Search found 127 matches
- Sun Mar 19, 2023 3:43 pm
- Forum: Investing - Theory, News & General
- Topic: TIPS Bonds Acquisition Premium Amortization
- Replies: 7
- Views: 1100
Re: TIPS Bonds Acquisition Premium Amortization
Here's an Excel calculator illustrated with $10,000 face value of the Feb 2040 purchased 12/9/2022 at a price of 111.28125. It assumes premium is amortized through the 2nd interest payment date, August 15th, every year until maturity on February 15th 2040. Using the initial yield-to-maturity (calculated with the Excel YIELD function), it calculates what the price would be on the given date with Excel's PRICE function. It then applies that price against the original inflation-indexed principal. The change in this principal value is the amortization for the period. Row Col A Col B Col C Col D Formula in Column B 2 Face value 10,000 3 Issued 12/09/2022 4 Matures 2/15/2040 5 Coupon 2.125% 6 Unadj price 111.28125 7 Yield 1.385% =YIELD(B3,B4,B5,...
- Fri Mar 17, 2023 5:58 pm
- Forum: Investing - Theory, News & General
- Topic: TIPS Bonds Acquisition Premium Amortization
- Replies: 7
- Views: 1100
Re: TIPS Bonds Acquisition Premium Amortization
I don't know exactly what box 6 on a 1099-OID is intended for, but I don't think it has anything to do with bond premium amortization for a TIPS. It is reported in box 12, "Bond Premium on Treasury Obligations" of a 1099- INT . That is where TreasuryDirect reports it for a $1,000 TIPS I purchased for educational purposes. Ahh, I see--thanks. That box 12 is also $0 but, per Fran's note above, I now gather that's correct. This mention of OID got me to wondering. The premium to be amortized should refer to the unadjusted price, not the adjusted price including the index ratio. Only the 30-year TIPS maturing 2040 and later pay interest on Feb 15. On 12/9/2022 ten of these had adjusted prices over 100; but only two had unadjusted pric...
- Thu Mar 16, 2023 4:07 pm
- Forum: Investing - Theory, News & General
- Topic: TIPS Bonds Acquisition Premium Amortization
- Replies: 7
- Views: 1100
Re: TIPS Bonds Acquisition Premium Amortization
OK, great--thanks, Fran
- Thu Mar 16, 2023 2:35 pm
- Forum: Investing - Theory, News & General
- Topic: TIPS Bonds Acquisition Premium Amortization
- Replies: 7
- Views: 1100
TIPS Bonds Acquisition Premium Amortization
I bought some TIPS Bonds on 12/09/2022 at premiums to par via our Vanguard brokerage account and was expecting to see Acquisition Premium amortization amounts in box 6 of my 2022 1099-OID. However, the 1099-OID has zeros in box 6. I've made a couple calls to Vanguard on this but no one has been able to explain this to me. So, 2 questions: 1) Given that my first interest income payments on these bonds were not received until 02/15/2023, am I only allowed to take the benefit of premium amortization at the time of receipt of the interest income payments? So that proper tax accounting would be $0 in amortization in 2022 and amortization to be recognized in 2023 only for the periods from 12/09/2022 through 02/15/2023 and from 02/16/2023 through ...
- Wed Mar 15, 2023 10:51 am
- Forum: Investing - Theory, News & General
- Topic: TIPS 1099-OID Adjustment for Tax
- Replies: 8
- Views: 1079
Re: TIPS 1099-OID Adjustment for Tax
I went thru the same question about when to report Accrued Interest paid to the seller in 2022 on quite a few TIPS as I built out my ladder thru 2022 with secondary market purchases. I only reported accrued interest that was actually paid to me in 2022 by Treasury. I will deduct the remaining amount paid by Treasury in January and February 2023 on my 2023 Tax Return. This was a bit painful as I had to review each confirmation and track it carefully. I did search various IRS publications and didn't find anything that was 100% definitive but it just made sense to me to take a conservative approach and not try to deduct any amounts prior to being paid by Treasury. Perhaps, a tax expert will weigh in and confirm if my approach is correct or no...
- Wed Mar 15, 2023 10:30 am
- Forum: Investing - Theory, News & General
- Topic: TIPS 1099-OID Adjustment for Tax
- Replies: 8
- Views: 1079
Re: TIPS 1099-OID Adjustment for Tax
[2] Accrued interest which you paid on purchase should be entered as an adjustment when entering a 1099-INT Is this contra-interest income adjustment applied in the year in which the accrued interest was paid, even if the related interest income is not received until the following tax year? This has been asked in other threads. Most members answer that it shouldn't be reported until the year of the first interest payment and cite an IRS instruction to that effect. However, I've always reported it for the year of purchase, for the following reasons (rationalizations?). If I didn't report it for the same year, I might forget it. I think the IRS rule is questionable since a cash-basis taxpayer is generally allowed to deduct expenses (as oppos...
