I hate refinances

[S T]

Met with a client today.

This seems really bizarre to me on what the client was thinking! Oh by the way she is a realtor.

Client refinanced personal residence and cashed out equity of $150,000. When I asked where was the $150,000 spent, she stated all was put into an annuity.

Then as we proceed, on one of her rental properties (very high dollar) she refinanced and cashed out equity of $443,000. When I asked where the $443,000 was spent, she stated all was put into an annuity.

Then as we proceed onward to another rental property, she refinanced and cashed out equity of $100,000. When I asked where the $100,000 was spent, she stated a new car, some in the bank, and a vacation.

How much can I charge for tracking these loans, and making the allocations and the tracing rules?

Right now I am sick to my stomach and have a very big headache!

Sandy

[JG EA]

I wish I could say something to help, but things have gotten so much more complicated. Perhaps it’s a sign of prosperity; perhaps it’s too many laws. Whatever it is you are not to blame.
I had a situation recently where I didn’t emphasize one course of action and the taxpayer did something I didn’t think he’d do. It worked out, but like you l was so sick.

I have in my notice to clients that if they have a big tax decision to make they need to make an appointment and talk about it first. I can’t possibly foresee all the stupid things they might do.

With your rental mortgage – I had the same thing last year and we had discussed how he couldn’t take the interest if the proceeds were used for personal things, yet that’s what he did anyway.

And just recently I had someone blame me for owing penalties (they said they had the money and could have made larger estimates if only they had known). I looked back in my notes and couldn’t find anything right then, but later I found a CFS projection of income. So, we had to discuss what the client thought she would have made and we must have discussed that she didn’t want to make the higher estimates! What are we supposed to do? Write down everything discussed and have the client sign that they agreed to something discussed? It’s crazy. I stewed about that one for a while and then got all my “evidence” together including my appointment book that showed we discussed ES taxes when she picked up and said she would be happier someplace else.

But enough about me, what can you do? Only the best you can. It’s a complicated business, getting more so all the time. The client has to accept their own responsibility. Does a doctor feel guilty when the patient not follow the diet, the RX, and then gets ill? No, the patient has to take responsibility for his health. So, too the taxpayer has to take responsibility for his actions. If he makes stupid decisions, he must accept responsibility also.

[S T]

Jg

Thanks JG,

The words really do help, and I know I can't take responsbility for the T/P actiions, but it would help if they would call first. This is a client that should have known better, but I also know some past personal background that might have led her to it. Such as some medical issues that could have lingering effects on her life outcome.

But being sensitive to most of my clients, I emotionally take it all in, which I know I should not, and then the dreaded task of advising them that what they did probably cost them alot in immediate tax dollars.

Then on the other side, my dreaded task, of trying to document the file, and make the right entries and decisions for the tax returns.

Well this client still owes me some more information, so I can put aside for a few days, but it was helpful to share.

I will probably have to post on the "dreaded" mortgage interest limitation deduction rules again!

Thanks,

Sandy

[jainen]

a lot of cash

>>that’s what he did anyway<<

There is nothing wrong inherently "wrong" about using rental equity for personal expenses. For some clients it could be very right. Although there is no tax advantage, it is still an inexpensive way to access a lot of cash.

[skhyatt]

Sandy, I've got a BIG bottle of advil if you need some. I know the feeling.

[DTS]

Advil

SK,

Forget the Advil, she needs a margarita with an extra shot!

Dennis

[skhyatt]

sounds better than advil