Conference nyoss1::market_investing

	In the previous years, the rule used to be that if one has paid
	either 90% of their total tax liabilities, or more than the total
	tax liabilities for the previous year thru witholding, then no
	penalty is levied. 

	Does this rule still hold this year? I'm especially concerned with
	the second clause of this rule. 

	What are the penalties in any case?

    re: -1
    
    I believe this is correct. I borrowed the laskers 1993 (for 1992) tax
    book from the Merrimack library and I believe that I read this. I went
    there a few weeks ago and was surprised that they had a few tax guides
    and that they were available to borrow.
    
    michael

Re .1:

I, too think that is still the way it works.  Also, if you owe less than
$500, they don't worry about it.

However, there is a gotcha...after your AGI hits a certain level (around
$80K, I think), they start scaling back on the exceptions. This is a new
trick, effective starting this year, and I'm not very familiar with it.
(yet)

The penalty:  Conceptually, they figure out how far you fell short of
the threshhold {min (90%,last_years_liability)} and "backcharge" you the
interest on that amount at a rate of around 11% or 12%.  If, for example
you were $200 short in the first quarter, they charge interest on that
money from the end of the quarter 'till your payment date.  If you were
only 100 short in the second quarter, they charge the interest on that
100 from the end of the second quarter 'till your payment.  Etc.

SteveSov

    re: .3
    
    Paragraph 2: I think you meant EXEMPTIONS.
    
    michael

No, really, I meant exceptions.

The "2210" (Penalty for underpayment...) form allows several types of
"exception" to paying the "full penalty".  New for '92, the "100% of
previous year liability" exception has an extra gotcha.  If you make
enough, they eliminate that exception (or part of it...I don't remember
all the details.)  Mostly, the "90% of this year's liability" and the
"100% of last year's liability" are the exceptions that apply to us
wage-earner types.  Business owners and folks who make quarterly
estimated payments have some other exceptions.

SteveSov

    
    	I placed $3,000 into various funds in 1992 under the UGMA for
    	my daughter; her SS# with me as custodian.
    
    	Can this be claimed as a gift? Is it then deductable as such?
    	Or, do I just claim any income, (growth funds so there shouldn't
    	be much), on my return, at her rate (a form I suppose), and forget
    	the $3000 transfer?
    
    	How have the rest of you college planners handled UGMA funds for 
    	tax purposes? (I have yet to get to the store for my Lasser's guide
    	but I plan to).
    
    	Bob

    
    	Re: .6
    
    >   How have the rest of you college planners handled UGMA funds for
    >   tax purposes?
    
    	I know this wasn't the question you were asking, but I'll answer it
    by saying that I "handle" UGMAs by not touching them with a 10 foot
    pole.  I'd prefer not to have a huge pile of cash fully under my
    childrens' control when they turn 18 and have to _hope_ that they use
    it to go to college.  If they decide not to use that money to go to
    college, I want the people who take the round-the-world cruise to be my
    wife and me! :-)
    
    							-craig

================================================================================
Note 341.6                     Tax questions 1992                         6 of 6
ASDG::WATSON "Discover America"                      14 lines   4-JAN-1993 12:03
                   -< Gifts to minors effect on taxes in 92 >-
--------------------------------------------------------------------------------
    
 >   	I placed $3,000 into various funds in 1992 under the UGMA for
 >   	my daughter; her SS# with me as custodian.
    
 >   	Can this be claimed as a gift? Is it then deductable as such?
 
    	You can give up to $10K/yr to anyone without PAYING a gift tax.  I
    	don't understand what you'd "deduct."  A gift is not something
    	you can deduct from your tax return (except to a charity).
    
    
    >  	Or, do I just claim any income, (growth funds so there shouldn't
    >	be much), on my return, at her rate (a form I suppose), and forget
    >	the $3000 transfer?
    
    	Your daughter should be paying taxes on the income (this is why her
    	SS # is on the account.)  If there's enough income, she has to file
        a tax return.  She has a small exclusion, but if she's under
    	14, you'll have to use a new tax rate schedule (can't use "single.").
    	Kids under 14 are taxed at their parents' marginal rate.

    

    .6
    
    DO NOT put college-going money in UGMA account. That money will count 
    towards your child's assets and he/she will never get any scholarships, 
    loans. etc. because he/she will be cash-rich. The colleges use a
    special formular to calculate financial aid: your kid's money are
    counted at much higher rate than yours. Thus, try to accumulate kid's 
    college money via your own accounts (mutual funds, etc.) - you will get 
    much better return on your investment.
    
    Talk to a college financial aid specialist and get the formula.
    
       Simon
    

    Re .6:
    
    .8 is correct.  You may not deduct as a charitable contribution a gift
    made to an individual.

    
    	re: .10
    	I thought for some reason I could deduct a gift but I
    	could not find a place to do so on the form. Guess that
    	answers that part. Thanks.
    
    	Re:UGMA
        I did place money this year into a UGMA fund for
    	some of the reasons mentioned such as low mins and such.
    	But, the majority of the money I'm investing is in our 
    	name and not my daughter's for all the horrible reasons 
    	you could let your imagination think about. Still, I want
    	her to have something that's her own, whether she chooses
    	college or not. It's an advantage I can give her that I did
    	not have. And, it has 16 years to grow. Now that I meet the 
    	mins in each fund, I have redirected the monthly deductions
    	into my group of funds which should make the bulk of our/her
    	college money. We also are buying bonds, fund our 401k and 
    	have more stock then I like to admit. BTW, I always thought 
    	of the stock plan as our main savings vehicle for college 
    	funding until last year...
    
    	I also thought it would be fun to have her track her own 
    	investments over time. An education in itself. 
    
    	Bob
    
    	

           I heard that there is some sort of amnesty program for people
           who have NOT filed returns in previous years.  Supposed, the
           way I heard it, was that the IRS would NOT prosecute, but
           would sit down and talk about some sort of way to "fix" the
           problem.  Has anyone else heard of this?  Is there a deadline?
           
           Steve
           
           PS- It's not for me ;-)

    Somewhere I read that IRA maintenance fees are deductable if they are
    paid by separate check.  Is this accurate ?  If so, where do they get
    deducted ?  Somewhere on Schedule A ?
    
    L.

    Re .13
    
    Yes, under "Miscellaneous" on Sch. A.

Hi,

	I was wondering if I can claim my PC (or some portion of the cost) as 
	a deduction for educational expenses. I believe the write off amount
        for educational expenses is based on some percentage of my gross income 
        and there is a form for such expenses. Since I am a software engineer 
        it would seem that the expense is not any different than courses or 
	books that I pay for myself as part of professional development.

	Any thoughts?

	Thanks.

	Pat

    
    	Re: .15
    
    	The IRS tightened up the rules concerning PC deductability this
    year.  Basically, you now need to be able to claim the PC as being a
    requirement for continued employment.  (I don't believe that getting a
    PC to learn new technologies is being classed as a "requirement for
    continued employment".)  For example, if Digital says that you _have_ to
    have a PC at home to continue your job, or if you travel a lot and
    Digital says that you have to have a portable PC to do work on airplanes,
    then it becomes a deductable expense.  Once this rule is met, then you
    get into the normal questions of how often was this system used for
    work-related activities and how often it was used for other things.
    
    								-craig

    Re .13/.14 (IRA Maint Fees):

    Deductible on Schedule A under miscellaneous, BUT (as best I can tell)
    only if the total miscellaneous is more than 2% of your AGI.

    L.

re .12

  My dad is a CPA and I used to work summers for him. The advice here
  is based upon my limited experience of 10 years ago. Having said that,
  I helped work for two clients with the same problem. Here's my advice:

  - Get a very, very good CPA.
  - File those returns. The IRS does not prosecute if you come forward 
    and file the returns. (They feel it would discourage other people
    from coming forward). If you don't have the money to pay, file the
    return anyway. The IRS will send you a bill for penalties+interest.
    and set up a payment paln for you.
  - When dealing with IRS, never, never miss a deadline. If you're
    going to be late with a payment or documentation call them up and
    tell them. The IRS agents are used to being lied to and can be 
    extremely vindictive. 

good luck,
jd
ps I used the word "you" for ease, I realize it should be "your friend"
                                                            

    
    what about deducting a PC as an investment cost ...
    
