Jeffrey B. Kahn, Esq. and Gary Sussman Discusses the Lifetime Estate Gift Annuity, the Building Blocks to Financial Security and the “Victory Tax” On ESPN Radio

Topics Covered:

1. Special Guest: Jim Sagona with Pacific Sotheby’s talking about the Sharp Health Care Lifetime Estate Gift Annuity

2. The Building Blocks to Financial Security

3. Victory Tax: Just how much are Olympians expected to pay for their medals?

4. Questions:

a. I have IRAs, a 401(k) through work and a savings account, where everything is in a budgeted model. How close am I to achieving financial security?
b. What is the foundation to achieving financial security? What should I be focusing on that I may have left out of my financial plan of investment accounts and savings?

Gary states: Good afternoon! Yes sometimes we just have to take the money and run! Welcome to Inside Advantage – Your Financial And Tax Radio Show.

This is Licensed Financial Planner, Gary Sussman, Senior Vice President Of Investments at Trilogy Financial Services.
Gary states:
Now Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team was not able to be on today’s show but we will have his associate attorney, Amy Spivey, join us later.
Gary states:

You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.

Gary states:

When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

Gary states:

And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.
Gary states:
Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.
Gary states:

For today’s show we have coming up:

Segment 2 material: The Building Blocks to Financial Security

Gary states:

Also coming up is:

Segment 3 material: Victory Tax: Just how much are Olympians expected to pay for their medals?

And of course towards the end of our show, we will be answering some of your questions.

Gary states: At this time, I’d like to introduce you to Jim Sagona. Jim is a realtor with Pacific SOTHEBY’S International Realty.

1) What is a Lifetime Estate Gift Annuity?
2) How long has Sharp been offering this program?
3) Why are donors passionate about having Sharp has the beneficiary to this gift?
4) Why would someone consider a LEGA?
5) How does this differ to a Reverse Mortgage?
6) Do you coordinate at all with peoples Estate attorneys?
7) How can people learn more about the program?

Gary states: Well it’s time for a break but stay tuned because we are going to let you know what The Building Blocks to Financial Security are.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Gary Sussman on Inside Advantage on ESPN.

BREAK

Gary states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Gary Sussman.

And be aware of the special offer that I have for you: Gary states PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Gary Sussman. The number to call is 949.536.2030. That is 949.536.2030. Or visit www.yourfinancialstory.com. NPC DOES NOT PROVIDE TAX NOR LEGAL ADVICE.

So, What Are The Building Blocks To Financial Security?

1) Have to start with laying the foundation…Cash accounts to meet our short term needs. For most people not the best place to be saving for long term goals. Fixed Accounts to provide stability and always perform on some level when our stocks/bonds may be underperforming.

2) Allocate dollars to primary int/long term goals. Home downpayments, Education, Retirement. Based on time frames.. seek higher ROR through mutual funds etc. Also diversify your account registrations. Don’t stick everything into Retirement even if this is your priority. Tax adv plans.

3) Only speculate when you can afford to live without it.

4) Don’t forget about asset protection. Boring and expensive stuff for most people. Health…Disability…Life…LTC…Tax…Estate

5) Cash flow. Where your money goes tell a lot about your priorities. Understanding Cash flow is often times the most important of all. Maximizing your abilities can often times hinge on cash flow.

Gary states PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Gary Sussman. The number to call is 949.536.2030. That is 949.536.2030. Or visit www.yourfinancialstory.com. NPC DOES NOT PROVIDE TAX NOR LEGAL ADVICE.

Gary states: Stay tuned because after the break we are going to explain the Victory Tax Uncle Sam is charging out Olympic Victors.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Gary Sussman on Inside Advantage on ESPN.

BREAK

Gary states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Gary Sussman.

Gary states: And Calling into the studio from Jeff’s Walnut Creek Office is his associate attorney, Amy Spivey.

Chit chat with Amy

Gary asks: Amy would you tell the listeners of your offer?

Amy replies: PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call our office to make an appointment to meet with Jeffrey Kahn, right here in San Diego or at one of our other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Go For The Gold And Pay Your Tax – Olympic Medals Taxable

Gary states: While millions of Americans were glued to their televisions to watch American athletes compete in this year’s Summer Olympics, the Internal Revenue Service was quietly getting ready to make sure that all our Olympic winners pay taxes on their victories.

Amy replies: It’s true. The Internal Revenue Code mandates that if you win a prize in a lucky number drawing, television or radio quiz program, beauty contest, or other event, you must include it in your income. For example, if you win a $100 prize in a marathon, you must report this income on your Form 1040. If you refuse to accept a prize, do not include its value in your income. Prizes and awards in goods or services must be included in your income at their fair market value.

Gary asks: So what is the impact to a U.S. athlete who wins in the Olympics?

Amy replies: America’s Olympic medalists must pay state and federal taxes on the prize money they get for winning. The U.S. Olympic Committee awards $25,000 for gold medals, $15,000 for silver and $10,000 for bronze.

Gary states: So I get it that any prize money one receives, he or she must pick up that amount as income.

Amy replies: But that’s not all. Olympians also have to pay tax on the value of the medals themselves.

Gary states: You mean the prize money is not enough for the government to tax but also the metal?

Amy replies: That’s right. Gold and silver medals are made mostly of silver, while bronze medals are composed of mostly copper. Rio’s medals are among the largest and heaviest ever and contain about 500 grams of either silver or copper.

Gary asks: So what are the deemed values of these metals?

Amy replies: The value of a gold medal is about $564; silver is worth about $305. Bronze is worth a negligible amount so it’s not taxed.

Gary asks: But what if an athlete does not accept his metal and prize or is later disqualified and has to return the metal and prize?

Amy replies: Any athlete who accepts his or her Olympic medal and does not have to forfeit it will have to report its value as income and pay taxes on it. That’s true even though the competition took place in Brazil and not the United States.

Gary asks: How do other countries tax this?

Amy replies: Winning Olympic athletes from most other countries don’t have to worry about their medals being taxed. This unfairness has resulted in considerable debate during each session of Congress when a Summer or Winter Olympics is held but any legislation to change the tax law has never made it out of Congress. In fact there is proposed federal legislation as we speak that would make “the value of any medal or prize money” awarded during the Olympics or Paralympics exempt from income taxes. The bill was passed by the Senate in July 2016 and is being considered by the House. It would apply to earnings from January 1, 2016 to January 1, 2021. California is reviewing a similar proposal.