- Tue Mar 14, 2023 10:01 pm
- Forum: Investing - Theory, News & General
- Topic: TIPS 1099-OID Adjustment for Tax
- Replies: 8
- Views: 1079
Re: TIPS 1099-OID Adjustment for Tax
[2] Accrued interest which you paid on purchase should be entered as an adjustment when entering a 1099- INT Is this contra-interest income adjustment applied in the year in which the accrued interest was paid, even if the related interest income is not received until the following tax year? For example: 2022 1099-INT from non-TIPS investments totals $100 a TIPS is purchased in Dec '22 with $150 accrued interest paid on a $200 coupon interest payment to be received 01/15/2023 No TIPS interest is received in 2022 Is 2022 Interest Income on the return $100, $0 or -$50? [*]Don't expect this to agree exactly with the amounts on a broker's 1099-OID, they are allowed to calculate it a slightly different way. (See this 2010 post by Doc .) If I ca...
- Sat Dec 24, 2022 6:25 pm
- Forum: Investing - Theory, News & General
- Topic: TIPS secondary market pricing--what am I missing?
- Replies: 6
- Views: 700
Re: TIPS secondary market pricing--what am I missing?
Thanks--this is exactly right. I see the 111.68359 price on my actual trade confirmation.
- Sat Dec 24, 2022 6:24 pm
- Forum: Investing - Theory, News & General
- Topic: TIPS secondary market pricing--what am I missing?
- Replies: 6
- Views: 700
Re: TIPS secondary market pricing--what am I missing?
Thanks, Kevin--this is the answer. I was looking at the Transaction History page, which only shows 2 decimals. But the actual trade confirmation shows 6 places. Mystery solved!Kevin M wrote: ↑Sat Dec 24, 2022 4:48 pm Vanguard uses many more decimal places than 2 for price in calculating amount, and I guess that would explain such a small discrepancy. Use the price on your trade confirmation or transaction history. Vanguard provides six decimal places for price in transaction history.
By contrast, Fidelity only provides price to 2 decimal places in transaction history, so you must calculate the more accurate price from principal amount (not including accrued interest), quantity and index ratio.
Kevin
- Sat Dec 24, 2022 3:41 pm
- Forum: Investing - Theory, News & General
- Topic: TIPS secondary market pricing--what am I missing?
- Replies: 6
- Views: 700
Re: TIPS secondary market pricing--what am I missing?
I calculate the same accrued interest amount that Vanguard provides, and it's based on the inflation-adjusted principal amount on the settlement date (i.e. 128,000 x 1.35729 x .02125/2 x (119/184)). So, I don't think it's that.secondopinion wrote: ↑Sat Dec 24, 2022 2:29 pm
I am not certain, but I believe the accrued interest receives an adjustment for inflation on payment.
- Sat Dec 24, 2022 2:27 pm
- Forum: Investing - Theory, News & General
- Topic: TIPS secondary market pricing--what am I missing?
- Replies: 6
- Views: 700
TIPS secondary market pricing--what am I missing?
I recently made a secondary market purchase of TIPS and Vanguard shows a slightly different total purchase price than I get via calculating it myself. I'm sure they're right and I'm wrong but I'm not sure what I'm missing and would appreciate some help. Here are the facts:
CUSIP: 912810QP6
# Bonds: 128 ($1,000 each)
Dated Date: 02/15/11
Ref CPI on Dated Date: 218.991
Settlement Date: 12/12/22
Ref CPI on Settlement Date: 297.23523
Settlement Date Index Ratio: 1.35729
Price: 111.68
Accrued Interest: $1,193.83
Vanguard Total Purchase Price: $195,225.22
My Calculated Total Purchase Price: $195,218.98
Difference: $6.24
My calculation is $128,000 x 111.68 x 1.35729 + $1,193.83
What am I missing? Thanks!
CUSIP: 912810QP6
# Bonds: 128 ($1,000 each)
Dated Date: 02/15/11
Ref CPI on Dated Date: 218.991
Settlement Date: 12/12/22
Ref CPI on Settlement Date: 297.23523
Settlement Date Index Ratio: 1.35729
Price: 111.68
Accrued Interest: $1,193.83
Vanguard Total Purchase Price: $195,225.22
My Calculated Total Purchase Price: $195,218.98
Difference: $6.24
My calculation is $128,000 x 111.68 x 1.35729 + $1,193.83
What am I missing? Thanks!
- Mon Dec 12, 2022 7:27 pm
- Forum: Personal Finance (Not Investing)
- Topic: Solo 401k Transfer--Vanguard Distribution Form to an External Account?
- Replies: 3
- Views: 269
Re: Solo 401k Transfer--Vanguard Distribution Form to an External Account?
You're on the right track and it sounds like Vanguard is on the wrong track. Do not sign/submit anything until you're confident of what will happen and are happy with it. Did you talk to Vanguard Small Business (888-490-1277), or just the regular Vanguard number? If the latter, I'd give VSB a call. OK, thanks. I've talked to multiple people in multiple areas (this really shouldn't be this difficult) but the last person was in their Onboarding Dept and he said he spoke with someone in the Retirement group. But, I know from past experience that the Retirement group is different from the VSB group, so I'll call the latter tomorrow and see what they have to say. Glad to hear you don't think I've completely misunderstood how this works--thanks
- Mon Dec 12, 2022 7:05 pm
- Forum: Personal Finance (Not Investing)
- Topic: Solo 401k Transfer--Vanguard Distribution Form to an External Account?
