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Archive for August, 2012

Weekend Roundup

Tough week for Armstrongs. Neil? Dead. Lance? Stripped of his seven Tour titles. Louie? Still dead.

Poor Lance. In addition to being wiped from the record books, by deciding not to pursue arbitration in the USADA’s case against him for doping from 1999-2005, Armstrong was also banned for life from USADA events. As a result, he can’t compete in the Ironman World Championships in Kona, Hawaii, this coming October, an event he had set his sights on winning.   

With training for Kona no longer a priority, Armstrong was free to compete in the Power of 4 Mountain bike race in Aspen this past weekend —  the course traversed all four ski resorts in the Aspen area; climbing over 9,000 vertical feet in 36 miles — and was promptly and decisively whooped up on by a 16-year old local kid, Keegan Swirbul.

On the tax front, Robert Wood over at Forbes has some helpful tips for avoiding troubles with the IRS. Tip #1: don’t be a rapper.

Whenever someone mentions the upcoming “fiscal cliff,” do you emit a high-pitched whimper and tilt your head in a quizzical manner in a futile attempt to comprehend what they’re talking about, like my dog when I say the word “play?” 

Lucky for you, the Wall Street Journal does a great job of breaking down exactly what the term means to you.

More on this later this week, but Gawker got their hands on nearly 1,000 pages of financial documents from Bain Capital, the former investment firm that employed Mitt Romney. While there are no bombshells to report, some readers are taking issue with what they perceive to be a manipulation — or as some have asserted, a flat-out abuse — of the preferred tax rates afforded “carried interest.”

O.J guilty of not paying his taxes. Oh, and double homicide.

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Texas judge predicts Longhorns to win 11 games, civil war to erupt in November.

My kid is much more advanced than your kid. Deal with it.

Girl, you know you better watch out. Lauryn Hill in tax trouble.

Man makes impassioned plea for you to cut Mitt Romney some slack.

 

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Texans terrify me. Not in the serial killing/face eating/meth cooking in a WalMart bathroom sort of way Floridians do, but more in a prideful, backwards, “If a Demeecrat wins the election again, I’m shootin’ the next Yankee I see! YEE-HAW!!!” kind of way. [Update: check out this recently comissioned billboard in North Texas]

Don’t get me wrong, much of the country is justifiably dissatisfied with the current state of affairs. But Texans…well, Texans sound like they’re ready to do something about it. And lest you think I’m unfairly stereotyping those in the Lone Star state, consider these words coming out of Texas — not from some random good ol’ boy hopped up on moonshine, but rather from a Lubbock judge of all people.

Kelly Erb Phillips over at Forbes has the details:

In Lubbock County, Texas, there’s talk of a tax increase. The increase is to be 1.7 cents per $100 for the next fiscal year, boosting the rate to 34.6 cents from the current rate of 32.9458 cents. The increases have been touted for a number of reasons. This week, on Fox TV, Lubbock County Judge Tom Head explained why he favors an increase. He wants additional funding to retain attorneys at the county level, expand the sheriff’s deputy staffing to decrease call times and minimize officer fatigue, prevent a civil war…

Whoa….slow down there maestro. I thought I heard you say “civil war?”

In an interview about the potential tax increases, Judge Tom Head explained how he feared that if President Obama were re-elected, he would cede the country to the UN, creating havoc:

“He’s going to try to hand over the sovereignty of the United States to the UN, and what is going to happen when that happens? I’m thinking the worst case scenario. Civil unrest, civil disobedience, civil war maybe. And we’re not just talking a few riots here and demonstrations, we’re talking Lexington, Concord, take up arms and get rid of the guy. Okay. Now what’s going to happen if we do that? If the public decides to do that? He’s going to send in UN troops. I don’t want ‘em in Lubbock County. OK. So I’m going to stand in front of their armored personnel carrier and say ‘You’re not coming in here’. And the sheriff, I’ve already asked him, I said, ‘You gonna back me?’ He said, ‘Yeah, I’ll back you.’ Well, I don’t want a bunch of rookies back there. I want trained, equipped, seasoned veteran officers to back me.”

Again…need I remind you, these words were spoken by a high-ranking, presumably-educated judge. Cue the dude from Billy Madison:

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Apparently, just because you say you dropped five grand on a toilet and $2,500 on a shower head doesn’t mean the IRS has to believe it.

Take it from Jovita Diaz. Diaz owned two properties, both of which were sold between 2007 and 2008.

Diaz purchased Property #1 in 1997 for $154,000. Upon selling Property #1 in 2007 for $459,000, Diaz claimed an adjusted tax basis of $553,000 and a resulting capital loss of $94,000. The IRS disallowed the loss, arguing that Diaz’ basis in Property #1 remained her original cost of  $154,000, and thus the sale resulted in a $305,000 gain.

Property #2, a rental property, was purchased by Diaz in 2005 for $490,000. In June 2008, upon selling Property #2 for $299,000, Diaz claimed a basis of $595,000, resulting in a capital loss of $296,000. The IRS again challenged the loss, this time allowing depreciation against the acquisition cost in computing a tax basis in the rental property of $452,000, reducing the claimed capital loss to $153,000.

In both scenarios, Diaz argued that she had made significant improvements to each property: nearly $400,000 in the case of Property #1 and $100,000 for Property #2. In each case, the Tax Court held that Diaz failed up carry her burden of establishing her basis in the sold properties:  

Petitioner did not introduce an invoice from the contractor, a canceled check, a construction permit for the improvements, or before and after pictures. Petitioner contended that she did not have documentation because she kept moving from one place to another. Her testimony was unpersuasive in support of her claim of [the] improvements.

