Location: Westland, Michigan, United States

Graduate of Walsh Institute Of Accountancy (Now Walsh College) Michigan in 1959. Retired in 1987, but still active in the profession **World War II Veteran (Pacific) **PHONE 734-261-1979 **E-MAIL **(Domain Name CPASENSE Registered) **Mentioned in the Journal of Accountancy, SmartPros, Tax Prof Blog, CPA2BIZ, CPA Journal, AccountingWEB, CPATrendlines & More **Search Accounting Blogs: (Includes cpasense)**TOPICS - FINANCE - FEDERAL & MICHIGAN TAXES ** Making Sense Of Your Finance & Taxes

Thursday, August 31, 2006

IRS Announces Standard Amounts For Telephone Tax Refund

One exemption $ 30
Two exemptions 40
Three Exemptions 50
Four Exemptions 60

Internal Revenue Service

Tuesday, August 29, 2006

Converting Personal Residence To Rental Property

For example, you bought a personal residence for $90,000 some years ago and it's now worth $550,000. Your basis for a rental home is $90,000 ( lesser of your basis or the fair market value). Land value is ignored in this example.

You might be better off selling the house and buying one for rental at the same price. Using the above numbers, you'd have no tax on the $460,000 gain, assuming you qualify for the $500,000 exclusion. Your basis in the new property would be $550,000. That would produce much higher depreciation deductions, and increase your cash flow.

If you convert your residence to a rental and rent it out for three years and then sell it at a loss, you may claim a long-term capital loss. Of course, if prices increase and you sell it you will have a capital gain. The residency exclusion rules apply to the sale of a residence owned and used as a residence for at least 24 of the 60 month period prior to the sale. That is why you need to rent your home for at least 3 years to avoid the residency rules that prohibit claiming a loss on a principal residence.


Sunday, August 27, 2006

New Rules On Donations Of Personal Property Kick In September 2

If you donate appreciated long-term capital gain property to charity, you can deduct the fair-market value of the property, even if you paid a lot less. If the donation is of an item other than publicly-traded stock or securites, the tax law requires you to support the donation with a "qualified appraisal."

The recently enacted pension bill (H.R. 4) adds new restrictions for donations of tangible personal property, like art. If the property is sold in the year it is donated, the charitable deduction will be limited to the cost basis. If the property is sold within three years of the contribution, the donor will have to recapture as income the amount the charitable deduciton exceeded basis. This takes effect for donations after September 1, 2006.

Be careful with any restrictions on the sale that you might impose as a condition of the gift; the IRS could say that the restriction reduces the value of the property, therefore also reducing your charitable deduction.

Roth & Company CPAs

Friday, August 25, 2006

IRS Eyeing Online Sales

In an effort to crack down on underreporting by individuals and businesses, an IRS official said the tax agency is discussing creating new reporting requirements

New York Society of CPAs

Wednesday, August 23, 2006

Parents Urged To Lock-In Michigan MET Tuition

With an August 31 deadline approaching, there's still time to enroll in the Michigan Education Trust (MET), Michigan's prepaid tuition program

Michigan Treasury

Thursday, August 17, 2006

New Pension Bill - Retirement Savings

The new law would repeal the sunset provisions in EGTRRA that apply to retirement savings. Long-range retirement planning would be enhanced by making these provisions permanent. The major EGTRRA retirement provisions that would be made permanent rather than sunset at the end of 2010 would include:

**Permanent higher dollar amount for IRA contributions ($4,000 starting in 2006, $5,000 in 2008, inflation adjusted thereafter);

**Permanent higher dollar limits on defined contribution plans ($44,000 in 2006), elective deferrals (including $15,000 in 2006 for Code Sec. 401(k) plan deferrals), Code Sec. 457 plan deferrals ($15,000 in 2006), SIMPLE plan contributions ($10,000 in 2006) and compensation that may be taken into account under a plan;

**Permanent increases in the annual benefit limit under a defined benefit plan ($175,000 for 2006);

**Permanent catch-up contributions for older workers ($1,000 after 2005 for IRAs, $2,500 for SIMPLE plans, $5,000 for Code Sec. 401(k) plans);

**Permanent higher deductible amounts for employer contributions to employee retirement plans (inflation-adjusted to $220,000 in 2006; 25% compensation deduction limit for stock bonus and profit-sharing plans).

Wednesday, August 16, 2006

New Charitable Contribution Rules

The new pension bill (H.R. 4) requires a cancelled check or a written receipt from the donee organization to support any cash contribution.

Credit card receipts should also work. This takes effect for 2007.

These new requirements are in addition to the existing rule that gifts of $250 or more require a written receipt from the charity; for these gifts, a cancelled check alone isn't enough

Donation of non-cash property (clothing, furniture,etc.) in "fair" condition is effective as of the date (August 17, 2006) the legislation was signed by the President.