Gary states: You would think most Americans would be in favor of the legislation but there appears to be some backlash.

Amy replies: That’s true. For example, should an Olympian who comes home with 4 medals conceivably make $100,000 tax free while millions of hard working Americans struggle to support their families on far less income yet have to pay taxes?

Gary states: Then of course one should recognize that the U.S. is the only major country that doesn’t provide government funding to its Olympians. Now a handful of lucky athletes land lucrative endorsement deals. But most of them rely on small stipends from the USOC, support from local businesses or supplemental income from a day job.

Amy states: It’s clearly a decisive issue with arguments on both sides. But what you need to remember that even income earned outside the U.S. may be taxable. Every year, thousands of taxpayers learn that lesson the hard way. If you live, compete or work outside the United States, you must still file tax returns here. In addition, if you win a prize or award, you must claim the value of that prize or award on your tax return as income.

Gary states: You know I am not convinced that an income exclusion for Olympians and Paralympians would change anything.

Amy states: I agree. Cutting taxes isn’t going to fix the fact that these athletes don’t get paid enough. And then how do you distinguish this from other individuals who win prestigious awards. Such is the case with Nobel prize winners who receive more prize money — around $1 million. Shouldn’t an award for such an accomplishment also be tax free?

Gary states: Amy you mentioned who U.S. taxpayers have to report income from all worldwide sources. What about someone who earns interest in a foreign bank account?

Amy replies: The tax law requires U.S. citizens and resident aliens to report worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

Gary asks: In speaking of foreign bank accounts, what are the Filing Requirements If You Have Undisclosed Bank Accounts?

Amy replies: By law, many U.S. taxpayers with foreign accounts exceeding certain thresholds must file Form 114, Report of Foreign Bank and Financial Accounts, known as the “FBAR.” It is filed electronically with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). Taxpayers with an interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2015 must file FBARs. It is due by June 30 and must be filed electronically through the BSA E-Filing System website.

Amy continues: Additionally, U.S. citizens, resident aliens and certain non-resident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds. Reporting thresholds vary based on whether a taxpayer files a joint income tax return or lives abroad. The lowest reporting threshold for Form 8938 is $50,000 but varies by taxpayer.

Gary asks: So How Does This Breakthrough Impact U.S. Taxpayers?

Amy replies: Consider this – about 60,000 U.S. taxpayers have come forward to disclose their previously undisclosed offshore accounts but just last year alone, 300,000 U.S. taxpayers filed Form 8938 disclosing foreign accounts. That would mean that about 240,000 did not previously report their foreign accounts and that under this recent filing of Form 8938 to IRS, they have put the IRS on direct notice of their non-compliance.

Amy continues: Our office saw an increase in interest and activity by U.S. taxpayers hiring our firm after the 2004 UBS scandal and subsequent implementation by IRS of its first dedicated Offshore Voluntary Disclosure Program.

Amy states: So we encourage taxpayers who are concerned about their undisclosed offshore accounts to come in voluntarily before learning that the U.S. is investigating the bank or banks where they hold accounts. By then, it will be too late to avoid the new higher penalties under the OVDP of 50% percent – nearly double the regular maximum rate of 27.5% and 10 times more than the 5% rate offered in the expanded streamlined procedures.

Amy states: And keep in mind that once the IRS contacts you, you cannot get into this program. You will now be subject to the maximum penalties (civil and criminal) under the tax law. Which is why …

Amy states: PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call our office to make an appointment to meet with Jeffrey Kahn, right here in San Diego or at one of our other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Gary states: Thanks Amy for calling into the show. Amy says Thanks for having me.

Gary states: Stay tuned as we will be taking some of your questions. You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Gary Sussman on Inside Advantage on ESPN.

BREAK

Gary states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Gary Sussman.

Gary states: And Jeff and I always pleased to make our offers to our listeners where… PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call Jeff’s office to make an appointment to meet with him in San Diego or at one of his other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Gary states PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Gary Sussman. The number to call is 949.536.2030. That is 949.536.2030. Or visit www.yourfinancialstory.com. NPC DOES NOT PROVIDE TAX NOR LEGAL ADVICE.

You should also know that the securities and advisory services are offered through National Planning Corporation (NPC) Member FINRA, SIPC, and a Registered Investment Advisor. Trilogy Financial Services and NPC are separate and unrelated Entities.

Gary states: And in the studio with me is Jim Sagona with Pacific Sotheby’s. Jim as our guest today you get the honors of pulling today’s questions. OK Jim, what questions have you pulled for us to answer?

Steven from Newport Beach asks: I have IRAs, a 401(k) through work and a savings account, where everything is in a budgeted model. How close am I to achieving financial security?

Gary Answers.

Jackie from San Diego asks: What is the foundation to achieving financial security? What should I be focusing on that I may have left out of my financial plan of investment accounts and savings?

Gary Answers.

Gary states: Well we are reaching the end of our show. Have a great weekend!

Jeffrey B. Kahn, Esq. and Gary Sussman Discusses Financial Planning, Undisclosed Foreign Accounts and the IRS On ESPN Radio – July 29, 2016 Show

https://soundcloud.com/kahntaxlaw/undisclosed-foreign-accounts-and-the-irs

Topics Covered:

1. Special Guest Mark Schwartz, Owner at Mark Schwartz Realty
2. Financial Planning missteps that could ruin everything
3. FATCA Momentum Grows; If You Have Undisclosed Foreign Accounts You Have No Where To Hide
4. Questions from our listeners:
a. I am considering offering a 401k to my employees, is this a good idea?
b. What if a taxpayer has already filed amended returns reporting income from foreign assets without entering into the Offshore Voluntary Disclosure Program?

Jeff states: Good afternoon! Yes sometimes we just have to take the money and run!

Welcome to Inside Advantage – Your Financial And Tax Radio Show.
This is Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.
Gary states:
And this is Licensed Financial Planner, Gary Sussman, at Trilogy Financial Services.
You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.
Jeff states:

When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

Gary states:

And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.
Jeff states:
Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.
Jeff states:

For today’s show we have coming up:

Segment 2 material: Financial Planning missteps that could ruin everything

Gary states:

Also coming up is:
Segment 3 material: FATCA Momentum Grows; If You Have Undisclosed Foreign Accounts You Have No Where To Hide
And of course towards the end of our show, we will be answering some of your questions.

Jeff starts chit chat with Gary.

Jeff states: So let’s introduce you to today’s guest:

Please welcome Mark Schwartz, Owner and Agent at Mark Schwartz Realty 858-414-4602.