- Replies: 3
- Views: 269
Solo 401k Transfer--Vanguard Distribution Form to an External Account?
I'm in the process of trying to move my Solo 401(k) account from Vanguard to ETRADE and have hit a snag--wondering if anyone here has experience with this process. I completed the Adoption Agreement at ETRADE to amend the plan custodian and they submitted the account transfer request to Vanguard but received back an error message. After several phone calls and research, Vanguard says that I must complete some paperwork for them before they can complete the transfer. However, the form they sent me is titled "Individual 401(k) Distribution Form to an External Account." This form appears to handle distributions from the plan (i.e. by direct rollover to another plan or via check to me), whereas my understanding was that the plan itsel...
- Tue Dec 06, 2022 12:15 am
- Forum: Personal Investments
- Topic: Confused about TIPS
- Replies: 27
- Views: 3636
- Fri Dec 02, 2022 9:51 pm
- Forum: Investing - Theory, News & General
- Topic: Best capital preservation approach for the 2033-2039 TIPS gap?
- Replies: 13
- Views: 1310
Re: Best capital preservation approach for the 2033-2039 TIPS gap?
Anyone have any thoughts on this question: This is very helpful--thanks. So, if I buy 4 rungs of the 2033s in January and 4 rungs of the 2040, I'd be selling roughly (is there a site that calculates daily current durations on all issued TIPS??) 7 yr, 6 yr and 5 yr remaining duration 2033s in 2024, 2025 and 2026, then selling roughly 11 yr, 10 yr and 9 yr remaining duration 2040s in 2027, 2028 and 2029. And replacing each of these sales with 7-9 yr duration new 10 yr issuances. Whereas if I use SCHP, the fund would have a roughly constant 7-8 yr duration, so that every fund draw would be selling 7-8 yr duration shares to and buy 7-9 yr duration, 10 yr maturity bonds. Do I have that right? If so, does this argue there is actually less real ra...
- Fri Dec 02, 2022 6:00 pm
- Forum: Personal Finance (Not Investing)
- Topic: Solo 401k Transfer--Conflicting Instructions on ETrade Adoption Agreement?
- Replies: 4
- Views: 374
Re: Solo 401k Transfer--Conflicting Instructions on ETrade Adoption Agreement?
Section 411(d)6 provides "anti-cutback" rules. https://www.irs.gov/retirement-plans/guidance-on-the-anti-cutback-rules-of-section-411d6 The point is to prevent a plan administrator from making a plan amendment that deprives plan participants of an accrued benefit. For example, a plan administrator might retroactively disqualify employees with less than a year of service by amending the plan back to the first of the year they started. Since this is a solo 401k, and you (presumably) are the only participant, and you aren't eliminating any accrued benefit for yourself by amending the plan, you probably don't need to worry about it. I see—thanks. Any concern then about choosing Jan 1, 2022 as the date, given that I made contributions...
- Fri Dec 02, 2022 4:54 pm
- Forum: Personal Finance (Not Investing)
- Topic: Solo 401k Transfer--Conflicting Instructions on ETrade Adoption Agreement?
- Replies: 4
- Views: 374
Solo 401k Transfer--Conflicting Instructions on ETrade Adoption Agreement?
[2022 thread bumped in 2023 --admin LadyGeek] I'm in the process of moving an existing solo 401k plan from Vanguard to ETrade and have run into a snag in the Adoption Agreement. After reading the good advice here in earlier threads, I've correctly checked the "Existing Plan Amendment or Restatement Date" box rather than the "New Plan Effective Date" one in the Standardized Adoption Agreement form. However, I'm also required to enter the "effective date of this amendment or restatement." The included instructions say, "The restatement Effective Date is generally the first day of the Plan Year in which this Adoption Agreement is signed." So, this would indicate Jan 1, 2022. However, there is a note in ...
- Thu Dec 01, 2022 1:51 pm
- Forum: Investing - Theory, News & General
- Topic: Best capital preservation approach for the 2033-2039 TIPS gap?
- Replies: 13
- Views: 1310
Re: Best capital preservation approach for the 2033-2039 TIPS gap?
I see--makes sense. Thanks againstevewolfe wrote: ↑Thu Dec 01, 2022 8:44 am
Yes, the difference in real rates between TIPS available now and I-Bonds available now is definitely a consideration. In our case, I didn't state, but we have some 1.2% and 0.7% paper I-Bonds that will mature in the 2038 time frame, as well as some others bought at lower fixed rates (including the current 0.4% that we purchased this week in our gift box for delivery in January).
Steve
- Thu Dec 01, 2022 1:51 pm
- Forum: Investing - Theory, News & General
- Topic: Best capital preservation approach for the 2033-2039 TIPS gap?
- Replies: 13
- Views: 1310
Re: Best capital preservation approach for the 2033-2039 TIPS gap?
Thanks, 2ndsecondopinion wrote: ↑Thu Dec 01, 2022 11:27 am
vineviz has replied to your questions and they look like good recommendations (on matters of duration and such, vineviz is very good at it). I agree with it.
- Thu Dec 01, 2022 1:50 pm
- Forum: Investing - Theory, News & General
- Topic: Best capital preservation approach for the 2033-2039 TIPS gap?
