JohnH

Sometimes reconversions are wise, but it's almost always when the investment has changed drastically in value in the months following the Roth conversion. The other situation might involve intentionally over-converting and then topping off by reconverting enough to stay just inside in the 15% bracket. This is commonly done when income is subject to fluctuations. Doesn't sound like your client is being that precise with alll this back & forth activity. She would probably benefit greatly by adopting a reasonable asset allocation, consolidating the accounts into a single holiding for Roth and a single holding for qualified money, and then setting up a simple 2-fund or 3-fund portfolio that's mirrored in each holding. Chances are she's spinning her wheels while deluding herself into thinking she's engaging in some high finance dealings. A "set-it-and-forget-it" long term strategy works, but she doesn't sound like the type who has that sort of financial discipline. I think a good rule of thumb is to aim for 25-40% in Roth and the remaining 75-60% in qualified money - for that subset of people who can really benefit from the balancing act in retirement. But there are exceptions, especially if the Roth conversion can be done at a true 15% net, which almost always means doing them before beginning to draw Social Security benefits.

I agree. I'm usually not in favor of increased regulation, but the financial advisor industry and their bank/financial services proxies should be held to a higher standard than they are. Any time a commission is involved, there's an incentive to give bad advice. 'It is difficult to get a man to understand something, when his salary depends on his not understanding it.' - Upton Sinclair

Great point. When people pose a tax question to me, I usually tell them that if a tax preparer answers with anything but "Well, it depends...", then the tax preparer probably misunderstood their question.

Roth conversions are highly beneficial to taxpayers who expect to be in the 15% or higher Fed bracket after retirement AND who are in the 15% bracket at the current time. It's also very important that they be done before beginning to draw Social Security in most cases. There are interesting tax management strategies for someone who has sufficient income in retirement to enable them to balance regular IRA/401(k) withdrawals with Roth withdrawals to meet their living expenses with the smallest tax haircut. Roth conversions at the right time and in the right amounts also help these taxpayers to avoid unnecessary taxes due to MRD's if they are not needed for living expenses. But having said all that, I can only think of a few very special situations in which someone should convert ALL their qualified money to Roth. Any financial advisor or banker who gives that sort of advice is way out of line.

I was fascinated by the reasoning and the apparent IRS position on this. I've never run across a 1099-C for cancellation of medical expenses, but if I had I would not have not come to this conclusion. I would have assumed that the excludable portion of the forgiven debt under Section 108 would only have been the tax-deductible amount after the 10%/7.5% haircut, and then probably only if the client itemized. I would have been totally off base on several levels.

Interesting article for spare-time reading: http://www.forbes.com/sites/anthonynitti/2016/06/06/john-oliver-buys-and-forgives-15-million-in-medical-debt-but-is-the-forgiveness-taxable/?ss=taxes#7f89131929a6

Thanks for all the additional replies. The trust is ending because the beneficiaries want to simplify their lives. Costs are not worth maintaining the trust, in their opinion. All beneficiaries are in agreement to end the trust.

I vote letter. Depending upon the amount involved, I might even pay the $12 for express mail, just to document when the reply & check copies were mailed in.

Thank you Sara. That's very helpful and a big relief.

Friday afternoon question, since my mind is elsewhere. Husband and wife own residential rental property with $50K cost basis but appraised at $200K in 2002. She dies later in 2002 and her half goes into an irrevocable trust. So the cost basis for her trust is $100K. Adult son and daughter of the couple are the beneficiaries of the trust. In 2012, the property is transferred to an LLC, owned 50% each by husband and the wife's trust. The LLC files as a partnership, with income/loss being reported by the husband and the trust via their K-1's. In 2014, husband dies. Property appraises at $400K. His will calls for his interest in the property to pass to the same son and daughter as above. Property eventually sells for $400K and the LLC will dissolve. As I see it, the cost basis for the son & daughter is $200K ($100K each) for their share of the husband's interest in the LLC. The son & daughter will report zero gain on each of their their proportional shares of the husband's 50% of the LLC ($200K selling price minus $200K stepped up basis), and the mother's trust will report $100K of long term capital gain ($200K selling price minus $100K in cost basis). Is that correct? Second question - any thoughts on whether the trust can show the $100K of long term capital gain on the K-1's issued to the son & daughter beneficiaries? (Tax will be much lower if the beneficiaries can report the gain rather than the trust). So far I've read lots of confusing stuff on this. Any thoughts or speculations would be helpful.

