Topics Covered:

1. Is there any truth to the theory that the Federal Reserve is the root of the cause why markets have plunged?

2. Why you should be outraged that we in the U.S. are paying substantially more for top prescription drugs than other countries!

3. What you need to know to stay out of trouble with the IRS if you live abroad or have foreign assets.

4. Questions from our listeners:

a. I am a U.S. citizen and in 2015 I married a nonresident alien, what should I use for my filing status for my 2015 income tax return?

b. When could we realistically be looking at the Federal Reserve earnestly considering the next rate hike?

c. What type of funds should I be considering for long term growth in say an IRA? Same question for a short-term wealth building individual account for unforeseen expenses?

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

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

Good afternoon! 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.

Windus states:
And this is Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President of Investments 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!

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.

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: Why you should be outraged that we in the U.S. are paying substantially more for top prescription drugs than other countries!

Windus states:

Also coming up is:

Segment 3 material: What you need to know to stay out of trouble with the IRS if you live abroad or have foreign assets.

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

Jeff starts chit chat with Windus.

Windus introduces her guest: Gary Sussman, Managing Partner at Trilogy Financial Services.

Gary says Hi!

Jeff states: So for today’s top story,
Is there any truth to the theory that the Federal Reserve is the root of the cause why markets have plunged?

Jeff continues: This is a question we picked up on various articles in The Wall Street Journal and Bloomberg News.

http://on.wsj.com/1PfzYU0; http://on.wsj.com/1PfxmFC; http://on.wsj.com/1nt5uDJ; http://www.bloomberg.com/news/articles/2016-01-25/deeper-dive-into-market-monsoon-shows-recession-alert-on-mute; http://on.wsj.com/1nwUAgo; http://bloom.bg/1KFGk9O

Jeff continues: The articles note that oil and stocks at their tightest correlation in 26 years. So how could the Federal Reserve’s 0.25% rise in rates this past December tank markets into the New Year and risk pulling us into a recession? You should know that current conditions have very little to do with the Central Bank and more to do with anxieties about China’s economy, emerging markets and oil.

Windus replies: Federal policy operates through a collaboration of financial conditions, i.e. stock prices, corporate bond yields, commodity prices, exchange rates and most of all, the desire for risk. Although the Fed doesn’t command the behavior of these comprehensive conditions, it does stimulate. Peter Berezin of BCA Research explains, “If you are a central bank reliant on increasing risk as your method for stoking spending, you’re going to run into a major problem. You can only increase risk so much. And when investors pull back, they do so in a very sharp way.”

Jeff states: The Fed quarter point rise in interest rates won’t push the U.S. economy into a downfall though, in actuality, short-term rates and bond yields really are not impacted by gradual rate changes made by the Fed. But an overall tightening of financial conditions in the U.S. could tip the scales toward a recession.

Windus continues: This doesn’t mean the Federal Reserve was wrong to begin implementation of such an aggressive monetary policy, considering the return of a low 5% rate of unemployment. So let’s look at the odds.

Jeff replies: Well currently, the unemployment rate is looking good at a seven year low, GDP is forecast at a 2.4% growth rate for 2016, and Goldman Sachs has said this will be a “reflationary year” even with the consideration of some price increasing yielding little to no gains.

Windus replies: This month’s Bloomberg survey of economists measures a median probability of a recession in the U.S. in the next twelve months at 19%. This is the highest probability since February of 2013; however, economists are looking not to 2017 but actually at 2018 for the likeliest year for contraction.

Jeff continues: At the same time Windus, the rough two-week start of the stock market this year, the worst on record, has been enough to shake investor confidence, destroying more than $2 trillion of equity value. Then again, signals are inconclusive if we go by history. The S&P 500, once down by 12% from its high, just made its 42nd correction of 10% since 1927, according to the Wall Street Journal.

Windus states: Looking at history out of the 42 corrections, only 13 of those corrections came within a year of a two quarter contraction in GDP. Chief Investment Officer at Leuthold, Doug Ramsey, is not convinced of the call of a recession. “If we go down to 25% on the S&P 500, then [he] would say, yes, we’ll have a recession. If we bottom here, I think it’s a much tougher call.”

Jeff states: Some might even say the economy is just having ‘digestion problems’. In a Bloomberg Television interview from the World Economic Forum in Davos on Friday, Laurence D. Fink, chairman of BlackRock Inc., the world’s largest money manager, explained that the over the course of the next year we’ll see improving market with global GDP around three-percent. Although, not as high as the IMF is forecasting, he believes “this is a capitulation, not a bear market.”

Windus replies: The S&P 500 would need to fall another five-percent from its January 20 worst low, in order to meet the threshold of a bear market warning. Only four recessions since the Great Depression have come without a bear market warning according to data compiled by Bloomberg.

Jeff continues: Now you should not be thinking that the recent junk bond massacre in the energy sector is signaling a recession, but if the world economy starts to slow down we need to look at U.S. industrial production for any warning signs of a recession. Trends in manufacturing tend to lead the economic cycle, as well as, being an indicator of market swings. Let’s face it, manufacturing is struggling.

Windus states: However Jeff, unlike declines in the past, the current decline in industrial production has been primarily driven by the collapse in the oil industry. The oil industry that just so happened to have been on the rebound this week.

