Announcement

Collapse
No announcement yet.

tax planning help

Collapse
X
Collapse
 
  • Page of 1
  • Filter
  • Time
  • Show
Clear All
new posts
Previous template Next
    #1

    tax planning help

    I am trying to get some ideas for tax planning for a high income TP.
    Situation is:
    Married with one child as a dependent and one 25 year old child living at home but working.
    He is currently receiving one year severence pay of $260,000. He will most likely be starting a new job within the next month earning the same annual salary. If he gets the job, he will receive a lump sum payout for his severence allowing him to contribute to the new company's 401(k) plan.
    I have suggested buying a home for the 25 year old (which is what he is saving up for), rent it to him and take a loss on the the rental activity. Eventually selling the home to the 25 year old.
    Does anyone else have some strategies that work well for their clients?
    As always, TIA.
    Noel
    "Some cause happiness wherever they go; others, whenever they go."- Oscar Wilde
    Tags: None
    #2
    Aside from the fact that losses between relatives are restricted or not allowed, with the income you are talking about the rental loss would be suspended.

    Comment

      #3
      Homer Simpson

      would say

      DOH!

      Okay any other bright ideas since mine was obviously flawed?
      Noel
      "Some cause happiness wherever they go; others, whenever they go."- Oscar Wilde

      Comment

        #4
        he wants to buy a house

        Since he wants to buy a house for the next generation, I think he should do that. I certainly wouldn't recommend tying up all his capital for some abstract tax "strategy." Tax planning should be subordinate to his overall financial goals.

        Comment

          #5
          It is not

          that he wanted to purchase a house for his son, my thoughts were to help cut his taxable income for 2006 since his earnings will be so much higher than normal. On top of that he will probably have some capital gains. I just didn't think all the way through the purchase of the second house and rental loss being suspended.

          He has a very good financial planner and he has done very well with his investments. This abstract tax strategy would by no means be tying up all his capital.

          As a service to my clients, I like to provide them with legal and above the board suggestions that can cut their tax bills at the end of the year.

          I was hoping I could get some other ideas that others tax preparers have successfully used with their clients.
          Noel
          "Some cause happiness wherever they go; others, whenever they go."- Oscar Wilde

          Comment

            #6
            Losing money to save taxes is not very smart financial planning. If the client wants to buy a second home for the kid and deduct mortgage interest and taxes so that the kid will get out of his house, that is one thing. But don’t do it just to get a tax deduction. Other than maxing out on all of his retirement contributions, there is no way to shield high W-2 earnings from taxes other than to spend it and lose it. If that is the goal, give me the money and I’ll pay the taxes for him.

            Comment

              #7
              Bees, sorry, but your idea is flawed. Receiving the money as a gift wouldn't make you pay any taxes. Only later on, maybe, depending on what you will be doing with it.

              I know exactly what I would be doing.

              Comment

                #8
                What Bees is saying is

                give me the dollar and I will pay the 40 cents of income taxes from you earning that dollar. Which is essentially the logic of spending money to save taxes is all about.

                Doug

                Comment

                Previous template Next

                Disclaimer

                Collapse

                This message board allows participants to freely exchange ideas and opinions on areas concerning taxes. The comments posted are the opinions of participants and not that of Tax Materials, Inc. We make no claim as to the accuracy of the information and will not be held liable for any damages caused by using such information. Tax Materials, Inc. reserves the right to delete or modify inappropriate postings.

                Working...
                X