IRS Private Agencies Debt Collection

The American Jobs Act of 2004 allows the Internal Revenue Service (IRS) to use private collection agencies (PCAs) as an additional resource to help collect delinquent federal taxes. This will help reduce the growing number of uncollected tax liabilities while allowing the Service to better focus on more complex tax cases and issues. Just like the IRS, the selected agencies will be able to contact taxpayers directly to ask for payment in a professional manner. They cannot, however, take enforcement actions, such as liens or levies, or work technical issues such as tax abatements or financial hardships.

IRS Publication: What You Can Expect When The IRS Assigns Your Account To A
Private Collection Agency - If you receive Letter 3998-C, you should read this publication

Internal Revenue Service

Michigan S.B.T. Repeal Approved By Legislature

The initiated law (IL) moving up the repeal date by two years for the state’s single business tax was approved August 9 by the Legislature. It passed with solid Republican backing and a few Democratic votes in the House. The Senate approved IL 1, repealing the tax effective December 31, 2007, by a straight party-line vote of 22-16, with the House following a short time later with a 64-36 vote. Questions may be directed to the Michigan Association of CPAs Government Relations Department at (248) 267-3710.

Tuesday, August 15, 2006

New Pension Bill: Guide To Charitable IRA Rollovers

Review of the new rules and how donors, charities, and IRA administrators might respond


Friday, August 11, 2006

Michigan Treasurer Applauds Congress For Continuing "529" Exemption For MET & MESP

Michigan State Treasurer Robert J. Kleine today commended Congress for making permanent the federal tax exemption for Section 529 plans, which was due to expire in 2010. This benefits parents, grandparents, and others who invest in either the Michigan Education Trust or Michigan Education Savings Program, by maintaining tax exemptions for distributions from the programs.

"This is great news for Michigan families," said Treasurer Kleine.

"Thousands who have MET contracts and MESP accounts will experience additional savings in the years ahead. This change should also encourage more families to begin to save for the future through one of these valuable programs."

Wednesday, August 09, 2006

Time to be Glad Movie

Turn Sound On

Monday, August 07, 2006

Pension Protection Act of 2006 (HR 4)
Passed by Congress August 3 and sent to the President's desk for his expected signature.

CCH Pension Briefing

CCH Special Report

Sunday, August 06, 2006

Gov. Bush Signs Florida Intangibles Tax Repeal Into Law

A Florida tax on stocks, bonds and other intangible property that Gov. Jeb Bush repeatedly has labeled ``insidious'' will be repealed by a bill (HB 209) he signed into law Thursday, July 27. Only about 300,000 people, some of Florida's wealthiest citizens, will share in annual savings totaling more than $131 million.

Friday, August 04, 2006

Trifecta Bill Fails In Senate - Pension Bill Approved

Late on August 3 the Senate narrowly defeated a motion to proceed to a three-pronged bill, the Estate Tax and Extension of Tax Relief Bill of 2006 (HR 5970) that would have extended a group of popular tax breaks, increased the minimum wage and permanently slashed the estate tax. The final vote was 56 to 42. Senate rules require a 60 vote supermajority because the tax provisions exceed the amount called for in the 2006 budget reconciliation.

Immediately following the so-called trifecta bill vote, the Senate approved the Pension Protection Act of 2006 (HR 4) by a vote of 93 to 5. The Senate is now slated to recess until September 7.

CCH News

Michigan - Canadian Trash Issue

Michigan Senator Stabenow's website

Senate Committee Releases Report Critical of Canadian Trash

Tuesday, August 01, 2006

Vacation Homes Come With Tax Benefits
Tax breaks can make owning a vacation home more affordable. If you’re looking to claim the most tax breaks possible, you need to carefully track the amount of time you and your family spend at your vacation home. According to the Michigan Association of CPAs, there are three basic scenarios of vacation home use and a different tax treatment applies to each....-MORE-

Back To School Basics: How To Qualify For The Hope And Lifetime Learning Credits
If you have a student heading off to college, you’ll want to do some homework to see if you qualify for the Hope credit or the Lifetime Learning credit. According to the Michigan Association of CPAs, these two education tax credits can help defray education expenses for you and your family. And because a tax credit is subtracted dollar-for-dollar from the taxes owed, it's more favorable than a tax deduction, which simply reduces the total income on which your tax is based. For example, if your tax bill is $2,000 and you qualify for a $1,000 education credit, you can cut your tax bill in half....-MORE-

Estate Planning Terms You Need To Know
The first step in planning for what will happen to your assets when you die is mastering some key estate planning terminology and concepts. Here, the Michigan Association of CPAs offers a brief explanation of some of the most frequently used estate planning terms....-MORE-

Understanding Estate Taxes And How They Can Affect You
If you want to leave more of your assets to your beneficiaries rather than Uncle Sam, it’s wise to start thinking about estate planning and estate taxes as soon as possible. Don’t make the mistake of assuming that estate planning is a task only for the wealthy. CPAs point out that with more individuals setting aside retirement and other savings earlier in life, they are likely to have larger estates that may potentially be subject to estate taxes. And this can be costly. For 2006, the maximum federal estate tax rate is 46 percent. To help you assess your potential estate tax liability, the Michigan Association of CPAs, provides the following information....-MORE-