Jeff replies: In fact, investors disregarded yet another sharp decline in Chinese shares as the rally in oil prices gave gain to U.S. stocks. This came about after a better-than-expected earnings report Tuesday.

Windus states: Taking a moment to consider the economic start of the New Year, it’s good to hear that even though the Shanghai Composite tanked to a grand total loss of 22% so far this year, U.S. stocks rallied freeing themselves from being pulled down further alongside the Chinese market.

Jeff states: Other earnings reports released on Tuesday, giving way to an upturn in the market include 3M, reporting profits and sales topping analyst’s expectations for the quarter as well as confirming its profit outlook for 2016. 3M shares gained 5%.

Windus continues: Johnson & Johnson increased 5% as well, despite a drop in quarterly sales, due to confidence in its core business and global health-care market.

Jeff continues: European shares also rebounded with the Stoxx Europe 600 Index gaining 0.9%, as recovering oil and base metal prices reprieved energy and mining companies.

Windus continues: Sprint shares jumped 19% after reporting a smaller than expected quarterly loss and boosted its direction for the year.

Jeff continues: In a recent turn of events, Coach reported quarterly sales gains for the first time since June 2013, and welcomed a share gain of 9.8%. Gold even rose 1.4% to $1,121.70 a troy ounce.

Windus states: Meanwhile, officials at the Federal Reserve announced Wednesday, that interest rates will remain unchanged. The Federal Open Market Committee is “closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook,” the central bank said in the statement following a two-day meeting in Washington.

Jeff replies: “This doesn’t read like a statement from a committee that is expecting to tighten again in March,” according to Johns Hopkins University in Baltimore, professor and a former Fed economist, Jonathan Wright. “Four rate hikes this year is not impossible, but I think it is unlikely and would be unwise.”

Windus makes final comment on this.

Jeff states: Well it’s time for a break but stay tuned because we are going to tell you all about how U.S. consumers pay substantially more for top prescription drugs than consumers in other countries.

Jeff continues: 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

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, Windus A. Fernandez Brinkkord.

Consumers in the U.S. are paying substantially more for top prescription drugs than other countries!

Jeff continues: I hope that after listening to this segment you will be outraged just as much as me and Windus that consumers in the U.S. are paying substantially more for top prescription drugs than other countries! But before we start this discussion, Windus wants to tell you about her special offer:

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 begins: In recent articles by Bloomberg News and The Week, they’ve examined the eight top selling prescription drugs, finding that the cost of these drugs are higher in the U.S. than most other countries. It is speculated that the reasoning behind price gouging Americans, is to presumably fund prescription research and development.

http://www.bloomberg.com/graphics/2015-drug-prices/; http://theweek.com/articles/597868/ecigarettes-generic-drugs-guide-fda-2016

Jeff states: Yes Windus, the cost of brand-name prescription drugs is found to be greater in the U.S. than many other developed countries. However, contentions from the drug industry claim that focusing on the U.S. list prices unfairly excludes the discounts established between insurers.

Windus replies: However, analysts at Bloomberg News have determined that even after these sometimes greater than 50% off discounts, prices are still much higher for Americans then they are abroad. Let’s compare these top eight to see exactly where we are and which ones in specific we are focusing on.

Jeff replies: To start with, after the estimated 60% discount, AstraZeneca still charges the U.S. more than twice as much for its Crestor cholesterol pill than the next most expensive country, Germany.

Windus continues: Sanofi charges 30% more in the U.S. than in China, the second-most expensive country, for its Lantus long-acting insulin. This is after discounts of roughly 50%, according to SSR Health.

Jeff continues: Also striking deals at 50% off on their drug, Advair asthma inhaler, GlaxoSmithKline Plc’s charges at least twice as much in the U.S. as opposed to other well developed countries.

Windus continues: Again according to SSR Health data, the list price of Januvia, Merck & Co’s diabetes pill, has likewise been negotiated to an estimated 50% discount on average. Yet, even considering the price cut, the drug is priced for Americans more than double what it’s costing our neighbors in Canada, coming in second for most expensive, Bloomberg reports.

Jeff continues: To give you a better idea of cost, AbbVie Inc’s lucrative rheumatoid arthritis treatment Humira, is priced in the U.S. at an estimated $2,500 a month after discounts. The runner up Germany comes in around $1,750 a month, Bloomberg reports. The price continues to drop even further in other countries around the world.

Windus: Additionally, price imbalance seems more prominent in cancer drugs. For instance, after an estimated fifteen-percent discount on the Herceptin breast cancer infusion drug from Roche Holding AG, it’s one-third more than the second most-expensive, Saudi Arabia. In addition, the cost of this medication is still 85% higher for Americans than it is for citizens of other high-income nations.

Jeff states: Unfortunately, discounts for the eighth drug, the chronic leukemia/cancer treatment Gleevec, could not be obtained, but its list price is more than $7,000 a month more expensive than the next populace. Americans are being quoted over 70% more, before any negotiated discount for this particular treatment. However, a generic version is anticipated to be available in February 2016, Novartis AG reports.

Windus continues: Finally Sovaldi, the Hepatitis C pill from Gilead Science Inc., actually gives American a bit more of a break with the U.S. ranking second just under Saudi Arabia, only after discounts. However, both Saudi Arabia and the U.S., along with other ranking high-income countries are running fairly neck-and-neck in cost comparison.