- Replies: 13
- Views: 1310
Re: Best capital preservation approach for the 2033-2039 TIPS gap?
Assuming inflation comes in at the current break-even rates, I'll generate about 1/5 of a year's required income in excess after-tax cash flow from each rung of the ladder from 2023-2032. This money would be available to reinvest in new issuances to help fill part of the gap. But of course higher than expected inflation would eat up this excess (which is why i'm building in the excess as cushion) If the "gap" reserve is held in TIPS (either a fund or individual bonds), any unexpectedly high inflation between now and the future will effectively be hedged: the value of the reserve will be inflated based on the actual changes in CPI, whatever those are. Oh, for sure. I was referring to the impact of excess inflation on the post-spen...
- Wed Nov 30, 2022 9:58 pm
- Forum: Investing - Theory, News & General
- Topic: Best capital preservation approach for the 2033-2039 TIPS gap?
- Replies: 13
- Views: 1310
Re: Best capital preservation approach for the 2033-2039 TIPS gap?
With that background, I'm looking for advice on how best to manage the gap in maturing TIPS between 2023 and 2039. I've read some threads on this and seen #cruncher's TIPSLadder Background notes on "Handling Gaps in TIPS Maturities." My biggest concern with the TIPS portfolio is maintaining positive real pre-tax rates of return, which are available now but might not be in the future. I'm aware that real rates are still below historical norms but I don't mind missing out on 2.5% real as much as I would be disappointed at getting stuck with negative real. Given all this, how do you think I should handle the gap years? I'm not sure there is a single "best" way to handle this, but I think either of the two common approaches...
- Wed Nov 30, 2022 9:56 pm
- Forum: Investing - Theory, News & General
- Topic: Best capital preservation approach for the 2033-2039 TIPS gap?
- Replies: 13
- Views: 1310
Re: Best capital preservation approach for the 2033-2039 TIPS gap?
I just went through the exercise of building a TIPS ladder, from early retirement to Social Security at age 70, earlier this fall. I spent days and days reading threads on the subject here and elsewhere (including Zvi Bodie's "Risk Less and Prosper"). In addition to the options that vineviz laid out (I'd be remiss if I didn't take the chance to thank him for all his thoughtful input on so many of the threads on this subject), you could consider using I-bonds to help fill part of the gap as well. In my case, I decided on a combination of approaches to deal with the 7 year window in maturing TIPS from 2033 through 2039. First, I purchased 4 years worth of floor expenses maturing in 2032 with the intention of reinvesting 3 of those ...
- Wed Nov 30, 2022 9:46 pm
- Forum: Investing - Theory, News & General
- Topic: Best capital preservation approach for the 2033-2039 TIPS gap?
- Replies: 13
- Views: 1310
Re: Best capital preservation approach for the 2033-2039 TIPS gap?
I'm not sure there is a single "best" way to handle this, but I think either of the two common approaches are roughly equally reasonable. As you know, those approaches are: a) loading up on extra 2032 and 2040 TIPS b) hold a reserve fund in SCHP You can use those as sources of funds to purchase new 10-year TIPS as they are issued between 2023 and 2029. Thanks--was hoping you would weigh in on this. A little bit more info and some specific questions: Assuming inflation comes in at the current break-even rates, I'll generate about 1/5 of a year's required income in excess after-tax cash flow from each rung of the ladder from 2023-2032. This money would be available to reinvest in new issuances to help fill part of the gap. But of c...
- Wed Nov 30, 2022 4:57 pm
- Forum: Investing - Theory, News & General
- Topic: Best capital preservation approach for the 2033-2039 TIPS gap?
- Replies: 13
- Views: 1310
Best capital preservation approach for the 2033-2039 TIPS gap?
I'm interested in setting up a TIPS ladder in my taxable account to cover relatively level (pre-tax) real unfunded spending needs for 2023-2039 (age 70 SS will bring down spending needs in 2039, so will need less that year). Yes, I understand TIPS are more easily managed in tax-deferred accounts but those will already be filled up with more TIPS (am thinking longer maturity bonds there) and my overall AA requires a large amount in my taxable portfolio. A taxable TIPS ladder is challenging in terms of liability matching, as there's no way to know what the taxable non-cash inflation adjustments will be and therefore no way to know exactly what the after-tax cash flows will be to meet the spending needs. So, I'll need to build the ladder with ...
- Tue Nov 29, 2022 10:56 am
- Forum: Personal Investments
- Topic: Am I OK to retire?
- Replies: 58
- Views: 10606
Re: Am I OK to retire?
My initial instinct is that you're not as safe as I would want to be to shut off the human capital engine, but everyone has a different risk tolerance. The biggest challenge is that you have a very long planning period. I encourage you to do some research on Wade Pfau's "funded ratio" and see how your's comes out. But the present value (i.e. assuming your expenses grow at the same rate as inflation during your 47 yr planning period) of your cost of living liabilities is around $8,030,000 ($185k x 14 yrs; then $155k for 33 yrs). So, you'd need at least this much in present value of after-tax assets to cover your present value liabilities. Your $7m will be reduced once you remove the portions that belong to the IRS in the forms of ...
- Mon Nov 28, 2022 8:56 pm
- Forum: Personal Investments
- Topic: Am I OK to retire?
