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Question about property being sold from a trust, and the taxes on the disbursements. My FIL had his house in a trust. He's getting older and moved to an assisted living facility, and thus sold the house, which was his primary residence. The proceeds were distributed between his 5 kids (including my wife). It was a pretty decent chunk of cash, even after dividing it by 5, so there's possibly a pretty big tax implication on it. My BIL (executor of the trust or whatever) sent out an email to everyone saying they are using a "section 121 exclusion" on the sale, and therefore no taxes will need to be paid on the distributions. My wife's mom passed a long time ago, so the exclusion is $250k (instead of 500k), which still covers the amount. Thus, we will not be receiving a K1 for the sale, nor be required to file anything regarding the sale as income. I thought I had never heard of this before, so just from a quick google, it appears like it's an appropriate use of it? It was his primary residence and he lived in it for at least 2 of the past 5 years. It's got all my in-laws up in arms about whether we're getting screwed by being told we don't owe taxes or whatnot. Reading more of the details, it is exactly what I used when I sold my primary residence years ago, so it looks like he is correct and we don't owe taxes on the gain? Henrik Zetterberg fucked around with this message at 00:08 on Dec 13, 2022 |
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Dec 13, 2022 00:06
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Henrik Zetterberg posted:It's got all my in-laws up in arms about whether we're getting screwed by being told we don't owe taxes or whatnot. Reading more of the details, it is exactly what I used when I sold my primary residence years ago, so it looks like he is correct and we don't owe taxes on the gain? Section 121 is available to individuals and married couples. Since a trust is not a natural person, they are generally not allowed to use this exclusion.
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Dec 13, 2022 02:49
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Hadlock posted:Uhh so fun one Remote workers residing in other states and working for a company in California are not subject to CA state tax. When your tax guy does your taxes there will be a form on the CA state tax that he will use to exempt that income and you'll get a refund of your CA withholding. You might need to "prove" that you are paying tax on that income in NC. For my MO to OK move that was just giving OK a copy of my MO taxes. On the other side, your NC taxes might have a section to add your remote work (or they might just use your federal numbers). You'll get a tax bill for NC. There might be a fee on the order of 5% of the tax owed because you didn't withhold there, so do change it going forward.
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Dec 13, 2022 02:55
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Henrik Zetterberg posted:Question about property being sold from a trust, and the taxes on the disbursements. My FIL had his house in a trust. He's getting older and moved to an assisted living facility, and thus sold the house, which was his primary residence. The proceeds were distributed between his 5 kids (including my wife). It was a pretty decent chunk of cash, even after dividing it by 5, so there's possibly a pretty big tax implication on it. What probably happened on paper, if people were advised by an accountant on this prior to the sale, is that the house was removed from the trust and sold, then the proceeds were deposited into a bank account in the trust. You need to hire an accountant to sort this out. There are huge amounts of money on the line here between various exemptions, basis stuff, etc. If your dad held onto it until he died you would owe $0 because your basis would step up to the amount at the date of his death. Crazy, right? Rich get richer. https://en.m.wikipedia.org/wiki/Stepped-up_basis Anyways that ship has sailed and hopefully someone talked to an accountant or estate attorney before making a massive monetary decision. For the thread: Does dad get to use mom's $250k exemption because she died while they were married?