Jeff replies: Furthermore, the 22% discount established with the U.S. in 2014 will more than double to 46% in February this year, Gilead released. Finally giving us a decent price-break on at least one of the top eight drugs.

Windus states: Chief Medical Officer Steve Miller of Express Script Holding Co, the largest manager of prescription-drug benefits insists, “We can no longer sustain a system where 300 million Americans subsidize drug development for the rest of the world.” Regardless, the drug industry sees it differently.

Jeff continues: In the U.S., drug companies set their own base price with increases in sticker price over time. Private insurers and benefit managers can then negotiate to strike a deal with the prescription manufacturers, which are rarely ever disclosed. Meanwhile Medicare, one of America’s largest buyers of medicine, is forbidden from haggling prices direct with drug companies.

Windus states: In the interim, given the current race for the White House, election years tend to focus heavily on issues like this. In fact, candidates are already pushing the Food and Drug Administration to lower drug costs. Then again, the agency only has indirect influence in this aspect.

Jeff states: However when we get down to the nitty-gritty, the FDA does have jurisdiction over 20-25% of every consumer dollar. Therefore, it matters what actions are taken and the agency has a considerable amount already on its plate outside of drug prices for 2016.

Windus replies: Lawmakers are turning to generic drugs that account for 88% of all prescriptions at 28% of the price, according to Generic Pharmaceutical Association. Far cheaper than their skyrocketing name-brand counterparts, these will effectively help ease the drain on consumer’s finances.

Jeff states: Currently, more than 4,300 generic medication applications are now awaiting FDA approval. The problem is that many of these applications are ‘deficient’ while “generic drug companies submit reports lacking critical information solely to win a space in the queue, and plan to fix them later,” according to The Week.

Windus continues: In order to expedite the issue, the FDA is expected to permit generic companies to later edit their labels with safety information prior FDA approval. The increased liability in the case of safety issues raises opposition in the industry. Which means, we had better start saving for the hefty cost of those prescription medications you’ll need in your retirement, which is why…

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.

Jeff states: Stay tuned because after the break we are going to tell you what you need to know to stay out of trouble with the IRS if you live abroad or have foreign assets.

Jeff states: 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

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, Windus A. Fernandez Brinkkord.

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

Chit chat with Amy

Jeff states:

What You Need To Know To Stay Out Of Trouble With IRS If You Live Abroad Or Have Foreign Assets.

Jeff continues: The Internal Revenue Service continues its educational efforts to remind U.S. taxpayers living abroad, as well as other international taxpayers, of their tax reporting obligations by launching You Tube Videos on IRS.gov.

Windus states: The videos cover the following international taxpayer topics:

• Filing Requirements
• Foreign Earned Income Exclusion
• Individual Taxpayer Identification Number (ITIN)
• Filing Status if Married to a Nonresident Alien
• Foreign Tax Credit
• Introduction to the International Taxpayers Web Page

Jeff states: So we have taken the most important points from these videos which we will discuss in this segment as well as provide you with our comments and tips if you have undisclosed foreign bank accounts or need to report foreign income. I will let Windus read off a point and Amy and I will follow up on each point.

Windus states: The U.S. taxes persons on their worldwide income.

Amy replies: By law, Americans living abroad, as well as many non-U.S. citizens, must file a U.S. income tax return. In addition, key tax benefits, such as the foreign earned income exclusion, are only available to those who file a U.S. return.

Amy continues: The Internal Revenue Code 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.

Windus asks: Amy what are the penalties for non-compliance?

Amy replies: Penalties for non-compliance:

Civil Fraud – If your failure to file is due to fraud, the penalty is 15% for each month or part of a month that your return is late, up to a maximum of 75%.

Criminal Fraud – Any person who willfully attempts in any manner to evade or defeat any tax under the Internal Revenue Code or the payment thereof is, in addition to other penalties provided by law, guilty of a felony and, upon conviction thereof, can be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than five years, or both, together with the costs of prosecution (Code Sec. 7201).

Jeff comments: The term “willfully” has been interpreted to require a specific intent to violate the law (U.S. v. Pomponio, 429 U.S. 10 (1976)). The term “willfulness” is defined as the voluntary, intentional violation of a known legal duty (Cheek v. U.S., 498 U.S. 192 (1991)).

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: The U.S. requires persons to report foreign bank accounts.

Amy replies: 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 with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) ) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). It is due to the Treasury Department by June 30, 2016, must be filed electronically and is only available online through the BSA E-Filing System website. For details regarding the FBAR requirements, see Report of Foreign Bank and Financial Accounts (FBAR).

Windus asks: Amy what are the penalties for non-compliance?

Amy replies: Penalties for non-compliance: The penalties for FBAR noncompliance are stiffer than the civil tax penalties ordinarily imposed for delinquent taxes.

For non-willful violations it is $10,000.00 per account per year going back as far as six years.

For willful violations the penalties for noncompliance which the government may impose include a fine of not more than $500,000 and imprisonment of not more than five years, for failure to file a report, supply information, and for filing a false or fraudulent report.

Jeff comments.

Windus states: U.S. requires foreign financial institutions to report U.S. accountholder to the IRS.

Amy replies: U.S. taxpayers with foreign accounts should also understand their reporting requirements under the Foreign Account Tax Compliance Act (FATCA). Third-party information reporting from foreign financial institutions or through intergovernmental agreements began in 2015.

