11 Temmuz 2012 Çarşamba
10 Temmuz 2012 Salı
8 Temmuz 2012 Pazar
Copyright Math and the U.S. Entertainment Industry
Can anyone trust the U.S. entertainment industry to be honest with the business numbers they make public?
We've all heard of Hollywood's accounting frauds, where even those small movies with tiny production budgets that unexpectedly go on to become huge blockbusters making millions and millions of dollars at the box office somehow never generate a profit.
But what about the other things the moguls of the entertainment industry say about their business? Things like the number of jobs and the amount of money they say are lost every year in their industry because of the damage done by copyright piracy?
Rob Reid takes on the entertainment industry's "©opyright Math™" in the following TED presentation (HT: Barry Ritholtz):
Some quick notes:
- The diameter of a penny is 0.750 inches (19.05 mm). It takes a lot of pennies to get to Mars!
- If Hollywood and the music industry are hurting in their pocketbooks from copyright piracy, it isn't showing up in the amount of GDP they generate in the U.S. every year. See the Congressional Research Service report below.... Wyden Memo from CRS on Movie Industry
- Nor does it seem to be affecting the government's count of the number of people who work in the motion picture and sound recording industry in the U.S. each year in any meaningful way.
All in all, it appears that the answer to the question we asked at the beginning of this article is simply "No."
Forecasting GDP for 2012Q2
Now that the U.S. Bureau of Economic Analysis has released its third estimate of GDP in the first quarter of 2012, we can now officially project where U.S. GDP for the second quarter of 2012 will be when it is nearly finalized three months from now!
Our chart below shows the forecast, expressed in terms of the inflation-adjusted chained U.S. dollars of 2005:
Going by our preferred Modified Limo forecasting technique, we see a 50% probability that real GDP in 2012-Q2 will be over $13,572.5 billion, and a 50% probability that it will be under that level.
We'll also give the following odds that it will be between the indicated values (again, in terms of constant 2005 U.S. dollars):
- A 68.2% probability of being between $13,367.7 billion and $13,649.9 billion.
- A 95.0% probability of being between $13,226.6 billion and $13,790.9 billion.
- A 99.7% probability of being between $13,085.5 billion and $13,932.0 billion.
Looking at our forecast for 2012-Q1 from three months ago, where we had forecast that GDP in the first quarter of 2012 would be finalized at or near a mid-range value of $13,508.8 billion in terms of 2005 U.S. dollars, we were off the BEA's third (and for now, final) estimate of $13,491.4 billion by 0.13%.
Testing a Hypothesis for New Jobless Claims
Do high gasoline prices affect the number of layoffs in the United States?
We're going to put our empirical observation-backed hypothesis that "Yes. Yes They Do" to the test during the next several weeks to see if we can get a solid answer to that question!
Here, we're defining "high gasoline prices" as being when the average price of a gallon of regular (unleaded) gasoline in the U.S. exceeds $3.50 per gallon in terms of 2011-12 U.S. dollars, as reported by the U.S. Energy Information Agency. We're also measuring the number of layoffs in the U.S. by the number of seasonally-adjusted initial unemployment insurance claims that are filed each week, as reported by the U.S. Department of Labor.
The test we're about to run hinges on an event that occurred in the week between 18 June 2012 and 25 June 2012, when the average price of gasoline in the United States fell back below the $3.50 per gallon mark.
Here, if our hypothesis holds, we'll see a shift in the trend for new jobless claims being filed some two to three weeks later, as employers react to this positive development which reduces their cost of doing business and also increases the disposable income of U.S. consumers after their current pay cycle ends and their next pay cycle begins.
Since most people in the U.S. are paid on a weekly, biweekly, or semi-monthly basis, that means a two to three week delay between when an event affecting employee retention decisions takes place to when it actually shows up in the weekly data for new jobless claims in the U.S.
After that, it can take several weeks longer to confirm the change in trend. Speaking of which, our chart below shows the previous two trends, along with the current trend:
We could see a shift begin as early as this week or next, however we expect it will be several weeks beyond that before we could confirm such a shift in the trend, given the effect the Fourth of July holiday will likely have on data reporting and the BLS' continuing issues with upward revisions to their initially-reported data in subsequent weeks.
