Real Estate Dealer

Today TaxMama hears from David in the TaxQuips Forum, who defines a dealer in real estate as someone who sells a single property for profit, as long as the intent to act as a dealer to real estate is present.”

Dear David,

You tell us that IRC 453(l)(1)(B) defines a dealer disposition as:

Any disposition of real property which is held by the taxpayer for sale to customers in the ordinary course of the taxpayer’s trade or business

Are you right that one property would qualify?

Perhaps. Perhaps not. Here’s an interesting quote from an article by Cali Zimmerman for NuWire Investor:

Real estate dealer rules can get a bit murky. In fact, “[t]he problem is so severe that, according to the Fifth Circuit Court of Appeals, ‘if a client asks you in any but an extreme case whether, in your opinion, his sale will result in capital gain, your answer should probably be, ‘I don’t know and no one else in town can tell you’’ (J.D. Byram, CA-5, 83-1 USTC para. 9381, 705 F. 2d 1418),” according to The CPA Journal.

The distinction between investor, landlord and dealer is important.

• As an investor, all the expenses are capitalized. The gains are capital gains.
• As a landlord, fixing up a property to rent out, the rental income is passive. The gains are capital gains, except for the depreciation.
• As a dealer, not only do you not get capital gains treatment, but the income and profit are self-employment income, subject to 15.3% self-employment taxes.

According to George Saenz in a BankRate.com article, issues to consider before condemning a transaction to dealerhood include

• Length of time the property is held.
• Number of sales
• Major improvements, like re-zoning and subdividing.
• The owner’s involvement in the sale of the property – are they handling it all themselves (or via their own paid staff), or are real estate agents and brokers involved?

Another issue to consider, that you have not, is the phrase “taxpayer’s trade or business”. Is flipping real estate their main occupation? Is this what they are living on? Probably not.

Generally, you can probably support investor or landlord status if this is not your main livelihood. Do the research properly and you will undoubtedly find case law to support your position if you’re only flipping one or two properties a year, while holding down a ‘day’ job.

And remember, you can find answers to all kinds of questions about real estate dealers, and other tax issues, free. Where? Where else? At www.TaxMama.com.

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Selling Inherited Home

Today TaxMama hears from Jami from California in the TaxQuips Forum, who has this question. “My aunt left me her condo and I have to sell it. The deed passed to me a week after I turned 55. Will the 55 & over real estate rule apply to me when I file my tax return?”

Dear Jami,

Sorry to learn about your aunt dying. But how sweet of her to leave you her condo.

It’s not clear to me what over 55 rule you’re talking about? Never mind.

Here’s how it works. You need to get an appraisal for the value of the condominium on the date of your aunt’s death. That will be your ‘basis’ or tax cost when you sell the condo. It’s possible that the executor of the estate has already done this. Please find out.

When you sell the condo, your gain will be based on the sales price, less selling costs, less the basis at date of death.

If you lived in the condo with your aunt for at least two full years out of the last five years, you will also be entitled to the $250,000 exclusion of profits since the condo was your personal residence. But you probably won’t need that. There won’t be a gain if you sell it in the same year your aunt died. The real estate market isn’t that strong in California these days.

If you didn’t live in it…try to sell the condo THIS YEAR. The capital gain rate for IRS may be as low as ZERO.

California doesn’t have any special rates. So your gain will be taxed at 9.3% or less, depending on your tax bracket. If there is a gain at all?

And remember, you can find answers to all kinds of questions about inherited assets, and other tax issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

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Gain on Real Estate

Today TaxMama hears from Toni in the TaxQuips Forum, who tells us. “I’m doing my own partnership taxes and am confused about entering information. In 2009, I bought, fixed up and sold 2 properties. [and Toni adds lots of details. ] I’m confused because I’ve added the gain twice from Form 4797. What am I doing wrong?”

Dear Toni,

When you are doing a partnership tax return, you should be using tax software. Consider Turbo Tax Business and H&R Block Premium and Business . The tax software will flow the numbers from any form to all the correct places on the tax return. Some numbers flow to more than one form, for a variety of reasons. When preparing partnership returns, some numbers flow to page 1, Schedule K, Schedule L, Schedule M-1 and/or M-2, the K-1s and who knows where else.

Unfortunately, this free TaxMama service is not designed to walk you through the line-by-line preparation of forms. Nor to review your tax return – a good review takes an hour or two.