    Say I buy a PC, QUICKEN Software, Prodigy Service and FOX ( for
    Fidelity access ) and show that I use the PC for investing reasons 50%
     of the time --- where and how can I deduct the PC under those terms ?
    
    jgk
    

    Can you claim mortgage interest on a second home?  My interpretation of
    the 1040 booklet is that you can claim the interest and real estate
    taxes but *not* the closing costs (points)?

    
    Is there a notes file where non-investing tax questions can be raised?
    
    Chuck

    I have heard that some of the job-search related expenses, like 
    travelling, are tax deductible.
    
    Are there any such deductions available for someone attending 
    interviews for higher education? If yes, can you tell me the relevant 
    IRS publications that I should read?
    
    Thanks,
    	:- raghu

    For the first time this year I purchased a mutual fund (JANUS 20)
    outside of my IRA.  The yearend statement included dividends, capital
    gains, and short term capital gains received for the period.  These
    were all automatically reinvested in additional shares of the fund.
    
    Any tax liability or reporting necessary this year??? or only when I
    cash in the fund??
    

Afraid so...you have to report it as income.  So you actually paid taxes on 
profits you didn't make.  This is usually viewed as being bad....but this
distribution also increases your basis for the fund (the average price you 
paid for it).  So say you hold this until 1994, and Clinton does raise taxes,
when you sell you have less of a capital gain....you actually end up paying less
in taxes....this works out great, that is unless inflation reduces your buying
power.


michael

    The dividends and short term capital gains are reported on schedule B
    as dividends, the long term capital gains are reported on schedule B as
    Capital Gains.  Janus will send you the appropriate 1099- forms
    sometime around the end of January. Keep the forms for future
    reference.
    
    Keep your statements!!! Since you re-invested the shares,  it all is
    considered a BUY on the distribution date the same as if they gave you
    the $$$ and you immediately purchased more shares for the same amount
    on the same day. When you sell off shares later on, your statement will
    let you determine the cost basis of those shares.
    
    Dave

    
    	Can you deduct brokerage commissions? If so, where? As misc
    expenses for investements?
    
    
    Thanks,
    John ( who can finally itemize after buying a house! )

Commissions figure into the cost basis of the security, thus they are not
deductable.

John Piekos

>Commissions figure into the cost basis of the security, thus they are not
>deductable.

    Is this true for both purchase commissions and sales commissions?

    I had thought that purchase commissions added to tthe cost basis 
    but that sales commissions subtracted from the selling price.

    Obviously the results are the same, so does it make any difference
    how this is reported?

    It does indeed make a difference how purchase and sales commissions are
    reported.
    
    The key guideline is to match how your broker reports your gross sales
    to the IRS.  If he deducts the sales commissions from the gross, then
    you do; if not, then add the sales commissions to the cost basis.  When
    you receive your copy of the form the broker sends to the IRS, inspect
    it carefully.
    
    If the numbers on your Schedule D do not match your broker's numbers,
    you can be sure you will get a tan envelope from the IRS.  Trust me. 
    
    

    
    
    How are profits from currency transactions to be treated for
    tax purposes?  Say I had  $1000 in a savings account
    denominated in Japanese Yen during 1992, and earned 7% (say)
    interest on it, also in Yen.  Also, say, the dollar fell against
    the yen, so that my Yen are now worth more.
    
    Are such gains counted as capital gains?  Do I realize this
    gain only when I change currencies back into dollars?
    
    Of course, I would treat the interest accrued as interest
    income converted at some average rate of exchange.
    
    Kaizad
    

    
    I have a question regarding capital gains  on the sale of a home...but
    with some confusing (at least to me...) twists.
    
    I went through a divorce last year, and retained ownership of the home
    involved.  The home is going on the market, but the bulk of the gain
    will be given to my ex-wife.  Upon sale, I would like to buy another
    home.  
    
    In order to avoid paying capital gains on the the monies from my
    current home, do I have to invest (as a down payment) an amount
    equal to or greater than the gain on the first house, OR does
    the purchase price of the new home just need to be greater than
    the selling price of the old home, regardless of the amount of 
    money I actually put down?
    
    Jim

    re .31
    
    The purchase price of the new house has to not be less than the selling
    price of your current house.
    
    But ... your divorce agreement should have spelled out how the house was
    to be treated for tax purposes.
    
    Under a "sharing" arrangement, you and your ex- would each assume half,
    so if the house sold for $x, you yourself would only have to spend �x
    to continue to postpone the capital gains tax.  However, if you owned
    the house in your name alone; and you agreed to pay her a sum of money
    equal to the difference bwteen the purchase and sale price, you might
    have to spend the full $x on a new home.  Sounds like a rereading of
    the divorce agreement or a quick call to your attorney is in order.

    That helps, but I'm still a little confused...
    
    The house is, in fact, my responsibility.
    
    If I sell the house for $100K, and my purchase was $75K, my gain is
    $25K.
    
    If I buy another home for $101K, with $5K down, do I avoid capital 
    gains tax on the $25K, or do I HAVE to show that I put $25K down
    on the new house?
    
    Jim

The purchase price of the new house must not be less than the sales price of 
the old house in order to *defer* -- not "avoid" -- capital gains tax.  The 
amount of the down payment doesn't matter.

Remember, in order to defer capital gains, you have a time constraint to meet
as well between the time the old house is sold and the time the new house is
*occupied* (not merely *purchased*).

	My broker did not send me any statement regarding my options
	trading for the last year. 

	How and where do I report this? I had some income as well as some
	expenses this year. Does this also go on Schedule D? 

	Say, I sold some calls and then closed out the position by buying 
	them back. So, I know my purchase and sales price (although in
	reverse). But, what if I sold calls that expired? Is my purchase
	price zero? Does it matter if the expiry date was in 1993?

	In another note, someone wrote that the limits for UTMA income for
	tax advantage are 600 (first, tax-free) and 600 (next, at 15%). 

	I'm using Turbo Tax, which seems to think that the limits are
	500 and 500 respectively. (This is the latest version, not for 1991 :-)

	So, is Turbo Tax wrong?

In 1991 (not 1992), the amount for UGTMA was indexed and increased
if you file a separate return for the child, i.e., the exempted amount
was $500 if you reported the income on your return vs $550 if you filed
a separate return for the child.

Hence it made sense to file a separte return for the child.  I suspect 
that it 1992 it may be a similar situation.

Gim

    re: 341.36
    
    Option trades go on Schedule D.  There is an area for "other"
    transactions, which includes options.
    
    At least, that's what I remember from my taxes...
    

    re:  Tax reporting of options trades.
    
    Options may have special tax reporting depending on the type of option
    trade you did. For simple,  (BUY Calls, then Sell them) the rules are
    analogous to trading a stock. The gain/loss is short term. 
    
    If you let one expire, your purchase price is 0. However, if it expired
    in 1993, that transaction is reported in 1993.
    
    I haven't traded options in many years. But there was a time when
    certain types of options trades which resulted in a loss were
    "advantaged" in that the loss could was allowed to be taken against
    ordinary income. I don't know if this still holds.
    
    I suggest you get some IRS form which hopefully explains all the rules.

	Re. .38

	> Hence it made sense to file a separte return for the child.

	What are the requirements/restrictions for this? I have income for
	my son who is less than 2 years old. Form 8615 is for Tax for
	Children under 14, but it has a requirement of income over 1200 for
	the child. I have less than that. 

	So, what form do I file? Does it have to be one of the 1040 variants?

