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Re: AOTC versus 529 plan [American Opportunity Tax Credit]

Great question Andy. Unfortunately, I don't have a definitive answer. Section 529 is silent regarding the timing of distributions. I doubt the intent was to allow the reimbursement of prior year expenses. The IRS is certainly aware of the potential for abuse and made it clear in Notice 2008-17. See...
by jared
Sat Jan 24, 2015 5:00 am
 
Forum: Personal Finance (Not Investing)
Topic: AOTC versus 529 plan [American Opportunity Tax Credit]
Replies: 40
Views: 2566

Re: AOTC versus 529 plan [American Opportunity Tax Credit]

Great question Andy. Unfortunately, I don't have a definitive answer. Section 529 is silent regarding the timing of distributions. I doubt the intent was to allow the reimbursement of prior year expenses. The IRS is certainly aware of the potential for abuse and made it clear in Notice 2008-17. Seem...
by jared
Thu Jan 22, 2015 11:50 pm
 
Forum: Personal Finance (Not Investing)
Topic: AOTC versus 529 plan [American Opportunity Tax Credit]
Replies: 40
Views: 2566

Re: AOTC versus 529 plan [American Opportunity Tax Credit]

Thanks Jared. I see your point. I was not aware that in such a scenario you will avoid the 10% penalty on the 529 withdrawal, since you are declaring that you are NOT using those withdrawn funds to pay for QHEE. Can you point me to some authoritative documentation that supports that? Although not a...
by jared
Thu Jan 22, 2015 2:39 pm
 
Forum: Personal Finance (Not Investing)
Topic: AOTC versus 529 plan [American Opportunity Tax Credit]
Replies: 40
Views: 2566

Re: AOTC versus 529 plan [American Opportunity Tax Credit]

But no double-dipping so payments made with 529 plan withdrawals are not eligible for AOTC treatment. So we need to use 529 plan withdrawals for all but $2,000 a year of QHEE in order to get the first tier of the AOTC. Not necessarily. The amount of qualified higher education expenses available to ...
by jared
Thu Jan 22, 2015 10:09 am
 
Forum: Personal Finance (Not Investing)
Topic: AOTC versus 529 plan [American Opportunity Tax Credit]
Replies: 40
Views: 2566

Re: AOTC versus 529 plan [American Opportunity Tax Credit]

But no double-dipping so payments made with 529 plan withdrawals are not eligible for AOTC treatment. So we need to use 529 plan withdrawals for all but $2,000 a year of QHEE in order to get the first tier of the AOTC. Not necessarily. The amount of qualified higher education expenses available to ...
by jared
Wed Jan 21, 2015 11:27 pm
 
Forum: Personal Finance (Not Investing)
Topic: AOTC versus 529 plan [American Opportunity Tax Credit]
Replies: 40
Views: 2566

Re: 529 beneficiary change

Bacchus01 wrote:So, if I read that right, I can open a 529 with me as the beneficiary, accumulate say $60k in it, and change the beneficiary to one of my children with no tax implications including gift tax issues?

No, treated as gift from old beneficiary to new beneficiary.
by jared
Sat Jan 03, 2015 7:22 pm
 
Forum: Investing - Help with Personal Investments
Topic: 529 beneficiary change
Replies: 12
Views: 1047

Re: Self employment - health ins deductible

seattlereader wrote:do you think TurboTax will be set up to handle this "circular relationship" successfully in the upcoming tax prep season for the 2014 tax year?

