1. stocks and bonds held as investments;

2. personal residence owned and occupied by you and your family;

3. personal automobile used for pleasure or commuting;

4. personal jewelry and gems;

5. gold, silver and other metals;

6. timber grown on your home property or investment property; and

7. coin or stamp collections.

When a capital asset is sold or otherwise disposed of, it results in either a capital gain or a capital loss. If you sell a capital asset for more than the basis in the asset – usually the purchase price – you have a capital gain. If you sell a capital asset for less than the basis in the asset – usually the purchase price – then you have a capital loss. While personal-use capital losses are generally NOT deductible in contrast to business-use capital losses, personal-use capital gains are generally taxed at lower capital gains rates, which are laid out below.

Capital gains and losses must be reported on Form 1040, Schedule D. The disposition of capital assets held for more than one year are considered long-term capital gains (or losses). The disposition of capital assets held for one year or less are considered short-term capital gains (or losses).

The tax rates that apply to capital gains are generally lower than the tax rates that apply to other income. The lower rates are called the maximum capital gains rates. For Tax Year 2010, the maximum tax rates for individuals are 0%, 15%, 25% and 28%. To figure the capital gains tax rate that will apply to your personal-use capital gains, use the Form 1040, Schedule and its accompanying worksheets and instructions.

For more information regarding capital gains and losses, see IRS Publication 544: Sales and Other Dispositions of Assets.

Not So Professional...Residents of Lincoln Estates found Liberty Tax Service marketing scheme to be "racist, disturbing and disrespectful"

Last week I spoke about the raid and bust of On Time Tax Consultants for allegedly scamming low income taxpayers.  Unfortunately, On Time Tax Consultants are not the only local tax preparation service targeting lower income individuals in our community.  

Liberty Tax Service, located at 3320 Southwest 35^th Boulevard, Gainesville, Florida, has also been under investigation for preying on low income individuals.  Although Liberty Tax Service has not been charged with doing anything illegal, they are still being scrutinized by the community.

As part of a marketing scheme to attract minority, low income customers in the Lincoln Estates Neighborhood, Liberty Tax Service allegedly made insinuations of compensating their customers with a $50 bill and DRUGS in exchange for utilizing Liberty’s Tax Services. The promotional “mailers” consisted of a baggie filled with a realistic-looking fake fifty dollar bill and two rocks, resembling crack cocaine.

Lincoln Estates has battled a reputation for being a lower income demographic with a persistent drug problem, but has recently partnered with law enforcement to revitalize their community and distant themselves from the drug problems.  Accordingly, residents of Lincoln Estates became concerned and contacted police after seeing the baggies, believing that such had been mistakenly left behind by a drug dealer.   Residents were outraged after learning the baggies were a marketing ploy from a tax service on the other side of town – allegedly targeting a particular demographic.

After complaints from Lincoln Estates residents whom were concerned the baggies contained real drugs, the Gainesville Police became involved and the mailers were pulled.  See the full story and what residents and Gainesville Police had to say about the situation:

http://www2.wjbf.com/news/2011/feb/17/tax-service-florida-hot-water-crack-promotion-tax–ar-1476840/

tax bracket Long-term capital gains rate by tax year 2007 2008, 2009 and 2010 2011 10 percent 5 percent 0 percent 10 percent 15 percent 5 percent 0 percent 10 percent 25, 28 and 35 percent 15 percent 15 percent 20 percent ]]> http://taxattorneyflorida.com/2010-capital-gain-rates-take-advantage-of-the-lower-rates/feed/ 1 http://taxattorneyflorida.com/throw-momma-from-her-private-jet%e2%80%93not-from-the-train/ http://taxattorneyflorida.com/throw-momma-from-her-private-jet%e2%80%93not-from-the-train/#comments Thu, 26 Aug 2010 19:10:20 +0000 Sarah E. Martello http://taxattorneyflorida.com/?p=171

Give Momma one more year of jet-setting!

New York Times columnist Paul Krugman famously  dubbed the Bush 2001 tax cuts the “Throw Momma From The Train Act”, because the estate tax was eliminated for just one year—2010. But as 2010 grinds on without a federal estate levy, it’s becoming clear that Krugman got it wrong.  Any Momma who would ride the rails (even the pricey Acela) probably isn’t worth shoving to a grisly demise.  It’s the Mommas flying on their private jets who need to pack parachutes or watch their backs. Without a doubt, the one- year lapse in the federal estate is a boon to heirs of the superrich. (At  least four billionaires, including George Steinbrenner have died so far this year.)  But for ordinary families, it is creating all sorts of grief and unintended consequences and might even cost some of them extra federal tax, to say nothing of lawyers’ bills.

One set of problems relates to wills that were written assuming there would be a tax; provisions  in such documents could inadvertently disinherit children or a spouse, or could subject an estate to unnecessary state estate tax.  (For more on these issues, click here. For a map showing 2010 state estate taxes, click here.)

Another set of problems relates to a trade-off Congress made in the 2001 law: In return for eliminating the estate tax in 2010, it also did away with the full “step-up” in basis for capital assets for 2010. In other years,  the basis cost of a  decedent’s capital assets–stocks, bonds, jewelry, real estate, artwork and so on– gets adjusted to its market value at his death, or six months afterward.  (The executor gets a choice.) Conveniently, that allows heirs  to sell all the property immediately with no capital gains income taxes due. But for those dying in 2010, the step-up in assets going to non-spousal heirs is limited to $1.3 million, with another $3 million in step-up allowed for assets left to a spouse.   This means some heirs of estates worth several million could end up paying more in total federal tax than they would have had their benefactor died in 2009, when all assets got a step-up in basis and the first $3.5 million of an estate going to non-spousal heirs was exempt from estate tax. (Amounts left to a citizen-spouse aren’t subject to estate tax, since Uncle Sam figures to get his when the second spouse dies.)  These moderately well-to-do families get hit with extra capital gains taxes because their benefactor died in 2010 instead of 2009, but they don’t save much or any estate tax, compared to 2009

While an unknown number of families may pay more, a greater number of them are having to shoulder a big paperwork and administrative burden.  Assuming capital assets (including a home and stocks) total more than $1.3 million, family members and executors must locate old records showing what assets were purchased for (if such records even exist) and deal with all sorts of complicated and potentially divisive issues such as which assets, going to which heirs,  get allocated the limited basis step-ups…

Considering the complicated nuances, it might be wise to keep Momma – and her private jet – around for another year.

We are likely to see one of the following scenarios (or a combination thereof):

1. Congress does nothing and allows the Bush tax cuts to expire (the tax laws from 2001 will reactivate on Jan. 1, 2011);
2. Congress passes legislation to extend ALL of the Bush tax cuts (Congressional Republican’s Position);
3. Congress passes legislation extending SOME of Bush’s tax cuts (Obama’s Plan- extend some of the stimulus measures, place new limitations on itemized deductions and allow the tax cuts benefiting taxpayers making $250,000+ to expire); or
4. Congress passes the legislation recently proposed by Congressional Democrats (similar to Obama’s plan but without extending stimulus measures and with no additional limitations on itemized deductions).

Despite the legislative unpredictability, taxpayers can still stay a step ahead by putting together a game plan for each of the possible tax scenarios above.

So check www.MyTaxBurden.org to see where you stand…however Congress decides to act (or not act).