    Assuming the child's only income in "un-earned", that is, interest it
    works like this:

    	- Child earns less than $600
    		No filing necessary
    	- Child earns $600-$1199
    		File 1040A and Schedule 1
    	- Child earns more than $1200 (and is over 14)
    		File 1040A and Schedule 1 and the 88xx (I forget the number)

    For children over 14, the $1200 doesn't apply.  BTW, anyone understand
    the logic of the age-14 threshold ?  What a stupid law.

    L.

    .42
    
    My son's income is mostly capital gains. Since 1040A does not deal with
    CG's, do I have to file another 1040 for him, in which he will declare
    that he is being claimed as a dependent on our tax forms? So, in all I
    will file a 1040 and a Schedule B and D (he has some dividend income
    also). 

>    .42
>    
>    My son's income is mostly capital gains. Since 1040A does not deal with
>    CG's, do I have to file another 1040 for him, in which he will declare
>    that he is being claimed as a dependent on our tax forms? So, in all I
>    will file a 1040 and a Schedule B and D (he has some dividend income
>    also). 

This is exactly what I did. She had income from sale of some zero-coupon bonds
and her Fidelity Asset Mgr. threw off some dividends and long-term cap. gains.
Filed a 1040 (marking line 32b "claimed as a dependent on my 1040"), Sch B for
the dividend portion of the Fid. Asset Mgr, and Sch D for the cap. gains from
the bond sale and cap. gain portion of Fid. Asset Mgr. Standard deduction is
$600 dollars this year, so the difference (about $400) was taxed  at 15%.

    I have a (relatively) simple question, which I think I know the answer
    to, but want confirmation.
    
    I bought some shares in a company in June which I sold in December for
    a capital gains loss. How do I report it on my tax return?
    
    Say I bought 100 shares @ $30 = $3000 and
    sold 100 shares @ $20         = $2000
    
    Net loss is                     $1000.
    
    Can I report this loss directly on my tax return (assuming I have < $3K
    capital gain losses for the year?
    
    In a related question, I sold some old DEC stock (more than 18 months
    old). Do I take the price that I bought the shares at (not including
    the 15% discount) as the FMV to calculate a profit or loss?
    
    thanks
    Sameer

    If you bought stock for $3000 and sold it later for $2000 you can take
    the $1000 loss of your income - just full out the proper schedule, and
    be sure to include any brokerage commissions!
    
    When selling DEC stock bought more than 18 months ago use the actual
    (discounted) purchase price as the basis.

How about if I was dollar cost averaging into a fund, then liquidated
the entire fund.  Do I have to calculate each monthly cost basis for
each BUY vs. the share price when liquidated?  I expected there will
be some gains, some losses.  

    re .47
    
    That is  but one method approved by the IRS and it is usually used when
    selling FIFO or "named buys".  Another method is to calculate the
    overall average cost of all the buys. Personally, I prefer the FIFO
    method; Rainbow+LOTUS makes the record keeping very easy. 
    
    As for reporting, on schedule "D" for "Date Purchased" enter
    (VARIOUS), for COST enter the sum of all costs (including appropriate
    brokerage fees) and then subtract from SALES to get GAINS.
    
    Whatever method you elect, you MUST continue to use that method for
    that fund unless you explicilty notify the IRS that you are changing
    methods. And notifying the IRS that you are changing ANY horses mid-stream
    is seldom beneficial to your mental well being.
    
    	Dave

There's also a decent publication put out by our friendly government 
that describes the methods for accounting this sort of information.  
I don't have the booklet with me but it had "mutual funds" in its name.

Dan

	I have a bit of a problem.

	I have been doing my taxes for years.  5 years ago after my 3rd and 
	last child was born I changed my expemtions on my W2 to 7 (2 adults,
	3 children and I figured in 2 more for mortgages, etc.) this worked
	fine for the last 5 years resulting in me being very close (within 
	$100) of my Federal Tax obligation.  However, I took my 1st shot
	at my taxes last night and was shocked to come out at almost $1000
	in the red !!!  My income has gone up (mostly my wife's who claims 
	Zero exemptions on her W2) but geez, almost a grand off ?  I've
	checked and rechecked all my deductions and they're all close to 
	what I put down for last year.  I don't understand it.  I knew the
	tax tables changed but I expected to be around 300-400 in the red 
	NOT almost a grand.  

	Anyways, I have a couple of questions:

	1) What is the penalties for going over the $500 owed threshold ?

	2) After rereading the IRS information concerning mortgage deductions
	   I *might* have an out in this area.  I refinanced my mortgage in
	   1986 and have been amortizing the $2240 closing fees over the 
	   30 years of the loan ($75 per year) however, it appears that I could
	   have taken the full $2240 deduction back on my '86 taxes.  My 
	   question is can I take the difference NOW (2240-350=1890) on this
	   years taxes or do I have to refile all those years ?

	3) It appears that my wife qualifies for the Earned Income Credit but
	   we would have to file seperate returns.  Has anybody done this and
	   has it worked out to be better than filing together ?

	Thanks in advance,

	Chuck

    re: .50
    
    I believe they changed the withholding formula during 1992 to take less
    out of people's paychecks, without actually changing the total tax due. 
    The intent was to give more money to people today (hoping they would
    spend it and improve the economy) rather than having people wait for
    their income tax refund.

     RE: .50
     
     It is my understanding that if you were within $100 or so last year
     and you are way off this year, they will not penalize you.  If you
     are significantly off two years running, however, they take a dim
     view.  
     
     I'm sure that there are some guidelines in the tax form instructions
     (or used to be).
     
                                       lance

    re: .50
    
    are you sure you owe a penalty? I think the law used to be that as
    long as you;ve witheld as much as the previous years tax, you are
    exempt from penalties.

    Maybe one of you can help clarify this for me...
    
    We used the dependent care account in 1992 for daycare expenses. We
    took the maximum pre-tax deduction of $5000. Daycare cost us roughly
    $8000 in 1992.
    
    Can I also take a tax credit based on the additional $3000 ?
    
    Marie

    Re. .54
    
    No, you can only take a maximum of $5000 on the Federal form. On your
    state taxes, you might be able to take more. E.g., on the MA Tax form,
    you can deduct the extra 3000 (or whatever comes out from the
    worksheet) on line 15 of the resident form. 

    re .50
    
    The only answer you find in here that you should pay attention to is
    the one that suggests you read the instructions for form 1040, Line 65.
    on page 27.
    
    I'd type it in, but I'm sure you all have it handy. :-)
    
    Actually, in a surprising move by the IRS, the instructions are
    relatively clear.
    
    Thanks to your dilemma go to George Bush.  He lowered the weekly
    take-away formula to make us all feel better after he broke his
    no-new-takes pledge.  Unfortunately, he never changed the "bottom
    line", nor the penalty formula.
    
    Instead of increasing your weekly deductions to avoid penalties NEXT
    year, you might want to look into making Estimated tax payments. When
    you increase your weekly deductions, you float a loan to Digital
    throughout the quarter.  When you make estimated payments, you send the
    check to the IRS at the end of each quarter; YOU get to use the money
    instead of Digital.
    
    Just a suggestion.  It is the principal of the thing. :-)
    
    Dave
    

Re .50, q2:

You can only "go back and refile" three years...'86 is too far back.
I would continue to follow the same course...amortize the refinance fee.

Same .50, q3:

Married filing separately doesn't qualify for the Earned Income credit.


SteveSov

    Wrong. You can file 1040X returns back 7 years for some situations, for
    instance Schedule D corrections. .50 should check with the IRS  for his
    specific situation.
    
    Ray

    
    In this years J.K. Lassers there is a discussion of minimum interest on
    seller-financed sales (page 65).
    
    It states that the seller can either charge 9% interest or one of the
    "applicable federal rates".  It states that these rates are published
    monthly in the "Internal Revenue Bulletin".
    
    Does anyone have access to these bulletins or know where I could find the
    rates for the last 3 months?  I tried the 800 IRS help number but they
    didn't know what I was talking about and promised to get back to me
    within 20 days. I also tried all the local public libraries.
    