I think they will be able to handle it, but I don't know for sure.
by jared
Sun Dec 28, 2014 12:33 am
 
Forum: Personal Finance (Not Investing)
Topic: Self employment - health ins deductible
Replies: 18
Views: 1690

Re: Self employment - health ins deductible

Maybe there has been newer guidance issued by the irs about this, but as far as I can tell, a sole proprietor can buy medical insurance from the exchange in his or her name and deduct it on line 29 assuming they show profits on schedule c, etc. Can anyone show me something better than what I've lin...
by jared
Wed Dec 24, 2014 1:59 am
 
Forum: Personal Finance (Not Investing)
Topic: Self employment - health ins deductible
Replies: 18
Views: 1690

Re: Self employment - health ins deductible

In my opinion, too much emphasis is being placed on the policy name. I don't believe having the spouse as the primary policy holder is going to render the health insurance expense nondeductible. This IRS CCA 200524001 released in 2005 contains some helpful information: http://www.irs.gov/pub/irs-wd/...
by jared
Wed Dec 24, 2014 1:44 am
 
Forum: Personal Finance (Not Investing)
Topic: Self employment - health ins deductible
Replies: 18
Views: 1690

Re: Low Income 401k/IRA Contribution Limits

retiredjg wrote:However, I don't know the answer to the question about filling both a Roth IRA and a Solo 401k based on the same dollars.

Fortunately, that question has already been answered above.
by jared
Wed Dec 17, 2014 9:46 am
 
Forum: Personal Finance (Not Investing)
Topic: Low Income 401k/IRA Contribution Limits
Replies: 12
Views: 1367

Re: Roth IRA Clarification

Regular contributions to a Roth IRA can be withdrawn tax and penalty free at any time regardless of age.
by jared
Mon Dec 15, 2014 10:19 pm
 
Forum: Investing - Help with Personal Investments
Topic: Roth IRA Clarification
Replies: 6
Views: 627

Re: Low Income 401k/IRA Contribution Limits

No. You need earned income for both of these, and it can't be the same earned income for two different contributions. Not true. You need compensation includible in gross income. Designated Roth contributions to a solo 401(k) do not reduce compensation includible in gross income. We've had this disc...
by jared
Mon Dec 15, 2014 9:45 pm
 
Forum: Personal Finance (Not Investing)
Topic: Low Income 401k/IRA Contribution Limits
Replies: 12
Views: 1367

Re: Roth conversion tax question

Since this thread has gotten into the devilish details, let me add my strange case--- My Mom opened a Roth IRA in 2013, and did a conversion of a traditional IRA into it. No previous Roth IRA. I inherited that Roth IRA in 2014. My personal Roth IRA was opened back in 1999, so that 5-yr period has p...
by jared
Mon Dec 15, 2014 4:39 pm
 
Forum: Personal Finance (Not Investing)
Topic: Roth conversion tax question
Replies: 23
Views: 1303

Re: Roth conversion tax question

nbseers uncle said: " since a new 5 year period starts with each conversion, any profit, interest, dividends, etc earned after the conversion will be subject to income tax, if withdrawn within 5 years of the conversion. " Can anyone offer any insight as to how this works if one has only o...
by jared
Mon Dec 15, 2014 9:10 am
 
Forum: Personal Finance (Not Investing)
Topic: Roth conversion tax question
Replies: 23
Views: 1303

Re: Roth conversion tax question

The answer depends on whether or not the distribution is a qualified distribution. If the distribution is a qualified distribution, then earnings are not taxable. If the distribution is not a qualified distribution, then earnings are taxable, even if over age 59 1/2. To be considered a qualified dis...
by jared
Mon Dec 15, 2014 12:14 am
 
Forum: Personal Finance (Not Investing)
Topic: Roth conversion tax question
Replies: 23
Views: 1303

Re: How do you contribute to your IRA?

Lump sum IRA and HSA in April for prior year contributions.
by jared
Thu Dec 11, 2014 2:16 pm
 
Forum: Investing - Help with Personal Investments
Topic: How do you contribute to your IRA?
Replies: 33
Views: 1708

Re: S Corp Taxes

Forget percentages and start thinking about what you would pay someone else to do the job.
by jared
Wed Dec 10, 2014 4:48 pm
 
Forum: Personal Finance (Not Investing)
Topic: S Corp Taxes
Replies: 6
Views: 652

Re: Can I get tax credits for my brother college fees?