Mapping the Criminal Ecosystem
What do lions, coyotes and L.A. gangbangers have in common?
Would you believe that the same math that describes how predators in the animal kingdom stake out their territory can be used to identify the boundaries between the turf claimed by rival gangs? The evidence comes from the UCLA Newsroom:
A mathematical model that has been used for more than 80 years to determine the hunting range of animals in the wild holds promise for mapping the territories of street gangs, a UCLA-led team of social scientists reports in a new study.
"The way gangs break up their neighborhoods into unique territories is a lot like the way lions or honey bees break up space," said lead author P. Jeffrey Brantingham, a professor of anthropology at UCLA.
Further, the research demonstrates that the most dangerous place to be in a neighborhood packed with gangs is not deep within the territory of a specific gang, as one might suppose, but on the border between two rival gangs. In fact, the highest concentration of conflict occurs within less than two blocks of gang boundaries, the researchers discovered.
The math the UCLA researchers used is the Lotka-Volterra equations, which were developed in the 1930s to describe how predator and prey species interact over time. The UCLA press release explains what the math describes:
The equations are based on the principle that competition between groups determines where the boundaries between rivals form, and even a tiny amount of competition is enough to cause territories to form.
"What's at work is a competitive balancing act where both gangs are trying to keep their rival as far away as possible," Brantingham said.
The model the researchers derived from the equation predicted that gang boundaries would form midway between the home bases of rivals and would run in a perpendicular line between them.
Seems pretty straightforward and simple, right? Let's see how the study fared when real world data from Boyle Heights, an area within Los Angeles' Police Department's Hollenbeck division, was considered:
The team looked at 13 gangs in the 6.5-square-mile area of Boyle Heights, a densely populated neighborhood on Los Angeles' east side that is bounded by three freeways. Gang activity tends to be confined within the freeway-bounded area.
To determine the home bases for each gang, the researchers relied on a prior study by Tita and his UC Irvine colleagues. The locations of the home bases ranged from a specific street corner to someone's house, a neighborhood business or any other specific location where a gang gathers most frequently.
Using the Lotka–Volterra formula, Brantingham's team drew boundaries between the known gangs. Unlike law enforcement's maps, the resulting effort did not produce gang boundaries that neatly followed streets. Instead, the boundaries ran through the yards of homes and businesses and through alleyways. When the boundaries did land on streets, they were as likely to crisscross them as follow them.
Here's an example of the map UCLA's social scientists produced (excerpted from here):
Note how different it is from CNN's 2003 map of the area's gang territories, which closely follows streets.
Now, mapping out where gang crime actually occurred in the years from 1999 through 2002:
Using police records, the researchers then mapped 563 known gang crimes that occurred between 1999 and 2002 and have been attributed by police to at least one of the 13 gangs. To their surprise, most of the crimes fell on the borders that the model laid between gang territories. When crime locations did deviate from the borders, they did so in a configuration that was consistent with the model. For instance, the theory predicted that 58.8 percent of the crimes would occur within one-fifth of a mile of the border between two gangs — or just under two blocks — and 87.5 percent within two-fifths of a mile of the border — or just over three blocks. Overall, 99.8 percent of crimes could be expected to occur within one mile of the border, according to the theory.
Reality turned out to be pretty close to the theory:
In fact, the team found that 58.2 percent occurred within two blocks of the border and 83.1 percent within just over three blocks of the border; in total, 97.7 percent of the crimes took place within one mile of the border between gangs.
It's like economics in a way - the most significant activity happens at the margins. But here, the typical transactions involve assault and murder. The areas closest to these margins, or boundaries between territories controlled by different gangs, account for over half of all gang crime recorded between 1999 and 2002!
More interestingly though, we find that its the competition between adversaries that defines where the boundaries between them form, rather than vice versa.
Elsewhere on the Web
Jeff Brantingham, one of the study's authors, has put other mathematical models to work to map out areas where burglars are most likely to be operating. The early results suggest that applying the math to direct police patrols may have reduced burglaries in some areas of Los Angeles by as much as 25%.
References
Brantingham, P. J., Tita, G. E., Short, M. B. and Reid, S. E. (2012), The Ecology of Gang Territorial Boundaries. Criminology. doi: 10.1111/j.1745-9125.2012.00281.x. 25 June 2012. [Ungated Version: Adaptation of an Ecological Territorial Model to Street Gang Spatial Patterns in Los Angeles.]