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Dec 13, 2022 04:44
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Need advice: I'm having an issue with a CPA i used for taxes the last few years. There are lingering issues with my "state" (Puerto Rico) taxes. My previous posts in the thread touched on those and i hoped it had been straightened out. The CPA originally said that the state had made an error and that he'd be able to resolve a tax dispute for a small fee, but he has apparently decided to ghost me. he hasn't responded to numerous calls and emails over the last 10 months. He'd always been slow and late responding to me, but now it's just nothing. He has a small office and I've left messages for him with his staff to no avail. I paid my bills every year, said I'd pay for the needed service in question, and have been professional in my communications, so I'm not sure what his deal is. The issue is that the state tax authority claims i owe them $26k. This is in addition to the ~$5k that they supposedly still owed me from the past two year's refunds. I had received a tax notice of an "error" a year ago for my 2020 return. before he went dark, the CPA said that it was a clear mistake on the state's part that he would need to clear up via an in person hearing, for the cost of $125. Ok, good, fine. All of my emails since then were asking the timeline for that action, and then.... Nothing. Zero response. Of course, i recently learned that the state found issues with my 2021 return, probably for related reasons, but i can't get any details on the issue. I've moved back to the mainland, so while I won't be filing PR taxes anymore, i don't know what the state tax authority might be able to do to collect or negatively impact me. Again, the CPA said that the state's calculation was in error, so it's driving me insane that this is just hanging out there unresolved. Not to mention that they might owe me $5k in refunds, although that feels like a lost cause at this point. If I lived on the island still, I'd be showing up constantly in person demanding attention. All forms of communication from afar appear to have failed. Can I hire another CPA to address this? I contacted someone a while back who only said that they couldn't get involved about an alleged error for another CPA's filing. Should I try to report him to a licensing entity? I looked into the PR CPA bar but can't find anything on this topic. Should I contact an attorney to hassle the CPA into action? What kind of attorney would be appropriate for this issue? Should I first send him a letter threatening legal action? Since he still needs to represent me in front of the tax authority, i had been trying in vain to avoid making this adversarial. Basically, i want the lingering tax issue resolved and to never interact with this guy again. Thesaurus fucked around with this message at 05:33 on Dec 13, 2022 |
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Dec 13, 2022 05:30
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H110Hawk posted:What probably happened on paper, if people were advised by an accountant on this prior to the sale, is that the house was removed from the trust and sold, then the proceeds were deposited into a bank account in the trust. You need to hire an accountant to sort this out. There are huge amounts of money on the line here between various exemptions, basis stuff, etc. My BIL who does all the paperwork assured me that he ran the trust and the forthcoming tax return through his CPA, who rubber stamped it all as good and qualifying for the exclusion. So, there may definitely have been some paperwork shell games to make sure the exclusion that can be used. I think the family is trying to get all the paperwork to make sure it’s all on the up and up. Funny enough, my other BIL (not one of the siblings), his brother is an IRS agent and said the whole thing was completely wrong, but he has the same info I have and that I’ve posted here. So who knows. We’re waiting on the rest of the paperwork. He couldn’t tell me whether he was a revocable or irrevocable trust, which seems super odd to me considering he was handling everything. But it looks like that distinction may make the whole difference. Henrik Zetterberg fucked around with this message at 06:03 on Dec 13, 2022 |
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Dec 13, 2022 06:01
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Mom being dead can make it partially irrevocable. An estate attorney should be going over this stuff. If a cpa is preparing and signing it then send it and let the IRS tell you. Potentially years later. Again paperwork matters materially here. Regardless, the recipients of the gift won't owe anything. And assuming they did the sale correctly and dad isn't super comically loaded (right now his half of the lifetime exemption is like $12 million. Mom is whatever it was when she died, potentially less than half that if she never saw trump as president. Now if dad kicks it tomorrow and it turns out he owes capital gains they can probably claw it back. Is sitting on the money in the trust for a few years feasible while it shakes out? 
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Dec 13, 2022 06:21
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Mom kicked it back in the early 2000s. Anyway, I appreciate all the input. I’ll probably post a follow-up when I learn more.
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Dec 13, 2022 06:29
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Thesaurus posted:Need advice: I'm having an issue with a CPA i used for taxes the last few years. There are lingering issues with my "state" (Puerto Rico) taxes. My previous posts in the thread touched on those and i hoped it had been straightened out. Yes, you should hire another tax pro in PR to handle this. I wouldn't bother trying to sue over 125 USD.
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Dec 13, 2022 17:50
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PatMarshall posted:Yes, you should hire another tax pro in PR to handle this. I wouldn't bother trying to sue over 125 USD. I don't care about the $125. The issue is the state coming after me for $26k in erroneous debt due to the accountant's negligence. Hopefully i can find a CPA who wants to get involved. Thesaurus fucked around with this message at 02:21 on Dec 14, 2022 |
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Dec 14, 2022 02:18
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H110Hawk posted:For the thread: Does dad get to use mom's $250k exemption because she died while they were married? Only if the property is sold within two years of the death.
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Dec 14, 2022 05:46
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SlapActionJackson posted:Only if the property is sold within two years of the death. Interesting! So it's basically the 2-of-5 rule still.
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Dec 14, 2022 05:59
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SlapActionJackson posted:Only if the property is sold within two years of the death. Which, this was not the case. It was just shy of 20 years between mom’s death and selling the property. 250 is enough to cover the gain. Dad is not turbo loaded.
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Dec 14, 2022 07:05
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Henrik Zetterberg posted:Which, this was not the case. It was just shy of 20 years between mom’s death and selling the property. That sounds promising.