    Thank You
    Dean

    re. .55
    
    You sure about that? I've either missed it in the literature the gov't
    sent me, or it's not in there.
    
    I haven't done my own taxes in about 4 years, and aside from this one
    issue it's fairly straight forward. 
    
    Marie

    A friend of mine has just tragically lost her husband (he was only 44
    years old).

    I'm helping her with her taxes and have it now pretty well under
    control.  (Her husband knew where everything was, but, alas, she had no
    clue...)

    Someone has told her that she hereafter must file quarterly.  Could
    someone help me understand this, specifically:

    	- Under what conditions must quarterly payments be filed ?
    	- What form gets filed, and where are they (and appropriate
    	  instructions) obtained ?
    	- When are the payments due, and which dates are covered by
    	  the payments (e.g. when is the estimated payment for calendar
    	  quarter 1 due ?)

    Thanks,

    L.

    Larry,
    
    Death of spouse is no reason in and of itself to file quarterly. 
    
>    	- Under what conditions must quarterly payments be filed ?
    
    People file estimated quarterly payments because their deductions from
    their paycheck do not equal the minimum % of their TOTAL AGI necessary
    to avoid penalties. 
    
>    	- What form gets filed, and where are they (and appropriate
>    	  instructions) obtained ?
>    	- When are the payments due, and which dates are covered by
>    	  the payments (e.g. when is the estimated payment for calendar
>    	  quarter 1 due ?)
    
    Cannot remember, at the moment.  However, call the IRS 800 #.  They
    will send the necessary paperwork and instructions.
    
    Some unsolicited advice....it sounds like your friend could use the
    services of a tax lawyer.  Although I tend to shy away from lawyers in
    general, this is one case where I get their help.  Although I am more
    than familiar with taxes, I engaged the services of a tax lawyer when
    my father died since "surviving spouses" was new to me.  Like you, I
    was able to gather everything together which made his job easier
    (cheaper, too).  A couple of the things he did/recommended were news to
    me and actually paid for themselves.
    
    
    As always, FWIW
    
    Dave

    Thanks for the advice.  I'll recommend it to my friend when it comes
    time to do the 1993 taxes (he died in 1993).  I'm helping her now with
    her 1992 taxes.

    L.

    I left another comany in 1992 to come to Digital.  At that time, I
    received distributions from my savings plans there.  I rolled it all
    into an IRA.  I've now received 1099-R's for those distributions.  
    
    Where should the 1099-R information go and what form do I use to say
    "Yea, but I rolled it all over, so you can't have any - nayyh!"?
                                                           
    Steven

    I've always been confused about how to report roll overs.  Years ago I
    rolled over an IRA from one bank directly to another.  I thought the
    reporting would be automatic, and, since there's no place on any form
    to report the activity, I didn't mention it on my taxes.  Two years
    later, I received a registered letter from Uncle IRS claiming that I
    owed taxes plus penalties for the distribution.  I eventually
    straightened this out, but not without significant headaches and
    hassles.

    Now, when I have any roll over transactions, I attach voluminous
    documentation of the transaction (from the "from" as well as the "to"
    institutions) to my return.

    Seems like there ought to be a form, though...

    L.

    
    I did a rollover about 3 years ago.  It seemed rather simple (so I 
    probably did it wrong).  I simply used line 16a and 16b.  On 16a I put
    the total amount of the distribution. Then on 16b I put the taxable
    amount (zero).  That was it.  So far no calls from Uncle Sammy.
    
    Chuck

That's where you're supposed to put it. 

    So you'd do something like this?
    
    16a Total IRA  $ 3,000     b Taxable amount   $ 0
    and attach a note saying where it was rolled from and where it was
    rolled to.

    
    That's what I did - minus any note explaining anything.

    Thanks.  More info from the dude that helps me with my taxes:
    
    Rollovers - A rollover is a tax-free distribution to you of cash or 
    other assets from one retirement plan that you contribute (roll over) 
    to another retirement plan.  It will be taxable later when the new plan 
    pays that amount to you.
        
    Note:  o You cannot deduct a rollover contribution on your tax return.
           o You must make the rollover contribution by the 60th day after
             the day you receive the distribution.
    	   o If you roll over a distribution from you pension plan into an 
             IRA, the most that you can roll over is the FMV of the assets 
             that you receive as your share from the plan, minus any 
             nondeductable contributions you made to the plan.  
        
    IRS Publication 590 has the detailed data for further support if 
    necessary.
        
    Reporting Your Rollover:
        
    Report any rollover from a qualified plan into an IRA on line 17a, Form 
    1040.  If the total distribution was rolled over, enter zero (0) on 
    line 17b, 1040.  Otherwise, enter the taxable amount of the 
    distribution on 17b.
        
    Use line 16a and 16b, Form 1040, to report rollovers from one IRA to 
    another IRA.
    

re      <<< Note 341.70 by VMSNET::S_VORE "I Feel the Need... for Speed" >>>

>    Rollovers - A rollover is a tax-free distribution to you of cash or 
>    other assets from one retirement plan that you contribute (roll over) 
>    to another retirement plan.  It will be taxable later when the new plan 
>    pays that amount to you.
>        
>    Note:  o You cannot deduct a rollover contribution on your tax return.
>           o You must make the rollover contribution by the 60th day after
>             the day you receive the distribution.
    
    The above was correct for up to 1992.  Starting in 1993, it would be
    misleading information.  As we have discussed elsewhere, starting in
    1993, you MUST do an automatic Rollover from one account to another to
    avoid paying taxes and penalties on the distribution.  That is, the
    transaction must be hands off; if YOU actually receive the monies, you
    will find that the distributor witheld 20% for the IRS.  Without going
    into the sordid details, good luck straightening it out and avoiding
    penalties.
    
    FWIW,
    Dave

re: .71

>                                                         ... starting in
>    1993, you MUST do an automatic Rollover from one account to another to
>    avoid paying taxes and penalties on the distribution. ..

      I do not think that the above is correct. My understanding is that
      you can still have the rollover money come  into  your  hands  and
      avoid  tax  and  penalties  if  you  re-investing  it  in  another
      qualified plan within 60 days.  
      
      What  is  new in 1993 is that when the money comes into your hands
      20% is always withheld.  You get this back when you file your  tax
      return  but,  meanwhile,  you  must  make  up  that  20%  when you
      re-invest.  If you don't then only the 80% remains tax and penalty
      free  but  you  end  up paying tax and penalty on the 20% that was
      withheld.
      
      As  a  practical  matter there is a now clear benefit (and maybe a
      fiscal  necessity!)   to  doing  the  rollover  directly   between
      qualified  plans.   So  the  spirit  of  .71  is  correct,  but my
      understanding of the details is different.

    .71 is correct. The rollover law was changed for 1993. You must have
    the two companies exchange the funds.
    
    I got mail regarding this recently.

    According to articles in several respected financial publications, .72
    is correct.

    Let me clarify since I assumed (drat) that a quick answer would
    suffice.
    
    Before Jan 1, 1993, you could take distribution of ALL of your money in
    a qualified retirement plan and then re-invest within 60 days and the
    IRS treated if all as if the monies had never left your retirement
    plan.  There were no deductions for Federal taxes and there were no
    penalties.  Paperwork was little, fewer IRSers on the payroll.
    
    Starting Jan 1, 1993, if you take distribution of retirement monies
    into your hands the distributing agent MUST withold 20% of those monies
    towards 1993 (for instance) Federal taxes.  If, within 60 days, you
    re-invest the TOTAL of your distribution into a qualified plan, you
    will avoid penalties for early withdrawal from a qualified plan.  NOTE,
    however, that you must re-invest the TOTAL, even though you never GOT the
    total; you only got 80%. So, if you want to avoid the penalties, you
    must re-invest that which you actually received PLUS a sum equal to the
    withheld 20%.  
    