Inventions for Everything
Having previously featured the best mousetrap ever, which was invented in 1881, we decided to see if there were any modern day patents that might compare in creativity.
And then we found the invention we're featuring today.
The invention we're featuring today is real. Really. You can look it up at the U.S. Patent and Trademark Office, under its patent number 6,293,874, which was issued on 25 September 2001, if you don't believe us.
It, as it happens, is, well, there really aren't any words we can use to describe it, so we'll let its inventor, Joe Armstrong of Lenoir, Tennessee, explain it via the patent's abstract, which describes, and we kid you not, a "User-operated amusement apparatus for kicking the user's buttocks". Really. We can't make this stuff up....
An amusement apparatus including a user-operated and controlled apparatus for self-infliction of repetitive blows to the user's buttocks by a plurality of elongated arms bearing flexible extensions that rotate under the user's control. The apparatus includes a platform foldable at a mid-section, having first post and second upstanding posts detachably mounted thereon. The first post is provided with a crank positioned at a height thereon which requires the user to bend forward toward the first post while grasping the crank with both hands, to prominently present his buttocks toward the second post. The second post is provided with a plurality of rotating arms detachably mounted thereon, with a central axis of the rotating arms positioned at a height generally level with the user's buttocks. The elongated arms are propelled by the user's movement of the crank, which is operatively connected by a drive train to the central axis of the rotating arms. As the user rotates the crank, the user's buttocks are paddled by flexible shoes located on each outboard end of the elongated arms to provide amusement to the user and viewers of the paddling. The amusement apparatus is foldable into a self-contained package for storage or shipping.
This is one of those times where a picture really is worth more than a thousand words:
You know, on second thought, perhaps we should build one of these for the patent examiners who approve stuff like this, who clearly need this kind of self-training device!...
7 Temmuz 2012 Cumartesi
WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’
* Kay Bell statesthe obvious in discussing politicians in her post “No-Tax Lies and Shifts on No-Tax Pledge” at DON’T MESS WITH TAXES – “They'reall lying”.
*A press releasefrom PRWEB tells us “UK Tax Freedom Day 2012 to be the 29th May”
“The 29 May will mark ‘Tax Freedom Day’, anotional time in the year when UK taxpayers will, as a whole, have earnedenough income to pay off their tax burden and start earning for their ownbenefit. Calculated annually by the Adam Smith Institute, it will take theaverage UK worker 149 days this year to pay off their debt to the state.”
Aren’t you glad tobe an American? The Tax Foundation putthe US “Tax Freedom Day” at April 17 this year – coincidently the initialfiling deadline for 1040s.
* Jean Murray iscorrect when she says “’Limited Liability’ Doesn't Mean ‘NO Liability’" ather ABOUT.COM BUSINESS LAW/TAXES blog.
She lists “some measures you and other owners of yourbusiness can take to minimize liability:
• Keep excellent corporate and LLC records.This includes LLCs too. Record all meetings and actions of the board and LLC membership.
• Don't mix business and personal funds. Mixing fundsdestroys the "veil" between business and personal finances and canleave owners at liability for other actions.
• Document transactions between owners and thebusiness. A loan to the business by an owner, for example, should be documentedjust like any other transaction.”
* Joe Kristan talksabout a disastrous Tax Court decision (for the taxpayer involved) in “An $18 Million Foot-Fault” at THE ROTH AND COMPANY TAX UPDATE BLOG.
As usual Joe’sbottom line tells it like it is -
“Themoral? Cheap tax help is oftenthe most expensive. By doing a returnwith an $18 million deduction by himself, the taxpayer saved on tax prep feesaltogether, so he has that going for him, anyway.”
WhileJoe states that the return in question was “self-prepared”, the post does notindicate whether or not the poor soul used tax preparation software to assistin incorrectly preparing the return.
* Howard Gleckmanreviews two different strategies for tax reform in “Tax Reform: Going Long v. Going Prudent” at the TAX VOX, the blog of the Tax Policy Center.
“And, of course, there is perhaps the mostlikely option of all: Go home. As they have for decades now, policymakers willtalk about tax reform even as they add more targeted tax breaks to the code.”