Windus asks: Amy what are the penalties for non-compliance?

Amy replies: Penalties for non-compliance: Foreign banks that are not certified by the IRS for reporting U.S. accountholders are subject to a 30% withholding tax on all U.S. sourced investments.

Jeff comments.

Windus states: The IRS requires disclosure of foreign financial accounts with your Form 1040.

Amy replies: In addition, under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets.  Generally, U.S. citizens, resident aliens and certain non-resident aliens must report specified foreign financial assets on this form 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. See the instructions for Form 8938 for more information.

Windus asks: Amy what are the penalties for non-compliance?

Amy replies: Penalties for non-compliance: Failing to file Form 8938 when required could result in a $10,000 penalty, with an additional penalty up to $50,000 for continued failure to file after IRS notification. A 40% penalty on any understatement of tax attributable to non-disclosed assets can also be imposed.

Jeff comments.

Windus states: The IRS has special programs for taxpayers to come forward to disclose unreported foreign accounts and unreported foreign income.

Amy replies: The main program is called the Offshore Voluntary Disclosure Program (OVDP). OVDP offers taxpayers with undisclosed income from offshore accounts an opportunity to get current with their tax returns and information reporting obligations. The program encourages taxpayers to voluntarily disclose foreign accounts now rather than risk detection by the IRS at a later date and face more severe penalties and possible criminal prosecution.

Windus asks: Amy, When did the IRS first start OVDP?

Amy replies: OVDP was first started by the IRS in 2009. Since then there have been more than 54,000 voluntary disclosures by taxpayers with undisclosed foreign bank accounts. The IRS has collected more than $8 billion from this initiative.

Windus asks: Both you and Jeff talked about the penalties and even criminal enforcement for non-compliance. What advantages does a taxpayer have coming into any of these programs.

Amy replies: For taxpayers who willfully did not comply with the U.S. tax laws, we recommend going into the 2014 Offshore Voluntary Disclosure Program (OVDP). Under this program, you can get immunity from criminal prosecution and the one-time penalty is 27.5% of the highest aggregate value of your foreign income producing asset holdings.

Jeff continues: For taxpayers who were non-willful, we recommend going into the Streamlined Procedures of OVDP. Under these procedures the penalty rate is 5% and if you are a foreign person, that penalty can be waived. This is a very popular program and we have had much success qualifying taxpayers and demonstrating to the IRS that their non-compliance was not willful. Which is why …

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.

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, Windus A. Fernandez Brinkkord 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, Windus A. Fernandez Brinkkord.

And Windus 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 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: 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.

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.

So Gary since you are our guest for today, we will let you pull the questions for us to answer on this week’s show.

Question from Paul of Carlsbad: I am a U.S. citizen and in 2015 I married a nonresident alien, what should I use for my filing status for my 2015 income tax return?

Answer: The filing status of a U.S. citizen or resident alien married to a nonresident alien is, in general, married filing separately. However, you can qualify to file Married Filing Joint by making an election on your tax return signed by both spouses. You can also make the election by filing a joint amended return within 3 years from the date you filed your original U.S. income tax return or 2 years from the date you paid your income tax for that year, whichever is later.

With this election in place, you and your spouse can file as married filing jointly but also you and your spouse must report the combined worldwide income and deduct the combined allowable worldwide expenses. Once made, the election applies to all later years until it is properly terminated.

Now if you do not make the election, you may be able to file under the Head Of Household Status if both of the following apply:

You paid more than 1/2 the cost of keeping up your home for the year; and
A qualifying person lived with you in your home for more than 1/2 the year.

Head Of Household Status should still produce a lower tax than Married Filing Separately so it would serve you best to meet with a tax adviser to get your options and make the best choice.

Question from John of LaJolla: When could we realistically be looking at the Federal Reserve earnestly considering the next rate hike?

Question from Brian in Chula Vista: What type of funds should I be considering for long term growth in say an IRA? Same question for a short-term wealth building individual account for unforeseen expenses?

Jeff states: Well we are reaching the end of our show. Gary, thanks for joining us today.

Gary states: Thanks for having me.

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

Windus states: Have a great day everyone!

Topics Covered:

1. Politics And The Market: Where are the U.S. and global markets are headed, when we begin the New Year in a slump and the Presidential election is right around the corner.

2. Recap from last week, as the International Monetary Fund once again cuts it outlook for the world economy, warning Tuesday that economic turmoil in China and financial contagion throughout emerging markets threaten to curb global growth.

3. Valuable rights you have as a taxpayer when interacting with the IRS.

4. Questions from our listeners:

a. If emerging markets are unstable and oil and commodities are tanking, which market segments should I be looking at for more stable growth when investing for retirement?

b. Will calling the IRS help me get my refund any faster?

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

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

Good afternoon! 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.

Windus states:

And this is Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments 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!

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.

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: What could be in store for the global financial markets in 2016 now that the IMF once again cut the outlook for the world economy?

Windus states:

Also coming up is:
Segment 3 material: The second part to our series on getting to know your Taxpayer Bill of Rights.
And of course towards the end of our show, we will be answering some of your questions.

Jeff starts chit chat with Windus.