Also, using Form 4797, there are several potential errors that most people make. Especially when it comes to the recapture of depreciation as ordinary income, computing basis, and how to deal with selling costs and fix-up expenses before sale.

Yes, some of the expenses might go on the Form 8825. Others should be part of basis. However, if these were never really rental properties, if they were properties you bought and fixed up to sell, you would have to capitalize all the expenses, not deduct them. This could be a grave error, with expenses that would be disallowed on audit. And David Toelkes brings up the issue that these properties might be considered inventory – which is an interesting point of view.

Another error is combining properties on one Form 8825. Why would you do that? These are two separate properties with distinct purchase and sale dates and escrows, aren’t they?

The more I think about the implications of the things you’ve written, the more potential errors I am seeing.

And why is this a partnership? You keep saying “I”. Do other people own the properties with you? Frankly, if you have partners, YOU should not be preparing a partnership return yourself. It’s one thing to prepare your own tax return involving purchases, sales and fix up of real estate. You can accept the responsibility for any errors you might make. But if you have partners, are you sure you want to expose them to the errors you’re clearly making this tax return?

Your own personal liability as the preparer of this return could be extensive if it is audited and major errors are found. Your partners would hold you liable for their additional taxes, penalties and interest. Do you really want that?

If you can afford all this real estate, you can certainly afford to invest the few hundred dollars for a qualified, experienced tax preparer. Do it. I don’t want to see you getting into trouble.

And remember, you can find answers to all kinds of questions about real estate, and other tax issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum

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Selling_Inherited_Home

Today TaxMama hears from Jami from California in the TaxQuips Forum, who has this question. “My aunt left me her condo and I have to sell it. The deed passed to me a week after I turned 55. Will the 55 & over real estate rule apply to me when I file my tax return?”

Dear Jami,

Sorry to learn about your aunt dying. But how sweet of her to leave you her condo.

It’s not clear to me what over 55 rule you’re talking about? Never mind.

Here’s how it works. You need to get an appraisal for the value of the condominium on the date of your aunt’s death. That will be your ‘basis’ or tax cost when you sell the condo. It’s possible that the executor of the estate has already done this. Please find out.

When you sell the condo, your gain will be based on the sales price, less selling costs, less the basis at date of death.

If you lived in the condo with your aunt for at least two full years out of the last five years, you will also be entitled to the $250,000 exclusion of profits since the condo was your personal residence. But you probably won’t need that. There won’t be a gain if you sell it in the same year your aunt died. The real estate market isn’t that strong in California these days.

If you didn’t live in it…try to sell the condo THIS YEAR. The capital gain rate for IRS may be as low as ZERO.

California doesn’t have any special rates. So your gain will be taxed at 9.3% or less, depending on your tax bracket. If there is a gain at all?

And remember, you can find answers to all kinds of questions about inherited assets, and other tax issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum

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Loss on Surrender

Today TaxMama hears from Karla in the TaxQuips Forum, with this question. “Is the loss on surrender of life insurance deductible on 1040?”

Dear Karla,

It’s not clear why you would have a loss when you surrender a life insurance policy. Of course, I don’t have much experience in this area.

Chapter 12 of IRS Publication 17 covers IRS rules about the <a

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Ask TaxMama Issue 565 – Thank YOU

Dear Family,

THANK YOU.

Did I remember to tell you just how much I appreciate you – your friendship and support, your comments and even, sometimes, your silences? Well, THANK YOU.

We don’t always remember to show our gratitude or appreciation. So, many years ago, I created a holiday for this very purpose. (You’ll even find mentions of it online) Thanks for All the Gifts Week. Today’s Thank You letter will tell you all about how to use for your own benefit, too.
http://taxmama.com/asktaxmama/happy-thanks-for-all-the-gifts-week/

Last week I told about the new series of courses I am starting to teach with Tom Buck, CPA and Sonya Wilt, EA. We developed these courses in response to the many requests from people who are in tax trouble and need guidance. This is the first phase of the project – training more tax professionals to help you. You – and the Tax Pros can see a sample and overview of the new series by scrolling down to the bottom of this page and selecting “IRS Practice Series: Overview of Collection Issues” – price = $0!
http://www.cpelink.com/teamtaxmama