Questions:
1. So Mark, tell us how you got into Real Estate?
2. Why Real Estate?
3. How do you get your business?
4. How is the market right now and where are there good opportunities?
5. There is a lot of competition out there, what separates you from the rest?
6. Tell us about your coaching and mentoring program?

Well it’s time for a break but stay tuned because we are going to tell you about Financial Planning missteps that could ruin everything.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Gary Sussman on Inside Advantage on ESPN.

BREAK

Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Gary Sussman.

And be aware of the special offer that Gary has for you: Gary states PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Gary Sussman. The number to call is 949.536.2030. That is 949.536.2030. Or visit www.yourfinancialstory.com.
Financial Planning missteps that could ruin everything

1. Investing is a complex and challenging issue. There are lots of experts who claim to know the best guaranteed investment strategy and the best way to structure investments for secure and optimal growth. However even the most sound investment strategy is not a guarantee of success especially when the one certainty that we know will hold true is that life is always going to get in the way of our “ideal future”
2. The first mistake is that people build their house before laying a foundation.
a. Can your current plans still complete if you are sued, you are unable to work due to sickness or injury, and could your family fulfil your current plans for them if you died?”

3. The second mistake is not having a clear vision for the future and knowing what our preferred future will look like.
a. How will we ever achieve our financial goals if we don’t even know what the finish line looks like.
b. Adjust to things when taken off course

4. The third mistake is that people are sold on a story versus a concrete strategy
5. The fourth mistake is not having a budget.
a. Budget is not a dirty word.
b. Knows what we can and afford
6. Fifth mistake is not planning for Longevity or costs associated with advanced medical care.

Gary states PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Gary Sussman. The number to call is 949.536.2030. That is 949.536.2030. Or visit www.yourfinancialstory.com.

Stay tuned because after the break we are going to tell you about how the FATCA Momentum is Growing – If You Have Undisclosed Foreign Accounts You Have No Where To Hid.
You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Gary Sussman on Inside Advantage on ESPN.

BREAK

Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Gary Sussman.

Calling into the studio from my Walnut Creek Office is my associate attorney, Amy Spivey.

Chit chat with Amy

And be aware of the special Offer that I have for you: PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

FATCA Momentum Grows; If You Have Undisclosed Foreign Accounts You Have No Where To Hide
Jeff states: Nine months have passed since the Internal Revenue Service announced on October 2, 2015 the exchange of financial account information with certain foreign tax administrations, meeting a key September 30th milestone related to FATCA, the Foreign Account Tax Compliance Act.
Amy states: This information exchange is part of the IRS’s overall efforts to implement FATCA, enacted in 2010 by Congress to target non-compliance by U.S. taxpayers using foreign accounts or foreign entities. FATCA generally requires withholding agents to withhold on certain payments made to foreign financial institutions (FFIs) unless such FFIs agree to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.
Amy continues: To achieve this, the IRS successfully and timely developed the information system infrastructure, procedures, and data use and confidentiality safeguards to protect taxpayer data while facilitating reciprocal automatic exchange of tax information with certain foreign jurisdiction tax administrators as specified under the intergovernmental agreements (IGAs) implementing FATCA.
Gary asks: Amy, what is the reason behind the Federal government enacting FATCA into law?
Amy replies: Well for a long time the IRS felt that U.S. taxpayers were keeping money abroad to evade paying U.S. taxes. There are also many U.S. taxpayers who are still not aware that when they file their U.S. income tax returns, they must report their worldwide income. So by enacting FATCA, foreign banks would eventually be reporting the same level of financial information as domestic banks already do to the IRS which the IRS can then use to verify compliance of U.S. taxpayers in reporting their worldwide income on their U.S. income tax returns. IRS Commissioner John Koskinen has even said that “meeting the September 30th deadline is a major milestone in IRS efforts to combat offshore tax evasion through FATCA and the intergovernmental agreements and that FATCA is an important tool against offshore tax evasion.”
Jeff states: You know a lot of foreign countries are also looking to benefit from the enactment of FATCA by facilitating and participating in the exchange of financial account information so they can enforce their own tax laws on their citizens who may be evading that country’s tax laws.
Amy replies: That’s right. The U.S. government has entered into a number of bilateral IGAs that set the groundwork for cooperation between the jurisdictions in this area. Certain IGAs not only enable the IRS to receive this information from FFIs, but enable more efficient exchange by allowing a foreign jurisdiction tax administration to gather the specified information and provide it to the IRS. And some IGAs also require the IRS to reciprocally exchange certain information about accounts maintained by residents of foreign jurisdictions in U.S. financial institutions with their jurisdictions’ tax authorities. Under these reciprocal IGAs, the first exchange of information had to take place by September 30, 2015.
Jeff asks: So Amy what should one do if they have undisclosed foreign bank accounts and unreported foreign income?
Amy replies: You should see tax counsel as soon as possible. The tax law imposes penalties as high as $100,000 or 50% of the principal value of your foreign accounts per violation and you can be incarcerated for as long as 5 years if convicted by a Federal court. Since 2009, over 60,000 U.S. taxpayers have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP), which is open until otherwise announced.
Gary asks: That is some serious punishment. Amy, what different programs are available to U.S. taxpayers?
Amy replies: The two main options are:
1. Offshore Voluntary Disclosure Program; and
2. Streamlined Filing Compliance Procedures.
Amy continues: The Offshore Voluntary Disclosure Program (OVDP) is a voluntary disclosure program specifically designed for taxpayers with exposure to potential criminal liability and/or substantial civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets. OVDP is designed to provide to taxpayers with such exposure (1) protection from criminal liability and (2) terms for resolving their civil tax and penalty obligations.
Amy continues: OVDP requires that taxpayers go back as far as eight years in amending income tax returns to report foreign source income and disclose foreign bank accounts. The taxpayers would include with their submission of these tax filings the payment of the back taxes, interest each year on the unpaid tax and a 20% accuracy-related penalty which is applied against the unpaid tax. In addition, the taxpayers would include payment of what we call the “OVDP penalty” which is 27.5% of the highest balance of the foreign bank account in the past eight years. The IRS in return will not pursue charges of criminal tax evasion which would have resulted in jail time or a felony on your record and the IRS will not pursue impose the other multitude of penalties the tax law otherwise provides.
Jeff asks: What about the other option you mentioned of Streamlined Filing Compliance Procedures?
Amy replies: The streamlined filing compliance procedures are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part. The key factor to be eligible for the streamlined procedures is that a taxpayer must show that he is non-willful in failing to report worldwide income and disclose foreign accounts.
Gary asks: If the streamlined procedures require a taxpayer to prove he was non-willful in failing to report the foreign account and foreign income and the regular OVDP does not, why would it still be beneficial to pursue the streamlined procedures?
Amy replies: Well for one thing that penalty is a lot lower. Recall that under regular OVDP the penalty is 27.5% penalty based upon the highest balance of the account in the past eight years. Beginning August 4, 2014, this rate increases to 50% for U.S. accountholders of certain foreign banks. Under the streamlined procedures the penalty is 5% of the highest balance of the account in the past six years and if you are a foreign person, that penalty can be waived under the streamlined procedures.
Jeff states: So it appears that for the streamlined procedures, the effort that you must place the most emphasis on to have a successful result is not so much in the preparation of the amended tax returns but showing that a taxpayer is non-willful.
Amy replies: That is correct. Many people think just by stating to the IRS that they did not know the law requires that you must report foreign income on your U.S. income tax return and disclose foreign accounts on an FBAR will satisfy this non-willful standard. There is a lot more than that to meet this standard. In fact we have identified over 50 factors that we cover with our clients which we then address in the non-willful statements that get included with the packages submitted to IRS. A comprehensive non-willful statement is the key to a successful submission.
PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Thanks Amy for calling into the show. Amy says Thanks for having me.