Howardends the post by posing a question to readers – “What do you think: Should tax reformers go long, or go prudent?”
Golong, Howard. Go long!
* Bill Bischoff,“The Tax Guy”, lists “3 Tax-Smart Ways to Pay Grandkid's Tuition” atSMARTMONEY.COM.
* Over at TAXABLETALK Russ Fox reports on “Another Survey, Another Bad Result for California”.
And, of course,another bad result for New Jersey –
“Alvarez & Marsal Taxand, a consultingand tax advisory firm, surveyed 800 financial executives (302 responded). Amongthe questions asked was Which states do you view as most competitive from a tax perspective? The usual suspects finished onthe bottom: California, New York, and New Jersey.”
* Trish McIntirecritiques a new “Tax Preparer Fraud Bill” at OUR TAXING TIMES.
I guess Congressdoes not think making preparers sit through 2 hours of ethics preaching eachand every year will automatically turn them all honest.
* Jason Dinesenanswers the question “What Does Thursday’s DOMA Ruling Mean for Taxes?” at theDINESEN TAX TIMES.
As Jason explains –“For now, nothing changes”.
THE FINAL WORD –
Al Neuharth calls a spade ashovel in his Friday USA TODAY editorial. Referring to “the Donald” (Trump, that is) Al says, “he’s a clown who loves doing or sayingthings, no matter how ridiculous they may be”.
The bottom line – “Anyway, he’s a clown. No politician or voter – or Yankee fan –should take him seriously”.
Trump once again illustrates hislevel of maturity and intelligence (as he did when, in response to Rosie O’Donnell’scomments about the fact that he screws his investors, said, basically, “she’sfat”) with his response, calling Neuharth “anangry man who likes making up stories – and using me to stay relevant”.
Few men are less relevant thanTronald Dump! Hopefully Donald Trump isthe only person who takes Donald Trump seriously. What a clown!
{FYI – I am off to LBI to restand recuperate. I have scheduled postshere at TWTP while I am away, but there will probably be no Wednesday BUZZ.}
TTFN
DON'T DO IT!
Iusually continue my answer by saying "don’t listen to your brother-in-law, yourcousin Manny, your auto mechanic, your neighbor or co-workers, or a guy youride to work with on the train".
ButI also mean don’t listen to a broker, banker, insurance salesman, or other“financial professional”.
Manypeople in the various financial industries may be experts in their particularfield, but know absolutely nothing at all about federal or state income taxes.Well maybe not nothing. They may have a little knowledge about taxes – but alittle knowledge can be truly dangerous.
Iam a tax professional, but I know next to nothing about insurance and would notthink to offer unsolicited advice about what type of policies or how much coverage you should have.
Whenyou are given advice from a so-called financial professional always considerthe source. Remember, an insurancebroker is a salesman, as is a stock broker and, to a degree, a banker. Theymake their money by selling you something. So take anything they tell youregarding taxes with several grains of salt.
Tobe honest, in many cases a financial professional providing tax advice is doingso out of a genuine desire to help you, and sincerely think he/she knows what theyare talking about. But there are those out there who are only interested inmaking a commission by selling you an annuity or other investment and give youfalse tax advice to try to convince you to give them your money.
Anytimeyou are given tax advice from a financial professional, or anybody else, besure to run it by your tax professional before taking any action.
Manytimes I have asked a client, after the fact, why they did something that wastax stupid – and was told “my banker”or “my broker” or “my insurance agent told me to do it”. Or, when asked why they did not do somethingthat was tax smart, they tell me their banker, broker or agent told them theycouldn’t.
So,to repeat - DO NOT ACCEPT TAX ADVICEFROM ANYONE OTHER THAN A PROFESSIONAL TAX PREPARER! TTFN
DON'T LISTEN TO BAD ADVICE
Justthought I would repeat some commentary from my publication THE SCHEDULE C NOTEBOOK -
Ibelieve it is bad advice to tell ALL taxpayers who have a Schedule C businessto incorporate. There is no tax advicethat applies to all businesses in all situations (except don’t cheat). Thedecision to incorporate a business requires careful review of all the specificfacts and circumstances of the individual situation. And taxes are not the onlyconsideration. In a majority of cases it is not financially beneficial, eitherin the short or long term, to incorporate.
