A self-directed IRA is like all other IRAs except the owner of the IRA is in control of the investment. This unique feature allows for alternative investments which differ from traditional investments such as mutual finds, certificates of deposit and money market funds. It provides the owner of the IRA to invest in real estate if he or she desires.

All self-directed IRAs must have a custodian such as a bank or brokerage house.

Certain transactions are “prohibited” and may jeopardize your tax deferred status of the IRA resulting in disqualification along with tax consequences. Transactions with disqualified individuals are prohibited transactions. Disqualified people are spouses, parents, children etc. For example you cannot lease real estate to your parents or spouse within a self-directed IRA.

Finally, the self – directed real estate IRA may have to pay tax on the unrelated business income. This is the portion of income from debt financed property acquired vs non debt portion financed acquisition cost. The IRA can also take advantage of depreciation. If for example the property shows net income of $11,000 and is financed 50% by debt and 50% by equity, only $5,500 or (50%) of the net income is subject to unrelated business income tax. This net income would be taxed at 15% or $825 in total

Advertisements

Cheap gasoline is great for the American consumer. It puts real disposable money in the hands of the average consumer. The consumer spends this additional money on other things and stimulates the economy. NO GOVERNMENT STIMULUS LOADED WITH PORK THAT DOESN’T REACH ALL AMERICANS.

Cheap oil also makes countries like Russia, Iran & Venezuela less powerful,

A Manhattan prosecutor was recently been accused of choking a women. I hope he is subject to the same cut throat methods that either he or members of his office employ to get a conviction. To often cops or members of law enforcement get special treatment and avoid the punishment they dish out to the average citizen. These members of law enforcement should be held to a higher standard than the average Joe. They are not above the law just because of where they are employed.

A recent Tax Court Summary Opinion allows a home office deduction even if there is some personal use of the area. In this recent case the taxpayer had to pass through the business portion of her apartment for personal reasons ( bathroom, kitchen etc.). The tax court said that her personal use was minimal and wholly attributable to the practicalities of living in a studio apartment.

Tax inversion has been in the headlines quite a bit recently. Legally reducing one’s taxes, however, is not illegal or unpatriotic. People and corporations have been moving to low tax states since the imposition of state corporate, personal, and estate taxes. Some states, most recently, like New York, have taken steps to try to stop this trend by lowering taxes. Governor Cuomo is to be commended for listening to a bi partisan committee who advised lowering taxes and retaining the tax base. Lowering taxes and increasing the tax base strengthens the economy and all benefit. The Federal government should learn from the states successful efforts to stop tax inversion

I gave a presentation on taxes a tax exempt organization aiding and assisting child care providers. Somebody asked what the minimum wage was and I responded that the President wants to raise that amount to $10.10 per hour. Most of the attendees were appalled and sated that if the minimum wage was increased to this amount layoff would follow. The president catchy phrase “lets give ourselves a raise” make no sense when it will only increase unemployment.

The IRS has issued new regulations on what must be capitalized as opposed to deducted. The IRS, unfortunately, has finalized two sets of rules. One for taxpayers(entities) with a written capitalization policy and audited financial statements, and one for smaller taxpayers (entities).

For companies with a written policy and audited statements, tangible personal property up to $5,000 per invoice may be deducted and not capitalized. This $5,000 limited is reduced to $500 per invoice for companies without audited financial statements.

In an effort to help apply this regulation evenly to smaller taxpayers (entities) who don’t have audited financial statements, business with less than $10 million in revenue and buildings with less than $1 million basis may deduct invoices of $10,000 or less

After closing on the replacement property in a 1031 exchange, the new owner often times wished to refinance that property and cash out. The question is, how soon after the closing can one do such? the short answer is in one nanosecond. There is no cut and dry rule regarding the time period. Obviously, the longer the time period the better. To avoid the step transaction rule being applied and having monies taken out treated as “boot” (taxable income), a justified business purpose ( such as lower interest rates)should be documented.The additional monies taken out can easily be justified if the mortgage payment remains the same.

The federal government did not pass a funding bill on October 1st. Thus, many IRS employee have been furloughed and the IRS will maintain only basis functions.

Refunds will not be issued and the IRS tracking service for refunds will not be operational.
Audits of returns will cease.

Returns can still be processed electronically and the Federal Tax Payment System will still be operational.

The State of New York has recently enacted new legislation which would create “tax fee zones” for businesses which locate near State and City universities. the new laws effective date is January 1, 2014.

The new law provides eligible businesses which either locate or expand near SUNY or CUNY Universites an exemption from business, sales and property taxes provided jobs are created and maintained by the entity which has relocated or expanded in the zone.

To be a qualified entity, an application must be submitted to the Empire Sate Development Board for acceptance. Qualified businesses include start-ups as well as businesses relocating from out of state.