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June 6, 2021 11:59 pm

A cash liquidating distribution are funds distributed to a shareholder when a corporation is partially or fully liquidated. The distribution represents a return of an investor’s capital, so it’s n...

June 6, 2021 11:58 pm

You may contribute funds from an IRA to a Qualified Longevity Annuity Contract (QLAC), up to the lesser of 25% of your IRA (including any QLAC) or the dollar limit applicable for the year. The origina...

May 3, 2021 11:06 pm

Condolences on the death of your spouse. Because you were married for all of 2020, you may file as married filing jointly. If you e-file, simply follow software instructions. If you file a paper retur...

May 3, 2021 11:04 pm

Required minimum distributions were waived for 2020. Anyone who did not take a distribution is fine; no special filing is required....

May 3, 2021 11:03 pm

You may have a capital gain on the sale of land adjacent to your home. Whether or not a mortgage is involved does not impact gain or loss for federal income tax purposes. However, you may be able to u...

May 3, 2021 11:01 pm

Yes. However, if the distribution from a qualified retirement plan or IRA is a “coronavirus-related distribution,” then no 10% penalty applies for anyone under age 59½. What’s more, a coronavir...

April 6, 2021 11:38 pm

If the amount of the underpayment is more than $1,000, you can avoid penalties if you’ve paid at least 90% of the tax liability for the year or 100% of 2019’s tax liability (110% if your adjusted ...

April 6, 2021 11:36 pm

No. Gambling winnings must be reported as income, but gambling losses are deductible only as an itemized deduction. There is no dollar limit on the write off but it’s limited to the extent of the ga...

April 6, 2021 11:34 pm

The nonbusiness energy credit, which is for adding insulation and certain other energy improvements to a principal residence, has been extended through 2020. The credit for solar and certain other ren...

April 6, 2021 11:31 pm

Long-term disability income that you receive prior to the minimum retirement age under your employer’s plan and that is shown as taxable compensation in box 1 of Form W-2 is treated as earned income...

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The Home Affordable Foreclosure Alternative (HAFA) program encourages lenders (banks) and borrowers (homeowners) to work together to avoid foreclosure. Under the programs, borrowers under water (ownin...

A child can be a parent's dependent if under age 24 and a full-time student who does not provide more than half of his/her support. A full-time student means the child is enrolled in school on a full-...

It depends. Interest on a loan used for personal purposes is not deductible. Interest on a home equity loan, however, is deductible regardless of what you use the proceeds for. In order for a loan to ...

Yes. Gain on the sale of your principal residence is tax free to the extent of your home sale exclusion. The basic exclusion of $250,000 ($500,000 on a joint return) applies only if you owned and used...

If your daughter will be under age 19 by the end of the year, you probably can claim a dependency exemption for her, even though she is on active duty and has gross income over the exemption amount ($...

The fact that you don't claim the exemption for a dependent child does not prevent you from using head of household status on your tax return. As long as you meet the other conditions for this status,...

Assuming your spouse died after 1981 and that your spouse was a U.S. citizen, you owned a "qualified joint interest" with your spouse. As such, your basis is 50% of the date-of-death fair market value...

If the value of your wife's estate, including not only probate assets but also IRAs, life insurance owned by her, annuities, and jointly owned property, is more than an applicable threshold ($5.43 mil...

A second home that you used for personal purposes (i.e., not as a rental property) is a personal asset. As such, loss on the sale of a second home is not tax deductible. However, if you received Form ...

It is not clear if or how you can deduct the convenience fee. The IRS addressed the question of convenience fees in connection with the payment of federal taxes. While the IRS does not charge a fee fo...

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First, you must determine whether this was a business or nonbusiness bad debt. A business bad debt is fully deductible as an ordinary loss; a nonbusiness bad debt is treated as a short-term capital lo...

If you have a C corporation that files Form 1120, you only report compensation (including wages, bonuses, and taxable fringe benefits), dividends, and other taxable distributions received. The corpora...

It depends. Whether you owe income taxes depends not only on your wages, but on all of your income. If your gross income is below the filing threshold for your filing status, you’ll obtain a full re...

You’re not asking the right question. You should be asking whether your spouse is your employee. Under the circumstances described, where your spouse is working solely for you and you have control o...

Yes, assuming you each meet the eligibility tests for the home office deduction. Each of you would need to complete a separate Form 8829 and attach it to your separate Schedule Cs if you figure the de...

No, unless your disability is blindness. This is the only condition for which an additional personal exemption can be claimed on a federal income tax return. However, if your income is very modest and...

It’s not clear. The IRS has not issued any official guidance on this very common question as yet. The law says that the policy must be established, or considered to be established, under her busines...