    Clear? No? Well, assume you retired from Digital on Jan 1, 1993 and the
    cash sum available to you from the Digital Retirement plan, to which
    you contributed nothing (to keep this relatively simple), is $50,000. 
    If you do an automatic rollover to another qualified plan, you will
    see $50,000 (less nominal fees, perhaps) show up in the new account. 
    HOWEVER, if you opt for the cash distribution, you will only get
    $40,000; the other $10,000 (20%) shows up on the check stub as Federal
    Witholding.  
    
    Now, since you would rather not pay an additional $5,000 in penalties
    due to early withdrawal (this is how $50,000 quickly adds down to
    $35,000) you decide to roll it all over into the qualified plan that
    you were considering before, but procrastinated too long about. 
    HOWEVER (and this situation is littered with howevers), you now must
    write a check for $50,000 since that is the amount of the original
    distribution; the IRS cares not that THEY got a portion of it.  
    
    What about the withheld 20%?  That gets applied to your taxes owed and
    you may or may not get it back depending upon the bottom line of your
    return. That means you must cough up $10,000 cash and do without it
    until sometime in IRS Q1 of 1994.
    
    However (again) you can bet your buns that it will get screwed up
    somehow so that you will cough up the extra $10,000, the IRS will
    misplace some key pieces of paper and will bill you $5,000, it will
    take you 3-5 years (not at all unheard of) to get your withheld $10,000
    back - if ever - and you will likely be audited each year until it is
    cleard up and for 3 years after.
    
    
    And so it goes.....
    
    Apologies for the brevity of my original explanation and the confusion
    it caused, I trust it is clearer now.
    
    
    Dave
    
    
    

I'm a 27 year old single male working for DEC.  I do not participate in a
401k program yet.  I do not own a house.  I pretty much have zero debt.
Hence, I get hammered comes tax time.

I'm wondering if I can take $2000.00, start an IRA, and then deduct that $2k
from my 1992 taxes?  I've read a lot of things that indicate I can do this, but
nothing convincing.

Anyone know for sure?

    If you were covered by DEC pension benefits in 1992, you cannot deduct
    any IRA contributions.
    
    Participation in the 401K plan has nothing to do with IRA-eligibility.

>I'm a 27 year old single male working for DEC. ...
>I'm wondering if I can take $2000.00, start an IRA, and then deduct that $2k
>from my 1992 taxes? ..

      The answer is "NO".
      
      1st, IRA contributions never have been and are not now deductible
      form "TAXES". The have been deductible from taxable income and are
      now in some cases (not yours -- see below). The difference is that
      a deductible IRA reduces your tax liability by $2000 (assuming you
      make the full contribution -- you can contribute less) times your
      marginal tax rate -- 15%, 28%, etc.
      
      2nd, IRA contributions are NOT deductible now if you are covered
      by a qualified retirement plan. As a DEC employee, you are covered
      by DEC's retirement plan and not eligible for this deduction.
      
      
      Comment: If you can afford it any way at all, I recommend that you
      DO contribute to an IRA.  Although your contribution is not
      deductible from current taxable income, your earnings in the IRA
      will compound tax free until you start to withdraw them.  This is
      a significant advantage over the compounding you get in a fully
      taxed investment program.
      
      Comment:  Fund your 401K plan fully.  It is deductible as well as
      compounding tax free.

      (NOTE:  Some readers of this conference will disagree with one or
      both of the preceeding comments.  I stand by them.)

    You cannot do this because DEC has a pension plan.  It is irrelevant
    that you may or may not have any vesting rights to this plan.
    
    L.

Is this a new rule for 1992?  I thought the worksheet for IRA deductions
from 1991 stated that you could still deduct a percentage or your
IRA contributions regardless of whether or not you had a plan at work.
It was income based as well.

I'll have to look it up tonight, but you should look in your 1040
instructions and read them carefully.  They should have an IRA
Worksheet with specific instructions on when you can and can't take
this deduction.  I was able to take it last year and had my taxes
checked by a tax accountant.

	What is the toll-free phone number to order tax forms ?

	Thanks,

	CHA
    

    	Unless things changed dramatically from last year, you CAN set
    up an IRA, whether or not you are covered by a retirement plan.  If
    you are covered by a retirement plan, the deduction may be limited,
    based upon both income and filing status.  However, the compounding
    of interest over the years may still make a non-deductable IRA
    attractive.
    
    Dave Eklund
    

    What are the tax liabilities are mutual funds? 
    If you invest $1000 in Fund X and the dividends are reinvested, you pay
    taxes on those dividends each year. What happens if you sell $500 2
    years down the road? Do you have a gain/loss to figure out?

    Buying/selling shares in a mutual fund is like buying any other
    investment.  If you invest $1000 to buy 50 shares at $20/share, 
    and later sell 20 shares when the price is $25/share, you get:
    
    	20 x $25 = $500 (sale), 20 x $20 = $400 (cost) 
        $500-$400 = capital gain in year of sale
    
    Reinvesting dividends is exactly the same as getting the dividends in
    cash, and then using them to purchase additional shares.
    
    If you make more than one purchase in a fund (including reinvested
    dividends, which is just like any other purchase) then you find that
    you have paid different prices for different shares, and when you sell
    you will have to determine which shares were sold to determine the
    gain/loss.  Typically this is done by assuming that the oldest shares
    are the first ones sold, but there are other methods.
    
    

    You must keep records from year to year.
    If you invested $1000 in fund.
    At end of year they declare dividend totalling $15.27.
    Now your cost basis is $1015.27 .
    If next year they declare a total of $24.30 in dividends, then add 
    the $24.30 to $1015.27.
    Your cost basis is now $1039.57.
    Keep in mind you don't HAVE to bother with this,but if you don't you 
    are OVERpaying in taxes.
    If you sell after a few years for $1100,and you said your cost basis was 
    $1000 instead of $1039.57, you are paying taxes on $100 instead of 
    $61.43. The IRS won't mind... they'll take the extra cash.
    In your example:
    	$1000  orig investment
    	$  40  div reinvestment (I picked a number as an example)
    	$ 500  sold 2 years later
    Your cost basis on remaining shares = $1000 + $40 - $500 = $460.00
    
    On the shares that you sold , unless you specify otherwise, it's 
    FIFO (First shares in = first shares out ). So if you sold $500 and the 
    share price was 25.00 a share, then you sold 20 shares. You must
    look at what you paid for the FIRST 20 shares that you bought. If you
    paid 20.75 a share for it , then your gain is
      $(25.00 - 20.75) * 20 shares
          $4.25  * 20
            $85.00  gain
    

         <<< SUBWAY::DISK$D1:[NOTES$LIBRARY]MARKET_INVESTING.NOTE;1 >>>
                             -< Market Investing >-
================================================================================
Note 341.88                    Tax questions 1992                       88 of 88
STAR::BOUCHARD "The enemy is wise"                   18 lines   4-MAR-1993 13:24
                    -< Incorrect 'cost basis' calculation >-
--------------------------------------------------------------------------------
No!
    
    >In your example:
    >	$1000  orig investment
    >	$  40  div reinvestment (I picked a number as an example)
    >	$ 500  sold 2 years later
    >Your cost basis on remaining shares = $1000 + $40 - $500 =
    >$460.00 [sic - total should be $540 in this (incorrect) example]
    
    The price you sell something at has no relation to the "cost basis" for
    the remaining shares.  What matters is how much you *paid* for the
    shares which are sold.
    
    If the shares sold for $500 were purchased for $400, the remaining cost
    basis would be $1000+$40-$400=$640.  If the shares sold for $500 were
    purchased for $600 the remaining cost basis would be
    $1000+$40-$600=$440
    

    	Yeah, $540.
    

    >Reinvesting dividends is exactly the same as getting the dividends in
    >cash, and then using them to purchase additional shares.
    
    Does this mean that one should declare the reinvested dividends on each
    year's tax return?  

    Yes, and the 1099 you get from the fund will have the dividends
    (and capital gains) listed.
    