Jeff states: So for today’s top story:

Politics and the Market: Where are the US and global markets are headed, when we begin the New Year in a slump and the Presidential election is right around the corner.

Several recent articles in the Wall Street Journal and The Week, review recent market analysis and the presidential campaign trail. http://www.theweek.com/articles/599573/hillary-clinton-biggest-glass-jaw-politics http://www.theweek.com/articles/599576/donald-trump-right-pick-trade-war-china-just-wrong-strategy  http://blogs.wsj.com/washwire/2016/01/20/john-mccain-stocks-plunge-will-hurt-democrats-in-november/# http://nyti.ms/1OGtcTz

Jeff states: The hits just keep coming, don’t they? The U.S. stock market had a turbulent day of trading mid-week as economic growth and the decline in oil prices continues to worry investors. During the peak of trading on Wednesday, the Dow Jones Industrial average was down a whopping 500+ points before redeeming itself to a near 250 point down for the day, or 1.5%. At market close, the S&P 500-stock index was down roughly 1% after fluctuating as much as 3.7%, while the NASDAQ, mostly tech-heavy, was left relatively unaltered.

Windus replies: Yes, Jeff. Wall Street had a fairly volatile day right off the bat on Wednesday, in response to the announcement after market close on Tuesday that IBM had seen a drop in its fourth quarter profit. This only adds to the heavy losses we’ve been seeing all month, with enormous amounts of selling reportedly amounting to more than $3.6 trillion globally, according to Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices.

Jeff continues: The early morning sell-off affected a broad range of global investments with the European stocks sinking severely, the Euro Stoxx 50 index down 3.3% and London’s FTSE 100 dropping 3.46% for the day. While Japan closed down 3.7%, showing a decline of more than 20% in the Nikkei 225 since its near-term high in June.

Windus states: With the state of the market in what it is, let’s reflect on how this might affect the upcoming election, this November. An article in the Wall Street Journal from the perspective of John McCain sheds light on the effects of a market plunge during an election year, with consideration to what the previous market crash did to his 2008 bid for presidency.

Jeff replies: On Wednesday in a brief interview, Mr. McCain stated that he bore the brunt of public outrage since voters blamed the Republicans, as Republican George W Bush then occupied the Oval Office. His speculation is that, this election year, the Democrats will suffer, as we now have President Barack Obama occupying the White House. “People hold presidents responsible,” he articulates.

Windus continues: Now the one big difference is, in 2008, the market plunge corresponded to the banking fiasco as many of the country’s financial institutions went under, taking the economy down the tubes with it. This time around, the slump is tied to economic slowdown in China.

Jeff replies: Also, the 2008 market collapse came just weeks before the November election, whereas we now have close to ten months to see the market turn around and have the economy recover. Therefore, it’s really too early to start speculating on government involvement, as Senate Minority Leader Harry Reid confirms that it is premature to conclude that the decline in the stock market reflects broader problems in the economy.

Windus states: In which case, let’s look at the Democratic candidates and see what else will be weighing against them. In the weeks beginning the New Year, Hillary Clinton’s national polling lead over her primary opponent, Bernie Sanders, has plummeted much like the market. All things considered, it’s astonishing that Sanders has gotten within striking distance.

Jeff replies: Let’s break this down to explain. The Democratic Party has long been enthusiastic for more diverse representation, and let’s face it, Sanders is a 74 year old white male, who is not particularly a great orator, and without any roots amongst minority groups. In 2008, Obama gained a significant amount of his support for potentially being the first black president. Now in 2016, Clinton would be the first woman commander-in-chief, thus claiming representational value as the first female president.

Windus continues: That being said, odds were firmly stacked against the Vermont Senator’s campaign. But what he lacks in prominence, he sincerely makes up for in credibility. His “root-and-branch” analysis of the American political and economic structure have been corroborated in the post-recession market, according to The Week. They continue by stating, ”The good old Bernie Sanders had been right there the whole time, railing against both conservatives and Clintonite neoliberal compromises”, when commenting on inequality nearing a record high, a decades old stagnant median wage and Wall Street basically owning Congress.

Jeff replies: So how do you beat a contender like Sander’s? Strategists lay it out simply, “acknowledge the basic truths of his perspective, but insist that Clinton is the more experienced, electable, pragmatic candidate….and run out the clock.” See if that will dampen Sanders unpretentious gusto, gaining on Clinton, as Obama before him.

Windus states: Clinton in turn has made a series of incoherent tactical mistakes, including over the past week, an obviously strategized attack on Sanders’ health care plan, drawing Republican speaking points. Let’s face it, if she continues to attack liberal goals, more leftist supporters will be willing to bet on someone who won’t betray them. Let’s take this moment to discuss the last GOP debate.

Jeff states: I’m sure everyone heard of the exchange between Donald Trump, Ted Cruz, and Marco Rubio last week. I’m talking about the one that started when host Neil Cavuto brought up an article by the New York Times that confirmed Trump supporting a 45% tariff levied on imports from China. Trump acknowledging a misquoting on the amount of the tariff, went on to defend the broader policy.

Windus continues: His reasoning behind supporting a plan for raising taxes on imports from a specified country, i.e. China, is to make those imports more expensive domestically. Bringing their price into balance with comparable American goods, providing Americans with a greater tendency to buy the latter. Considering the U.S. trade deficit with China was a monstrous $342.6 billion in 2014, Trump isn’t exactly mistaken here.