The second phase of the project is develop a resource where people in trouble can meet and help each other. Having kind of a hot-line for folks who’ve all faced horrible tax messes due to the nastiness of divorce, the new business quicksand of payroll taxes and taxes confusing beyond words, and just plain tax anxiety overload! Sonya, Eva and Tom (SET – hey, how do you like that acronym?) are going to provide complimentary resources for you, a place where you can congregate anonymously with others and compare notes and share ideas and successes – and there will be some inexpensive hands-on courses to help you fill out the forms yourself when you simply cannot afford to pay the thousands that tax professionals must charge you for the intense number of hours involved in collections defense. The graduates of the Tax Practice Series (above) will be able to help you – we’ll encourage them to donate some hours of Pro Bono guidance. There’s not much at the new site – but Tax Debt Anonymous coming this fall.
http://www.taxdebtanonymous.com/

Tax Holidays are ending, but there may still be some for a while. Check to see if you have back-to-school savings in your state.
http://taxmama.com/tax-quips/tax-holidays-coming-up/

This month’s MarketWatch column will help you determine if you owe extra taxes because of this year’s Making Work Pay Credit. Look for it next week. Or…I might just write about something new and interesting that we learn at the IRS Tax Forums – and tell you about the Making Work Pay Credit elsewhere.
http://www.marketwatch.com/Journalists/Eva_Rosenberg

Other interesting articles on MarketWatch Tax available to you include Amending Your Tax Returns to Get Refunds; Can’t Pay Your Taxes – Tips on what you can still do…and more.
http://www.marketwatch.com/taxes

EA Class News
Wow! We finished up Part 2 last night. Everyone was jubilant and ready to party. In fact, some will join me in Las Vegas next week to do just that. Lots of people have been passing Part 1. A few people have gone ahead and tackled Part 3 – and passed! Our first brave soul, Greg, took Part 2 and PASSED!

The Part 3 class will start on August 31 when we return.
www.irsexams.com

We have new FALL SPECIAL price, to give you Part 3 live and Self-Study on Parts 1 and 2
http://irsexams.com/registration/

And remember, you can get a 10% discount on the EA Class if you register for TaxMama’s Family first.
http://taxmama.com/membership/family-membership/
The discount code can be found in the Family Look-Ups resource.
http://taxmama.com/family-member-resources/
Upcoming Events

Upcoming on CPE LINK – with CPE for CPAs, EAs, and more
http://taxmama.com/earn-cpe-without-leaving-the-office/

September 1 at 12:00pm PT
Doing Tax Research Online for Free
Identify reliable sources of tax information,
how to use them and understand them.

September 15 at 10:00 PT – Roger B. Adams, EA (with minor assist from TaxMama)
Understanding Tax Treaties
Learn the fundamental principles of the purpose and application of tax treaties. Why should you care? Because there are over five million Americans living outside of the U.S., over two million of whom live in the Western hemisphere (principally in Canada and Mexico).

The IRS Practice Series
Team taught with Eva Rosenberg, EA, Tom Buck, CPA and Sonya Wilt, EA
Sep 13, 9:00am – 10 Steps to Release IRS Levies on Paychecks or Bank
Oct 8, 9:00am – 10 Steps to Resolving Collection Issues
Nov 1, 10:00am – Hands-on Collections Workshop
Dec 7, 10:00am – 6 Simple Steps to an Offer-in-Compromise (form 656)
Dec 10, 9:00am – The Un-agreed Collection Alternatives and Appeals

http://www.cpelink.com/teamtaxmama

SELF-STUDY at CPE LINK:

>Homebuyers Credits for Tax Professionals
The specific laws related to your clients. How to get it rigth the first time. What to watch out for.
And how to overcome IRS Rejections.

>IRS Practice Series: Overview of Collection Issues – Price = ZERO:
This on-demand webcast provides a broad overview of the collections process. From preparing the Power of Attorney – IRS Form 4868, to freezing the collection activity, to Offers-in-Compromise and Appeals, the course will explore the numerous collection issues a practitioner may encounter and lay the ground work for the IRS Practice Series. Topics will be covered in more detail in the dozen courses of The IRS Practice Series – leading to a Tax Mediary (CTM) Certificate upon completion of the series.
http://www.cpelink.com/teamtaxmama
Other TaxMama News:

At Equifax this week, you learn about the new Tax Increase for Wealthy Americans: Will You Pay More? Ilyce Glink tells you How to Save More Money at Home. Dan Solin gives you 10 Golden Rules All Investors Should Follow. Linda Rey tells you all about Insuring a Vacant Home. Equifax Expert Diane Moogalian gives you profound about about – Credit Report FAQs: What Do I Do When a Family Member Dies?
http://www.equifax.com/blog/tax/en_ff
This week’s AccountingWeb.com blog discusses the very unpopular new Preparer Licensing rules.
http://www.accountingweb.com/blogs/accountingweb/talk-taxmama
These rules are designed to protect taxpayers like you – so pay attention to what your preparers are saying. They are talking about it everywhere – passionately.
http://taxmama.com/forum/taxquips/new-irs-rules-for-tax-preparers/

In Money Funnies this week we give you some sarcasm about leglislative brilliance.
http://taxmama.com/category/asktaxmama/money-funnies/

In IRS News, we learn that IRS is doing away with paper payment systems as much as they can. Businesses with regular payment requirements, like payroll taxes, estimated payments, etc. will all have to go electronic next year. IRS provides explanations and alternatives. TaxMama gives you a tool to use for last-minute e-payments if you have to make a payment before your EFTPS account is set up.
http://taxmama.com/category/asktaxmama/irs-news/
In TaxQuips this week we start the week with Bill, who is really angry about the new rules for tax professionals. Look at what everyone else has to say about this – passion! Same-sex Marriage is in the news again. TaxMama explains the tax issues. Chris challenges TaxMama to provide tax-savings tips for wage-earners. I meet the challenge! We end the week with Karen whose father died. She wants to know if the settlement she’s getting is taxable.
http://taxmama.com/category/tax-quips/
Have you always wanted to understand how a Balance Sheet works? Or how to do a tax return when you work in two or more states? Bruce McFarland explains, at the TaxQueries blog!
http://blog.taxqueries.com/author/brucemcfarland/
http://blog.taxqueries.com/

As always, we love your feedback, opinions and ideas.
You are what makes all this fun – and interesting!

Please use the Comments link online.
http://taxmama.com/asktaxmama/ask-taxmama-issue-565

TaxNerd gear makes a bold statement year-round.
It helps attract the opposite sex!
Shop at www.taxnerd.net or http://www.zazzle.com/taxmama*

Hugs from your favorite TaxNerd,
http://www.zazzle.com/taxmama*

Eva Rosenberg, EA

Your TaxMama® is watching…out for you.

www.TaxMama.com
www.snurl.com/homebiz-tax
www.TaxMama.com/TaxQuips
www.IRSExams.com
www.TaxNerd.net

==========================————————————————————-
TAX CALENDAR
http://taxmama.com/tax-calendar-2010/————————————————————-
08/31/2010 Time for businesses to consider setting up retirement plans
09/15/2010 Partnership Returns Due- FINAL DEADLINE
09/15/2010 Corporate Returns Due- FINAL DEADLINE
09/15/2010 S Corporate Returns Due- FINAL DEADLINE
09/15/2010 Estate & Trusts Returns – Final Deadline; Bankruptcy fillings use the same form
09/15/2010 Individuals, Farmers & Fishermen Pay 3rd Quarter Estimated Tax Payment
09/15/2010 Corporations – 3rd Quarter Estimate Tax payment Due
09/15/2010 Estates & Trusts 3rd Estimated Tax Payment
09/15/2010 Deadline for Corporations and Partnerships to fund SEP-IRAs for previous year.
09/30/2010 Last day to establish SIMPLE plans for current year
09/30/2010 Time for businesses to consider setting up retirement plans
10/15/2010 Net Operating Loss – Eligible Small Business carry back loss
10/15/2010 Personal Returns – FINAL DEADLINE————————————————————-
From TaxMama® to You!————————————————————-

Follow TaxMama®’s Tweets – http://twitter.com/TaxMama

You are invited to put a TaxQuips Widget on your phone, social networking page, website, or… You’ll get the TaxQuips as soon as they published – long before they are distributed in by e-mail. It’s a nifty gadget. Just pick up the code and paste into your site or application.
http://www.widgetbox.com/widget/taxmamas-taxquips-daily-tax-podcasts

Download TaxMama’s 2010 iphone Tax Calendar. My gift to you.
http://snurl.com/taxcalendar

Never miss a tax deadline again!
The customizable tax calendar is here.
Add or Remove dates. Add your own reminders – get alerts.
http://snurl.com/itaxmamapro

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Making IRS Payments

Proposed Regulations Expand the Use of Electronic Payment System and Discontinue Paper Coupons Next Year

WASHINGTON — Consistent with a Financial Management Service initiative announced in April of this year, the IRS today issued proposed regulations to significantly increase the number of electronic transactions between taxpayers and the federal government.