Stay tuned as we will be taking some of your questions. You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Gary Sussman on Inside Advantage on ESPN.

BREAK

Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Gary Sussman.

And Gary and I always pleased to make our offers to our listeners where… PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Gary states PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Gary Sussman. The number to call is 949.536.2030. That is 949.536.2030. Or visit www.yourfinancialstory.com.

You should also know that the securities and advisory services are offered through National Planning Corporation (NPC) Member FINRA, SIPC, and a Registered Investment Advisor. Trilogy Financial Services and NPC are separate and unrelated Entities.

Jeff states: If you would like to post a question for us to answer, you can go to my website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

And again I want to introduce our quest, Mark Schwartz, Owner and Agent at Mark Schwartz Realty. So Mark as our guest, what questions have you pulled for us to answer?

Charles from San Diego asks: I am considering offering a 401k to my employees, is this a good idea?

Gary answers.

Stanley from Newport Beach asks: What if a taxpayer has already filed amended returns reporting income from foreign assets without entering into the Offshore Voluntary Disclosure Program?

Jeff replies: When a taxpayer bypasses the Offshore Voluntary Disclosure Program and instead files the delinquent FBAR’s and amends income tax returns to include foreign income, that we call is a “quiet disclosure”.

Jeff continues: The IRS is aware that some taxpayers have made “quiet disclosures” by filing amended returns, by filing delinquent FBARs, and paying any related tax and interest for previously unreported income from foreign assets without otherwise notifying the IRS. Because of this the IRS has put procedures in place whereby its computers can detect these filings and now open up examinations or investigations against these taxpayers. Our firm has already seen this happen.

Jeff continues: That is why taxpayers who have already made “quiet disclosures” are encouraged to participate in OVDP by submitting an application, along with copies of their previously filed returns (original and amended), and all other required documents and information to the IRS’s Voluntary Disclosure Unit. By doing this taxpayers are protected from criminal prosecution and obtain the favorable penalty structure offered under OVDP. Unlike a voluntary disclosure through OVDP, quiet disclosures provide no protection from criminal prosecution and may lead to civil examination and the imposition of all applicable penalties. And remember, once the IRS starts an examination or investigation, it is too late to enter into OVDP.

Jeff states: Well we are reaching the end of our show.

Remember you can send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com.

Gary states: Have a great day everyone!

Jeffrey B. Kahn, Esq. and Windus Fernandez Brinkkord Discusses Brexit, Summer Wedding Tax Woes and the IRS On ESPN Radio – July 22, 2016 Show

Topics Covered:

1. Jonni Bailey with Ruff Haus Design, A business’ loyal marketing company!

2. As Brexit Unfolds…what we need to know.

3. Summer Wedding Tax Woes.

4. Questions from our listeners.

***********************************************************************

Windus states: Good afternoon! Yes sometimes we just have to take the money and run! Welcome to Inside Advantage – Your Financial And Tax Radio Show.

This is Licensed Financial Planner, Windus Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.
My co-host Jeffrey B Kahn, board Certified Tax Attorney is out today. But Amy, his associate, will be calling in for our 3rd segment.
You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.

When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.
Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com or on my team’s website at www.guideyourstory.com.
For today’s show we have coming up:

Segment 2: As Brexit Unfolds…what we need to know.

Also coming up is:

Segment 3: Summer Wedding Tax Woes.

And of course towards the end of our show, we will be answering some of your questions.

Joining me today as a guest co-host and the star of our first segment is Jonni Bailey with Ruff Haus Design, A business’ loyal marketing company!

Chit chat with Jonni, pack leader

Windus states: Well it’s time for a break but stay tuned because we are going to tell you more about what Brexit really means.

You are listening to Licensed Financial Planner, Windus Fernandez Brinkkord and my co-host Jonni Bailey on Inside Advantage on ESPN.

Return from BREAK

Windus states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Licensed Financial Planner, Windus Fernandez Brinkkord with my co-host today Jonni Bailey.

Let’s kick off this segment with my special offer: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus Fernandez Brinkkord. The number to call is 858-314-5169. That is 858-314-5169. Or visit www.guideyourstory.com.

Brexit: I read a few articles from the Wall St. Journal & Bloomberg to really wrap my head around this topic.

Jonni, so this term is being used quite a bit, but what does it mean to you?

Ultimately, not to beat the dead horse into the ground, Brexit is the United Kingdom leaving the European Union, which was more of a trade connection/agreement to them than anything else. But the EU is bigger than this and it has made a big impact on countries inside of the UK. I know I discussed on another show that the UK is made up of four countries: England, Wales, Ireland, and Scotland. The two countries likely hardest hit with England’s decision are Scotland and Ireland. Now Scotland voted to stay but what happened in Ireland is much more complicated and a little more difficult to navigate! Once upon a time, not long ago, even though it feels like it, Ireland was divided between the Northern Ireland and the Republic. With the largely Protestant Democratic Unionist Party backing leave and the Mainly Catholic Sinn Fein campaigning to remain. Jonni, so foreign to us to see religion tied into politics, right? Although we do see that here with some of our main issues dividing rights regarding abortion and marriage. Do you think religion plays a big role in politics here in the US?