Whileincorporating will certainly reduce one's 1040 audit risk, it is very often notthe best idea for the average sole proprietorship. Incorporation can generatemuch more paperwork, recordkeeping, federal and state tax filings, costs, andgeneral all-round "agita" than it is worth.
Forone thing, like a marriage, it may be relatively cheap to "get into"a corporation, but it can be very expensive to "get out of".
Thereare indeed times when it is better financially to incorporate a one-personbusiness, especially when excessive health insurance and other employee benefit costs are involved. Butcertainly not in all cases.
Somesay the decision to incorporate is a “no-brainer”. There is very little, if anything, about taxlaw that is a no-brainer – especially when it comes to business taxes. That iswhy tax professionals exist. Thedecision to incorporate is by no means a “no-brainer”. It involves a lot ofbrain work!
TTFN
WHERE THE FAKAWI?
FYI– I am moving from New Jersey to Pennsylvania (as I have been “threatening” todo for the past couple of years)! This move will reduce my annual livingexpenses by about $12,000!
Movingwill not affect my 1040 practice. Instead of mailing their “stuff” to my mail drop in NJ next seasonclients will mail their “stuff” to a mail drop in PA.
Ihave purchased a condo – and will close in mid-July. I should be fully moved by mid-August.
Andthis year I will be attending the annual National Conference and Expo of theNational Association of Tax Professionals to be held nearby in Baltimore MDfrom July 9-12 (leaving this Sunday). Iwill be posting here, and also at THE TAX PROFESSIONAL, daily from Baltimoreduring the conference next week – sharing tax info and tax developments learned,and reminded of, at the various educational sessions.
WhenI return from Baltimore my attention will be taken up by my move – and postswill continue to be sparse. I will tryto maintain the twice-weekly BUZZ schedule. There will be a regular Saturday BUZZ installment tomorrow.
OnceI have settled in – by the end of the summer – I hope to return to regularposting at both blogs.
“Talk”to you from Baltimore next week!
TTFN
Why Filing Taxes for Your Client, Even When They Aren't Required, Might Be a Good Thing!
Most all tax preparers understand how income levels and filing requirements are contingent upon filing status, age and the type of income clients receive. What is often overlooked, however, even when clients aren't required to file with Uncle Sam, is the fact that it may indeed advantage them to do so.
Not surprisingly, the Irs provides definitive instructions on the requirements for filing Forms 1040, 1040A, or 1040Ez. With all of the new prestige tax revisions and exceptions, some tax preparers are turning to Tax Cpe procedure materials or Ea Cpe curriculum to brush up on how these new revisions stand to advantage clients. Some continuing instruction tax courses are even focused exclusively on these new tax laws, showing tax preparers how to clients who fit into this scenario to get the greatest bang out of their tax returns.
Form 1040 Instructions
Quick Tips on Non-Required Filing Benefits
Why Filing Taxes for Your Client, Even When They Aren't Required, Might Be a Good Thing!Homebuyer Credit
First time homebuyers are eligible for a maximum 00 or 00 if filing married status separately. To qualify, a someone must have entered into a compact on or before April 30th 2010 and have accomplished by September 30th 2010.
Tax Withheld
For taxpayers who have estimated their tax payments, had a former years overpayment, or had income tax withheld, they may be eligible for a refund.
Child Tax Credit
If a taxpayer has at least one child that qualifies and they didn't receive the full estimate of the current Child Tax prestige originally, they could get a refundable credit.
American occasion Credit
Given the newly renamed and vast Hope credit, taxpayers can claim this prestige for tuition and positive fees for undergraduate and post-secondary education. The maximum prestige per student is ,500.
Earned income Tax Credit
For those individuals who worked but earned dinky in 2010, this tax prestige may prove beneficial in considering to file because it may qualify them for a refund.
Health Coverage Tax Credit
This prestige is primarily for individuals who have received Adjustment aid (either Trade or Reemployment Trade). Further, those receiving Pbgc pension payments may also qualify and receive a credit.