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Dec 14, 2022 07:18
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You can't take depreciation on an asset you no longer own right like if you're taking depreciation annually on 13 cows and you only one 2 cows you're either lying about your assets or committing some kind of tax fraud eh? Is there some other possible explanation? Also I think I've recently discovered that it actually is legal to use sole proprietor business type losses to offset basically any other income e.g. your wife has 50k in W-2 income and you make 50k a year in passive income from rental properties but you "lose" 100k a year in your "ranching" "business" it means you don't pay any federal taxes? That seems kinda crazy to me, is that really how it works?
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Dec 16, 2022 02:33
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bird with big dick posted:You can't take depreciation on an asset you no longer own right like if you're taking depreciation annually on 13 cows and you only one 2 cows you're either lying about your assets or committing some kind of tax fraud eh? Is there some other possible explanation? Not one I've heard being possible, unless there's some farming rule I'm not thinking of. quote:Also I think I've recently discovered that it actually is legal to use sole proprietor business type losses to offset basically any other income e.g. your wife has 50k in W-2 income and you make 50k a year in passive income from rental properties but you "lose" 100k a year in your "ranching" "business" it means you don't pay any federal taxes? That seems kinda crazy to me, is that really how it works? Yes, but if you're constantly taking business losses they will certainly audit to confirm you are actually running a legitimate business (if you make a reported profit you pay taxes on, they generally will accept you're running a business without argument). So if you aren't acting like a serious business (keeping your business and personal income/accounts separated, no personal-related items claimed as expenses, spending on appropriate items for the work you're supposedly doing, etc.) they can come back and rule it's a hobby (which prevents claiming expenses under Trump's tax laws) or outright tag you for fraud. But if you are indeed running a business you can take losses against the rest of your income; you can't be legally required to run a SUCCESSFUL business after all and the law works under the presumption the guy losing tons of money on their business deserves a break on their taxes. Mind you, I suspect this is an area where a lot of fraud (or people misunderstanding the rules) does happen, since it does generally take an audit to determine (and quite a lot of tax court stuff does involve this sort of thing).
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Dec 16, 2022 03:02
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Bought a car years ago for $6,000. KBB values it today at $2,800. For donated cars, I understand that you can only claim a deduction for the amount of gross vehicle proceeds if a charity auctions it off. But what if I donate it to a fire department, where they won’t be selling it but will be putting it to use (training for rescue and recovery)? I could then claim the full $2,800 value?
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Dec 16, 2022 21:39
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Ask them if they will write the kbb value on the receipt. If so, yes.
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Dec 16, 2022 21:49
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Hey tax goons, would love some advice. My wife and I just bought a house, but really she bought a house. My credit is in the 680 range, and hers is just above 800, so the rate was better for her to apply for the mortgage solo. What are the tax implications of her trying to put me on the deed at this point or in the future? Potentially relevant info: I owned and recently sold a house. She is a first time home buyer. My credit black mark has been fixed and is rising fast (on the scale of credit score improvement) We have up until now always filed taxes as married but filing separately.
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Dec 17, 2022 23:20
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Doom Rooster posted:Hey tax goons, would love some advice. There aren't really any tax implications to being added to the deed. The main tax issue about home ownership is the mortgage interest deduction; since you're filing MFS (married filing screwed) you're probably itemizing already and once you're liable for the mortgage you can then take your share of the interest deduction assuming that you're also making payments to the house.
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Dec 19, 2022 05:51
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I have a very simple situation, I just file a 1040, and then for my state (MN) just the regular income tax form (M1) and the property tax refund (M1PR). I do have a mortgage. my AGI is just barely too high to get the IRS free file. is there any free federal option available? I'd be okay doing state by paper as the refund doesn't take very long. what about freetaxusa?