Now, Ireland uses the Euro, not the pound, which I didn’t know and obviously ties it closely to the union even more. AND Ireland is one of the PIIGS (Portugal, Italy, Ireland, Greece, and Spain) countries that needed a bailout from the EU to get out of the last recession! Now England did contribute to that for Ireland despite not being a direct part of the currency. I know the term “bail-out” is used quite a bit. Here is what it meant for Ireland:

Ireland needed money to help shore up banks after it pumped money into the banks and essentially nationalized the bank system. Then the government got into trouble so the EU pumped into their economy $100 billion Euros. In exchange for this, the country had to agree to austerity. What does/did austerity mean? First austerity means: it is a set of economic policies implemented with the aim of reducing government budget deficits. In Ireland, that meant a huge cut in welfare spending and a rise in the VAT rate, which is a tax levied on most goods and services. Now in Ireland, welfare pertains to three things: social insurance payments, means tested payments, and universal payments. To break that down in the US terms: Social Security, Unemployment payments, Welfare (in the traditional US sense).

Jonni, what is your perspective on a country needing to be Bailed-out, do you agree or disagree with providing that kind of money to a country? Do you think austerity puts pressure on the population? If your company needed money to stay afloat, and you had to take it what austerity could you implement to keep going that wouldn’t impede your ability to be profitable?

Then for Ireland comes the issues of their already very instable economy. And with the austerity, they are just now becoming stable. The critical attraction to Ireland is the amazing corporate tax rate. Now they’ve had the ability to keep this and not assimilate to the rate of the UK because of their ties to the EU. Without membership in the EU, they may have to now increase this tax rate putting Ireland in a difficult position economically, again.

Now to turn to other interesting aspects of the bailout:
WizzAir Holding is cutting seats to and from the UK due to the weaker pound.
Appliance maker Electrolux AB & Groupe Eurotunnel SA both said the weaker pound will hurt earnings.
Concern and uncertainty for how the UK will unwind itself from the EU is creating a cloud over corporate forecasts, shaping how companies make decisions. This alone could cause pressure that could inadvertently trigger a recession in the UK.
Not all news is bad, many companies do stand to make money from this as well. British firms that make their money from outside of the UK are going to benefit from the lower currency!
I’ve even had many friends and clients tell me about how they are buying the pound now, at these rates, in advance for future vacations!

On the investment front, currency can be a huge risk and put pressure on your ability to earn money when you invest or diversify into international investments. You may want to inquire if your investments are “hedging” the currency right now to help reduce some of the issues. You should never remove 100% of investments in any one area, trying to time the market is a huge issue. That is a great time to stop and remind every one of our offer:

Windus states PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus. The number to call is 858-314-5169. That is 858-314-5169. Or visit www.guideyourstory.com.

Windus states: Stay tuned because after the break we are going to tell you about those summer wedding tax woes!

You are listening to Licensed Financial Planner, Windus Fernandez Brinkkord and my co-host Jonni Bailey on Inside Advantage on ESPN.

BREAK

Windus states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Licensed Financial Planner, Windus Fernandez Brinkkord and my co-host today Jonni Bailey with Ruff Haus Design.

Calling in today is Amy Spivey, Jeff’s associate at the Law Offices Of Jeffrey B Kahn, P.C. Amy, how are you doing today?

Chit chat with Amy

Windus states: And before we start our next segment, Amy would you please tell our listeners of your offer?

Amy states PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call our office to make an appointment to meet with Jeffrey Kahn, right here in San Diego or at one of our other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

How a Summer Wedding Can Affect Your Taxes

Windus states: With all the planning and preparation that goes into a wedding, taxes may not be high on your summer wedding checklist. However, you should be aware of the tax issues that come along with marriage.

Windus asks: Amy what are some basic tips that taxpayers should be aware of?

[Amy responds with the following tips]

• Name change. The names and Social Security numbers on your tax return must match your Social Security Administration records. If you change your name, report it to the SSA. To do that, file Form SS-5, Application for a Social Security Card. You can get the form on SSA.gov, by calling 800-772-1213 or from your local SSA office.

• Change tax withholding. A change in your marital status means you must give your employer a new Form W-4, Employee’s Withholding Allowance Certificate. If you and your spouse both work, your combined incomes may move you into a higher tax bracket or you may be affected by the Additional Medicare Tax. Use the IRS Withholding Calculator tool at IRS.gov to help you complete a new Form W-4.

• Changes in circumstances. If you or your spouse purchased a Health Insurance Marketplace plan and receive advance payments of the premium tax credit in 2016, it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace when they happen. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance credit payments are paid directly to your insurance company on your behalf to lower the out-of-pocket cost you pay for your health insurance premiums. Reporting changes now will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance, which may affect your refund or balance due when you file your tax return.

• Address change. Let the IRS know if your address changes. To do that, send the IRS Form 8822, Change of Address. You should also notify the U.S. Postal Service. You can ask them online at USPS.com to forward your mail. You may also report the change at your local post office. You should also notify your Health Insurance Marketplace when you move out of the area covered by your current health care plan.

• Tax filing status. If you’re married as of December 31, that’s your marital status for the whole year for tax purposes. You and your spouse can choose to file your federal income tax return either jointly or separately each year. You may want to figure the tax both ways to find out which status results in the lowest tax.
Windus asks: Can you get a Tax Write-Off for your wedding?

Amy replies: Generally you cannot write-off a wedding but there are ways that newlyweds can spend for their weeding that can actually save money when it’s time to pay taxes at the end of the year.

Windus states: Well I am sure that tax write-offs are usually the last thing a bride and groom think about when planning a wedding but what tips so you have on this?

Amy replies: The Attire. Brides often wear their wedding dress only once. And while some opt to keep them for whatever reason, others have no idea how to discard them. For a tax write-off, consider donating the wedding gown to a nonprofit organization like Goodwill, MakingMemories.org or CinderellaProject.net. These organizations will take your dress and issue you a donation receipt for your good efforts. While you’re at it, consider donating the bridesmaids dresses, flower girl dress, ring bearer’s outfit and any nonperishable decorations.

Windus asks: What about the venue?

