read More
My friend Roger Botterbusch recently put together a most excellent presentation on the tax implications of owning Publicly Traded Partnerships (PTPs), also commonly referred to as Master Limited Partnerships (MLPs). As a result I developed a new profound distaste for investment brokers pedaling these things for their ‘prospective’ fat returns whilst simultaneously poo-pooing the heavy, heavy administrative burden they bring at tax time.
The most interesting point of the presentation was that all but two PTP’s traded in the United States kick out incredibly complicated year end K-1′s to the owner for reporting on the 1040. In preparation for the presentation a ridiculous case study was bandied around about a taxpayer who engaged in ‘day trading’ PTP’s. The ‘trading’ activities on their face were moderately successful but when taking into consideration that the tax practitioner Read More
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