Adding to my previous response... See Reg 1.25A-5(b)(1) (1)In general.— Solely for purposes of section 25A, if a third party (someone other than the taxpayer, the taxpayer's spouse if the taxpayer is treated as married within the meaning of section 7703, or a claimed dependent) makes a payment direc...
by jared
Sun Nov 30, 2014 1:45 am
 
Forum: Personal Finance (Not Investing)
Topic: Can I get tax credits for my brother college fees?
Replies: 13
Views: 1474

Re: Can I get tax credits for my brother college fees?

kaneohe wrote:Can you gift him the money and let him take the credit?

This isn't necessary. If OP pays brother's expenses to the university, brother is treated as having received the funds from OP and, in turn, paying the tuition to the university. Brother takes the credit if he otherwise qualifies.
by jared
Fri Nov 28, 2014 10:24 pm
 
Forum: Personal Finance (Not Investing)
Topic: Can I get tax credits for my brother college fees?
Replies: 13
Views: 1474

Re: S Corp question

Agree with others. Pay for an opinion from an attorney knowledgeable in this area. What does the LLC operating agreement say about dissolution and distribution of assets? What does state law say about dissolution and distribution of assets? The LLC is a legal entity formed under state law. The S Cor...
by jared
Sat Nov 22, 2014 12:34 am
 
Forum: Personal Finance (Not Investing)
Topic: S Corp question
Replies: 10
Views: 1586

Re: S Corp question

Agree with JacobyTT...not enough information to answer these questions. Probably going to need some clarification on this statement:
Hayden wrote:I put in the money, but split ownership with my partner 51/49.
by jared
Fri Nov 21, 2014 2:25 pm
 
Forum: Personal Finance (Not Investing)
Topic: S Corp question
Replies: 10
Views: 1586

Re: What financial tools/software do you use?

QuickBooks to track all income, expenses, assets, and liabilities. Everything is entered manually and reconciled on a monthly basis. I like QuickBooks because it is a double-entry accounting system. I also like having the ability to print financial statements. Excel for anything I can't do in QuickB...
by jared
Wed Nov 19, 2014 12:56 am
 
Forum: Personal Finance (Not Investing)
Topic: What financial tools/software do you use?
Replies: 35
Views: 2800

Re: Can 401(k) plus IRA contributions exceed earned income?

Assume the wife is a sole proprietor. If her net self-employment income is $30k, then her SE taxes would be $3,956 (15.3% of net). She will be allowed to deduct $1,978 (50% of $3,956) from her taxable income. She will thus be entitled to contribute a maximum of $26,022 combined to her Traditional s...
by jared
Wed Oct 29, 2014 2:47 pm
 
Forum: Personal Finance (Not Investing)
Topic: Can 401(k) plus IRA contributions exceed earned income?
Replies: 13
Views: 1162

Re: Tax planning for long term capital gains

Here are two income tax calculators that give a very different answer when you plug in the same numbers: To make things simple lets say I have no regularly taxed income. My only income is long term capital gains of $50,000. I claim the standard deduction and one personal exemption. No state income ...
by jared
Fri Oct 24, 2014 9:59 pm
 
Forum: Personal Finance (Not Investing)
Topic: Tax planning for long term capital gains
Replies: 14
Views: 1156

Re: Just wondering how you personally calculate net worth

Assets - Liabilities. I track my personal finances in QuickBooks. My house and vehicles are included as assets on the balance sheet at a conservative value and adjusted as necessary. My mortgage is a liability on the balance sheet. On a monthly basis, I reconcile bank accounts and make adjusting ent...
by jared
Thu Oct 23, 2014 11:14 am
 
Forum: Personal Finance (Not Investing)
Topic: Just wondering how you personally calculate net worth
Replies: 56
Views: 4158

Re: Employer Reimbursing Health Insurance Premiums - Taxable

I have individual health insurance that is medically underwritten. It is considered a "grandfathered plan" under the ACA. My employer has been reimbursing me for the premiums of this plan. Historically, this was done pre-tax. The premium reimbursements were not disclosed on my w-2. My emp...
by jared
Tue Oct 21, 2014 1:26 pm
 
Forum: Personal Finance (Not Investing)
Topic: Employer Reimbursing Health Insurance Premiums - Taxable???
Replies: 12
Views: 714

Re: Can I deduct unreimbursed mileage from a S-Corp?