Amy replies: The Venue. Believe it or not, some wedding venues are tax deductible. Choose a ceremony or reception venue located at a museum, public-owned park or even a historic house or building of some sort. These places are usually owned by nonprofit organizations who use the money they receive for upkeep purposes only. Speak with the head of the venue sight to make sure that it is a nonprofit organization and what portion of the cost you pay is in excess of the deemed value of the rental of the space (only the excess amount could be deductible as a charitable contribution).

Windus asks: Can you think of anything else?

Amy replies: Wedding Favors and Gifts. Charity donations can make thoughtful wedding gifts and favors. They also save you money during tax season. So instead of purchasing a trinket that your guests or attendants may discard later, opt for a donation to your favorite charity on behalf of all those who are a part of your wedding.

Amy continues: Flowers and Foods. You can also get a tax write-off for items that have a short life, such as leftover food and all those floral centerpieces. After the wedding is over, ask a friend or family member to bring the items to a local nursing home, homeless shelter or somewhere similar. You will get a tax deduction for the cost of the remaining food and flowers and you’ll put a few smiles on faces.

Windus states: I would think that writing off anything associated with a wedding would be a red flag with IRS so how should a taxpayer document this?

Amy replies: Documenting. Whether you have your taxes done by a professional accountant or take care of them yourself, it’s important to document each of these wedding tax write-offs. Keep all your receipts for any purchases you make and request a donation sheet (signed by the organization) that states how much you donated, what you donated and when. Save all your contracts for any wedding venues and, if possible, request that the venue organizer provide you with receipts for each of your payments.

Windus states: So it seems that these write-offs are being structured as qualifying expenditures as charitable contributions.

Amy replies: That’s right. Reporting Charitable Contributions. To claim charitable deductions, you must itemize them on Schedule A of Form 1040. The IRS will need any and all receipts and statements that support the fees, expenses and donations that you claim. If your total noncash contributions exceed $500, you must also fill out Form 8283, Noncash Charitable Contributions, and attach it to your tax return. If you donate a single item worth more than $5,000, you must add Form 8283, Section B, and obtain an appraisal.

Windus asks: When could an Engagement Ring be tax deductible?

Amy replies: An engagement ring signifies a commitment between two partners and marks their intention to marry at a later date. Because engagement rings are typically made from precious metals and stones, the price can range from several hundred dollars to several thousand dollars. Whether you may claim an engagement ring as a tax deduction depends on individual circumstances. If you plan to propose and purchase an engagement ring to seal the deal, you may not deduct the cost of the ring from your taxes. An engagement ring is considered a capital gains item rather than a household item, making it ineligible for deduction purposes.

Windus asks: So let’s say the engagement falls apart and now you have this ring. Can you donate it and get a tax write-off?

Amy replies: Donating a Ring. You may donate an engagement ring to a charitable entity if, for instance, your engagement ended without marriage or if you divorced and no longer want to keep the ring. In most cases, the donation represents a charitable contribution that you can deduct from your tax liabilities for the year in which you donate the ring. However, to claim the ring as a tax deduction, the charitable organization must be able to use or sell the ring. Contributions that a charitable entity cannot use are not tax deductible. The amount you can deduct from your tax liability depends partially on the value of the ring. Obtaining a certified appraisal of the ring might help you maximize your tax deduction if the ring has increased in value since purchase. The cost of the appraisal is not included in the charitable contribution deduction; however, you may deduct the cost of the appraisal as a miscellaneous deduction.

Amy continues: It’s Risky Business To Take A Tax Write-Off For Your Wedding but if it is done right it should be respected by the IRS which is why …

Amy states: PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call our office to make an appointment to meet with Jeffrey Kahn right here in San Diego or at one of our other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Windus states: Thanks Amy for calling into the show. Amy says Thanks for having me.

Windus states: Stay tuned as we will be taking some of your questions. You are listening to Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Windus states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Licensed Financial Planner, Windus Fernandez Brinkkord and my guest Jonni Bailey with Ruff Haus Design.

Jonni, how have you enjoyed the show so far today? Ready to answer some audience questions?

First, let’s highlight the Trilogy offer one more time today: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus. The number to call is 858-314-5169. That is 858-314-5169. Or visit www.guideyourstory.com.

You should also know that the securities and advisory services are offered through National Planning Corporation (NPC) Member FINRA, SIPC, and a Registered Investment Advisor. Trilogy Financial Services and NPC are separate and unrelated Entities.

Windus states: If you would like to post a question for us to answer, you can go to Jeff’s website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

OK Jonni, Now you get to ask me the questions.

Have a great day everyone!

Jeffrey B. Kahn, Esq. and Windus A. Fernandez Brinkkord Discusses The Financial Markets, Deducting Hobby Losses and Your Taxes On ESPN Radio – July 8, 2016 Show

Topics Covered:

1. Special Guest: David “Stan” Stankaitis, CCIM; President at Trillium Capital Partners, Commercial Mortgage Broker
2. Said the “Stock Market to the Bond Market: La-La-La I Can’t Hear You”
3. Beware Your Hobby Business Could Land You In Tax Court
4. Questions from our listeners:
a. In order to invest more conservatively in the current volatile market and ride out the market slump until the next Bull Run, what type of investments should I be shopping for?
b. If I’m not set to retire for the next 40 years, should I really be concerned with how I’m investing right now if I’ll make it up further down the line?
c. Would investing on a Cost-Basis average eliminate some volatility if I choose to keep investing steadily through a recession?

***************************************

Windus states: Good afternoon! Yes sometimes we just have to take the money and run! Welcome to Inside Advantage – Your Financial And Tax Radio Show.

This is Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.
Windus states: My co-host, Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team, is off today but we still have things covered.

Windus states:

You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.

Windus states:

When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

Windus states:

And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.

Windus states:

Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.

Windus states:

For today’s show we have coming up:

Segment 2 material: Said the “Stock Market to the Bond Market: La-La-La I Can’t Hear You”

Windus states:

Also coming up is:
Segment 3 material: Beware Your Hobby Business Could Land You In Tax Court
And of course towards the end of our show, we will be answering some of your questions.

Windus states: It’s time now to introduce you to our special guest this week:

David “Stan” Stankaitis, CCIM; President at Trillium Capital Partners, Commercial Mortgage Broker

1. Tell us a little bit about what you do Stan.
2. What peaked your interest about your line of work, in the first place?
3. What did you do prior to entering the field of Commercial Mortgages?
4. How did working as a Derivatives Trader and Options Market Maker prepare you for your current position?
5. What made you decide to found your own lending company in 2006, and then later form Trillium Capital Partners?
6. How large is your company now?
7. With all of the different types of loan funding of commercial property, do you have a primary focus?
8. Why are you focused on these types of properties?
9. Besides the magnitude, can you tell our listeners what the major differences between private residential and commercial real estate mortgages?
10. What types of loan programs do service?