Jeff replies: Let’s look at it this way. As you said Windus, U.S. was indebted $342.6 billion in goods in 2014. That means that the demand for those products didn’t generate jobs in the U.S., but in China. In 2013, the Economic Policy Institute estimated that since 2001, we’ve lost 2.8 million jobs to China, primarily in manufacturing. This hurts the working class since these lost jobs are predominantly held by lower-income Americans.

Windus continues: However, where Trump is flawed is endorsing tariffs as a solution when the core problem is currency manipulation by the Chinese government. They are buying up U.S. dollar denominated assets in immense magnitude, driving up demand for the dollar, which increases its value. What do you get? American exports are more expensive and Chinese imports are cheaper. Tariffs would only affect imports. We need to make American exports cheaper to revive jobs at home.

Jeff replies: Now China may not be the only currency manipulator in the world, but it’s definitely the biggest. Since currency manipulation by China and other countries took off in the 1990’s, the annual totals for America’s trade deficit have exploded, according to The Week. Good news is that the Chinese are trying to “mend their ways and been seen as a reasonable player”, says Robert Scott, EPI’s expert.

Windus states: The good news is that the United States already has the legal implements to rebalance the holdings of assets in the two countries. According to Scott, “The Treasury and the Federal Reserve have the authority to buy Chinese assets to offset their purchase of U.S. assets, if they’re destabilizing our economy.” One way to put it would be a proposal called, “countervailing currency intervention,” that basically neutralizes the effect with strategic purchasing of assets.

Jeff replies: This would still be a trade war of sorts, but it creates a balancing effect with a long-term goal of convincing the offending country to lessen its holdings with an agreement for the U.S. to follow suit in a rewarding equal measure. This would essentially keep China from continuing to export its unemployment problem to the States.

Windus finishes: That’s right, Jeff. Unlike the Chinese, the U.S. hasn’t devaluated our currency to increase demand for our goods, ending up with more jobs being sent oversees creating an increase in inequality and a decrease in enough jobs to keep everyone employed.

Well it’s time for a break but stay tuned because we are going to tell you what could be in store for the global financial markets in 2016 now that the IMF once again cut the outlook for the world economy.

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

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.

Recap from last week, as the International Monetary Fund once again cuts the outlook for the world economy, warning Tuesday that economic turmoil in China and financial contagion throughout emerging markets threaten to curb global growth.

Jeff states: Considering the last few weeks in the market, Windus and I think it would be good to discuss how the economic outlook for the world economy is shaping global growth.

Jeff continues: But before we do Windus would like to remind you of her offer …

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.

Jeff states: Some recent articles in The Wall Street Journal have looked at what we could expect in the way global growth decline and its effect on the world economy, given the instability on Wall Street with a lack luster start to 2016. This, in conjunction to a widening trade deficit and what looks like a full blown financial crisis in China. http://on.wsj.com/1RQez6r http://on.wsj.com/1RQbpPW http://on.wsj.com/1V4nXkq http://on.wsj.com/1RR3jqr

Windus states: That’s right, Jeff. According to International Monetary Fund (IMF) chief economist Maurice Obstfeld, “it’s going to be a year of great challenges, unless the key transitions in the world economy are successfully navigated, global growth could be derailed.” This is expanded upon in the fund’s recent update in its World Economic Outlook.

Jeff states: A large part of the current stumble seen in global markets is concern of the world’s second largest economy, China. Investors have been pulling a lot of their capital out resulting in a surge in borrowing costs and suppression of currency. With commodities prices taking a nose dive as seen with oil prices and weak global demand, prospects of growth across emerging markets is questionable.

Windus continues: When it comes down to it, exporters have received the brunt of this effect. The IMFs forecast for Brazil diminished by 2.5 percentage points down to 3.5%, as the scandal of government corruption is compounding growth problems. Russia’s growth will contracted by 1%, a 0.4 percentage point under the previous outlook, while the Eurozone and Japan are struggling to recuperate growth amidst lofty debt loads and weakened demand, providing little expansion by 1.7% and 1%, respectfully.

Jeff replies: Here in the U.S., a strong dollar is crippling exports, therefor softening the acceleration of the world’s largest economic engine. The IMF has given the American economy a growth rate of 2.6% his year, up just a 0.1 percentage point from last year, but a 0.2 percentage point down from their previous predictions.

Windus states: As far as China is concerned, the IMF left its forecast to settle at 6.3% this year, with a projected 6% for next year, falling from 6.9% in 2015. While these rates are lower than Beijing’s official estimates, the effect of monetary and fiscal policy growth being extracted by authorities will steadily deflate the financial sector.

Jeff replies: This is where investors begin to worry. Beijing’s ability to implement economic shift from a credit based model to a more consumption based one, is uncertain. As stated in the Wall Street Journal, “the country’s debt burdens, excess manufacturing capacity, questionable data and a series of recent policy missteps are all raising concerns.”

Windus continues: The fact is China’s pending economic doom is fanning the flame of market volatility. Or more generally speaking, emerging markets are vulnerable to a financial crisis the IMF warns. Over the past year, emerging market bonds, currencies and equities have taken a beating as investors have withdrawn hundreds of billions of dollars. The concern of an accelerated, plummeting China or even the U.S. Federal Reserve alluding to a more aggressive interest rate, could potentially turn the seeping outflow of money into a torrent flood.

