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Here is a hypothetical. A trust holds real estate. The trust expires and no one notices. The trust assets, the real estate, passed automatically to the beneficiary upon expiration. Is this a taxable event - sale/exchange/other disposition? State is MA.
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Feb 29, 2012 17:30
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Leopold Stotch posted:Here is a hypothetical. A trust holds real estate. The trust expires and no one notices. The trust assets, the real estate, passed automatically to the beneficiary upon expiration. Is this a taxable event - sale/exchange/other disposition? It depends. For federal income tax purposes, in most cases the answer is no, the transfer is not a taxable event. Depending on the nature of the trust and the identity of the beneficiary, there could be a generation-skipping transfer tax issue, but it's unlikely given that the vast majority of people never have to worry about GST tax.
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Feb 29, 2012 18:46
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entris posted:It depends. For federal income tax purposes, in most cases the answer is no, the transfer is not a taxable event. Thank you, that was my understanding as well, but it seemed odd. I assume then that the creator of the trust pays taxes when the property is put in? Otherwise doesn't the property eventually pass from the trust creator to the beneficiary tax free?
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Feb 29, 2012 20:29
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Leopold Stotch posted:Thank you, that was my understanding as well, but it seemed odd. Inheritances are not subject to federal income tax. The estate may be subject to estate taxes if it is large enough, but the current exemption is $5,000,000 so only larger estates need to worry about this.
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Feb 29, 2012 20:33
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Leopold Stotch posted:
Sort of. The beneficiary is going to take a carried over basis from the trust, which got its basis in the property from the settlor (the person who created the trust). Typically this means the beneficiary will have a lower basis in the property, which will result in higher gain when the beneficiary sells the property. In contrast, if the beneficiary received the property from the settlor at the settlor's death, the beneficiary will get a basis equal to the fair market value of the property at the settlor's death, which is usually higher than the settlor's basis. This means the beneficiary in this situation will pay less income tax when s/he later sells the property.
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Feb 29, 2012 20:38
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entris posted:Sort of. The beneficiary is going to take a carried over basis from the trust, which got its basis in the property from the settlor (the person who created the trust). Typically this means the beneficiary will have a lower basis in the property, which will result in higher gain when the beneficiary sells the property. Why would the trust not recognize an adjusted basis? My understanding is that only gifts made before death don't get the basis adjustment, or assets inherited from 2010 estates that elected not to pay estate tax.
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Feb 29, 2012 20:47
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furushotakeru posted:Why would the trust not receive a stepped up basis? My understanding is that only gifts made before death don't get a stepped up basis. Sorry, I was imprecise with my language. A trust receiving property from a decedent will get a setupped up basis. I was only talking about inter vivos trusts. edit: hahaha you edited your post to include the 2010 carry-over basis rule. God that rule is a mess.
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Feb 29, 2012 20:48
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Got it. Thanks guys. An inter-vivos trust gets the settlor's basis in the property, which stays with the asset and is passed on with it to the beneficiary. Taxes are not avoided but just deferred until /if the beneficiary eventually sells.
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Feb 29, 2012 21:07
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A GIANT PARSNIP posted:In 2009 I had a capital loss of $6,192. I had assumed that $3,000 of that was taken in 2009, but I plopped in the numbers TurboTax wanted from my 2009 return and it kept telling me that I would be taking $3,000 in 2010 and have $3,192 to carry over into 2011. It seems since I only made $2,349 in 2009 (I was unemployed until late November '09) my standard deduction was enough to zero out my wages. Does this mean I carry all $6,192 into 2010, and by extension carry $3,192 into 2011? I fear this got lost on the last page. Can anyone help me with a quick overview of what happens with a capital loss as your income approaches 0, and how your personal deduction factors into this?
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Mar 1, 2012 00:42
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Leopold Stotch posted:Got it. Thanks guys. An inter-vivos trust gets the settlor's basis in the property, which stays with the asset and is passed on with it to the beneficiary. Taxes are not avoided but just deferred until /if the beneficiary eventually sells. With the way the real estate market is, you might actually wind up with a capital loss on the sale of the property depending on the timing.