- Replies: 58
- Views: 10606
Re: Am I OK to retire?
My initial instinct is that you're not as safe as I would want to be to shut off the human capital engine, but everyone has a different risk tolerance. The biggest challenge is that you have a very long planning period. I encourage you to do some research on Wade Pfau's "funded ratio" and see how your's comes out. But the present value (i.e. assuming your expenses grow at the same rate as inflation during your 47 yr planning period) of your cost of living liabilities is around $8,030,000 ($185k x 14 yrs; then $155k for 33 yrs). So, you'd need at least this much in present value of after-tax assets to cover your present value liabilities. Your $7m will be reduced once you remove the portions that belong to the IRS in the forms of u...
- Sun Nov 27, 2022 10:22 pm
- Forum: Personal Finance (Not Investing)
- Topic: $25k gift of jointly-owned ETF shares to a child--no 709 required?
- Replies: 12
- Views: 934
Re: $25k gift of jointly-owned ETF shares to a child--no 709 required?
OK, thanksMarkNYC wrote: ↑Sun Nov 27, 2022 10:00 pm The IRS has clearly stated their position. If their position depended on specific procedural requirements, they would have stated those procedural requirements. Don't overthink it. The IRS does not want unnecessary gift tax returns that serve no practical purpose.
- Sun Nov 27, 2022 9:05 pm
- Forum: Personal Finance (Not Investing)
- Topic: $25k gift of jointly-owned ETF shares to a child--no 709 required?
- Replies: 12
- Views: 934
Re: $25k gift of jointly-owned ETF shares to a child--no 709 required?
Rather than relying on what TurboTax says, taxpayers may prefer to rely on the stated position of the IRS. On their website, in the section Gift Tax, FAQs, the IRS states: Q: "What if my spouse and I want to give away property that we own together?" A: "Each spouse is entitled to the annual exclusion amount on the gift, as shown in the table"... Year ---------- Annual exclusion per donee ------------ Annual exclusion total per donee (from 2 spouses) 2018-2021-----------$15,000----------------------------------------$30,000 2022 -----------------$16,000----------------------------------------$32,000 2023 -----------------$17,000----------------------------------------$34,000 Thanks, Mark--I was hoping you would weigh in ...
- Sun Nov 27, 2022 8:31 pm
- Forum: Personal Finance (Not Investing)
- Topic: $25k gift of jointly-owned ETF shares to a child--no 709 required?
- Replies: 12
- Views: 934
Re: $25k gift of jointly-owned ETF shares to a child--no 709 required?
I think you're right, but two issues to note. If any shares have an unrealized loss, there is a step-down in basis when giving them; if shares have an unrealized gain (and the idea here is to sell them in the child's lower tax bracket) be aware of the kiddie tax if the child is under the age threshold for their circumstances. Thanks. Kiddie tax would be an issue in 2022 but not in 2023, so the thinking is that the gift would occur in late December 2022 but the sale of the shares would not take place till January 2023. My understanding is that gift itself would not result in income subject to Kiddie tax, so that the cap gains realized in 2023 would be taxable then but at the child's much lower (0%) cap gains tax rate. Do I have that right a...
- Sun Nov 27, 2022 8:26 pm
- Forum: Personal Finance (Not Investing)
- Topic: $25k gift of jointly-owned ETF shares to a child--no 709 required?
- Replies: 12
- Views: 934
Re: $25k gift of jointly-owned ETF shares to a child--no 709 required?
Rather than relying on what TurboTax says, taxpayers may prefer to rely on the stated position of the IRS. On their website, in the section Gift Tax, FAQs, the IRS states: Q: "What if my spouse and I want to give away property that we own together?" A: "Each spouse is entitled to the annual exclusion amount on the gift, as shown in the table"... Year ---------- Annual exclusion per donee ------------ Annual exclusion total per donee (from 2 spouses) 2018-2021-----------$15,000----------------------------------------$30,000 2022 -----------------$16,000----------------------------------------$32,000 2023 -----------------$17,000----------------------------------------$34,000 Thanks, Mark--I was hoping you would weigh in ...
- Sun Nov 27, 2022 5:48 pm
- Forum: Personal Finance (Not Investing)
- Topic: $25k gift of jointly-owned ETF shares to a child--no 709 required?
- Replies: 12
- Views: 934
Re: $25k gift of jointly-owned ETF shares to a child--no 709 required?
I think you're right, but two issues to note. If any shares have an unrealized loss, there is a step-down in basis when giving them; if shares have an unrealized gain (and the idea here is to sell them in the child's lower tax bracket) be aware of the kiddie tax if the child is under the age threshold for their circumstances. Thanks. Kiddie tax would be an issue in 2022 but not in 2023, so the thinking is that the gift would occur in late December 2022 but the sale of the shares would not take place till January 2023. My understanding is that gift itself would not result in income subject to Kiddie tax, so that the cap gains realized in 2023 would be taxable then but at the child's much lower (0%) cap gains tax rate. Do I have that right a...
- Sun Nov 27, 2022 5:29 pm
- Forum: Personal Finance (Not Investing)
- Topic: $25k gift of jointly-owned ETF shares to a child--no 709 required?