I work for an S-corp and receive a W2 from it. I also own 30% of the company and receive a 1120S K1 that has fairly significant earnings. I have to drive about 2000 miles per year for the company which is unreimbursed to me. It would not represent 2% of my AGI, but I am wondering if it can somehow ...
by jared
Sat Sep 27, 2014 2:37 pm
 
Forum: Personal Finance (Not Investing)
Topic: Can I deduct unreimbursed mileage from a S-Corp?
Replies: 1
Views: 203

Re: Federal gift tax implications question

The retitling of the account was a gift. That's a totally separate issue than your question "does he still have to pay Federal Gift Taxes..." If gift taxes are due, they're due in the year of the gift. At death, it's no longer a gift tax question. The deceadants share of the account is in...
by jared
Sat Sep 27, 2014 11:36 am
 
Forum: Personal Finance (Not Investing)
Topic: Federal gift tax implications question
Replies: 6
Views: 555

Re: Tax liability on farm rental income

Generally speaking... If cash rent lease, report on Sch E (not subject to SE tax). If crop share lease with no material participation, report on Form 4835 (not subject to SE tax). If crop share lease with material participation, report on Sch F (subject to SE tax). See Pub 225 - Farmer's Tax Guide (...
by jared
Fri Sep 05, 2014 12:02 pm
 
Forum: Personal Finance (Not Investing)
Topic: Tax liability on farm rental income
Replies: 4
Views: 404

Re: LLC and an IRA

This is very unlikely to increase tax advantaged space. Rents from real estate are excluded from the definition of net earnings from self-employment.
by jared
Mon Aug 25, 2014 3:04 pm
 
Forum: Investing - Help with Personal Investments
Topic: LLC and an IRA
Replies: 3
Views: 503

Re: Fed Taxes on Sale of Rental/Primary Residence

Assuming you sold in April 2013, and it became a rental unit after April 2010, and you lived in it at least until April 2010...then you meet the "2 of 5 years" criterion. So that only leaves the depreciation. If you claimed rental income on your tax return that you could have also claimed...
by jared
Wed Aug 13, 2014 9:39 pm
 
Forum: Personal Finance (Not Investing)
Topic: Fed Taxes on Sale of Rental/Primary Residence
Replies: 12
Views: 1018

Re: Fed Taxes on Sale of Rental/Primary Residence

Assuming you sold in April 2013, and it became a rental unit after April 2010, and you lived in it at least until April 2010...then you meet the "2 of 5 years" criterion. So that only leaves the depreciation. If you claimed rental income on your tax return that you could have also claimed...
by jared
Wed Aug 13, 2014 10:23 am
 
Forum: Personal Finance (Not Investing)
Topic: Fed Taxes on Sale of Rental/Primary Residence
Replies: 12
Views: 1018

Re: How to Minimize Taxes: Family Selling Farm (Estate Plann

MN Finance wrote:Look, these are all really good ideas for taxes but the issue is whether or not this 70 year old couple wants to be in the farm business for the next 20 years. The assumption is that they do not.

Agree. Sounded to me like the decision to sell the land and residence has already been made.
by jared
Wed Aug 13, 2014 12:13 am
 
Forum: Personal Finance (Not Investing)
Topic: How to Minimize Taxes: Family Selling Farm (Estate Planning)
Replies: 21
Views: 1755

Re: How to Minimize Taxes: Family Selling Farm (Estate Plann

- Possible installment sale to spread the gain over multiple years and potentially minimize gain subject to 3.8% Net Investment Income Tax and 20% long-term capital gain rate. - Possible Section 121 exclusion of gain on sale of residence. "Possible" and "potentially" because we d...
by jared
Sun Aug 10, 2014 11:31 pm
 
Forum: Personal Finance (Not Investing)
Topic: How to Minimize Taxes: Family Selling Farm (Estate Planning)
Replies: 21
Views: 1755