The proposed regulations (REG 153340-09) would eliminate the rules for making federal tax deposits by paper coupon because the paper coupon system will no longer be maintained by the Treasury Department after Dec. 31, 2010. The proposed regulations generally maintain existing rules for depositing federal taxes through the Electronic Federal Tax Payment System (EFTPS).

Using EFTPS to make federal tax deposits provides substantial benefits to both taxpayers and the government. EFTPS users can make tax payments 24 hours a day, seven days a week from home or the office.

Deposits can be made online with a computer or by telephone. EFTPS also significantly reduces payment-related errors that could result in a penalty. The system helps taxpayers schedule dates to make payments even when they are out of town or on vacation when a payment is due. EFTPS business users can schedule payments up to 120 days in advance of the desired payment date.

Information on EFTPS, including how to enroll, can be found at www.eftps.gov or by calling EFTPS Customer Service at 1-800-555-4477.

Some businesses paying a minimal amount of tax may make their payments with the related tax return, instead of using EFTPS. More details regarding taxes required to be deposited using EFTPS, dollar thresholds and other specific requirements are in the proposed regulations.

[TaxMama Note” Be sure to take a look at this last-minute payment option if you have not yet set up our EFTPS account.

Additional Information:

• Publication 4132, which explains the process of enrolling and paying via the Internet
• Publication 966, The Secure Way to Pay Your Federal Taxes for Businesses and Individuals
• Publication 4169, Tax Professional Guide to Electronic Federal Tax Payment System
• Publication 4320, EFTPS Toolkit, which contains PDF and descriptions of EFTPS educational materials and their intended target audience, and is for use by tax professionals and financial institutions to assist in educating their clients on the benefits of EFTPS.
• Publication 4275, Express Enrollment for New Businesses
• Electronic Payment Options Home Page

• Ask TaxMama :: Where taxes are fun and answers are free
• www.TaxQuips.com :: The number ONE free tax podcast online
• IRS News :: Where you can comment on this

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The Sheer Genius of Politicians

In a bid to stem taxpayer losses for bad loans guaranteed by federal housing agencies Fanny Mae and Freddy Mac, Senator Bob Corker (R-Tenn) proposed that borrowers be required to make a 5% down payment in order to qualify.

His proposal was rejected 57-42 on a party-line vote because, as one Senator explained, “passage of such a requirement would restrict home ownership to only those who can afford it.”

I can’t add anything to this.

Courtesy of Blakely Sanford, EA in San Diego, CA

Please remember to send us your humor.
Clean jokes preferred.

<!– —>Read more Money Funnies here:
http://taxmama.com/category/asktaxmama/money-funnies/

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• www.TaxQuips.com :: The number ONE free tax podcast online
• Money Funnies at TaxMama.com :: Where you can find more humor

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Happy Thanks for All the Gifts Week

At first glance, what things come to your mind when you see the name of this holiday? Do you see brightly wrapped packages with glittery bows? Do you see an envelope with a card, but more importantly, a generous check?

Or do you see a caring friend or relative stepping in to help when you’re overwhelmed? How about an acquaintance or mentor who takes time out of their busy day to guide you through a problem? Then, there’s the clerk at the dry cleaners who went out of her way to get you something on time – or the service manager at your auto place who fixed things you didn’t even realize could have killed you. What about the teacher who spent extra time putting together interesting lesson plans so you’d want to learn? Remember the client or customer who came by with gift because they were so pleased with your work? What about that grocery clerk at the end of the day who smiles and banters with you and lightens your load?

Taken for Granted?

Often, you don’t think about the family members who are always there for you. The people who call you regularly so yo never feel you’re alone. Or the boss who gives you regular paychecks, on time, every month – or the bonuses that you feel are your right! Do you think about the IRS agent or other tax agent who went out of their way to help get you out of a tight fix? Have you thought about your co-workers who cover for you when you’re late, or give you a hand with your projects? How did you thank your spouse, lover or parents when they made sure you had food in the fridge, utilities always operational, clean clothes. In fact, did you remember to thank your parents for all that they did? Your home, your education, perhaps even your car?

When was the last time you said “Thank You” to all the people who make your life so good?