    		-John Bishop

     re: .88 and previous
     
     You guys are losing me on this "cost basis" stuff.  If I get a
     dividend which is reinvested, it goes to buying new shares--with no
     effect on the original shares.  That is, if I own 100 shares of a
     fund bought at $1/share, currently worth $2/share and receive a
     dividend of $10, the result is 100 shares w/cost basis of $1/share
     and 5 shares w/cost basis of $2/share.  So where does the cost basis
     change?
     
     Perhaps this cost basis stuff you are describing involves totaling
     up the total amount paid for shares and dividing by the number of
     shares to get an "average cost basis"--as a simplified way to keep
     track.  I think I heard about this somewhere.
     
     Since you tend to want to sell your newer (more expensive) stock
     first, this averaging business might be good.
     
     Is there any way to sell your newest shares first, i.e. if I can
     track which shares were bought when (e.g. with MYM software) can I
     not choose which shares to sell?
     
                                       lance

    
    You can sell specific shares of a mutual fund by putting the request in
    writing to the mutual fund company.
    
    The talk about a "cost basis" in the last few notes is a simplification
    which assumes that you are selling all of the shares in a fund.  Then
    is doesn't matter if you have 100 @$1 and 5@$2, or 50@$1 and 30@$2, all
    that matters is the total cost (from the tax-man's point of view).
    

    Cost basis is important when it comes to filling out Sch D where you
    report your Capital Gains/Losses.  It is somehwat difficult to compute
    the gains/losses without knowing what the "basis" of determining the
    associated "cost" was.
    
    When you sell stock that was accumulated over time with various
    purchasing dates as is often the case with a Mutual Fund, there are
    four methods available for computing cost basis.  The first, and the
    only one I am able to use and retain any sanity with, is the old
    faithful FIFO method; shares are sold in the same order in which they
    are purchased.  Another method is to tell the comapny, IN WRITING, the
    number and purchase dates of specific shares.  The other two methods
    are variants of averaging; most Mutual Fund companies will send to you
    the "average cost basis" of shares you sell if you elect that
    accounting method.
    
    Note, however, that whatever accounting method you first elect, you
    MUST not change that method with THAT fund unless you notify the IRS -
    never, never, never notify the IRS that you are doing something
    "different" unless you are prepared to be audited.
    
    As I have written in other places, these are serious questions and
    answers in here will, by nature, be brief and inconclusive.  If you
    MUST know the answer, take the time to do your own research.
    
    As always, FWIW.
    
    Dave

My question concerns second mortgages, where the money was used for some other
purpose than the existing house. I bought some land in another town.

I know the the deduction on interest paid is only deductable "equivelant to the
amount of the original loan."  My question is,how do I determine that amount ?

For example, 

	Original Loan       = 75K
	Remaining Principle = 50K
	Second Mortage	    = 50K

	This means I can only deduct interest on 75K, not 100K which is the total
	of the remaining principle and second mortgage.. Right.

Is there a formula for determing this ?


Thanks....Jim

	Question on PMI (? Mortgage Insurance) :

	Can I "itemize deduct" this beast on schedule A (or any other 
        schedule) ?

	Thanks for any feedback.

	-Santosh

Last year I purchased a house and since I did not have enough itemized deductions
I took the standard deduction.  However, this year I want to itemize my
deductions since I am deducting the interest on the house.  Can I still deduct 
all my closing costs this year or did I loose that chance by doing a standard 
deduction last year ?

    RE: .97
    
    You can never deduct **ALL** your closing costs in one year.  The
    closing cost is deducted over the life of the loan.  That is if
    you have a closing cost of $6000 and a 30 years mortgage.  You can
    deduct $200 per year for 30 years.
    
    Therefore, yes, you can deduct the closing cost ($200 in this 
    example) this year.  However, you lost the $200 deduction last
    year, since you chose not to itemize last year.
    
    Wendy

Re : .97

  You say that last year you purchased a house. Do you mean 1992. If so then this
would be the first year that you could deduct any closing costs on it anyways. It
may have just been the way it was worded.

	/Ken

    Also, remember only the points are deductable.  All other
    costs (legal fees, appraisal fees, bank fees etc.) are not deductable.

    re: .97, .98
    
    Points are *fully* deductible in the *first* year of the loan for a
    home purchase.  You only need to break them down over the life of a
    loan when refinancing.
    

	Is Property Transfer Tax deductible?

	     - Michael

    Who is supposed to pay taxes on the interest received for security
    deposit/last month's rent escrow account?  Is the tax paid by the
    landlord or the tenant?
    
    If it's paid by the landlord, do I consider the interest that was sent
    to me since we've rented for over a year to just be tax free and ignore
    it as income?
    
    							John

    I don't know the IRS regulations, but I strongly suspect the landlord
    pays the tax on the interest received.  After all, the bank sends the
    1099 to the IRS with the landlord's SSN, right?  And since the bank
    notified the IRS, your suggestion to consider the interest tax-free
    will cause a letter to be sent to you by the IRS.  Amazing how the
    color tan instills fear in Americans!
    
    If you are a Massachusetts landlord, then you of course have paid your
    tenant the interest on his deposit as mandated by law.  That makes
    your expenditure a tax deduction; and it makes the tenant pay the tax
    on the interest you paid him.
                  

    Actually, I'm a tenant.  I received some interest from the landlord but
    it was not the same as the amount that the account earned this year. 
    It is supposed to be the amount that was earned from August, 1991 to
    August, 1992 since we moved in to the place in August of 1991.  So, now
    I'm trying to figure out if I should pay taxes on the interest received
    and she should pay it on the interest paid from August 1992 to December
    1992.  Or should one of us just pay it on the whole amount for the year
    and if so, which one?  I believe it is her taxpayer ID number on the
    1099 that was sent out.  Doesn't seem real straightforward to me.
    
    							John

Re .105

>    Actually, I'm a tenant.  I received some interest from the landlord but
>    it was not the same as the amount that the account earned this year. 
>    It is supposed to be the amount that was earned from August, 1991 to
>    August, 1992 since we moved in to the place in August of 1991.  So, now
>    I'm trying to figure out if I should pay taxes on the interest received
>    and she should pay it on the interest paid from August 1992 to December
>    1992.  Or should one of us just pay it on the whole amount for the year
>    and if so, which one?  I believe it is her taxpayer ID number on the
>    1099 that was sent out.  Doesn't seem real straightforward to me.

The landlord is supposed to send you a check for interest in Mass. once
a year, and is supposed to send you a 1099 reflecting the amount of the
check you were sent.  What actually goes on in the bank account the landlord
has set up is irrelevent -- the landlord could be earning 8% or 2% on the
interest, and still has to send you 5%, which is what you're taxed on.

Note that for the MA state return, interest from your landlord does *not*
count as MA bank interest, and is therefore taxed at 12%.

-- Andrew

    The law has been changed. The landlord nolonger has to pay 5% but only
    what is actually paid on the account.
    
    The 1099 from the landlord may not be the same amount as paid to the
    tenant since the date of payment may not correspond to the end of the
    calendar year and therefore may be a different amount.
    
    Ray

    Does anyone know how much the standard deduction and the personal
    exemption for 1992 are?
    
    Dan

Re .95:

Mortgage interest (secured by the home) is (in 1992) deductible.

It is either "pure" mortgage interest, or "home equity" interest.

Pure mortgage interest is "acquisition" costs... ie the remaining principle.

"Pure" mortgage interest is limited by the acquisition costs, with a ceiling
of 1 million.

"Home equity" interest is limited to the interest on 100,000.


You're OK to deduct the interest on the 100K, but you have to remember to 
add back the interest on the "home equity" part on your AMT (6251) form.

Note also, in your case, that since the extra money was used to purchase
land (an investment), you could probably deduct it anyway as "investment
interest expense", subject to the limitations thereof.

I'd have to go look up the specific numbers as to the limitations on "pure"
interest vs. "equity" interest, but I'm pretty sure about the caps at
1 mil and 100K.

SteveSov

    
    Tax ? ...
    