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Mar 1, 2012 01:42
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A GIANT PARSNIP posted:I fear this got lost on the last page. Can anyone help me with a quick overview of what happens with a capital loss as your income approaches 0, and how your personal deduction factors into this? I believe if there is no benefit the capital loss is carried over.
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Mar 1, 2012 04:42
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A GIANT PARSNIP posted:In 2009 I had a capital loss of $6,192. I had assumed that $3,000 of that was taken in 2009, but I plopped in the numbers TurboTax wanted from my 2009 return and it kept telling me that I would be taking $3,000 in 2010 and have $3,192 to carry over into 2011. It seems since I only made $2,349 in 2009 (I was unemployed until late November '09) my standard deduction was enough to zero out my wages. Does this mean I carry all $6,192 into 2010, and by extension carry $3,192 into 2011? Yes. Your 2009 return should have a capital loss carryforward worksheet that shows you the calculations.
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Mar 1, 2012 16:55
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I've got an hypothetical question: gay marriage is now legal in many states, so it's no problem to file as married for your state taxes. As I understand it (and I could be totally wrong on this), the federal government doesn't recognize gay marriages under DOMA. So, if one is married to someone of the same sex, would you list yourself as married on your state taxes, and unmarried (possibly with a dependent) on your federal? Or is your marriage recognized as far as the IRS is concerned?
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Mar 2, 2012 05:15
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Spoilers Below posted:I've got an hypothetical question: gay marriage is now legal in many states, so it's no problem to file as married for your state taxes. As I understand it (and I could be totally wrong on this), the federal government doesn't recognize gay marriages under DOMA. So, if one is married to someone of the same sex, would you list yourself as married on your state taxes, and unmarried (possibly with a dependent) on your federal? Or is your marriage recognized as far as the IRS is concerned? DOMA impacts the Federal return so you have to file single, although the rules aren't clear if you are allowed to file the spouse as a dependent on the Federal return. You may also have to prepare 2 Federal returns: the actual single return and a hypothetical couple one to determine the federal AGI for use (if applicable) on the state return (this depends on state-by-state basis).
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Mar 2, 2012 05:37
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How do I deal with this situation: I was accepted for a National Science Foundation funded REU (Research Experience for Undergraduates) at a major university. This 10 week internship was stipended. At the end of the program, the University cut me a $6000 check that covered said stipend. They provided no information on how to handle it tax wise. I received no W2's from the University. When filing my federal return -- where do I put this? ALSO -- I filed my state taxes last year because I received a refund, but declined to file federal because I was under the threshold of income required to file ($5000 I believe) and would have had to pay taxes. Do I need to file last years federal taxes this year or do I just forget they ever existed? BrainDamage fucked around with this message at 09:34 on Mar 2, 2012 |
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Mar 2, 2012 09:30
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Spoilers Below posted:I've got an hypothetical question: gay marriage is now legal in many states, so it's no problem to file as married for your state taxes. As I understand it (and I could be totally wrong on this), the federal government doesn't recognize gay marriages under DOMA. So, if one is married to someone of the same sex, would you list yourself as married on your state taxes, and unmarried (possibly with a dependent) on your federal? Or is your marriage recognized as far as the IRS is concerned? File married on your state tax return and unmarried on federal. The IRS cannot recognize same-sex marriage - although there are certain cases where the IRS is forced to recognize property rights of same-sex couples in community property states, but that's a newly developing area of the tax law so it's unclear what to do in that situation.
