No doubt you’re aware that the estate tax has been repealed, solely for people dying in 2010. It’s less well known that repeal of the estate tax was accompanied by a change in the rules for adjusting the basis of inherited assets. For a description of the rules that apply when you inherit from someone who dies this year, see our new page on basis of property inherited from 2010 decedents.
Archive for the ‘Taxation of Investments’ Category
Basis Rules for 2010 Decedents
Thursday, August 5th, 2010Friday Wrapup
Friday, July 23rd, 2010Tax news of interest to investors came mainly from the courts this week, though the IRS gave paid tax return preparers something to groan about. (more…)
Stock Loan Treated as Sale
Friday, July 23rd, 2010The Tax Court has sided with the IRS in a case where they sought to collect over $100 million in taxes from billionaire Philip Anschutz. At issue was a complicated arrangement known as a variable prepaid forward contract, in which Anschutz received cash up front for a sale to occur later. Anschutz loaned the shares that were covered by this contract to the firm providing the up front payment, permitting that firm to sell the shares. The court found that the prepaid contract and the lending arrangement had to be seen as part of a single deal, with the result being that the sale is viewed as taking place at the time of the up front payment rather than later as Anschutz intended. (more…)
Part-Time Gambler Is Professional
Tuesday, July 20th, 2010In a summary opinion, the Tax Court has found that an individual can qualify as a professional gambler despite pursuing the activity part-time. While the decision doesn’t have precedential value, it should help inform us in determining who qualifies as a professional trader. (more…)
Friday Wrapup
Friday, July 2nd, 2010A rare break in congressional gridlock produced some actual tax legislation this week, albeit of limited scope. In addition, it appears we may be heading toward an expansion in the use of Roth retirement accounts. (more…)
Homebuyers May Get Reprieve
Wednesday, June 30th, 2010Update: this legislation has been passed by the Senate as well as the House, and becomes law upon being signed by President Obama.
Under current law, the homebuyer tax credit is available only if you had a binding contract by April 30 and close on your transaction by June 30. The June 30 closing deadline has posed problems for some purchasers, and on June 29 the House of Representatives passed a law that would extend the closing deadline to September 30. The Senate must act before this bill can become law.
This bill would extend the closing deadline but does not make the credit available to people who did not have a binding contract by the April 30 deadline.
Roth Conversions and the Medicare Tax
Thursday, June 24th, 2010This is the fifth in our series on Roth conversions and tax rates. (For earlier ones, click on the “Roth conversion” tag below this entry.) Our focus here is on how the new Medicare tax on investment income may affect planning for a Roth conversion in 2010 — even though the new tax doesn’t take effect until 2013. (more…)
Medicare Tax on Investments: First Look
Wednesday, June 16th, 2010Taxation of investments will undergo one of its most significant changes ever in 2013, when the Medicare tax is set to begin applying to investment earnings of higher-income individuals. Although this tax is years away, investors and their advisors need to be planning for it now as it will affect strategic decisions they make this year, including Roth conversions and capital gain realizations. Here’s a first look at the new tax. (more…)
Ruling on Foreign Currency Option
Friday, May 21st, 2010In a case of first impression, the Tax Court has ruled (PDF) that a foreign currency option is not a foreign currency contract as that term is defined for purposes of section 1256 of the Internal Revenue Code. The ruling prevents the taxpayer from using the mark-to-market rules of section 1256 to claim a loss in connection with the option.
Gaps in Broker Reporting of Basis
Friday, May 14th, 2010It isn’t here yet, but it’s coming soon. Beginning with the 2011 tax year, those Forms 1099-B you receive from your broker for sales of stock will include not just the amount you received in the sale, as it does currently, but also your cost basis. The added information will be a convenience to those who are inclined to comply with the tax law, and a deterrence to those who are not. Basis reporting won’t be comprehensive, however, and it will be interesting to see how taxpayers respond to the gaps. (more…)