The lesson is obvious. When reporting a sale from real estate, save all documents supporting not only your acquisition cost (such as a closing statement), but also those establishing the cost of any and all improvements made to the property. After all, it’s up to you to prove you spent what you say you did; it’s not up to the IRS to prove you didn’t.

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If I’m ever going to develop into the kind of dad who feels comfortable verbally abusing elementary school teachers or hurling whiskey bottles at youth soccer referees, it’s vital I get an early start on letting the world know just how uniquely special and gifted my three-month-old Emily is. You can call it bragging, but I like to think of it as merely being a proud parent. And if Emily’s many accomplishments cause you to realize just how special your child isn’t, well, that’s just your insecurity getting the better of you. Learn to deal with it.

While she was lying in her basinet, I put one of Emily’s toys next to her and she reached over, grabbed, it, and picked it up over her head. Three-month old infants aren’t supposed to have the spatial awareness, manual dexterity, or brute strength necessary to do that sort of thing! What an athlete she’s going to be. Is your three-month old daughter playing with her toys? No? Well don’t panic just yet, I’m sure she’s just a late bloomer. Just don’t be upset if Emily doesn’t pick her for kickball during grade school. It’s nothing personal, I just want my daughter associated with winners.

As part of my goal to expose Emily to the 100 greatest novels ever written before she starts kindergarten (we knocked off 27 while she was in utero!) I recently put her on my lap and read aloud the complete works of Fyodor Dostoyevsky. While she slept through much of “The Brothers Karamazov,” she was really bright eyed and alert for “Crime and Punishment.” I think she really empathized with the protagonist’s ethical dilemma and struggle for moral redemption. She’s so sensitive like that. What’s that you say? You read “Hop on Pop” to your infant? How sweet. Don’t worry, I’m sure Dairy Queen will still be taking applications in eighteen years.

Yesterday we asked Emily “Where’s Maci?” and she looked right at our dog. I don’t know if you know this, but it’s really, really rare for a three-month-old to be able to associate names with faces like that. I was so proud, I tried to get her to do it again for some of our dinner guest, but she wouldn’t. She gets so shy in front of strangers sometimes.

Just the other day I was working on the New York Times Sunday crossword and was struggling with a five letter word for “Yiddish food warmer” when Emily let out a loud “BLECH!!” I’m not sure where a three-month-old baby would pick up an understanding of the Jewish prohibition on cooking on the Sabbath, but that just goes to show how smart she is. What’s that, your son just turned four and he’s still struggling with the crocodile maze at Applebee’s? Don’t worry, I’m told the Army still has a nice little college tuition payment program.

A woman on the street walked up to us this morning and told us Emily looks JUST like the Gerber baby and that she should totally do some modeling! I was all like, “I know!! I say the SAME THING ALL THE TIME.” Then we laughed and laughed and laughed and I gave the woman my business card. My wife didn’t think she had any actual connections to the modeling industry, and was just being nice to our daughter, but I’m sure we’ll hear from her soon. What a great day.

You should see how big and strong Emily’s legs are! I know the doctor said they’re within the normal range, but I suspect he was just trying to limit his legal liability should Emily somehow not become a professional athlete. Do you believe the local youth leagues won’t let her start playing until she’s five? I spent the better part of the weekend researching which parts of the country play soccer in the fall and lacrosse in the spring, so we don’t limit her options. We’ve never really considered moving to Florida before, but there are some really fantastic athletic programs there. What can I say…the things we do to make our kids happy!

In closing,

New parents are the worst.

Tony

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Kerry Kerstetter conducted an accounting and tax preparation business out of his Arkansas home. When preparing his Schedule C for his personal tax return, Kerstetter made a litany of mistakes, among the more egregious of which were:

  • Deducting depreciation on his entire home, rather than the portion used exclusively and regularly for business as permitted under Section 280A.
  • Deducting all of his personal credit card interest and mortgage interest on Schedule C, rather than on Schedule A or — in the case of the credit card interest — nowhere.  
  • Deducting pet food as “supplies.”

To make matters worse, Kerstetter failed to file his 2001 and 2003 returns on time. When he did get around to filing them, the returns reflected large net operating loss carryforwards that wiped out his income, but that Kerstetter could not substantiate.

As you might expect, the Tax Court expected more from someone holding themselves out to the public in such an esteemed, trusted position as a tax advisor:

Petitioners’ arguments in this case have not been supported by evidence or by authority. Instead petitioners make assertions based only on their generalized testimony and on petitioner’s claimed years of experience in dealing with the IRS on behalf of clients. Particularly in view of petitioner’s experience, the absence of corroboration of his testimony by organized and reliable records leads us to conclude that petitioners have not carried their burden of proof as to the disputed deductions.

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We previously mentioned that singer Lauryn Hill was facing tax evasion charges for failing to pay her federal tax bill from 2005 through 2007.

In late June, Hill plead guilty to the charges and now faces a November sentencing date and up to three years in a New Jersey prison, where she would immediately become the crowd favorite at Tuesday night Karaoke.

Yesterday, news came down that Hill was also delinquent on her New Jersey tax obligations to the tune of $440,000.  Of course, unless the State is content to be paid in cigarettes, I wouldn’t expect that debt to be settled while Hill is serving time.

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