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Real Estate Inherited From a Deceased Spouse? Step Up Your Tax Knowledge
Did you inherit real estate from a deceased spouse? The internal revenue code has special tax treatment for valuing the basis of inherited property regardless if you have estate tax filing requirements and no doubt this will impact you.
If the inherited property has appreciated in value, the surviving spouse will generally receive a step up in basis of the inherited property to the fair market value (FMV) at:
1) the date of decedent’s death or
2) on the alternate valuation date (within 6 month of the date of death).
Further, in community property states (i.e. California, Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), married individuals are typically considered to each own 50% of the community property. As such, when either spouse dies, the entire value of the community property, including the part owned by the surviving spouse, receives a step up in basis to the FMV. For this rule to apply at least 50% of the value of the community property must be included in the deceased spouse’s gross estate regardless if the deceased spouse’s estate must file a estate tax return.
These rules can come in handy when a surviving spouse is in need of liquid capital. It should be noted that this special tax treatment can have adverse consequences if not handled correctly. Consult your tax adviser for more information.
Sources:
LLC vs S Corporation – What’s the difference?
Most every business start-up has come across the question “LLC or S corporation?”.
While this is a very common question, the response is often different depending on who you are talking to.
It should be noted that an LLC might work for some while an S corporation could be better for others – there is no “one size fits all” approach to entity selection.
In short, here are a few pro’s and con’s for the LLC and S Corporation entity structure:
LLC –
- PRO – Divide profit as members see fit
- CON – Passthrough income subject to self-employment tax if member has personal liability for debts of LLC or actively participates in trade or business of LLC
S Corporation –
- PRO – Passthrough income is not subject to self-employment tax. Only employee-shareholder “reasonable compensation” subject to payroll taxes.
- CON – Only issue single type of stock and must distribute profit based on percentage of stocked owned
Of course there are many more pro’s and con’s for each entity selection – feel free to call us with any questions and will be happy to discuss more (800) 425-0570.
For more related information visit the following links:
http://tiny.cc/xjz22x IRS: Partners’ Share Of LLC Income Is Subject to Self-Employment Tax
http://tiny.cc/smz22x 5 Common Objections to Forming a Corporation or an LLC
TAX DUE DATE – Business & Trust/Estate Taxes – September 15th, 2015 – Are you ready?
September 15, 2015 – This is the last day to file a 2014 calendar year income tax return for your:
- Corporation
- Partnership
- Trust/Estate
Be aware – This due date applies only if you timely requested a 6-month or 5-month extension. If you did not file an extension then there is even more urgency to file your tax return as soon as possible – expect penalties and interest if this is the case, but contact us immediately and let’s get those penalties abated!
Also, you must deposit the third installment of estimated income tax for 2015.
If you need help filing or have questions, feel free to call us today for a FREE initial consultation (800) 425-0570 or email questions to Contact@MrSmartTax.com
Equal vs Fair – What is the difference?
Today there are many reference to fair and equal, but do we really understand what these words mean? Do the politicians blasting their fair an equal message understand what they’re talking about?
In the most basic sense:
Fair = in accordance with the rules or standards; legitimate.
Equal = a person or thing considered to be the same as another in status or quality.
What do you think? Is being fair more important than being equal or is equality more important than fairness? Can both exist simultaneously?
#Marijuana: High On #Taxes
Legally selling marijauna? Federal law prohibits deductions for business expenses such as rent, office expenses, etc. however the IRS concedes that excise taxes levied by states on the sale of marijuana can be written off due to the fact that the tax is a reduction on the amount realized in the sale. Currently the state of Washington charges and Colorado charge a 37% and 15% tax respectively on the retail sale of marijuana. What is also notable is that the IRS will allow a deduction for the cost of the marijuana that is sold but not forfeited – a taxpayer in California had his medical dispensary raided by the feds and was not allowed to deduct the cost of the marijuana that was seized due to the fact that there was no sale.
Read more on Marijuana taxes….
Marvel Comics $16M Super Mutant Tax Trouble
Not even superheroes can save Marvel Entertainment LLC from the IRS who assessed the comic company $16.6 million in tax deficiencies due the company harvesting losses from bankrupt companies. Marvel Entertainment Group Inc and some of its subsidiaries filed for bankruptcy in 1996 and there remained approximately $97 million of net operating losses (“nol’s”) which were then carried forward to the successor company the Marvel Group in 1998. As a result the Marvel group was able to reduce taxable income with these nol’s for the years 1999-2004. According to the IRS their method of doing so was a no-no. Something tells me that his superhero magnate is not down for the count just yet…
http://tiny.cc/wjh50x
Healthy Workplace Health Family Act of 2015 (AB 1522)
An employee w
ho, on or after July 1, 2015, works in California for 30 or more days within a year from the beginning of employment, is entitled to paid sick leave. Employees, including part-time and temporary employees, will earn at least one hour of paid leave for every 30 hours worked. Accrual begins on the first day of employment or July 1, 2015, whichever is later.
Exceptions: Employees covered by qualifying collective bargaining agreements, In-Home Supportive Services providers, and certain employees of air carriers are not covered by this law.
An employer may limit the amount of paid sick leave an employee can use in one year to 24 hours or three days. Accrued paid sick leave may be carried over to the next year, but it may be capped at 48 hours or six days.
Usage
- An employee may use accrued paid sick days beginning on the 90th day of employment.
- An employee may request paid sick days in writing or verbally. An employee cannot be required to find a replacement as a condition for using paid sick days.
- An employee can take paid leave for employee’s own or a family member for the diagnosis, care or treatment of an existing health condition or preventive care or for specified purposes for an employee who is a victim of domestic violence, sexual assault or stalking.
Employers
Reminder: California Employers Required to Notify Most Employees about Paid Sick Leave
There are several things employers must do to comply with the Healthy Workplace Healthy Family Act of 2014 (AB 1522).
- Display poster on paid sick leave (Spanish) (Vietnamese) where employees can read it easily.
- Provide written notice to employees with sick leave rights (Spanish) (Vietnamese) at the time of hire.
- Provide for accrual of one hour for every 30 hours worked and allow use of at least 24 hours or 3 days or provide at least 24 hours or 3 days at the beginning of a 12 month period of paid sick leave for each eligible employee to use per year.
- Allow eligible employees to use accrued paid sick leave upon reasonable request.
- Show how many days of sick leave an employee has available. This must be on a pay stub or a document issued the same day as a paycheck.
- Keep records showing how many hours have been earned and used for three years.
Retaliation or discrimination against an employee who requests or uses paid sick days is prohibited. An employee may file a complaint with the Labor Commissioner against an employer who retaliates or discriminates against the employee for exercising these rights or other rights protected under the Labor Code. Local offices are listed on our website at http://www.dir.ca.gov/dlse/DistrictOffices.htm.