05 May 2023
0

There’s a Favorable “Stepped-Up Basis” If You Inherit Property

Roger Rossmeisl, CPA
Individual Tax Briefs
Theres a Favorable Stepped-Up Basis if you Inherit Property

A common question for people planning their estates or inheriting property is: For tax purposes, what’s the “cost” (or “basis”) an individual gets in property that he or she inherits from another? This is an important area and is too often overlooked when families start to put their affairs in order. Under the fair market value basis rules (also known as the “step-up and step-down” rules), an heir receives a basis in inherited property that’s equal to its date-of-death value. So, for example, if your grandfather bought shares in an oil stock in 1940 for $500 and it was worth $5 million at his death, the basis would be stepped up to $5 million for your grandfather’s heirs. That means all of that gain escapes income taxation forever! The...

25 Apr 2023
0

Paperwork You Can Toss After Filing Your Tax Return

Roger Rossmeisl, CPA
Individual Tax Briefs
Paperwork You Can Toss After Filing Your Tax Return

Once you file your 2022 tax return, you may wonder what personal tax papers you can throw away and how long you should retain certain records. You may have to produce those records if the IRS audits your return or seeks to assess tax. It’s a good idea to keep the actual returns indefinitely. But what about supporting records such as receipts and canceled checks? In general, except in cases of fraud or substantial understatement of income, the IRS can only assess tax within three years after the return for that year was filed (or three years after the return was due). For example, if you filed your 2019 tax return by its original due date of April 15, 2020, the IRS has until April 15,...

25 Apr 2023
0

Tax Rules for Donating Artwork to Charity

Roger Rossmeisl, CPA
Individual Tax Briefs
The Tax Rules for Donating Artwork to Charity

If you’re an art collector, you may wonder about the tax breaks available for donating a work of art to charity. Several different tax rules may come into play in connection with such contributions. Basic rules Your deduction for a charitable contribution of art is subject to be reduced if the charity’s use of it is unrelated to the purpose or function that’s the basis for its qualification as a tax-exempt organization. The reduction equals the amount of capital gain you would have realized had you sold the property instead of giving it to charity. Example: You bought a painting five years ago for $10,000 and now it’s worth $20,000. You contribute it to a hospital. Your deduction is limited to $10,000 because the hospital’s use of the...

25 Apr 2023
0

Some Taxpayers Qualify for More Favorable “Head of Household”Tax Filing Status

Roger Rossmeisl, CPA
Individual Tax Briefs
Some Taxpayers Qualify for More Favorable "Head of Household" Tax Filing Status

When preparing your tax return, we’ll check one of the following statuses: Single, married filing jointly, married filing separately, head of household or qualifying widow(er). Filing a return as a head of household is more favorable than filing as a single taxpayer. For example, the 2023 standard deduction for a single taxpayer is $13,850 while it’s $20,800 for a head of household taxpayer. To be eligible, you must maintain a household, which for more than half the year, is the principal home of a “qualifying child” or other relative of yours whom you can claim as a dependent. Basic rules Who is a qualifying child? This is a child who: Lives in your home for more than half the year, Is your child, stepchild, adopted child, foster child,...

24 Apr 2023
0

Gift Tax Return Basics

Roger Rossmeisl, CPA
Individual Tax Briefs
Gift Tax Return Basics

Did you make large gifts to your children, grandchildren or other heirs last year? If so, it’s important to determine whether you’re required to file a 2022 gift tax return. And in some cases, even if it’s not required to file one, you may want to do so anyway. Filing requirements The annual gift tax exclusion has increased in 2023 to $17,000 but was $16,000 for 2022. Generally, you must file a gift tax return for 2022 if, during the tax year, you made gifts: That exceeded the $16,000-per-recipient gift tax annual exclusion for 2022 (other than to your U.S. citizen spouse), That you wish to split with your spouse to take advantage of your combined $32,000 annual exclusion for 2022, That exceeded the $164,000 annual exclusion...

