You Decide Week 3

According to the law, the interests on your mortgage payments are tax deductible. In fact, at the end of each year, your lender will simply add up your 12-month interest payments (without

In summary, the only tax advantage of selling the old house is that a larger deduction of mortgage interest on the new home. Paying off a mortgage associated with a primary residence has no impact on calculation of gain or loss, it simply reduces the otherwise deductible mortgage interest. You should have mentioned that under IRC 163 the $1M principal balance limitation to fully deducting interest and that they can deduct interest on their primary residence and one other residence.

On June 1, 2016, exactly three months ago, Marianne and Dory received an audit notice for Wise-Holland’s 2011 tax return because some deductions taken were

Generally, a realized gain from sale of personal residence can be excluded from gross income under Exclusion 121. The amount realized is the selling price of the property less any disposition costs. The adjusted basis is then determined and the amount is subtracted from the realized sum. This will give you the amount of loss or gain from the sale of the property. Since the couple occupied the sold home for at least 2 of the last 5 years they fulfill the requirements for exclusion 121 treatment. The exclusion amount for the couple if filing jointly is $500.000 and the calculation would be as follows:

Thank you for coming to our offices and allowing us to review and discus your concerns regarding your tax questions. I have been assigned to reply to your questions and I have listed my recommendations below. After you both have reviewed these recommendations, please contact me so we can go over any additional questions you may have.

Recently, Jeremiah Cranston contacted our office in regards to him possibly providing services under a consulting agreement for Coastal Drillers, Inc. He is concerned about the stock redemption that was completed six years ago and what effect, if any, working as an independent contractor might have on him regarding the redemption.

Issue e) What tax benefits would John realize if he invested $15,000 in Jane 's jewelry making?

In order to determining how the $300,000 fee was received as Federal income on the part Mrs. John Smith, we first have to determine the requirements for income. According to Code Sec. 61(a)(1) of the Internal Revenue Code (IRC) “gross income includes all income from whatever source derived,” that is including the following items: compensation for services, including fees, commission, fringe benefits and similar items (Intuit-TaxAlmanac, 2006). In John’s case, income received from fees that were paid by his client from rendered services will meet that requirement of gross income. Under Section

You will be able to deduct your new home mortgage interest and property tax but there is no tax benefit if you pay off your existing mortgage.

Internal Revenue Code § 121 (a) notes that the $500,000 exclusion for joint returns that the Dutros appropriated would only apply “if, during the 5-year period ending on the date of sale or exchange, such property has been owned and used by the taxpayer as the taxpayer’s principal residence for periods aggregating 2 years or more.” The important phrase to note is that the home has been used by the taxpayer as their “principal residence” for at least two years. Therefore, the dilemma is that the Dutros rebuilt their home and

Part III: Discuss the tax consequences of contributing cash, property, and/or services to the new entity.

“When you rent, you write your monthly check and that money is gone forever. But when you own your home, you can deduct the cost of your mortgage loan interest from federal income taxes, and usually from your state taxes” (Home Buyers Guide, p4). Buying a home can be alarming, if you are not prepared, whether for the first time or even for the fifth time. If you take time before going into the process to gain the knowledge needed, one might see that

Dramatically decrease monthly mortgage payment and provide homeowners extra income to live each month. For example, a $575,000 mortgage at 6% interest rate is about $3,500 per month. The same loan at a 2% interest rate is approximately $2,100 per month.

Homeowner can deduct on their federal and state income taxes the amount of mortgage interest and real estate taxes they pay each year. For example, by itemizing deductions on the tax return, a married couple filing jointly can deduct $21,000 from his taxable income. A renting married couple may not have a lot of deductions, so they might choose the standard deduction, which is $10,300. Home receives an additional $10,700 in tax deduction than the renting couple. Assuming both couples each earn $100,000 per year. The renting couple would have to pay income tax on $89,700. The owning couple would pay tax on $79,000 difference of $10,000 owners can put in their pocket. Everyone wants to cut back on what they pay in taxes and home ownership not only decreases taxes, but builds equity.

Russell, D., Butcher, D. (2012). 110.289 Taxation Study Guide. Palmerston North, New Zealand: Massey University, School of Accountancy.