actionjackson fucked around with this message at 03:38 on Dec 20, 2022 |
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Dec 20, 2022 03:31
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quote:It appears additional reporting forms (Form 8621- Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) are required for your ETF funds held in your Canadian open trading account. This is such endless misery. I spent my entire life being responsible and putting my money towards my retirement and now the govenrment is going to steal from me even more than they did with the deemed dispositions and the fact the canadian government continues to withhold my RSU vests even though I'm not a canadian tax resident. Now I'm being punished even more by my retirement funds being tax as income rather than capital gains. Everywhere I look my money is just rotting away. All of my equity grants that I paid 50% income tax on by the canadian government at 300 dollars a share is now worth 100 dollars a share. I was forced to close my Canadian consulting LLC. My Canadian mortgage interest rate is now 5% despite a year of begging to have a fixed rate mortgage. I can't do it myself because I had to give away my house to my parents because again of bullshit international tax reasons. Nobody told me I had to liquidate my TFSA until it was too late. For the past 18 months I've been trying to have my US 2021 taxes sorted out ahead of time to where I understand everything. I've tried to do the right thing for the past 18 months and every accountant, every accounting firm, every financial advisor, has let me down. I'm months past the filing deadline and still I'm being jerked around. I just feel sick. I'm over a million dollars in fake money down because I've spent the past year killing myself over my job and haven't had the energy or the correct advisory to properly manage my risk with my RSU holdings of the company I'm killing myself over despite over a year of constantly weekly begging from either my old or my new accounting firm to help me do things right. It's not an easy decision to cash out half a million dollars of stock into a US account without understanding all of the tax implications when the economy is collapsing and my residency in the US is so uncertain. How am I only now today learning of PFIC for the first time after over a year of this. Disgusting incompetence all around me. The old accounting firm is charging me 14k and they've done nothing for me. What is even the right thing to do with my canadian holdings such the US government doesn't rob me blind. I don't know what to do. Methanar fucked around with this message at 03:47 on Dec 20, 2022 |
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Dec 20, 2022 03:43
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If you lost a million bucks that means you had a million bucks so you can gently caress right off, pay the $14K you owe your accountant and swallow the taxes you owe.
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Dec 20, 2022 04:15
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Epi Lepi posted:If you lost a million bucks that means you had a million bucks so you can gently caress right off, pay the $14K you owe your accountant and swallow the taxes you owe. Any accountant doing international tax that didn't know about PFIC should probably be stiffed on their fees, if not outright sued for damages.
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Dec 20, 2022 04:26
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The tax laws for American expats are atrocious. It is so loving hard to save for retirement abroad. The only brokerage selling US domiciled ETFs/mutual funds in Japan stopped taking new clients. So pretty much every American resident in Japan is sitting on their hands waiting for a way to invest for retirement to come along. Just cash rotting away. PFIC prevents most Americans from investing in Japan's very nice IRA/401k equivalents. Only option at the moment is individual stock picking.
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Dec 20, 2022 04:32
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Turns out that "gently caress people with foreign money" polls very well with American voters, because they immediately think of "Jeff Bezos hiding his money in Bermuda" and not "Jeff down the street who transferred to Osaka to be a middle manager"
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Dec 20, 2022 04:38
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I don’t know how many billable hours make up $14,000 in fees but I really need to raise my rates.
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Dec 20, 2022 06:11
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Missing Donut posted:I don’t know how many billable hours make up $14,000 in fees but I really need to raise my rates. Probably 40 or so?
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Dec 20, 2022 06:16
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KillHour posted:Turns out that "gently caress people with foreign money" polls very well with American voters, because they immediately think of "Jeff Bezos hiding his money in Bermuda" and not "Jeff down the street who transferred to Osaka to be a middle manager" I think most Americans are well aware that expats don't even start to pay taxes until they're over $100k in foreign earned income and they get a dollar for dollar credit towards foreign taxes paid, so whatever measly amount of taxes they do pay to Uncle Sam more than covers their share of the cost of the expeditionary force that will come and get them if things go south.
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Dec 20, 2022 06:20
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sullat posted:I think most Americans are well aware that expats don't even start to pay taxes until they're over $100k in foreign earned income and they get a dollar for dollar credit towards foreign taxes paid, so whatever measly amount of taxes they do pay to Uncle Sam more than covers their share of the cost of the expeditionary force that will come and get them if things go south. We pay taxes in our country of residence, genius. The US and Eritrea are the only two countries in the world that even attempt to tax the foreign income of their non-resident citizens, so the earned income exemption and foreign tax credit are a bare minimum accommodation, not some great benefit of living abroad. Gabriel Grub fucked around with this message at 06:49 on Dec 20, 2022 |
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Dec 20, 2022 06:45
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KillHour posted:Turns out that "gently caress people with foreign money" polls very well with American voters, because they immediately think of "Jeff Bezos hiding his money in Bermuda" and not "Jeff down the street who transferred to Osaka to be a middle manager" I mean, in general, a ton of tax changes are sold as "let's go after those rich people!" but the actual implementation seems to be designed to target/annoy other groups. (See: Venmo/PayPal reporting)
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Dec 20, 2022 10:23
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sullat posted:I think most Americans are well aware that expats don't even start to pay taxes until they're over $100k in foreign earned income and they get a dollar for dollar credit towards foreign taxes paid, so whatever measly amount of taxes they do pay to Uncle Sam more than covers their share of the cost of the expeditionary force that will come and get them if things go south. you vastly overestimate median knowledge of the tax system. most americans don't even understand how their own progressive tax brackets work.