Jeff replies: In order to offset these risks, the IMF has sounded its familiar “call to arms” of additional government stimulus and a revamp of economic policy. “A mix of demand support and structural reforms is even more urgent,” says the world’s premier economic counselor. Obstfeld caution’s not stumble into a deflationary trap, as weak demand risks pushing the global economy over the edge.

Windus replies: Now what does the IMF have in mind as far as a plan of attack? Well, the fund advises the Feds to hold tight for signs of more solid growth before taking on higher interest rates, whereas central banks in Europe and Japan should floor the “easy-money gas pedal”. Countries with a little more wiggle room in their budgets, like Germany for instance, should throw taxpayers funds into the economy, with an emphasis on spending. In addition, requiring emerging markets to focus on credible economic reforms that would result in boosted economic growth, would in turn bolster investors.

Jeff states: So when should we see global growth pick up? The IMF predicts growth rates to remain fairly flat next year for many of the world’s largest economies, and given that China’s economy is due to slow, the slight increase in global growth in 2017 is expected to come from Brazil and Russia recovering from their two-year recessions.

Windus states: Focusing more on the China factor, the world’s second largest economy is, in fact, signaling weakening economic momentum. According to Nomura Group economist Yang Zhao, “the real economy basically hasn’t picked up very well”, as China forecasting choppier seas ahead of them with growing debt and excessive housing and factory capacity.

Jeff replies: Any gains from the recovery of the summertime crash have been depleted, as stocks fall into the New Year. That, and any tools the government has traditionally used recover growth are proving progressively ineffectual, i.e. infrastructure spending, easy money and ramped-up exports. Not to mention, as we alluded to earlier, the reliability of China’s economic data flashes concern that growth is declining at a higher rate than the government is actually reporting.

Windus replies: These fears of unreliable data combined with concerns over the nose-dive of oil and commodities prices, are said to be the cause of the 2016 stock market slump, according to the Wall Street Journal. Don’t get me wrong, companies like Delta Air Lines are profiting off of the dive in oil prices. The recently named, No. 2 carrier, even showed a little 1.4% recovery in the market once confirming final quarter profits. This was after a rough 12% loss into the 2016 tumble.

Jeff states: Let’s continue to bring it home a little more. Saying at the same time that there are weak spots in the economy, the Federal Reserve continues to endorse the strength in the job markets signally positivity. The December jobs report of 292,000 added jobs in the U.S., exceeded analyst expectations, while unemployment remained a low 5% and steady core inflation, despite declines in oil prices.

Windus replies: Standing behind their decision to raise interest rates this past December, the Feds new target from short-term rates, of 0.25%-0.50%, is still well below the long-term average, and is still supportive of economic growth and financial markets. Not to worry, they won’t automatically continue to raise rates, but will consider any changes in the economy.

Jeff states: Contrary, Peter Boockvar, chief market analyst at the economic and market research firm called the Lindsey Group, argues the Federal Reserve should raise rates this year on the basis of driving the U.S. economy on a more beneficial long-term trajectory, regardless of the risk of pushing us into another recession. He continues by saying, “there will never be a good time to raise interest rates after being easy for so long, but we can either turn into Japan(which has had low rates and low growth for many years), or break out of the trap” by jump starting interest rates.

Windus states: Well it sounds like 2016 will be a challenging year for investors which is another reason why …

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.

Jeff states: Stay tuned because after the break we are going to tell you valuable rights you have as a taxpayer when interacting with the IRS.

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

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, Windus A. Fernandez Brinkkord.

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

Chit chat with Amy

Getting to Know Your Taxpayer Bill of Rights

Jeff states: Did you know that every taxpayer has a set of fundamental rights. The Taxpayer Bill of Rights takes the many existing rights in the tax code and groups them into 10 categories.

But before we start, we want to remind you that … 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.

Jeff continues: Every taxpayer should be aware of these rights before interacting with the IRS. We covered the first five in last week’s show so today we will cover the remaining five and grade how the IRS is doing on preserving each right for taxpayers.

[Windus to read off each “right” followed by comment by Amy and then by Jeff. Windus to end each one asking Amy and Jeff what grade they give from IRS on a scale of A to F. OK for Jeff and Amy to give different grades. Windus can ask why the difference.]

Windus states: It’s great that I have not one but two tax attorneys that I can bounce these rights on.

Number Six … The Right to Finality.  Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit.

Jeff adds comments. Amy can also add comments.

Number Seven …The Right to Privacy.  Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections and will provide, where applicable, a collection due process hearing.

Jeff adds comments. Amy can also add comments.

Number Eight …The Right to Confidentiality.  Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information.

Jeff adds comments. Amy can also add comments.

Number Nine …The Right to Retain Representation.  Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.

Jeff adds comments. Amy can also add comments.

Number Ten … The Right to a Fair and Just Tax System.  Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

Jeff adds comments. Amy can also add comments.

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.

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, Windus A. Fernandez Brinkkord 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, Windus A. Fernandez Brinkkord.

And Windus 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 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: 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.

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.

OK Windus, what questions have you pulled for us to answer?

Samantha from San Diego asks: If emerging markets are unstable and oil and commodities are tanking, which market segments should I be looking at for more stable growth when investing for retirement?