Quick Tips of Non-Required Filing for Losses
Two Scenarios
When taxpayers have suffered an whole loss because of an speculation losses:
- Only if filed in 2010 can they carry that loss transmit and offset dutible capital gains in future years
- They can carry these losses as far back as 2008 and perhaps ask a reimbursement of carry forward, but, again, only if they filed in 2010.
When taxpayers have company losses that experienced a net operating loss (Nol) for 2010:
There are a plethora of resources ready that cover these details and the types of taxpayers that fall into this unique category. The key for enrolled agents, certified collective accounts and other tax professionals is to do the research, sign up for an enrolled agent class or look on the tax Cpe sites that showcase this information.
Irs Circular 230 Disclosure
Pursuant to the requirements of the Internal income aid Circular 230, we forewarn you that, to the extent any guidance relating to a Federal tax issue is contained in this communication, together with in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax connected penalties that may be imposed on you or any other someone under the Internal income Code, or (b) promoting, marketing or recommending to another someone any transaction or matter addressed in this communication.
Why Filing Taxes for Your Client, Even When They Aren't Required, Might Be a Good Thing!Is the IRS lying and defrauding the American people? Hear from the man who beat Video Clips. Duration : 45.58 Mins.Robert Lawrence challenged the IRS claim that he is required to file a 1040 Income Tax Confession Form and pay a Federal Income Tax. The US Government charged him with committing “tax crimes”, but later dismissed these charges! The IRS dropped the case when they found out that Robert relied on the instructions within the IRS' 1040 booklet and the law. Robert had proof from these sources that he was not required to file. Hear how this living “David” won his victory over the paper-tiger “Goliath” (the IRS). Freedom Law School Speaker: Robert Lawrence Host: Peymon Mottahedeh
Keywords: googlevideo
5 Temmuz 2012 Perşembe
REAL LIFE TAX TALES
Here is a real life story from my clientfiles. The names have been changed so Iam not fined for breaking privacy rules (see – I do know my “ethics”!).
Patty O’Furniture continued to work pastage 70½. He had begun to take RMDs fromhis traditional IRAs, but continued to contribute each year to his employer’s401(k) plan and a ROTH IRA. He also madeannual contributions to a spousal ROTH IRA for his non-working spouse, who hadrecently also turned age 70½ and began taking RMDs from her traditional IRA.
Patty passed away of a sudden heart attackwhile at work in early 2012, prior to making his or his wife’s 2012 ROTH IRAcontributions. During January of 2012 heearned $8,000+ in W-2 income.
Obviously a 2012 ROTH IRA contributioncould not be made for Patty, as he had gone to his final audit, and IRAcontributions cannot be made for a decedent after death (since “the primarypurpose for an IRA is the accumulation of retirement funds” – from PLR8439066).
Mrs. O’Furniture, who will have no earnedincome for 2012, asked me if she could make a $6,000 contribution to her ROTHIRA for 2012.
I did my research and here is what I found–
A non-working spouse can make a contribution to a spousal IRA for the year of thedecedent’s death as long as the funds donot come from the estate. Thecontribution must be made with her personal funds – funds she holds outside theestate.
In Private Letter Ruling 8527083 the IRSallowed a contribution to a non-working surviving spouse's IRA made after thedeath of the working spouse.
If the surviving spouse had maintainedseparate checking, savings or investment accounts prior to the passing of thedeceased spouse there is no problem determining “funds held outside theestate”.
But what if, as was the case with myclient, all funds and accounts had been in joint name?
Mrs. O’Furniture could consider half of thebalances in the various joint accounts as being “funds she holds outside theestate”.
Any questions?
TTFN
UNIQUE TAX DEDUCTIONS
· SwimmingPool:
A taxpayer suffered from emphysema. He installed a swimming pool after his doctorprescribed he undergo a daily exercise regimen. He swam twice a day, whichimproved his breathing capacity.
The Tax Court in Cherry v. Commissioner allowedhim to deduct the cost of the pool as a medical expense, to the extent the pool’scost exceeded the corresponding increase in the market value of the property.
The primary purpose of the pool was medicalcare. So the cost of heating the pool, pool chemicals and portion of thetaxpayer’s insurance premiums were also deductible.
If you ask me – the taxpayer could havejoined the YMCA or other health facility to get in his twice-daily swim at asubstantially lower out-of-pocket cost, and the deduction should have beenlimited to the cost of the health facility membership. I guess the Tax Court does not take frugalityinto account in its decisions.