Re: SEP-IRA employer contributions fr/ personal account-prob

That was the first example that I found in my search. The facts in the Peek case are much different than the proposed solution in OP's scenario. In the Peek case, the disqualified person extended credit indirectly to an entity owned by the disqualified person's IRA. The language of section 4975(c)(1...
by jared
Thu Jul 24, 2014 9:37 pm
 
Forum: Investing - Help with Personal Investments
Topic: SEP-IRA employer contributions fr/ personal account-problem?
Replies: 18
Views: 1464

Re: SEP-IRA employer contributions fr/ personal account-prob

Jared and Alan obviously did not look up examples of indirect prohibited transactions. Why don't you do that before debunking my take on it? The interpretation of indirect loan is fairly strict. For starters, the SUBSTANCE of the CPA's idea still leaves the principal involved in a loan with the pla...
by jared
Wed Jul 23, 2014 10:28 pm
 
Forum: Investing - Help with Personal Investments
Topic: SEP-IRA employer contributions fr/ personal account-problem?
Replies: 18
Views: 1464

Re: SEP-IRA employer contributions fr/ personal account-prob

IRC 4975(c)(1)(B): ".....the term prohibited transaction means .....lending of money or other extension of credit........between a plan and a disqualified person." The disqualified person here is the S corp (or brian2013, not sure which way to go), who has been deemed to be in a loan rela...
by jared
Tue Jul 22, 2014 1:43 pm
 
Forum: Investing - Help with Personal Investments
Topic: SEP-IRA employer contributions fr/ personal account-problem?
Replies: 18
Views: 1464

Re: SEP-IRA employer contributions fr/ personal account-prob

mah001 wrote:The CPA must be unaware of the concept 'indirect prohibited transaction,' which would make the entire ira immediately taxable. The good news is there would be no excise tax on the prohibited transaction.


Would you mind elaborating on this?
by jared
Tue Jul 22, 2014 1:10 am
 
Forum: Investing - Help with Personal Investments
Topic: SEP-IRA employer contributions fr/ personal account-problem?
Replies: 18
Views: 1464

Re: Multi-year payment is 529 qualified withdrawal?

IRC Section 529 is silent regarding the timing of distributions and education expenses. To my knowledge, there is nothing in the current law that says the distributions cannot be used for prior year expenses. That's not to say that the IRS wouldn't want to challenge this upon examination. However, I...
by jared
Fri Jul 18, 2014 10:40 pm
 
Forum: Personal Finance (Not Investing)
Topic: Multi-year payment is 529 qualified withdrawal?
Replies: 14
Views: 955

Re: 529 Account & Non credit course

Thanks everyone for your help. I'm still confused on whether a noncredit course qualifies for funds from a 529 account. I'll keep looking into it and if I find a resource that may help I'll post it in a reply. What a kind group this is. I've been touched over the last X years with the generous help...
by jared
Wed May 28, 2014 10:35 am
 
Forum: Personal Finance (Not Investing)
Topic: 529 Account & Non credit course
Replies: 9
Views: 795

Re: 529 Account & Non credit course

I don't believe credit vs. noncredit matters for purposes of Section 529. See the definition of Qualified Higher Education Expenses in IRC Section 529(e)(3). http://www.law.cornell.edu/uscode/text/26/529 A very similar definition is in Proposed Reg 1.529-1(c). See Page 34 of http://www.irs.gov/pub/i...
by jared
Tue May 27, 2014 10:32 am
 
Forum: Personal Finance (Not Investing)
Topic: 529 Account & Non credit course
Replies: 9
Views: 795

Re: IL resident, anyone have issue with state tax?

So I moved to IL because of my wife. I only have been here for a few years, but have had a few issues with IL taxes. I filed electronically to save time, but I got a notice of correction from IL. I looked and realized that it excluded tax paid to another state. It turns out that IL can't handle ele...
by jared
Tue May 06, 2014 12:36 am
 
Forum: Personal Finance (Not Investing)
Topic: IL resident, anyone have issue with state tax?
Replies: 5
Views: 625

Re: Jointly own condo with Mom - Tax problems ahead?