Windus states: Well it’s time for a break but stay tuned because we are going to tell you what the bond market is telling us.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Windus states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

And be aware of the special offer that I have for you: Windus states Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169. Or visit www.guideyourstory.com.

Stock Market to Bond Market: ‘La-La-La I Can’t Hear You’
http://on.wsj.com/29sak2d

1. Lehman Brothers fell over in September 2008, equities slumped, then rallied back to their previous levels within a week
a. Brexit isn’t Lehman, but the stock market is behaving similarly
b. (DISCUSS: Similarities and historically what happened at the beginning of the great recession)
2. Since the Brexit vote, Treasury yields have tumbled, and they kept falling even as shares recovered
a. Last Friday, 10-year and 30-year yields set new lows, as did British and Japanese benchmarks
b. Bondholders think central banks will worry about the economic impact of Brexit, keeping rates lower for longer
c. (DISCUSS: Difference between now and when Lehman’s went down, bond yields rebounded with shares)
3. A divergence of bonds and equities isn’t healthy
a. (DISCUSS: Is recent activity showing that stocks are no longer about growth, but about a desperate search for safe alternatives to low-yielding bonds?)
4. We can hope
a. If Fed is scared by Brexit into keeping rates low even as the economy recovers, shareholders win
b. Short run: Brexit keeps central banks at bay until word gets around that the US economy isn’t much affected by UK troubles
c. (DISCUSS: Agree or disagree—we are in a post-Brexit safe zone and the decision for the UK to leave the EU will no longer affect us.)
5. The three big dangers for investors post-Brexit
a. Italy’s wobbly banking system
i. (DISCUSS: Explain situation with Italy pleading with Germany for bail out & possible political woes)
b. With interest rates still negative in Europe and Japan, investors may fret that central banks are running out of ammunition
i. (DISCUSS: Where interest rates are headed and whether or not you believe the Feds would considering dropping rates again so soon)
c. Governments may loosen their purse strings at the advice of the central banks to try and stimulate growth
i. (DISCUSS: Pros and Cons of increasing the US deficit versus a tighter budget. Should the world economy follow suit?)
6. Problem with investors playing it safe with equities that people will always need even in bad times(utilities, consumer staples, healthcare and telecommunications), is that they would all be hit it bond yields rise again
a. (DISCUSS: Higher bond yields caused by faster economic growth are offset by higher profits, meaning profits for the companies investors have shunned. How do you properly balance to be stable for either out-come, Bear Market or Bull Run)?

Windus states: Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169. Or visit www.guideyourstory.com.

Windus states: Stay tuned because if you run a side business or are looking to deduct losses from a hobby beware of the potential pitfalls that could land you in Tax Court.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Windus states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Jeff is off for today but we still have his associate attorney, Amy Spivey calling in from Walnut Creek.

Chit chat with Amy

Windus states: And before we start our next segment, Amy would you please tell our listeners of your offer?

Amy states PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call our office to make an appointment to meet with Jeffrey Kahn, right here in San Diego or at one of our other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Beware Your Hobby Business Could Land You In Tax Court

Windus states: Many people successfully develop a hobby into a going concern and actually receive income from it. That income must always be reported and taxes paid on that money regardless of your situation.

Amy states: Now if you leave that hobby as a hobby, under the tax law, you are not allowed to deduct any of the losses incurred by activity in that hobby. That is the reason most people turn their hobbies into a “trade or business” once they start making money.

Windus asks: Do taxpayers and the IRS have differing views as to what constitutes a “trade or business”?

Amy replies: Yes. A taxpayer will argue that the activity is a trade or business and therefore the loss is deductible in full. The IRS will argue that the activity is a hobby so expenses from the activity are generally limited to the income derived resulting in no deductible loss.

Amy continues: Let’s say you have a backyard greenhouse where you grow orchids and travel all over the world to collect new plants to add to your inventory and propagate. While you may think of this as your legitimate side business, the IRS is likely to disagree. If the IRS sees a history of losses from the activity, they may well challenge whether it is truly a “hobby” rather than a trade or business. If successful, such a challenge would preclude you from deducting a net loss from the activity, effectively rendering your orchid-growing-related tax-benefits useless.

Windus asks: When Are Hobby Losses Deductible?

Amy replies: By showing that your pursuit of your “hobby” is an activity engaged in for profit, you may be able to deduct those years where you incurred losses if you meet certain presumptions.

Amy continues: For activities not involving the breeding, training, showing, or racing of horses, the presumption is that your business is an activity engaged in for profit where you show annual net income from an activity for 3 or more of the taxable years in the period of 5 consecutive taxable years which ends with the most recent taxable year. So if for the first three years your activity has incurred losses, you must show net income in years four and five (even if only $1.00 in each year) in order to still be able to deduct the first three years of losses.

Amy continues: For activities involving the breeding, training, showing, or racing of horses, the presumption will work in the same fashion except you must show annual net income from an activity for 2 or more of the taxable years in the period of 7 consecutive taxable years which ends with the most recent taxable year.

Windus asks: Are there any factors out there that taxpayers should know to determine whether an activity is entered into for profit or a hobby?
Amy replies: The regulations under Section 183 (the so-called “hobby loss rules”), provide nine factors, which if answered in the affirmative, are indicative of a business.

Amy to recite each factor.
1. The manner in which the taxpayer carries on the activity. Do they complete accurate books? Were records used to improve performance?
2. The expertise of the taxpayer or his advisers. Did the taxpayer study the activities business practices? Did they consult with experts?
3. The time and effort expended by the taxpayer in carrying on the activity. Do they devote much of their personal time and effort?
4. The expectation that the assets used in the activity may appreciate in value. Is the plan to generate profits through asset appreciation?
5. The success of the taxpayer in carrying on similar or dissimilar activities. Have they converting them from unprofitable to profitable?
6. The taxpayer’s history of income or losses with respect to the activity. Has the taxpayer become profitable in a reasonable amount of time?
7. The amount of occasional profits. Even a single year of profits can be a strong indication that an activity is not a hobby.
8. The financial status of the taxpayer. Does the taxpayer have other income sources that are being offset by the losses of the activity?
9. Does the activity lack elements of personal pleasure or recreation? If the activity has large personal elements it is indicative of a hobby.