For more on medical deductions see myMAINSTREET.COM items “Tax Tip: When to Deduct Medical Expenses” and “Tax Tip: Can I Deduct My Gym Membership?”.
· Body Oil:
A professionalbodybuilder used a lot of body oil to make his muscles glisten in the lightsduring competitions.
The Tax Court, in Wheirv. Commissioner, upheld the deduction.
The body buildingactivity was engaged in a for-profit, and apparently glistening musclesincrease one’s chances of winning a cash prize.
The Court did notallow deductions for buffalo meat and special vitamins to enhance strength andmuscle development.
TTFN
DON'T DO IT!
Iusually continue my answer by saying "don’t listen to your brother-in-law, yourcousin Manny, your auto mechanic, your neighbor or co-workers, or a guy youride to work with on the train".
ButI also mean don’t listen to a broker, banker, insurance salesman, or other“financial professional”.
Manypeople in the various financial industries may be experts in their particularfield, but know absolutely nothing at all about federal or state income taxes.Well maybe not nothing. They may have a little knowledge about taxes – but alittle knowledge can be truly dangerous.
Iam a tax professional, but I know next to nothing about insurance and would notthink to offer unsolicited advice about what type of policies or how much coverage you should have.
Whenyou are given advice from a so-called financial professional always considerthe source. Remember, an insurancebroker is a salesman, as is a stock broker and, to a degree, a banker. Theymake their money by selling you something. So take anything they tell youregarding taxes with several grains of salt.
Tobe honest, in many cases a financial professional providing tax advice is doingso out of a genuine desire to help you, and sincerely think he/she knows what theyare talking about. But there are those out there who are only interested inmaking a commission by selling you an annuity or other investment and give youfalse tax advice to try to convince you to give them your money.
Anytimeyou are given tax advice from a financial professional, or anybody else, besure to run it by your tax professional before taking any action.
Manytimes I have asked a client, after the fact, why they did something that wastax stupid – and was told “my banker”or “my broker” or “my insurance agent told me to do it”. Or, when asked why they did not do somethingthat was tax smart, they tell me their banker, broker or agent told them theycouldn’t.
So,to repeat - DO NOT ACCEPT TAX ADVICEFROM ANYONE OTHER THAN A PROFESSIONAL TAX PREPARER! TTFN
DON'T LISTEN TO BAD ADVICE
Justthought I would repeat some commentary from my publication THE SCHEDULE C NOTEBOOK -
Ibelieve it is bad advice to tell ALL taxpayers who have a Schedule C businessto incorporate. There is no tax advicethat applies to all businesses in all situations (except don’t cheat). Thedecision to incorporate a business requires careful review of all the specificfacts and circumstances of the individual situation. And taxes are not the onlyconsideration. In a majority of cases it is not financially beneficial, eitherin the short or long term, to incorporate.
Whileincorporating will certainly reduce one's 1040 audit risk, it is very often notthe best idea for the average sole proprietorship. Incorporation can generatemuch more paperwork, recordkeeping, federal and state tax filings, costs, andgeneral all-round "agita" than it is worth.
Forone thing, like a marriage, it may be relatively cheap to "get into"a corporation, but it can be very expensive to "get out of".
Thereare indeed times when it is better financially to incorporate a one-personbusiness, especially when excessive health insurance and other employee benefit costs are involved. Butcertainly not in all cases.
Somesay the decision to incorporate is a “no-brainer”. There is very little, if anything, about taxlaw that is a no-brainer – especially when it comes to business taxes. That iswhy tax professionals exist. Thedecision to incorporate is by no means a “no-brainer”. It involves a lot ofbrain work!
TTFN
COST BASIS REPORTING
Rogeridentified the problem –
“Every new piece of legislation meant tosimplify certain tax areas generally adds complexity of one sort or another tothe Code. {tax pros} often refer tonew tax legislation as an ‘Accountants Full Employment Act.’
A case in point is thecost basis reporting requirement, in place during this past tax season. Whilecomplicated enough by itself, the situation is exacerbated by differences inthe requirements for brokers and investors.”
Asa tax professional, perhaps the biggest challenge, and time consumer, I facedduring the past tax season was the new Schedule D/Form 8849 format.
