We issue this warning once every four years: if you bought an investment on February 28 last year, and you plan to sell it for a long-term capital gain, you need to delay your sale until March 1. This is because of a little-known technicality. Strictly speaking, your holding period for a capital asset includes the day of sale but not the day of purchase. Stock or other assets bought on February 28, 2015 have a holding period that began March 1, 2015, so you have to hold until March 1, 2016 to have a long-term gain. It may seem logical that selling on Leap Day would satisfy the year-and-a-day rule when the purchase was on February 28 of the previous year, but that would be leaping to the wrong conclusion.
Tax Guide for Investors
Don’t Sell on Leap Day
February 27, 2016
Visit Our 2016 Filing Season Guide
January 31, 2016
We’ve released our 2016 Filing Season Guide with updated guidance on free tax return filing opportunities and other useful features.
Inflation Adjustments for 2016
November 22, 2015
The period used for these adjustments (September 2014 through August 2015) saw one of the smallest changes since we began using inflation-adjusted figures in the 1980’s, second only to the period used for the 2009 adjustments, when we were in an economic meltdown. Prediction: those who have been complaining for years that Federal Reserve policies are going to lead to high inflation will continue complaining.
Most of the tax figures we tend to watch closely (contribution limits for IRAs and 401k accounts, the gift tax exemption amount) remain unchanged. The personal exemption amount was previously so close to an adjustment that this year’s boost of less than half of 1% was enough to push it from $4,000 for 2015 to $4,050 for 2016.
Domestic Partnership Won’t Be Treated as Marriage
October 22, 2015
The Treasury has issued proposed regulations reflecting the Supreme Court’s decisions concerning same-sex marriage (Windsor, which struck down relevant parts of the Defense of Marriage Act, and Obergefell, which requires all states to permit and recognize same-sex marriages. In essence, the regulations treat same-sex marriage the same as the marriage of a man and a woman for federal tax purposes. However, registered domestic partnerships, civil unions, and other similar relationships will not be treated as marriages for federal tax purposes. Reproduced below is the explanation of this point offered in the preamble of the proposed regulations. Read the rest of this entry »
Time to Think About Undoing a Roth Conversion
October 5, 2015
When you convert a traditional retirement account to a Roth IRA, you have until October 15 of the following year to undo that conversion using a recharacterization. Normally this is advantageous if the account suffered a significant decline in value between the date of the conversion and the date you pull the recharacterization trigger. Recent stock market turbulence may leave a fair number of people in a position where they should consider this action.
September 15, 2015
If published reports turn out to be accurate, it seems likely we’ll be hearing plenty about this in the coming months. A quirk in the rules for Medicare Part B may result in a huge jump in costs — but only for 30% of enrollees.
July Law Contains New Tax Compliance Rules
August 22, 2015
Just as highway funds were set to run out, Congress passed a highway bill and President Obama signed it into law July 31, 2015. To pay for the bill without raising tax rates, Congress included some new compliance provisions that will affect some recipients of inherited property, owners of partnership interests, and taxpayers with mortgages.
details: Surface Transportation Act of 2015
A Tax-Free Fringe You Hope You’ll Never Need
August 13, 2015
Imagine this. A hacker breaks into the computer system of the company where you work and downloads employee data, including your social security number and date of birth. The company announces that they’ll pay for identity protection services for the employees, but then some wise guy says hey, isn’t that a taxable fringe benefit? Doesn’t the company have to include the value on the employee’s Form W-2, forcing the employee to pay tax on this amount?
Fortunately, the wise guys at the IRS say no. The employer doesn’t have to report this item on Form W-2 (or, for non-employees, on Form 1099-MISC), and the employee doesn’t have to report it on his or her tax return. And the same is true if you received identity protection services from a company where you shopped, if it’s provided because of a data breach. This rule doesn’t apply if you receive these services for reasons other than a data breach, or if you receive cash in lieu of such services.
details: IRS Announcement 2015-22 (PDF)
An Easier Way to Report Capital Gains
February 27, 2015
If you have more than a few sales of stocks, mutual funds or other investments to report on your tax return, you may want to be aware of a recent change in IRS requirements for reporting these transactions.
details: Easier Capital Gains Reporting
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