Q: My husband and I have lived in our home for 32 years. We bought it for about $80,000, and now it's worth more than $500,000. My husband died last year, and I'm planning to sell the home. I read about the $250,000 home-sale tax exclusion for single people and $500,000 for married people. Am I limited to $250,000? A.T., Rockaway, N.J.
Small Business Tax
Section 179 vehicles should be a key part of your small business tax deduction strategies. Can Section 179 property fit in with your business tax strategies?
Let Business Management Daily help you get each and every rental property depreciation credit and business tax deduction you’re entitled to.
The March 15 deadline for filing a 2003 corporation tax return is approaching quickly. (See tax calendar, page 5.) Rather than slapping together your tax paperwork at the last minute, punt. You can earn a six-month extension by filing Form 7004, Application for Automatic Extension of Time To File Corporate Income Tax Return, and paying what you estimate you owe.
Q: I'm wondering about the repercussions of the break in the relationship between gift and estate taxes. If I make a $1 million gift in 2004 and pay no gift tax by using up my gift-tax exemption, will I still have an unreduced estate-tax exemption of $2 million in 2008? L.S., New York, N.Y.
With the stock market heating up, you may have borrowed cash in 2003 for investment purposes or to buy stock on margin.
Of course, you'll want to maximize the write-off for your investment interest. But usually your investment interest deduction is capped at the amount of your total investment income.
You can file Form 4506, but it could take up to 60 days to receive a photocopy and cost you $39. Better option: Call the IRS to order a transcript that lists line items from your original return (only 1040s) for up to three previous years.
Q: In a recent item in your newsletter, you said that sole proprietors, partners and LLC members can use the per-diem method for reimbursing meals and incidental expenses on business travel. (See 11/3/03 issue.) Shouldn't that list also include S corporation shareholder/employees? P.D., CPA, Englewood, Colo.
Q: My elderly father lives in Spain and plans to give large financial gifts to our family this year. Are there any special IRS requirements we must meet? T.D., Vero Beach, Fla.
Q: We own a vacation home in Vermont that we are leaving to our adult son in our wills. The home cost $95,000 and is now worth around $300,000. We've made about $15,000 in improvements over the years. Will our son owe any income tax if he inherits the home in the next few years? M.M., Stamford, Conn.
Q: My brother borrowed $20,000 from me back in 2000. We set up a payment plan with 7 percent interest payments. But he only paid back $2,700 before he died last year without any real assets. Can I deduct the unpaid balance on my 2003 return? K.R., Newburgh, N.Y.
You've probably heard that hiring your children is a great tax-saving move. Their income is taxed in their low tax bracket, and as long as you handle things correctly, your company can deduct the compensation.