Often, you mean to, but time seems to pass so quickly, have you noticed? All of sudden, ‘I’ll write that card next week’ has turned into two or three months. If you send it now, it would be embarrassing. Or would it?

Oodles of Gift Occasions

Thanks For All The Gifts Week was created by me, Eva Rosenberg, at this time of year for several reasons.

First, By the end of August, you’ve lived through Valentine’s Day, Purim, Easter, Passover, Secretary’s Day, Mother’s Day, Father’s Day, graduation, Fourth of July, and your country’s annual celebration, most birthdays, many weddings and showers, lots of new babies, lots of successes and celebrations.

By this time of the summer, if you’ve had the luxury of having one (say a big THANK YOU for that privilege), your enthusiasm and energy has wilted in the heat and the humidity. School hasn’t started yet, neither has the new job. The High Holy Days of the Jews and aren’t due for a little while. It’s still a long way to Thanksgiving, Christmas and New Years…when, of course, you want to position yourself to get more gifts, right?

Second, one of the lovely traditions of Judaism is that before the High Holy Days, people are supposed to seek forgiveness from those they’ve wronged or hurt. But there is no tradition for you to remember to say “Thank You” to those who always treat us well.

Third, doing something nice, for no apparent reason, will make both you and recipient of your thanks feel great. (And since you’ve been feeling guilty for neglecting them for so long, just imagine the burden this will lift from your shoulders!) After all, there is never a bad time to do something nice, is there?

For Every Thing There is a Season

Well, that makes this the perfect time to catch up on all those ‘Thank You’s.’

The people you send them to aren’t expecting these expressions of gratitude. They’ll be charmed and delighted to hear from – when you don’t have your hand out. In fact, they may have been harboring resentments towards you because of all the things they’ve done for you, that you took and took as though you were simply entitled. (Read Dear Abby and Ann Landers sometimes – you’ll see some of the pain and anger expressed by parents, aunts, uncles, grandparents,…)

This is also a great time to catch up on those birthday gifts you meant to send out on their birthday. Ok, so it’s three, or six months late. Won’t that make them like it even more? It could even revive relationships!

Good Pranks

In fact, when I was in high school, I had a boyfriend whose birthday was in December. I missed it. And later, we faded apart. In the middle of the summer, I saw something that reminded me of him. So, I wrapped it up and sent it off with a birthday card. Naturally, he called, bewildered about my timing. It opened a door between us and we got closer than we ever had. In fact, it led to a marriage proposal. (Only he was just one evening too late.)

Over the years, I’ve done this to people, even people I saw every day. They’re always surprised, think I’m nuts, but go about feeling great all day. You never know when an unexpected card or gift can change a person’s life.

Buried Treasure

So, take this week to think about the people who’ve made you feel good all year. Send them a card, a note or a letter. You could send them a virtual card, but it has no permanence. Give them something they can save and cherish.

Maybe, like me, they’ve kept every personal card and letter they’ve ever received. To me, those are my most precious treasures. They are the history of all the love in my life – from friends, family, lovers, clients, and especially my husband…who seems to have squirreled away all the cards I’ve given him, too. I fell in love all over again when I found his stash one day.

And to you, my friends, I say thank you for reading my Ask TaxMama columns every week or my TaxQuips columns every day – my occasional Tweets. I thank you for your notes and comments, even when you disagree with me.

Just hearing from you spices up my day!

With warmest gratitude,

Eva Rosenberg.

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• www.TaxQuips.com :: The number ONE free tax podcast online
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Is This Taxable Income

Today TaxMama hears from Karen in California in the TaxQuips Forum, who tells us. “My father died from lung cancer that was determined to be caused by job conditions. My brother and I may be receiving a one-time survivors benefit compensation check for a large amount of money. Will this be taxable income?”

Dear Karen,

How awful about your father! I doubt that any money can compensate you for losing him.

Will your benefit be taxable? Probably not.

But I would take the paperwork to a good, local tax professional and have someone read the information to see what the money is really paying for. Without reading the documentation, it’s impossible to be certain.

When it’s for lost income – that’s taxable.

When it’s for pain and suffering as a result of a physical issue (like death and illness), it’s not taxable.

There may be other issues in-between.

Odds are, you won’t be facing taxes. But please check, just to be sure.

You and your brother take care of each other. OK?

And remember, you can find answers to all kinds of questions about death-related compensation, and other tax issues, free. Where? Where else? At www.TaxMama.com.

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