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LITIGATION SUPPORT

Cancellation of Debt Income- Adding Insult to Injury

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Your rental property went down in value so much that it was worth less than your $500,000 mortgage, so you walked away from the property. Let the bank enjoy it!

You pat yourself on the back for your clever move until the following January. January is 1099 time and you get a 1099-C from the bank stating you have $500,000 of cancellation of debt (COD) income

Your cronies at the club tell you that you have to pay US and NJ income tax on the $500,000 at ordinary income tax rates, not the favorable capital gains rates. You calculate that your brilliant move will cost you $200,000.

HELP! [Read more…] about Cancellation of Debt Income- Adding Insult to Injury

New Additions to IRS “Fresh Start” Program

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The IRS “Fresh Start” initiative was introduced last year as a response to the inability of struggling taxpayers to pay their taxes. In 2012, the IRS is significantly expanding the program with two major additions.

First, there will be a new “failure-to-pay penalty relief” for two categories of taxpayers:

  • Wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17 deadline for filing a federal tax return this year
  • Self-employed individuals who experienced a 25 percent or greater reduction of business income in 2011 due to the economy [Read more…] about New Additions to IRS “Fresh Start” Program

How Litigation Affects Your Taxes

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You have money coming to you from a pending law suit, but you’re wondering whether Uncle Sam will want a share of it. The answer varies, depending on various factors such as how you were damaged, how the case is resolved and more. Here are a few facts you should know before negotiating a settlement. [Read more…] about How Litigation Affects Your Taxes

NJ Court Clarifies Contingent Interest for Estate Asset Valuation

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NJ Inheritance Tax is computed on the clear market value of property transferred, valued at the date of death. In the Estate of Claire Schinestuhl,the NJ Division of Taxation determined that the shares of a publicly traded company inherited by the decedent, Claire, from her brother, Prescott Schinestuhl must be separately valued as of the date of Claire’s death and not about two years later when the sale proceeds of the shares were distributed by her brother’s estate.  [Read more…] about NJ Court Clarifies Contingent Interest for Estate Asset Valuation

Form 8938: Statement of Specified Foreign Assets

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The IRS has added Form 8938 to the individual 1040 tax return, taking another step to collect tax on unreported interest on overseas accounts. In addition to the risk of a third party disclosing the taxpayer’s foreign accounts to the IRS, this form now puts an affirmative duty on the taxpayer to disclose his foreign accounts. The sanctions for not completing and attaching the form (when required) include numerous severe civil penalties and potential prosecution followed by a term in federal prison. If you fail to file Form 8938 or fail to report a specified foreign financial asset, the statute of limitations for the tax year may remain open for all or part of your income tax return (Form 1040) until three years after the date you filed Form 8938. [Read more…] about Form 8938: Statement of Specified Foreign Assets

NJ Tax Refund for Madoff Victims’ Phantom Income

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A New Jersey Tax court has ruled that investors in Bernard
Madoff’s Ponzi scheme are entitled to refunds on state taxes paid for gains
that never existed. John and Cathy Dalton, a Middletown couple who invested
nearly $700,000 with Madoff, filed amended New Jersey returns for 2005, 2006
and 2007. They had paid taxes on more than $206,000 in capital gains and almost
$37,000 in dividends that proved to be fictitious. They recalculated the taxes
payable, and requested a $5,026 refund. On October 1, 2009, the Division of
Taxation denied the refund, despite the fact that the capital gains and
dividends were non-existent.  Their argument was that since the Daltons had withdrawn a portion of their investment in [Read more…] about NJ Tax Refund for Madoff Victims’ Phantom Income