Windus asks: Is there any particular factor that stands out over the others?

Amy replies: No one factor is determinative but the more you have in your favor, the better off you are. And because factors 4 through 9 are largely out of your control, you’d better make sure you’ve got the first three buttoned up by running the activity in a businesslike manner. Your business records must be up-to-date and accurate, and your business plan must lay out a course for creating profit from your activity in the future. That written business plan can be a real asset if you end up in Tax Court versus the IRS.

Windus asks: Are there certain activities that attract IRS attention more than others, and by their very nature expose the taxpayer to risk of a hobby loss challenge?

Amy replies: There seem to be two “hobbies” that trigger audits most frequently and those are horses or yachts. Both are money pits, and so if people can figure out a way to make a business out of them, that will provide either tax deductions and/or income to cover the high expenses of each. The IRS knows this, and is very strict when applying the rules to these activities. When structuring these, pay very close attention to business start-up details.

Windus states: Despite the presumptions you discussed, the IRS does not always see your hobby as a viable business, and that is where tax difficulties arise. I suspect that there are a lot of Tax Court cases involving whether an activity was a hobby or business.

As time permits – Amy can discuss any of these cases leaving time for her to recite Jeff’s plug.

1. Fishing: In Busbee v. Commissioner, T.C. Memo 2000-182, this taxpayer decided to hold fishing tournaments. These tournaments required him to promote the activity through flyers, speaking engagements, and other marketing efforts. He had to recruit participants and sponsors. He intended his hobby of fishing tournaments to supplement his retirement income as he developed it into a business. Through the process, he became an expert in bass fishing. The Tax Court considered all of this, and allowed his business.
In Peacock v. Commissioner, T.C. Memo 2002-122, this taxpayer began tournament fishing in his retirement. Sailing everywhere on his personal yacht, he and his wife fished specifically for the pleasure of participating in the tournament, especially when these tournaments were in exotic locales. In this case, the Tax Court decided this was not a business but a hobby for the activity was not “motivated primarily by the pursuit of profit”. What probably hurt their case, even subtly, was the fact that they had just sold a business and were now millionaires.

2. Golfing: In William James Courville v. Commissioner, T.C. Memo 1996-134, an optical engineer, after 30 years of employment, was laid off. He decided to become a professional golfer, but took only 4 golf lessons while a “professional”. He did not qualify for the senior tour, and ended up with no income from this activity. However, he did submit a Schedule C, listing expenses totaling over $16,000. The Tax Court declared that he “failed to establish that his golfing activity was carried on with the actual and honest objective of making a profit”.

3. Track and field coaching: In Parks v. Commissioner, T.C. Memo 2012-105, the taxpayer began his professional career as a writer of freelance articles on the sport of track and field. Over a number of years, he owned a track and field magazine, coached at a number of different locations, studied with one of the foremost experts in the industry, then basically tried to establish himself and his trainees as credible within the field. By 2006, this man had a winning contestant who qualified for the Olympic trials, and by 2009, that contestant signed the taxpayer coach to a lucrative contract as his exclusive coach, and things only got better for the taxpayer. However, in a tax period of 9 years, the coach showed only a $43 profit, so the IRS claimed hobby not business. The Tax Court considered the case in great detail and decided primarily (although not all points) for the taxpayer, saying his income was growing and he had great potential for success. They did not see track and field as a typical hobby, and that did work to the taxpayer’s benefit.

4. Writing: There is an infamous case which always gives people a chuckle, and that is the man who decided to write about prostitution. Vitale v. Commissioner, T.C. Memo 1999-131. Ralph Louis Vitale, Jr., in 1999, claimed on his tax return that he was in the business of writing about prostitution. When this taxpayer began his “research” four years before his retirement, he was still a full-time employee. Over the course of time, he visited a large number of brothels doing his “research” and always paying for services in cash (no records kept). He did keep a journal detailing each of his visits and expenses, and eventually developed a manuscript from his notes. Vitale submitted his manuscript to a vanity publisher, paying $4,375 to publish it. All told, after he received $2,600 in royalties, the publisher went bankrupt. Subsequently, the book rights were returned to him, and he again began marketing his book throughout the industry. The IRS said this was just a hobby and disallowed Vitale’s deductions. So Vitale went to Tax Court. At first, the Tax Court felt that the taxpayer had a profit motive and overruled the IRS, even though the court also made comments about the “recreational” qualities of the contents of his book. The court did like his record-keeping and marketing and felt it showed his professionalism. But then the Tax Court disallowed all of his deductions, for the taxpayer could prove none of them (remember the cash payments?). Nevertheless, the court did not penalize this taxpayer in any way, saying that he had made a reasonable attempt to comply with the law.

Amy states: The U.S. Tax Court weighs “profit motive” most heavily in each of their decisions. Profit is a key decider when considering whether an activity is hobby or business. Is your hobby truly for profit or only for pleasure? That is foremost and basic premise that the Tax Court considers. Which is why ….

Amy states: PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Windus states: Thanks Amy for calling into the show. Amy says Thanks for having me.

Windus states: Stay tuned as we will be taking some of your questions. You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Windus states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Windus states: And Jeff and I always pleased to make our offers to our listeners where… PLUG: The Law Offices Of Jeffrey B. Kahn, P.C. will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call Jeff’s office to make an appointment to meet with him right here in San Diego or at one of his other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Windus states: Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169. Or visit www.guideyourstory.com.

You should also know that the securities and advisory services are offered through National Planning Corporation (NPC) Member FINRA, SIPC, and a Registered Investment Advisor. Trilogy Financial Services and NPC are separate and unrelated Entities.

Windus states: If you would like to post a question for us to answer, you can go to Jeff’s website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

Windus states: And in the studio with me today is our special guest, David “Stan” Stankaitis, CCIM; President at Trillium Capital Partners, Commercial Mortgage Broker. And Stan as our special guest, I will let you read what questions our listeners have for us to answer?

Carlos from San Diego asks: In order to invest more conservatively in the current volatile market and ride out the market slump until the next Bull Run, what type of investments should I be shopping for?

Windus answers.

Susan from Carlsbad asks: If I’m not set to retire for the next 40 years, should I really be concerned with how I’m investing right now if I’ll make it up further down the line?

Windus answers.

Sandra from Newport Beach asks: Would investing on a Cost-Basis average eliminate some volatility if I choose to keep investing steadily through a recession?

Windus answers.

Windus states: Well we are reaching the end of our show.

Remember you can send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com.

Have a great day everyone!