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Mar 2, 2012 14:29
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entris posted:File married on your state tax return and unmarried on federal. The IRS cannot recognize same-sex marriage - although there are certain cases where the IRS is forced to recognize property rights of same-sex couples in community property states, but that's a newly developing area of the tax law so it's unclear what to do in that situation. It's a hassle. Oregon requires you running the returns a couple different ways to determine the income, so you wind up paying us accountants a bunch of money for little benefit. Edit: Oregon also allows medical weed, but the IRS still considers it illegal, so you can't take the cost of your medical weed as a medical deduction. Seems the states are starting to "rebel" a bit from federal policy and it's starting to create disjointed tax law.
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Mar 2, 2012 17:38
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AbbiTheDog posted:It's a hassle. Oregon requires you running the returns a couple different ways to determine the income, so you wind up paying us accountants a bunch of money for little benefit. 
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Mar 2, 2012 17:46
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scribe jones posted:an EA I know here will do the extra return for free. she calls it the "homo promo" That's terrible yet catchy. Not sure my same-sex couples here have that same sense of humor though.
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Mar 2, 2012 19:20
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AbbiTheDog posted:That's terrible yet catchy. Not sure my same-sex couples here have that same sense of humor though. If it involves them paying you less money they might be forgiving
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Mar 2, 2012 21:18
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AbbiTheDog posted:Seems the states are starting to "rebel" a bit from federal policy and it's starting to create disjointed tax law. New York seems to have decoupled from the Federal Internal Revenue Code for years and years, so this isn't a shock.
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Mar 3, 2012 04:03
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ThirdPartyView posted:New York seems to have decoupled from the Federal Internal Revenue Code for years and years, so this isn't a shock. Every year the cost of preparing state returns is increasing. With states so desperate for revenue they are continuing to push the limits on what they can tax.
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Mar 3, 2012 17:50
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seymore posted:Every year the cost of preparing
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Mar 3, 2012 19:12
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furushotakeru posted:Remind me, did you switch from lacerte?
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Mar 3, 2012 20:07
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We use ProSystem fx. drat expensive, but comprehensive.
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Mar 4, 2012 03:50
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I wouldn't mind Lacerte if it just had a couple more features. Like the "don't crash every time you switch from detail view to forms view" feature. 
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Mar 4, 2012 04:41
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scribe jones posted:I wouldn't mind Lacerte if it just had a couple more features. Like the "don't crash every time you switch from detail view to forms view" feature. I would love the feature of not having to hold for 45 loving minutes every time I call in for support. Also, not having to call in every time they update because something breaks.
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Mar 4, 2012 05:12
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furushotakeru posted:I would love the feature of not having to hold for 45 loving minutes every time I call in for support. Also, not having to call in every time they update because something breaks. I've actually had insanely good luck with hold times, I know it won't last though. If they could fix the tabswitching thing I would basically be a happy camper (and make their DMS be less of a pile of poo poo, but now I'm just dreaming).
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Mar 4, 2012 05:15
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I was thinking about something earlier this week and was curious if this is right. Say I made my living buying things on craigslist that I felt were priced too low and then reselling the exact same items for more, and that this was my only source of income. Let's also say I wanted to pay my taxes, as I'm guessing a lot of people in this line of work don't bother. Would this all be classified as capital gains and avoid Social Security, Medicare, and SE tax? Would I qualify for the long-term gains rate on things I held for over a year? Would I be able to take a capital loss on items that I eventually sold for less than what I paid, given that these weren't purchased for actual use? It seems like if all of these are true, they could be a pretty big advantage of this type of income (assuming you don't care about ever getting SS or have a spouse that can get you in).
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Mar 4, 2012 15:46
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ChineseBuffet posted:I was thinking about something earlier this week and was curious if this is right.
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Mar 4, 2012 17:15
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Mattism posted:The stuff you were buying would be your inventory, and the profit you made from reselling it would be ordinary income. You'd also need to complete Schedule C or Schedule C-EZ (if you meet the criteria to use it) and Schedule SE. This is, of course, assuming that you aren't incorporated (and therefore need to file Form 1120). Also, here is the IRC definition of capital asset.