- Replies: 12
- Views: 934
$25k gift of jointly-owned ETF shares to a child--no 709 required?
My wife and I are contemplating a ~$25k gift of ETF shares, which we hold jointly, to our child. The form 709 instructions are not as clear as I would like them to be, but I believe that a gift of jointly-owned property is automatically considered a gift of 1/2 value by each of us. And therefore, as each individual gift would be ~$12.5k and below the $16k individual exclusion, neither of us would need to file a 2022 form 709. My understanding is that there is no "split gift" here, as the property is jointly-owned, so there is no need to file a 709 and indicate a split gift to get the full $32k combined exclusion to cover the gift.
Do I have this right? Thanks!
Do I have this right? Thanks!
- Sat Nov 26, 2022 11:48 pm
- Forum: Personal Investments
- Topic: 30 Year TIPS Ladder starting Half-Way up the Ladder
- Replies: 11
- Views: 1252
Re: 30 Year TIPS Ladder starting Half-Way up the Ladder
Regrettably there is no way around this, as the longest maturing TIPS issued is 30 years, so right you can only go until 2052. One way around it would be to buy enough 2052 TIPS to cover 21 years, then each year for the next 20 years you'd sell 1/21 of those and buy the newly issued TIPS. There is of course interest rate risk, but unfortunately it's unavoidable. The alternative would be to buy a long TIPS fund to cover beyond 2052 and let the fund deal with that. Either way the interest rate risk is unavoidable. What about buying the 21 years worth of 2052s but, rather than selling 1/21 each year and incurring real rate change price risk on every sale tranche, hold all of it for the full 30 years, then use the end period funds to construct...
- Thu Nov 24, 2022 11:01 am
- Forum: Personal Finance (Not Investing)
- Topic: Self employed health insurance—what counts?
- Replies: 14
- Views: 1347
Re: Self employed health insurance—what counts?
I recently got a quote for a non-marketplace plan, which the rep was careful to point out it doesn’t meet the requirements for “minimum essential coverage” due to restrictions that don’t really apply to me or my family. The question I have is, does that distinction jeopardize my ability to deduct the premiums (I’m a sole proprietor). No, it does not. You may deduct the premiums (subject to the same income restrictions that apply to deductions of ACA plan premiums). Similarly, my dentist has a prepaid discount program available where we pay upfront for a couple cleanings and any additional work is discounted. Would that count as dental coverage I could deduct, or would that fall under a Schedule A type of deal instead? This I'm not as posit...
- Mon Nov 21, 2022 10:04 am
- Forum: Personal Finance (Not Investing)
- Topic: How to Deal With Past Mistakes in Form 8606
- Replies: 19
- Views: 2728
Re: How to Deal With Past Mistakes in Form 8606
I wrote the IRS a letter and sent in a revised Form 8606 regarding my 1997 taxes. I had made a mistake and failed to include $2000 on Form 8606. 1997 was the last year I contributed to a non-deductible IRA. Next year I switched to contributing to a Roth IRA. Anyway, the IRS replied back after a few months and told me, I need to submit a Form 1040X and all documents. That's what I am going to do. Did you make a withdrawal or Roth conversion in 1997 so that the missing $2k impacted your tax amount? Or did you just fail to include the $2k on line 1 and therefore lines 1 & 3 were incorrect, but there was no impact on your tax amount? If the latter, I'm surprised they would require a 1040X for a 25 yr-old return, given everything else I've ...
- Mon Nov 21, 2022 10:01 am
- Forum: Personal Finance (Not Investing)
- Topic: How to Deal With Past Mistakes in Form 8606
- Replies: 19
- Views: 2728
Re: How to Deal With Past Mistakes in Form 8606
I forgot to file 8606 non-deductible contributions for tax years 2016-2018. I discovered the mistake when I was doing the tax return for tax year 2020. So based on other similar threads on BH, I did two things: (1) downloaded 8606 forms for 2016-2018, filled them up and kept for my records. (2) corrected the IRA basis on 8606 for tax year 2020 and added an explanatory statement as to why my basis changed. (3) downloaded and kept for my records all the relevant 5498 forms. So, did you file a paper return with a letter explanation or is there some way in TT (or similar) to provide an explanation as part of the e-filed return? Thanks I did it with TurboTax, which allows you to attach explanatory statements, then e-filed. In fact, it was Turbo...
- Mon Nov 21, 2022 8:39 am
- Forum: Personal Finance (Not Investing)
- Topic: How to TLH Individual TIPS Bonds?
- Replies: 14
- Views: 947
Re: How to TLH Individual TIPS Bonds?
If the maturities are next year, then they would not be substantially identical. But if the maturities were 20 years in the future, it would be a wash sale, assuming the interest rates are very close. There are a few court cases involving bonds that address that issue. Thanks. Any idea why these time-to-maturity differences impact the substantially identical analysis? Curious as to the reasoning in those cases. There is not much difference in the total amount expected between two bonds differing by 3 months, 20 years in the future, whereas there would be a significant difference between a 3-month and 6-month bond. Also, the two 20-year bonds, with a 3-month difference, would have similar risk regarding interest rate changes, whereas there ...