Rogerexplained –
“Beginning on Jan. 1, 2011, it becamemandatory for brokers and other financial intermediaries to report cost basisinformation on Form 1099-B to investors and to the IRS for equities acquired onor after that date. The new requirement, spelled out in the Emergency EconomicStabilization Act of 2008, also covers mutual funds acquired on or after Jan.1, 2012, and will cover debt securities, options and private placementsacquired after Jan. 1, 2014.”
Andas I explained in my post “That Was The Tax Season That Was” –
“A new Form 8949 was added to report theindividual short-term and long-term transactions in three separate categories –sales where the cost basis was reported to the IRS on Form 1099-B, sales wherethe cost basis was not reported to the IRS on Form 1099-B, and sales that werenot reported on a Form 1099-B. Aseparate Form 8949 was required for each of the three categories. The Schedule D served as a summary of the8949s.”
Iwent on to detail the biggest problem with this new requirement –
“The various brokerage and mutual fund housesall treated the new Form 1099-B portion of the year-end consolidated tax reportdifferently.
For the most part thisnew system required some additional time, but not additional agita. In many cases the 1099-B reporting wasexcellently broken down into separate categories of short-term “covered”(transactions where cost basis was required), short-term “non-covered”,long-term, and undetermined term. And again and loss analysis, with cost basis for all, or almost all, transactionsprovided, was also included in the report in the same format.
In some the 1099-Breceived by the taxpayer included the cost basis for all transactions –although you often had to read the fine print to discover if the cost basisshown had actually been reported to the IRS.
The worst cost basisreporting formats came from Morgan Stanley Smith Barney and TD Ameritrade, withTD the bottom of the barrel. The 1099-Bfor these brokerages was not broken down to list different categories oftransactions (as described above). Transactions were listed alphabetically, regardless of term or coverage,with cost basis information shown only where required.
MSSB reports includeda gain and loss analysis, but it was merely broken down by short and long term,as had been done in past years. TD didnot include a gain and loss analysis in its consolidated statement. The client had to go online to generate theanalysis, also still in the short or long only format.
The additional workrequired for clients of these brokerages was not so bad with only one or twopages of transactions. But several hadmultiple (as many as 50) pages of transactions (can you say “churning”) – makingproper reporting much more difficult and time consuming than in the past.”
Requiringbrokerage and mutual fund houses to report cost basis is a good thing. In tax seasons past the biggest challenge,and time consumer, was determining cost basis for investments sold by cluelessclients. Brokers and funds were oftenalready providing profit and loss statements with much cost basis information,which was helpful, and when this was not automatically included in a ConsolidatedYear-End 1099 Statement, or some cost basis information was missing, I could inmany cases get the information direct from a client’s individual broker.
Makingcost basis reporting mandatory will eventually save lots of time during taxseason. However, it will take a longtime to fully phase in to maximum reporting. By the time that comes I will be retired.
AndI expect we will never have 100% cost basis reporting. What about the stock that was inherited froma relative, or was received as a gift when the taxpayer was a child? It is easy enough to determine the cost basisfor inherited investments, assuming you know the date of death, and futureregulations could require brokerages to determine cost basis based on date-of-deathvalue at the point the investment is transferred into the account. But determining the basis of a giftedinvestment can be almost impossible.
Inthe meantime to make things a little easier perhaps the IRS could establish arequired pro-forma format for all Form 1099-Bs from all brokerage and fundhouses, and all houses could come to an agreement that Profit and Lossstatements included in the Consolidated Year-End 1099 Statement be done in thesame pro-forma format (if industry-wide agreement is at all possible).
Ideally,all 1099-Bs (and P+L statements)would be “broken down into separatecategories of short-term “covered” (transactions where cost basis wasrequired), short-term “non-covered”, long-term, and undetermined term.”
And, while I am as happy as a pig in reality tv transferring broker-provided profit and loss statements to Form 8849 (and in the past Schedule D) as is, how do I really know that the information provided by the broker is correct. And what is my responsibility as a tax pro to make sure the information is correct?
The alternative is to have all clients keep detailed, contemporaneous, and ongoing records of all investment purchases.
Ohwell, I can dream, can’t I!
TTFN