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Dec 20, 2022 14:25
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actionjackson posted:I have a very simple situation, I just file a 1040, and then for my state (MN) just the regular income tax form (M1) and the property tax refund (M1PR). I do have a mortgage. my AGI is just barely too high to get the IRS free file. is there any free federal option available? I'd be okay doing state by paper as the refund doesn't take very long. what about freetaxusa? Freetaxusa should cover you. Honestly not sure if they’ll force you to do the state return though them or not since I’ve never had to do one. You could also use the fillable pdfs if your super confident in your abilities and hate yourself.
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Dec 20, 2022 15:13
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MadDogMike posted:Not one I've heard being possible, unless there's some farming rule I'm not thinking of. The dude I’m suing’s (for personal injury) lawyer seems to have overshared (a la Alex Jones) his tax documents which has seemed to reveal that he hasn’t paid a single cent in federal income tax in at least a decade. 8 out of the last 10 years were net losses and in the two that weren’t, carry over losses were used to offset any income. I think he’s mostly doing it via depreciating assets he doesn’t have and huge numbers for maintenance and repairs that I bet have dodgy receipts. Dude is just a shitbag.
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Dec 20, 2022 16:22
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bird with big dick posted:The dude I’m suing’s (for personal injury) lawyer seems to have overshared (a la Alex Jones) his tax documents which has seemed to reveal that he hasn’t paid a single cent in federal income tax in at least a decade. 8 out of the last 10 years were net losses and in the two that weren’t, carry over losses were used to offset any income. Doesn't the IRS give a finders fee for fraud tips that pan out?? 
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Dec 20, 2022 16:50
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Yeah it’s definitely on my mind after everything is finished with the lawsuit
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Dec 20, 2022 16:54
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Gotta get paid before you have the IRS squeeze him.
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Dec 20, 2022 17:04
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KillHour posted:Probably 40 or so? Sounds like I missed the boat in not becoming an expert on international tax issues. pmchem posted:you vastly overestimate median knowledge of the tax system. most americans don't even understand how their own progressive tax brackets work. This. Every year I pick up new clients and have to educate them that jumping into another tax bracket doesn't subject all their income to the higher rate. The average American has no clue about international tax issues because they don't crop up in their lives.
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Dec 20, 2022 17:07
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jemand posted:Doesn't the IRS give a finders fee for fraud tips that pan out?? Try Form 3949-A or Form 211. Gabriel Grub posted:We pay taxes in our country of residence, genius. That's... exactly what I said? If your bill ends up being $25,000 in American taxes and $24,000 in Canadian taxes you only end up paying $1,000 to the IRS. Check out Pub 514 if you're into that sort of thing.
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Dec 20, 2022 17:14
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Epi Lepi posted:If you lost a million bucks that means you had a million bucks so you can gently caress right off, pay the $14K you owe your accountant and swallow the taxes you owe. I don't know why you'd say that. If you really think a million dollars is a lot of money to have as a net worth after a life of work, not that it's even enough to buy a house, then surely you must acknowledge it's a lot to lose. I won the lottery, I know that. I did my best to be responsible with it and do the right thing. I worked 50-60 hours a week for years killing myself for my career to the neglect of everything else in my life stressing out from the petrifying constant fear of wasting the opportunity/foot in the door lottery I was given but did not deserve to have, to not lose it. I paid 50% marginal income tax combined between federal and provincial. My 100k on paper of stock turned into 50k post tax, then 16k after the collapse of the stock market. Then for all of my other retirement savings I'm, in the words of my accountant, being treated extremely punitively by a foreign government on my retirement fund, I've already paid taxes on. Is an 83% reduction in my fake money retirement fund enough for you to masturbate your political beliefs to? Do you know what I want? I want a sense of financial security for myself and the people I care about in my life. And all I feel is that despite my best efforts I've lost it all. Methanar fucked around with this message at 18:44 on Dec 20, 2022 |
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Dec 20, 2022 18:37
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