- Sun Nov 20, 2022 9:19 am
- Forum: Personal Finance (Not Investing)
- Topic: How to Deal With Past Mistakes in Form 8606
- Replies: 19
- Views: 2728
Re: How to Deal With Past Mistakes in Form 8606
So, did you file a paper return with a letter explanation or is there some way in TT (or similar) to provide an explanation as part of the e-filed return? Thankssquirrel1963 wrote: ↑Sat Nov 19, 2022 7:10 pm I forgot to file 8606 non-deductible contributions for tax years 2016-2018.
I discovered the mistake when I was doing the tax return for tax year 2020. So based on other similar threads on BH, I did two things:
(1) downloaded 8606 forms for 2016-2018, filled them up and kept for my records.
(2) corrected the IRA basis on 8606 for tax year 2020 and added an explanatory statement as to why my basis changed.
(3) downloaded and kept for my records all the relevant 5498 forms.
- Sun Nov 20, 2022 9:14 am
- Forum: Personal Finance (Not Investing)
- Topic: How to Deal With Past Mistakes in Form 8606
- Replies: 19
- Views: 2728
Re: How to Deal With Past Mistakes in Form 8606
One thing you may want to try is to file an amended tax return for 2021 with an updated form 8606 and a letter of explanation. Why would I file an amended 2021 return, as that return was correct as filed and did not include an incorrect 8606? Seems like, if anything, there may be reason to send in corrected 2011-2013 8606s with an explanatory letter, although most advice I've read seems to indicate even that's unnecessary. Thanks The way I understand it you can file an amended return for the prior 3 tax years, so if you file an amended return for 2021, and included a "corrected" form 8606 with a letter of explanation that it covered tax years 2011-2103, at least the IRS would have the "corrected" form. It's up to you. B...
- Sat Nov 19, 2022 4:26 pm
- Forum: Personal Finance (Not Investing)
- Topic: Accidentally mixed pre-tax and post-tax in Traditional IRA
- Replies: 18
- Views: 1406
Re: Accidentally mixed pre-tax and post-tax in Traditional IRA
By "withdraw", I'm assuming you mean Roth conversion. You could do that (of course you'd only be taxed on the pre-tax portion of the combined conversion amount), but you might consider your marginal tax rate this year compared your expectation for future years to determine if now is the right time to do it.liam_w22 wrote: ↑Sat Nov 19, 2022 4:17 pm Thanks for the reply! Unfortunately I don't have a side business, just the one full time job.
Would it be easiest to just withdraw everything (both pre and post tax) from the Traditional IRA while I can and take the double tax hit on all of it? Since the amount is not extremely high (I just checked and total should be around $6K).
- Sat Nov 19, 2022 4:10 pm
- Forum: Personal Finance (Not Investing)
- Topic: How to Deal With Past Mistakes in Form 8606
- Replies: 19
- Views: 2728
Re: How to Deal With Past Mistakes in Form 8606
Why would I file an amended 2021 return, as that return was correct as filed and did not include an incorrect 8606? Seems like, if anything, there may be reason to send in corrected 2011-2013 8606s with an explanatory letter, although most advice I've read seems to indicate even that's unnecessary.
Thanks
- Sat Nov 19, 2022 4:06 pm
- Forum: Personal Finance (Not Investing)
- Topic: Accidentally mixed pre-tax and post-tax in Traditional IRA
- Replies: 18
- Views: 1406
Re: Accidentally mixed pre-tax and post-tax in Traditional IRA
Hello, I was hoping someone could help with a Traditional IRA tax question (tried searching for it in the forum but the ones I found had other caveats that didn't apply)! I have some pre-tax money in a Traditional IRA ($3000) in brokerage #1, and this year I accidentally contributed about $2000 to my Roth IRA in brokerage #2 before realizing I actually wasn't eligible. So I had brokerage #2 move the $2000 from the Roth into a Traditional IRA. So there's $3000 pre-tax in brokerage #1s Traditional IRA, and $2000 post-tax in brokerage #2s Tradtional IRA. Now I'm realizing that this was probably a dumb thing to do, and that I'll have to keep track of it every year for the rest of my life or something. Is there any way to undo this mess? So far...
- Sat Nov 19, 2022 3:40 pm
- Forum: Personal Finance (Not Investing)
- Topic: How to Deal With Past Mistakes in Form 8606
- Replies: 19
- Views: 2728
Re: How to Deal With Past Mistakes in Form 8606
I wrote the IRS a letter and sent in a revised Form 8606 regarding my 1997 taxes. I had made a mistake and failed to include $2000 on Form 8606. 1997 was the last year I contributed to a non-deductible IRA. Next year I switched to contributing to a Roth IRA. Anyway, the IRS replied back after a few months and told me, I need to submit a Form 1040X and all documents. That's what I am going to do. Did you make a withdrawal or Roth conversion in 1997 so that the missing $2k impacted your tax amount? Or did you just fail to include the $2k on line 1 and therefore lines 1 & 3 were incorrect, but there was no impact on your tax amount? If the latter, I'm surprised they would require a 1040X for a 25 yr-old return, given everything else I've ...