    I was filling out my 1992 Mass. Income tax form (Form ABC)
    
    Under the income section:  Line 8.
    
    8. Interest from Mass. banks. List Mass. banks and amounts of interest.
    
    	Q: Do I only need to list Mass Bank interest.  How about banks
    outside Mass ???  
    
    Also (My first year with stock div's.) where does stock dividends paid
    to me go in this form (Again do I need to list this as income?)?
    
    Thks. for the help.
    

Interest from non-Mass banks and stock dividends are taxed at a higher rate.
Take a look at the instructions where it tells you how to determine if you
can use ABC.  I'd guess that you can't use Form ABC.

    I have a question about depreciation and improvements to rental property.

    In 1992 I spent about $4K on improvements on a rental property that
    I have owned for several years.  Do I simply add the $4K to my basis 
    and continue the depreciation as before (over the original 27.5 years)?

    Or do I need to depreciate the improvements over their own 27.5 year
    (or some other length) term?

    thanks,
    -dave

You depreciate the improvements on their own schedule even though it may
be the same schedule that you are currently using for the rest of the 
property.  If you didn't, you'd end up depreciating the improvements
starting in the middle of the schedule, and you wouldn't be taking the
full depreciation over its useful life.  Taken to an extreme, if you were
on the last year of the depreciation for your rental property when you added
the $4k worth of improvements, it wouldn't make sense to only get 1 year's
worth of depreciation for it.

After a few years, you may end up with a sheet with several items on it
for depreciation, each with its own schedule and each having been put in
service at a different time.  And it really gets fun when they change
the depreciation schedules. I've got stuff done in the same year, but in
different months during the time that all the schedules were being changed,
so I'm depreciating on all sorts of schedules. Gets kind of sticky around
this time of the year, but if you keep it all written down, it is still
manageable.

Cathy

    I refinanced my mortgage last year.  Both the original mortgage and 
    the new mortgage were guaranteed by the Veterans Administration.
    
    Are either of the VA funding fees (one for the original loan I paid
    off and one paid to the VA to get the new loan) deductible?
    
    I recognize the new one would have to be amortized over the life of 
    the loan.

	Speaking of improvements, is a roof considered an improvement
	or a repair?  Thanks in advance. Jeff

    If I have my IRA fully in a mutual fund family can I deduct the cost of
    Barron's, newsletters, because I use them to switch between funds to
    maximize my retirement objectives? In other words any funds I expend to
    manage my IRA - deductable?

    re roof
    No.  A roof is considered normal maintenance, even tho it may last
    20 or so years.  If you improve (i.e. add a ridge vent) then the
    cost of that item can be added to the basis for the house and will
    lower a possible cap gain upon selling.

>    If I have my IRA fully in a mutual fund family can I deduct the cost of
>    Barron's, newsletters, because I use them to switch between funds to
>    maximize my retirement objectives? ...

      If my memory is correct, the answer is "no", because the earinings
      of the IRA aren't taxable.  You can deduct such expenses from  the
      earnings on taxable investments.

>     No.  A roof is considered normal maintenance, even tho it may last
>     20 or so years.  If you improve (i.e. add a ridge vent) then the
>     cost of that item can be added to the basis for the house and will
>     lower a possible cap gain upon selling.

	Sigh, thanks, that's what I was afraid of.  I bought the house
	"As-Is" (it was an Estate Sale) so I basically got the price
	of a new roof knocked off the purchase price.  I guess I would
	of been better off instead having had the roof done and rolled
	into the purchase price :-((  Oh well, live and learn.

	One thing I forgot to say, I'm an owner-occupied 2-family, so
	at least then I'll be able to take 50% of the roof off as a
	deduction all in one tax year (?).

	My house is about 125 years old, and appears to have the original
	wooden shingles under the 3 layers of asphalt ones.  The roofer
	is going to have to tear everything off and lay plywood (3/4" due
	to the span).  I'm guessing as long as I get an itemized bill,
	that at least the price of the plywood (which should last forever,
	unlike the asphalt 20 year life), which is about $1,200 worth,
	may be considered an improvement/capital-expense?

	Thanks again, Jeff

Re .117

I think a roof qualifies as an improvement as it extends the life of
the building.  A repair would be something like patching a small portion
of the roof, but I think by re-roofing the whole house, that is considered
an improvement.  I fairly certain the whole thing is spelled out in one
of the IRS publications, probably the one on depreciation which I have
at home. I'll try to remember to check tonight.

Re .119

If the roof is an improvement as I think it is, you can depreciate 
50% of it since half the house is rental property. You can add the
other 50% to your basis for your personal portion and use that number
to figure your capital gain when you finally sell it.

If it turns out to be a repair, you would write off 50% of the cost
as maintenance on the rental property piece when you fill out 
Schedule E.

    I checked in this year's Publication 17.  On page 116, examples
    of improvements are given as "putting a recreation room in your
    unfinished basement, adding another bathroom or bedroom, puttig up
    a fence, putting in new plumbing or wiring, installing a new roof,
    or paving your driveway."  

Re 116:

If the fees are billed separately, and
If the fees are paid "out of pocket" (instead of being paid from IRA funds)
then
You can deduct them as Investment Expense, along with your other "Misc
Itemized" deducts on Sched A.  (But you still have to get over the 2%
limitation.)

Fees paid to manage tax-exempt investments aren't deductible, but an IRA
isn't exempt, its just deferred.

SteveSov

    
    Can I deduct Margin Loan Interest?  If so where do I do so?  My best
    guess is to claim it under miscellaneous expenses.  Thanks in advance.
    
             -- Phil

>    Can I deduct Margin Loan Interest?  If so where do I do so?  My best
>    guess is to claim it under miscellaneous expenses.  Thanks in advance.

Yes, you can.  I do it every year.  It is an itemized expense and goes
on Line 11 of Schedule A (Investment Interest).  The only catch is that 
you cannot deduct interest paid on your margin balance that exceeds your 
investment income for the year.  See the explanation of Line 11 for more.

The thing I cannot figure out is:  Can you deduct dividends you paid
on stocks that were held short?  I believe you can.  Anyone know where?

If the margin interest was incurred by purchasing non-taxable investments,
you can't deduct it.

    Thanks for the help so far.  I have one more question.

    On MA state Form 1 (lines 13 and 14) you and your spouse can each deduct
    up to $2000 paid to FICA.  Is there a place where you can deduct the Self
    Employment tax that you paid?

    -dave

    
    Due to a number of anomolous income effects, I find that I can for the
    first time in years make a deductible IRA contribution of about $600
    for 1992.  I plan to put in the full allowable $2000.  Is there any
    reason to keep these two -the deductible $600 and the non-deductible 
    $1400 - in separate IRA accounts? Otherwise, I can save myself a $10 fee
    and put both amounts into a single account.
    
    Kaizad

      It  is  not  necessary  to keep deductible and non-deductible IRAs
      separate.   However,   you   must   track   the   deductible   and
      non-deductible   contributions  or  you'll  have  to  pay  tax  on
      EVERYTHING you take out,  intead  of  only  on  the  portion  that
      represents earnings and non-deductible contributions.  There is an
      IRS form for doing this.  Unfortunately, my  experience  has  been
      that  most  of  the  IRS  doesn't know about the form.  We've been
      saving a blank copy and photocopying it for several years. I don't
      know  the  form number off had; if you can't find it, send me mail
      and I'll look it up for you.

      If I have two IRAs, one funded wholly by deductible and one wholly
      by  non-dedudctible  contributions,   can   I   make   withdrawals
      selectively, in order to control the tax consequences? Or will any
      withdrawal be treated as a withdrawal from a combined pool or  all
      my   IRA  accounts?  

    Re. .26:
    
    By the way, you may deduct on your MA tax form min(2000, FICA+Medicare)
    not just min(2000, FICA).                         

Re: .128:

When you make withdrawls, all of the existing IRA's are lumped together
and the taxable/non-taxable portion of the withdrawl is prorated at the
same ratio as the total-IRA/non-deductible-contributions.  Even if you
keep separate accounts, its all treated as one pool.

