joanmcq

I have recently become aware that certain investment 'advisors' are promoting a scheme by which one takes up to $100,000 in home equity to purchase cash value life insurance. Supposedly, you get a tax deduction while having the assets grow tax free, thereby having the best of both worlds, blah, blah, blah. As you can see, I don't think much of this strategy. However, the question has been posed, is this actually possible, or does it run afoul of the Sec 264 laws against taking deductions for purchasing life insurance premiums? The only references I can find are pre 1986, and deal more with whether there was economic substance to the transaction apart from the tax benefit.

>>I looked over the return and pointed out ... <<

Look at this from their point of view. They showed you the return because you are a professional in the field of taxation. You agreed to review it, you analyzed it, and you advised them about how the IRS was probably interpreting it. That makes you responsible!

If you do not follow through with a conclusion and recommendation about how to handle this, you are suggesting there is nothing wrong with what they are doing.

Even from what little you have posted, it seems to me possible that this company did some things improperly. Maybe they can explain it. Maybe they will have large tax liabilities (for which your friend might be personally liable under the 100% penalty). Maybe somebody will go to jail. Who knows?

You accepted the engagement. It may have been informal and unpaid, but you should still treat it professionally. Write the letter.

I am composing a letter, but please let me straighten this out. I am an employee for a company that is not providing audit protection for this person. I was assigned the case to look over, and let him know why they may be auditing him. Actually its not him. It is his wife's 5 % ownership s-corp. He is not a friend. I provided assistance as an employee of a company.

All of it unless he had basis in the IRA. There is no DOD step up in basis on an inherited IRA (I wish! I've got one myself)

No, I simply work for a company that the husband of the minority shareholder bought audit protection from for his personal return. We do not provide audit protection on payroll issues. I looked over the return and pointed out what appeared to trigger the audit, ie the COGS deduction for labor on the 1120-S. He had come to the same conclusion. The 1120-S was professionally prepared by an accountant hired by the majority shareholder, who appears to be providing representation.

I'm not the representative, thank god.

I am assuming you mean fees paid to the executor for administering the estate. If so, I would, especially if the fees are over $600.

I'm in a circa 1937 house, but the downstairs stays pretty comfy due to the shade trees and state of the art rice hull isulation in the walls (I'm not kidding, it's quite a mess if you have to open up a wall. Not to mention what the cats think of the piles of the stuff in the attic). the upstairs, where my home office is, is about 140 degrees, without the wall units running. Its my excuse for not doing work in the summer....

I grew up in the east, but am a real wuss in the cold now. Wouldn't have an idea of how to drive in the snow. and I'm about to put on a third layer because of the over AC at the work office.

Some cities in CA at least have their own minimum wage, called a 'living wage'. My guess is Janinen is in San Jose or San Francisco. In other words, it pretty much takes that much to be able to live there!

You grow pubs up there? Is that why the IRS has so many of them?

Funny, here in Sacramento, CA, I close the house during the day and open up at night to spare the AC. We usually have lows in the 50s or 60s at night even if its in the 90s or 100s during the day. And only about 30% humidity. This week it's been in the 80s. Nice.

Just got more info; one shareholder took a distribution for the $180,000 and did treat clerical help as independent contractors. And the other shareholder's accountant is going to handle it.

Good.

Does anyone have experience with theses? Audit notice is from AL Dept. of Industrial Relations, Umemployment Compensation Division. Want to perofrm audit at place of business. I'm guessing it may have something to do with the $180,000 of labor COGS for a psychiatry office, although they ask for all records including AR, corp minutes, bank statements, and financial statements, as well as all the employment filings and records.

The problem is that most clients will not come back to you if they receive a letter from the IRS. Clients think you made a mistake and that's the reason why they received the letter.