Well, more new information. I didn't know about the Snipping Tool. Now I've already used it a couple of times. Anybody have suggestions for any more neat features?

Today is Friday May 27. This morning when I came into work, I turned on my computer and began a normal day. But then as I visited this forum it occurred to me this could have been a very stressful & aggravating Friday. As I noted in my reply to your post on Monday of this week, since I had clicked the "x" on the Win10 installation window, the sneaky Win10 install had been scheduled for Thursday night without my knowledge. I only discovered this after running the utility you graciously provided the link for. Since I switch my computer off in the evening, I suspect that when I turned the computer on this morning the Win10 install would have been sitting there waiting to pounce. By the time I made coffee and started trying to work, I would have been bogged down in a frustrating cycle of "what's going on and why?" So again I just want to say "thanks" for the heads up you gave on Monday. Many thanks.

I turn off my computer every evening. When I came in this morning and started it up, it was nice not to have to deal with the annoying Win 10 popup, since I ran the Never10 utility. Thanks very much for that link.

Thanks. I had clicked the "x" in the upper right-hand box this morning (as always) without looking carefully at the screen. Sure enough, when I checked the status, it told me Win 10 was scheduled to be installed this upcoming Thursday. So I went through the extra steps to cancel the upgrade. Now I think I'll run one of the above blockers. Talk about sneaky - this is unforgivable behavior by Microsoft. They really are accountable to no one.

I'm with you. If I have a refund, I made a major planning mistake during the year

Here's the sign I prefer if my office. It covers all sorts of situations. OfficeSign.pdf Although with some clients I occasionally I want to pull this one out:

What I'm going to suggest is unpopular, but here's what I'd probably do. Maybe I'm just feeling overly generous today. I assume he owes about $1,300 based on what you said. Unless it's a terribly complicated return you are best served to get rid of it. I'd print out the return and mail it to him via certified mail with return receipt. Add a fee to the bill for paper filing if you are inclined to do so, plus a charge for the certified mail/RR charges. I'd include a note that he is incurring about $12 per month of charges (interest plus FTF penalty) on the $1,300 as long as it remains unfiled, but if he doesn't file by Oct 15, IRS will add another $65 per month to the aforementioned. Recommend that he file the return with IRS using the same method you used (certified mail with RR). The certified mail with RR proves he got the return from you, and the letter gives him proper advice on what happens if he delays or doesn't file by Oct 15. Maybe he will pay and maybe he won't, but at least you don't have to think about the situation any longer. If he cheats you out of your fee, at least you'll be able to prevent him from cheating you again in the future. Sometimes the best stress relief is to claim the high ground and move on.

I found another one while tinkering with the keyboard. Here's the expanded list. Type of Formatting Keyboard Shortcut Bold Text Ctrl+B Italic Text Ctrl+I Underline Ctrl+U Strikethrough Ctr+T Bulleted List Ctr+Shift+L (press again to switch to numbered list, etc) Increase Text Size Ctr+Shift+> Decrease Text Size Ctr+Shift+<

Thanks for the link. I'm repeating it here since this reply jumped to a new page: http://windows.microsoft.com/en-us/windows7/using-sticky-notes This opens up even more possibilities for sticky notes.

I also noticed that it's necessary to scroll down a ways in the "All Program" list before seeing "Accessories". Even though it begins with "A", it isn't at the top of the list. I think that's because regularly-used individual programs are at the top, then you need to scroll down to start looking at folders. The "Sticky Notes" program is just one of many application inside the "Applications" folder.

Looks like I am the only person who didn't know about this feature. Thanks for all the great additional tips Judy. I'm storing them on a sticky note.

I was having some work done on my computer by AVG today, and I discovered something I didn't know existed. (I'm running Windows 7 on this computer.) The technician kept putting an electronic sticky note on the screen as he was working & making notes on it. It looked just like a regular paper sticky note. Then he would close the sticky note when he finished that task. When I asked about it, he showed me where it is in "Programs" and he said it is a standard feature. Maybe I'm just the last one to the party, but I never knew this existed. I've been playing around with it and so far I've been able to open the sticky note in every program I run on this computer. Does anyone else use this very much?

The "don't appear to be too trusting of each other" part of your reply is definitely a red flag. All the more reason to do everything strictly by the book.

Interesting. I think I'll start showing my occupation as "Accountant (Semi-Retired) (Marginally Profitable)" and see what happens. Will let everyone know.

Well, you clearly crossed the line between preachin' and meddlin' with that sly grin.