- Sat Nov 19, 2022 1:52 pm
- Forum: Personal Finance (Not Investing)
- Topic: Tax advice needed
- Replies: 2
- Views: 531
Re: Tax advice needed
Assuming there are no other reported income-related issues to also consider (e.g. SS taxation, Medicare premiums, college fin aid eligibility, etc.), I think this simplifies down to ordinary income, cap gains, SE tax (assuming your farm income is SE income), NIIT and additional Medicare tax calculation comparisons and a bet on federal income tax policy for 2023. Regarding the latter, I'll assume that tax brackets (other than COLA increases) and rates won't change in '23 vis-a-vis '22. Obviously, if you felt there was a material risk of higher rates and/or lower COLA-adjusted brackets, that would be an important factor to consider. Regarding the former, ignoring deductions (other than the MFJ SD) and other unknown factors (including state ta...
- Sat Nov 19, 2022 9:10 am
- Forum: Personal Finance (Not Investing)
- Topic: How to Deal With Past Mistakes in Form 8606
- Replies: 19
- Views: 2728
Re: How to Deal With Past Mistakes in Form 8606
What I personally would do is prepare, but not file, correct versions of 2011 through 2013 8606s. I'd also write a letter of explanation for my record that goes with these 8606s (pretty much what you've outlined here in your post, maybe with references to account numbers and so forth). I'd then print and save the letter of explanation and the three 8606s with my 2022 tax return. The IRS seems not to do much with 8606s, and I'm confident errors are legion. If the IRS ever does follow up with you about the discrepancies between your 2022 8606 and your earlier ones (they probably won't), you can give them your filed documents and notes and hope they agree that you've complied with the law. And if they never follow up (most likely), then at le...
- Sat Nov 19, 2022 9:05 am
- Forum: Personal Finance (Not Investing)
- Topic: How to Deal With Past Mistakes in Form 8606
- Replies: 19
- Views: 2728
Re: How to Deal With Past Mistakes in Form 8606
I didn't read the whole saga part carefully. I think Alan S. is the expert around here on this topic. Hopefully he'll chime in. I think what he would say: 1. You can't amend your 2010 return. It's too late. The IRS won't accept it. 2. You also can't amend 2011 through 2013 returns to fix the 8606 issues. It's too late. The IRS won't accept them. 3. You should enter the correct numbers on your 2022 8606. What I personally would do is prepare, but not file, correct versions of 2011 through 2013 8606s. I'd also write a letter of explanation for my record that goes with these 8606s (pretty much what you've outlined here in your post, maybe with references to account numbers and so forth). I'd then print and save the letter of explanation and t...
- Sat Nov 19, 2022 8:37 am
- Forum: Personal Finance (Not Investing)
- Topic: How to Deal With Past Mistakes in Form 8606
- Replies: 19
- Views: 2728
Re: How to Deal With Past Mistakes in Form 8606
Thanks. I did hit the search box (including these linked threads) before posting but couldn’t find situations close enough to mine.rkhusky wrote: ↑Sat Nov 19, 2022 7:07 am First few hits in the search box:
viewtopic.php?t=365043
viewtopic.php?t=337379
viewtopic.php?t=304587
- Fri Nov 18, 2022 9:52 pm
- Forum: Personal Finance (Not Investing)
- Topic: Any Solo 401(k) Providers Accept Rollovers of Pre-Tax Only Portion from TIRAs?
- Replies: 19
- Views: 1202
- Fri Nov 18, 2022 9:49 pm
- Forum: Personal Finance (Not Investing)
- Topic: How to Deal With Past Mistakes in Form 8606
- Replies: 19
- Views: 2728
How to Deal With Past Mistakes in Form 8606
In preparing to do a rollover of the pre-tax component from my TIRA to my solo 401(k), I’ve discovered that my old tax accountant made some mistakes in my 2010 tax return in completing form 8606 and that I subsequently made basis reporting mistakes in my 2011, 2012 and 2013 8606 forms. I’m not sure what to do (if anything) about it at this point, so would appreciate some advice. Here are the facts: In January 2010, I did a Roth conversion of my entire TIRA balance. This was roughly $63k with an after-tax basis of around $40k In November 2010, I lost my job and did a rollover of my 401(k) balance from my former employer's plan into this same TIRA. This was a roughly $160k rollover and at year-end, the TIRA balance was around $166k For the 1s...
- Fri Nov 18, 2022 4:12 pm
- Forum: Personal Finance (Not Investing)
- Topic: Any Solo 401(k) Providers Accept Rollovers of Pre-Tax Only Portion from TIRAs?
- Replies: 19
- Views: 1202
Re: Any Solo 401(k) Providers Accept Rollovers of Pre-Tax Only Portion from TIRAs?
Thanks for the update. That makes a lot more sense. And I'd agree it does seem to mean what you think it means. So even if you end up moving to Schwab, you can do this rollover first and then move to Schwab. Thanks, yes, that's the plan (or to ETrade, depending on which one has the best incentive to move the account). I do have a problem that's popped up relative to the historical TIRA basis reporting in my forms 8606 from before I fired my tax accountant and began completing the returns myself. Not sure how best to fix that, so will create a dedicated post for that to ask for some feedback. Will link to that here when I get the facts and the post sorted out. Would appreciate your view on that if you have a chance to take a look. Thanks ag...