My job is doing CP2000s for people that have bought audit insurance. They're my bread and butter. If my private clients get CP2000s, I have a good enough rapport to explain the matter. Sometimes its something they didn't give me, or in the case of one which keeps getting 1099s with trustee fees as in box 7, I warn them that they will likely get a letter, and I will take care of it.

Oh well, more to get paid for. And my job is trying to get me to go to 40 hours a week......and this will give them more ammunition.

Jainen... will do..thanks. I deleted my cookies for that site the day I was banned.

edit: Best I can tell.. there were 3 people banned. Also, it looks like most current posts only have 2 or 3 replies. Not much of a tax discussion going on now days on that site. I just renewed my QF handbooks and I will not be renewing their rag.

I'm trying to find out what happened to you guys......when did this happpen? I think george was due to the travel agents post....

I got one stating I had to renew by June 20 to be entered in the contest.

I'm assuming they ( the brothers who were on the account) are concerned about their gift limitations, not the mother's. The money is now theirs. As I just went through this with my sister and brothers, yes , they each can gift $12,000 per year to limit gift tax exposure, and if spouses are involved, more can be gifted. Without involving spouses, each brother who was not on the account can get $24,000 this year, and the rest in 2008. However, if, for example, the brothers with the money are gifting to spouses of the brothers with out, the money would technically become the spouse's, not the intended brothers. At least when I went through this, it was december, so my brothers only had to wait until January for the rest.

Thanks, can't be on too many boards!

I'm lucky in that I have CCH at work, so I can come in and do research on another company's dollar!

This is five. ERC, I had no idea you weren't a tax geek like the rest of us. This makes your willingness to set up this board even more altruistic and for that I (and the rest of us I'm sure) are truly grateful. Ask away!

I just got a case like this, and knew I had read in depth about investment lawsuits somewhere recently. Thank god for this resource!

BTW, what is the 'TMI board'?

Hillary outlined her economic fairness doctrine: “There is no greater force for economic growth than free markets, but markets work best with rules that promote our values, protect our workers and give all people a chance to succeed. Fairness doesn’t just happen. It requires the right government policies.”

So, according to Hillary, free markets work best when they’re constrained by the "right" government policies. In other words, free markets work best when they’re not free. I find that really scary, myself. Sadly, tho, I think a lot of people will read or hear those lines of hers and think she is right. Because they will not really think about what she is implying. They will just react to the term 'fairness', something everyone wants. Not realizing that letting the government decide what is 'fair' is not really something they would want to do, based on past experience with government 'services'.

With no government interference we have the robber baron era. No minimum wage, no overtime for over 40 hours, no worker's comp, no right to unionize. No fines for dumping toxic waste in our waterways and air....remember the Cayahogo river catching fire? I lived in Pittsburgh before the clean air and water acts, and grew up thinking rivers were brown, with dead trees on the banks. That was a lot of government interference in business and the businesses complained the extra costs would put them out of biz. Didn't happen.

I happen to like the fact that my money is safe in my bank.....FDIC insurance is government interference. jeez, even look at what the SUV loophole in the luxury auto limits did to encourage people to buy big, unnecessary gas hogs that contributed to our overdependence on oil, and encouraged the automakers to keep making big gas hogs instead of fuel efficient autos...wrong government policy there.

Like I've said before, I've been terrified for the last 7 years.

Y'know I did get a letter once telling me how they could help me get funds in the state dormant fund account. Turns out a retirement account with the state that I kept forgetting to send change of addresses for had been turned over. How nice of them to inform me of money I had waiting....not that I needed their services to get it.

My apologies then.

I've rarely had problems with eservice. Sometimes if I let a request expire due to being signed on too long, I have to go out completely to the IRS home page and start over. And sometimes the system is down, but the page usually indicates that. One of my coworkers complains it rarely works for him, but I think its him and not the system!

I've gotten quite a few of these. I just send a copy of the previous year Sch A with the sales tax deduction. I get a lot where AMT created no tax benefit too. They are usually easy to clear up.