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If you are at least 70-1/2 years old by the end of the year, you can make a direct transfer to a public charity up to $100,000. The portion transferred is not taxable, and it counts toward your requir...

Assuming your spouse died after 1981 and that your spouse was a U.S. citizen, you owned a "qualified joint interest" with your spouse. As such, your basis is 50% of the date-of-death fair market value...

Knowing your holding period enables you to determine whether gain or loss on the sale of the stock is short-term or long-term. Short-term is a holding period of one year or less; long-term is more tha...

Yes. IRAs are taxed on unrelated business income. This may be received if your IRA holds an interest in a master limited partnership (MLP). This income is reported to an IRA owner on Schedule K-1 and ...

Generally, all income earned in an IRA account is not currently taxable. The income is tax deferred and, regardless of the source of the income, is reported as ordinary income when distributions are t...

No, there is no netting or income averaging for capital gains and losses that occurred in different years. You must report last year's gain, which can only be offset by last year's capital losses, plu...

Gain on the sale of Section 1202 stock, which is qualified small business stock, is not fully taxable. This is because there's an exclusion of gain for stock held more than five years. Assuming you sa...

Yes. Making the conversion requires you to report all the income in the account, so determine whether you want or can afford to do this. You can opt to convert only a portion of the account....

Because your income is too high, your contribution is treated as an excess contribution subject to a 6% penalty. The 6% penalty applies each year unless you take corrective action. You can withdraw th...

To determine her loss, she needs to know her tax basis. When you give property, such as stock, the recipient's tax basis used for determining gain or loss is usually your basis. More specifically, sin...

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Probably not. These likely are considered nondeductible personal expenses for you. Legal fees are usually deductible only if they are related to:The collection of taxable income, such as legal fe...

An employee who receives sick pay is taxed on it. It is treated the same as other taxable compensation, which means it is taxable for income tax purposes and subject to FICA.Employers who give sic...

A child can be a parent's dependent if under age 24 and a full-time student who does not provide more than half of his/her support. A full-time student means the child is enrolled in school on a full-...

If you made a nonbusiness loan to someone and the loan is completely worthless, you can take a nonbusiness bad debt deduction. A nonbusiness bad debt is treated as a short-term capital loss. A busines...

It depends. Interest on a loan used for personal purposes is not deductible. Interest on a home equity loan, however, is deductible regardless of what you use the proceeds for. In order for a loan to ...

Legal fees paid by an estate are deductible by the estate for estate tax purposes. If you paid the fees out of your own pocket, the estate can reimburse you. If you don't seek reimbursement, you will ...

Yes. The big question is how much income do you have to report? Likely you'll receive Form 1099-MISC or other information return listing the value of the car that the IRS wants you to report as income...

Attorney's fees to produce taxable income are deductible. Since part of the disability payments is included in gross income, part of the attorney's fees is deductible. However, you treat them as a mi...

If the value of your wife's estate, including not only probate assets but also IRAs, life insurance owned by her, annuities, and jointly owned property, is more than an applicable threshold ($5.43 mil...

Yes. As part of the PATH Act, signed into law on December 18, 2015, the tax-free treatment applies to transfers from IRAs to public charities up to $100,000 per year by those age 70-1/2 and older appl...

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Report the interest from these loans as you would report any other type of interest income. Depending on the amount of your interest, you may enter it directly on your return or need to complete Sched...

Yes. IRAs are taxed on unrelated business income. This may be received if your IRA holds an interest in a master limited partnership (MLP). This income is reported to an IRA owner on Schedule K-1 and ...

This is a perennial tax question. Usually filing jointly saves a couple taxes. And joint filing is required in order to use certain tax breaks. However, there are instances where filing separately mak...

There are various strategies that can be used by someone with a job to avoid paying estimated taxes with respect to income not subject to withholding. Some strategies include:Increasing withholdi...

Because your income is too high, your contribution is treated as an excess contribution subject to a 6% penalty. The 6% penalty applies each year unless you take corrective action. You can withdraw th...

It is not clear if or how you can deduct the convenience fee. The IRS addressed the question of convenience fees in connection with the payment of federal taxes. While the IRS does not charge a fee fo...

If you are talking about federal income taxes, they are never deductible. If you paid state income taxes for 2014 when you filed your return in 2015, the additional taxes you paid with your return bec...

Yes. An election worker, who may be compensated by a set fee per day or a stipend for an election period, may be referred to by various terms (e.g., poll worker, moderator, machine tender, checker, ba...

While you call it recycling, in effect you are selling the item at a price that is less than what you paid for it. You have no gain to report; you cannot take a loss because the item was for personal ...

Yes, but you need to consider how to make the child a beneficiary. Being a minor means the child can’t inherit the account outright; you’ll need to name a custodian who manages the account until t...

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