My understanding is that when you sell the house, the basis of half the house (the half your mother owned) will be one-half of whatever the value was at the time she died. The basis for the other half (the part you owned originally) will be one-half of whatever was paid for the house plus a share o...
by jared
Fri May 02, 2014 12:08 am
 
Forum: Investing - Help with Personal Investments
Topic: Jointly own condo with Mom - Tax problems ahead?
Replies: 11
Views: 1149

Re: Jointly own condo with Mom - Tax problems ahead?

The entire value of jointly held property (non-spouses) with the right of survivorship is included in a decedent’s gross estate except for the portion of the property for which the surviving joint tenant furnished consideration. See IRC 2040(a). (http://www.law.cornell.edu/uscode/text/26/2040) The b...
by jared
Thu May 01, 2014 8:46 pm
 
Forum: Investing - Help with Personal Investments
Topic: Jointly own condo with Mom - Tax problems ahead?
Replies: 11
Views: 1149

Re: Anyone on the TaxAlmanac.org forum?

FYI - Taxalmanac.org will be offline permanently on 6/1/14. One of the members has created a new site/forum to replace TA: http://www.taxprotalk.com/forums/ Many of the TA users have migrated to the new forum. Just thought I would share in case any Boglehead Tax Pros and former TA users weren't aware.
by jared
Wed Apr 30, 2014 9:53 pm
 
Forum: Personal Finance (Not Investing)
Topic: Anyone on the TaxAlmanac.org forum?
Replies: 7
Views: 813

Re: Transfer securities from IRA to satisfy RMD?

Maybe someone should "Ask J.K." why the stock in the taxable account has a zero basis. Good question. In this fairmark thread on in-kind distribution, Alan S provides guidance that contradicts JK. http://fairmark.com/forum/read.php?2,34649 Re: RMD from IRA Acct to Non IRA Acct Posted by: ...
by jared
Wed Apr 30, 2014 2:26 pm
 
Forum: Investing - Help with Personal Investments
Topic: Transfer securities from IRA to satisfy RMD?
Replies: 12
Views: 1250

Re: Transfer securities from IRA to satisfy RMD?

There is something called an in-kind IRA distribution that may work for your mom http://www.jklasser.com/askjk/i-have-to-take-a-required-minimum-distribution-from-my-ira-can-i-take-stock-instead-of-cash/ I have to take a required minimum distribution from my IRA. Can I take stock instead of cash? Y...
by jared
Wed Apr 30, 2014 1:33 pm
 
Forum: Investing - Help with Personal Investments
Topic: Transfer securities from IRA to satisfy RMD?
Replies: 12
Views: 1250

Re: Do I need an accountant? Small business with 55 k in rev

I should have said "may" be recaptured. I got swept up in the excitement of deductions for a home office, and did not realize the home office deductions are factored in and require more action on tax returns when the home is sold, than if never declared as home office deductions. I person...
by jared
Sun Apr 06, 2014 8:48 pm
 
Forum: Personal Finance (Not Investing)
Topic: Do I need an accountant? Small business with 55 k in revenue
Replies: 8
Views: 493

Re: Do I need an accountant? Small business with 55 k in rev

Lafder wrote:Any home office deductions will be recaptured when you sell your home. So it may or may not be worth the hassle to declare them.

Fortunately, this isn't true.
by jared
Sun Apr 06, 2014 8:36 pm
 
Forum: Personal Finance (Not Investing)
Topic: Do I need an accountant? Small business with 55 k in revenue
Replies: 8
Views: 493

Re: Illinois tax question

Angelus359 wrote:Illinois has a 5% flat tax

If I contributed to traditional IRA, and then converted to Roth IRA, would it avoid the tax?

Yes.
by jared
Sun Apr 06, 2014 7:57 pm
 
Forum: Investing - Help with Personal Investments
Topic: Illinois tax question
Replies: 19
Views: 883
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