Note that "conduit IRA's", used for rolling over 401K (etc) plans, do not
suffer from this "one pool" syndrome if they are in fact rolled on into
the next 401K plan.

(I think the form is an 8606...not sure)

SteveSov

>(I think the form is an 8606...not sure)

      That number sounds awfully familiar.  
      Anyway, I'm sure its got 8s and/or 6s and/or other digits in it.
      
          ;-)

  8606 is the form. Make certain that you keep a copy of the form in your records
as you will need it when you start to withdraw from the IRA.

	/ken

    	If any portion of your contribution is nondeductible, you are
    REQUIRED to file form 8606 - even if you do not file a 1040!!  This
    is so that the total amount of the deductible/nondeductible portions
    of your IRA(s) can be tracked from year to year.  It's an interesting
    "paper trail" which eventually allows you to calculate the portion
    of the money withdrawn as taxed/nontaxed.
    
    Dave Eklund
    
    PS Yes, by all means, KEEP A COPY of this form (probably forever...)
    

    Going back to .42 on custodial accounts. My 2-year old has some
    Fidelity Funds that she had total dividends/cg's of $230 in 1992.
    
    This is what's in note .42
�    	- Child earns less than $600
�    	    		No filing necessary
�    	    	- Child earns $600-$1199
�    	    		File 1040A and Schedule 1
�    	    	- Child earns more than $1200 (and is over 14)
�    	    		File 1040A and Schedule 1 and the 88xx (I forget the number)
    
    
    1) Do I have to report it anywhere?
    2) I like the arguments against having kid's pile up too much cash
    especially as it pertains to college scholarships/grants. If I switch
    it out of there and into accounts that would be under my name,what are
    the tax implications?
    
    

    
    Does anyone tell me if one can claim GAMBLING LOSSES and what's the max
    limit on it ? What's the form to file for this loss ?
    
    When you win they sure do take their share so I was wondering about the
    counterpart ??
    
    thanks,
    /Alkesh

	I believe you can deduct losses only against winnings.  Ie.
	you're only taxed on net winnings, but you can't deduct net
	losses.

	Same is true if you buy lottery tickets, if you win, you can deduct
	the cost of those tickets, but you can't deduct more than you won.

	The government also has the same double edged sword when you sell
	your primary residence, you can't deduct a loss, but they'll tax
	you on the gain (if you don't reinvest it ALL w/in 2 years).

	The biggest kisser is you that the CPI isn't used to adjust purchase
	figures when computing gain!  You still have to pay taxes on a
	supposed gain even though you may of actually lost out already due to
	inflation.

    re: .136
    
    in some states, such as Mass, you can't event deduct the cost of losing
    lottery tickets - only the cost of *winning* tickets;
    
    i.e., buy 500 $1 tickets, hit one winner for $500, you pay taxes on
    $500 (winning ticket) - $1 (cost of winning ticket).

	Ohhh, don't you have a system like ours.....

	If you pay tax on the bet, you don't have to pay tax on the winnings.

	So, the football pools, and the forthcoming lottery, are "tax paid"
	when you bet, so the winnings are tax free.

	When you go to a bookies, you can choose to pay tax on your bet, or
	pay tax on the winnings.


	This way, the government gets its tax up-front, and is guaranteed to get
	tax - rather than have to try to chase up winners, and ensure winnings
	are delared - they reckon they get more this way.
	Betting tax is 12%.

	Heather

    
    for residents of Massachusetts and Britain:
    
        I always find this time of year ironic.  On April 19, residents of
        Massachusetts celebrate 'Patriot's Day' in commemoration of that
        day in 1775 that the Brits and the residents of Lexington MA (and
        later Concord) fired the first shots in the revolutionary war...
        to correct the evils of unfair taxation and a burdensome 
        government.
    
        Since U.S. holidays are now all celebrated on Mondays, April 19
        and April 15 (tax day in the U.S., for you Brits out there) are
        sometimes even observed on the *same day*.  What goes around comes
        around, I guess.
    
          :I

.138> Ohhh, don't you have a system like ours.....

	I've never heard of a betting tax before.  Who is "ours"?
	Your node is from site code RDL, I'm going to guess
	Reading, England?

>.138> Ohhh, don't you have a system like ours.....
>
>	I've never heard of a betting tax before.  Who is "ours"?
>	Your node is from site code RDL, I'm going to guess
>	Reading, England?


	Yup, I'm in the UK, however I'm site code REO, and have been for 5
	years. I think RDL was Queens house, which was closed 2-3 years ago.

	Betting tax is a levy put on your bet, so if you bet 10 quid to win,
	then you actually pay 11.20 if you choose to pay the tax on the bet.
	If you do this, your winnings are tax-free.

	If you choose not to pay the betting tax, then you have to pay tax on
	your winnings.

	Most people choose to pay tax on the bet.

	With Littlewoods football pools, the forthcomming lottery and the tote,
 	there is no choice, the bet is tax-paid, so the winnings are tax free.

	Heather

    RE: 134  On Custodial accounts
    
>    1) Do I have to report it anywhere?
    
    	According to my CPA (if I can remember what he said 2 weeks
    	ago when I asked similar questions):
    
    	No reporting needs to be made of interest earned on a custodial
    	account if the earnings are < $600 for the tax year.
    	
    	If the child earns $600 to $1199 and is under 14, then the child 
    	needs to file a tax return. The interest earned is taxed at the 
    	child's tax rate based on their earnings.
    
    	If the child earns over $1200 or is over 14 (I think), then the 
    	forms you file includes the interest earnings as part of your income
    	and get taxed accordingly.
    
>    2) I like the arguments against having kid's pile up too much cash
>    especially as it pertains to college scholarships/grants. If I switch
>    it out of there and into accounts that would be under my name,what are
>    the tax implications?
    
	The difference is that if the investments are in a custodial
    	account you can get some relief by having the interest earnings
    	taxed at your kid's tax rate (until they earn $1,200 a year or
    	the rugrat turns 14, in which case the IRS gets their money at your 
    	tax rate regardless of whose name it's in.)
    
    	If you have the investments for them in your name, then it is
    	looked upon as your investment and taxed at your income bracket. 
    
    I hope I remembered all that right. I decided to put things in the
    custodial accounts myself.
    
    /es
    
    

>    especially as it pertains to college scholarships/grants. If I switch
>    it out of there and into accounts that would be under my name,what are
>    the tax implications?
    
    My understanding is that this isn't legal.  Once you give it to them
    (put it under their name) you cannot legally take it back (put it under
    your own name).
    
    L.

>    My understanding is that this isn't legal.  Once you give it to them
>    (put it under their name) you cannot legally take it back (put it under
>    your own name).
    
    
    This is correct. Everything you put into a custodial account belongs to
    your offspring as soon as they reach a certain age (in Massachusetts 
    the age is 18 unless you specify an age beyond that when you set up the
    account). 
    
    This means that if your kid turns out to be a moronic, hateful, drunken
    idiot who beats you up daily you are unable to punish the resentful
    offspring by withholding the oodles of cash you have stashed away in
    his/her name. The cash is theirs to do with as they see fit and there's
    really nothing you can do about it ... at least nothing I'm aware of.
    
    /se
    

    I have asked this question more than once and always got the answer
    that yes,you can do anything you please with money in a custodial
    account (including taking it back) until the child reaches 18.
    
    Ken

    Can you document that ?  Has anyone researched this that can site a
    reference other than "I was told" ?

    L.

    From Massachusetts C.201A, section 3:
    
    "A gift made in the manner prescribed in this chapter shall be
    irrevocable and shall convey to the minor an indefeasible legal title
    to the security, life or endowment insurance policy, annuity contract
    or money given, ..."
    
    Go to your local library and read the UGMA statute.  It's only 8 pages,
    and it's written in reasonably clear English.

    That's what I thought.  Thanks for the reference.
    
    L.