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Mar 4, 2012 17:49
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Mattism posted:The stuff you were buying would be your inventory, and the profit you made from reselling it would be ordinary income. To expand the explanation just a bit. If you go out and buy one Oriental Rug, keep it in your home for a while, then sell it for a profit then you will pay a capital gain tax on the transaction. If you buy a bunch of Oriental Rugs, and sell them routinely, with the intent that it is your sole or a principle means of support then it will be considered ordinary income.
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Mar 4, 2012 18:06
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scribe jones posted:I wouldn't mind Lacerte if it just had a couple more features. Like the "don't crash every time you switch from detail view to forms view" feature. You're having this problem? The "update the forms everytime you change a number" is dragging our input down to a crawl. Ugh. That and my 2011 database got slightly corrupted, so switching to too many clients in a row will crash your lacerte. More of a hassle than anything else, but I can't get the database repair tool to work.
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Mar 4, 2012 18:06
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AbbiTheDog posted:You're having this problem? The "update the forms everytime you change a number" is dragging our input down to a crawl. Ugh. You can turn this off in options - its on the "setup" tab and is called "show input warnings on detail tab". You have to turn this off for each module separately, but it made Lacerte crash a lot less for us.
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Mar 4, 2012 18:54
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furushotakeru posted:You can turn this off in options - its on the "setup" tab and is called "show input warnings on detail tab". You have to turn this off for each module separately, but it made Lacerte crash a lot less for us. Hmmm. I'll have to give that a try.
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Mar 4, 2012 19:45
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AbbiTheDog posted:Hmmm. I'll have to give that a try. Isn't it fun to pay thousands and thousands of dollars a year (including a 15% cost hike over last year) to beta test software?
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Mar 4, 2012 20:31
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furushotakeru posted:Isn't it fun to pay thousands and thousands of dollars a year (including a 15% cost hike over last year) to beta test software? We had a new client come in where I had to poke around our 03 - 06 software, and it ran so quick and smooth. Then I went back to 11 and cried while I kept minimizing the bottom popup.
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Mar 4, 2012 20:50
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AbbiTheDog posted:We had a new client come in where I had to poke around our 03 - 06 software, and it ran so quick and smooth. Then I went back to 11 and cried while I kept minimizing the bottom popup. You can turn that off too, it's right above the other setting - "show help me pane on startup".
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Mar 4, 2012 21:04
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My wife is anticipating starting a new job as a self-employed independent contractor. So I'm trying to help her run through some possible scenarios of what her potential earnings, taxes, and retirement contributions could be. Trying to calculate self-employment taxes and individual 401k maximum contribution amounts is hurting my brain. Someone who really knows what they're doing double check me on this. Let's say after expenses she has $58,740.00 in net profit. From what I calculate, she will pay $8,299.70 in self-employment tax (15.3%) Her maximum solo-401k company contribution will be $10,918.93 (25%) She could also contribute $17,000 in elective deferals to the 401k, Leaving her with an adjusted gross income of $26,672 which would be subject to federal and state taxes. Does this come out right? I used the 92.35% figure on the net profit to calculate her SE tax according to schedule SE, and reduced her net profit by half of the SE tax before calculating the maximum solo-401k contribution (which from the self-employment worksheet comes out to a 20% contribution based on the 25% maximum unreduced rate). Edit: Also, as another question... if she applied to be considered as a corporation for federal income tax purposes, would that make the profit sharing contribution higher (and overall employment tax lower) by being able to deduct the profit sharing as a business expense prior to calculating the employment taxes? flowinprose fucked around with this message at 22:19 on Mar 4, 2012 |
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Mar 4, 2012 22:10
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So this year Arizona added a line at the bottom of their state return which says "Tell us how much stuff you bought online and then add 6.6% to your total tax". I know everyone is supposed to file sales/use tax returns for stuff you buy online but I doubt anyone kept track of what they bought online in 2011. I'm just wondering if this is common in most states or is this something new?
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Mar 4, 2012 22:29
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