You probably think you already know the value of your business. After all, who would know it better than the owner? The reality is, however, that there are several factors that impact the value that many business owners are unaware of. In addition, the emotional investment one has in his business may cause him to underestimate risks or overestimate cash flows. Why is it important to know the true value of your business? Here are a few compelling reasons. [Read more…] about Do You Know the Real Value of Your Business?
ESTATE, TRUST, GUARDIANSHIP
Gifts in Contemplation of Death: The Burden of Proof is on You
An important and commonly misunderstood law regarding gift giving prior to one’s death was recently highlighted in a NJ case. As background, when a child inherits from a parent there is no New Jersey inheritance tax, whereas there is a tax if any other relative or friend inherits. As a result, if one gifts an unusually large amount of money within three years of his or her death to someone other than a child, the possibility that the gift was made to avoid paying state inheritance tax comes into question. A common misunderstanding is that unless there is reason to assume the giver was aware of his impending death the transfer is not a taxable one. In fact, the truth is quite to the contrary. [Read more…] about Gifts in Contemplation of Death: The Burden of Proof is on You
Supporting a Relative? You May be Entitled to Tax Breaks
Supporting your financially distressed relative is a commendable act that can also result in significant tax savings. If the recipient meets all of the criteria required to be deemed a “qualified relative”, you can benefit in several ways. First of all, the qualified relative can be claimed as a dependent and you can therefore take his personal exemption ($3,750 in 2011) on your return. Another benefit is that you can add his medical expenses to yours for the medical expense itemized deduction. This is especially important for those whose medical expenses do not exceed the 7.5% of AGI (Adjusted Gross Income) minimum threshold to deduct medical expenses. Even if you don’t itemize, you can still benefit by filing as head of household instead of as single, resulting in a much greater standard deduction (in 2011 the standard deduction was $5,800 for single and $8,500 for head of household). The criteria to be a “qualified relative” are as follows: [Read more…] about Supporting a Relative? You May be Entitled to Tax Breaks
Got An IRA? Here’s a Tip That Can Save You NJ Income Taxes
IRA Distributions: Federal VS NJ
Contributing to a traditional IRA reduces your federal income and, as a result, when you take a distribution down the road it’s fully taxable. While the distribution is fully taxed on the federal level because of this previous tax benefit, what many overlook is the fact that the distribution is not necessarily fully taxable to New Jersey. When the contributions to the traditional IRA were made, they were not deductible for NJ. [Read more…] about Got An IRA? Here’s a Tip That Can Save You NJ Income Taxes
Do I Have To Report My Foreign Inheritance?
While the recent IRS crackdown has increased awareness of filing requirements for foreign assets and income, the requirements regarding foreign inheritances are much less well known. As a rule, there is never a recipient income tax liability on foreign inheritances. Estate tax (for which the estate is liable), is a different matter. If the person leaving the foreign inheritance is a U.S. citizen then it would be subject to estate tax. If not, there is no estate tax liability. [Read more…] about Do I Have To Report My Foreign Inheritance?
Forgot to File a Gift Tax Return? IRS Letter May Be On Its Way
Did you transfer your home or property to your children? Even if they weren’t technically gifted, did you “sell” them for a dollar? If you failed to file a gift tax return, there may be an unwelcome IRS letter arriving in your mailbox soon. The IRS is currently scrutinizing real estate transfers in 15 states – yes, New Jersey and rest of tri-state area included – with additional states likely to be added. It has found that 60-90% of gratuitous non-spousal real estate transfers were not reported on gift tax returns. Perhaps you are thinking “OK, so I’ll be more careful about this in the future but unless the IRS audits me I’m fine”-think again! If you make future taxable gifts requiring the filing of gift tax returns, those returns must disclose your prior gifts. If you do not include a gift from a prior year, the future return is false. [Read more…] about Forgot to File a Gift Tax Return? IRS Letter May Be On Its Way