10 Apr 2023
0

Claiming Losses on Depreciated or Worthless Stock

Roger Rossmeisl, CPA
Individual Tax Briefs
Claiming Losses on Depreciated or Worthless Stock

Have you bought stock in a company that later dropped in value? While you may prefer to forget such an ill-fated investment, at least you can claim a capital loss deduction on your tax return. Here are the rules that apply when a stock you own is sold at a loss or becomes completely worthless. Stock sales produce capital losses  Stocks are capital assets and produce capital gains or losses when they’re sold. Your capital gains and losses for the year must be netted against one another in a specific order, based on whether they’re short-term (held one year or less) or long-term (held for more than one year). If, after netting, you have short-term or long-term losses (or both), you can use them to offset up to...

30 Mar 2023
0

Awarded Money in a Lawsuit or Settlement? It’s Only Tax-Free in Certain Circumstances

Roger Rossmeisl, CPA
Individual Tax Briefs
Awarded Money in a Lawsuit or Settlement? Its Only Tax-Free in Certain Circumstances

You generally must pay federal tax on all income you receive but there are some exceptions when you can exclude it. For example, compensatory awards and judgments for “personal physical injuries or physical sickness” are free from federal income tax under the tax code. This includes amounts received in a lawsuit or a settlement and in a lump sum or in installments. But as taxpayers in two U.S. Tax Court cases learned, not all awards are tax-free. For example, punitive damages and awards for unlawful discrimination or harassment are taxable. And the tax code states that “emotional distress shall not be treated as a physical injury or physical sickness.” Here are the facts of the two cases. Case #1: Payment was for personal injuries, not physical injuries A taxpayer...

26 Feb 2023
0

There Still May be Time to Make an IRA Contribution for Last Year

Roger Rossmeisl, CPA
Individual Tax Briefs
There Still May be Time to Make an IRA Contribution for Last Year

If you’re getting ready to file your 2022 tax return, and your tax bill is higher than you’d like, there may still be an opportunity to lower it. If you’re eligible, you can make a deductible contribution to a traditional IRA right up until this year’s April 18 filing deadline and benefit from the tax savings on your 2022 return. Rules for eligibility You can make a deductible contribution to a traditional IRA if: You (and your spouse) aren’t an active participant in an employer-sponsored retirement plan, or You (or your spouse) are an active participant in an employer plan, but your modified adjusted gross income (MAGI) doesn’t exceed certain levels that vary from year-to-year by filing status. For 2022, if you’re a married joint tax return filer...

26 Feb 2023
0

May 15 Tax Deadline Extended to October 16 for California Disaster Area Taxpayers

Roger Rossmeisl, CPA
Automotive, Current Events, Individual Tax Briefs, Small Business Tax Briefs
May 15 Tax Deadline Extended to October 15 for California Disaster Area Taxpayers

As reported in IR-2023-33 on 2/24/2023 Disaster-area taxpayers in most of California now have until October 16, 2023, to file various federal individual and business tax returns and make tax payments, the Internal Revenue Service announced last Friday. Previously, the deadline had been postponed to May 15, 2023 for these areas. The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA) in on the page entitled California Severe Winter Storms, Flooding, Landslides, and Mudslides. There are four different eligible FEMA declarations, and the start dates and other details vary for each of these disasters. The current list of eligible localities and other details for each disaster are always available on the Tax Relief in Disaster Situations page on IRS.gov. The additional relief postpones...

20 Feb 2023
0

Child Tax Credit: The Rules Keep Changing But It’s Still Valuable

Roger Rossmeisl, CPA
Individual Tax Briefs
Child Tax Credit: The Rules Keep Changing But It's Still Valuable

If you’re a parent, you may be confused about the rules for claiming the Child Tax Credit (CTC). The rules and credit amounts have changed significantly over the last six years. This tax break became more generous in 2018 than it was under prior law — and it became even better in 2021 for eligible parents. Even though the enhancements that were available for 2021 have expired, the CTC is still valuable for parents. Here are the current rules. For tax years 2022 and 2023, the CTC applies to taxpayers with children under the age of 17 (who meet CTC requirements to be ‘’qualifying children’’). A $500 credit for other dependents is available for dependents other than qualifying children. CTC amount The CTC is currently $2,000 for each...

ROGER ROSSMEISL, CPA

Kho & Patel CPAs
160 E. Arrow Highway
San Dimas, CA 91773

(714) 325-0442
roger@khopatel.com

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