Windus answers.

Peter from Newport Beach asks: Will calling the IRS help me get my refund any faster?

Answer: As of January 19, 2016 the IRS has opened up processing of 2015 income tax returns. Calling the IRS will not speed up your refund. Instead use the IRS2Go mobile app or use the Where’s My Refund? tool. Both are available 24 hours a day, 7 days a week. So at what point should you approach IRS if this service is not showing the issuance of a refund. Keep in mind that the IRS phone and walk-in representatives can only research the status of your refund if it has been 21 days or more since you filed electronically, more than 6 weeks since you mailed your paper return, or “Where’s My Refund?” directs you to contact the IRS. If the IRS needs more information to process your tax return, the IRS will contact you by mail. The IRS will not call you without first sending you a notice.

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.

Windus states: Have a great day everyone!

Topics Covered:

1. Few ways to improve your odds for record $700M Powerball

2. Top Housing Trends Coming Your Way in 2016.

3. Valuable Tax Breaks Of The Past Are Extended To The Future.

4. Questions from our listeners:

• I saw a property that I am interested to buy but it is a bank owned home. What are some of the questions I should be asking?
• I am getting ready to do my 2015 taxes and want to know what is required to deduct business-related entertainment expenses.

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

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

Good afternoon! 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. My co-host, Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services, is out on assignment so I have a special guest host joining me in today’s show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.

So I would like to introduce: Bryan DeVore. Hi Bryan.

Hi Jeff.

Jeff states: Bryan is a realtor with Berkshire Hathaway HomeServices California Properties. You have been in the real estate business of over 12 years and your message is that you help clients achieve their real estate goals.

[Chit chat with guest co-host]

Jeff states: Each week Windus and I state – 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.

Jeff continues: Now don’t fret if you miss any of our shows broadcasted each Friday at 2:00PM Pacific Time because replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.

Jeff states:

For today’s show our guest co-host, Bryan DeVore, be discussing:

Segment 2 material: Top Housing Trends Coming Your Way in 2016.

Also coming up is:

Segment 3 material: Valuable Tax Breaks Of The Past Are Extended To The Future. You will want to make sure you are taking advantage of Congress’ gift to you.

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

[Chit chat with guest co-host]

Jeff states: So for today’s top story:

Few ways to improve your odds for record $700M Powerball

With all the hoopla going on with Powerball, an article in Yahoo news caught my attention that really puts things in perspective. http://news.yahoo.com/few-ways-improve-odds-record-700m-powerball-213015825.html

The record-breaking $700 million Powerball jackpot is the stuff of dreams, but it all boils down to math. From the huge prize to the enormous odds against winning it, Saturday night’s drawing is a numbers game that gives players good reason to brush up on their math, maybe as they stand in line to buy a ticket. A look at some of the statistics:

Bryan states: THE MOST IMPORTANT NUMBERS – For those who match all five white balls and the red Powerball, the key numbers are the $700 million jackpot, paid out over 30 years or as an immediate $428.4 million in cash. Those figures are before federal and state taxes, which will eat up roughly half of the cash-option prize.

Jeff states: THE ODDS – Ticket holders have a 1 in 292.2 million chance of winning. To put that in perspective, the odds of hitting the jackpot are about the same as your odds of flipping a quarter and getting heads 28 times in a row, said Jeffrey Miecznikowski, associate professor of biostatistics at the University at Buffalo.

Bryan states: WHEN WILL SOMEONE WIN? No one has won the Powerball jackpot since early November, which is why the prize has grown so large. The bigger prize entices more people to buy tickets, and that drives up the jackpot. The increased ticket sales also make it more likely there will be a winner, simply because all those extra tickets mean more number combinations are covered.

Jeff states: DOES MATH OFFER ANY HINTS TO IMPROVE THE ODDS? Scott A. Norris, an assistant professor of mathematics at Southern Methodist University, said there’s no trick to playing the lottery, but your tiny odds of winning are a bit better if you let the computer pick rather than choosing yourself. That’s because when people use birthdates or other favorite figures, they generally choose numbers 31 or below. That ignores the fact that there are 69 numbered balls.

Bryan states: HOW MUCH DOES BUYING MULTIPLE TICKETS HELP? Your odds increase with additional tickets, but it’s important to keep in mind how small they are to begin with. If you have a 1 in 292.2 million chance of winning with one ticket, you have 10 times the odds if you buy 10 tickets. Yet the probability is still incredibly small. “The odds are so astronomically small that even 100 times that number is exceedingly unlikely to win,” Norris said. “It’s probably still not going to happen if you buy a hundred tickets or a thousand tickets or even a million tickets.”

If you have extra cash and are thinking of buying all possible number combinations, that is allowed, but it wouldn’t be very smart. At $2 a ticket, the strategy would cost about $584 million, and when taxes are subtracted, you’d end up losing money. And if someone else had the winning numbers, you’d need to split the prize. You’d make back some of that money by smaller prizes paid for matching three, four or five of the balls plus the Powerball, but chances are it still wouldn’t be a good bet.

Jeff states: WHAT TO DO WITH THE WINNINGS? Despite the odds, someone will eventually win the prize. What then? Is it better to take the money as an annuity or in cash?

Olivia S. Mitchell, a professor of Insurance and risk management at the Wharton School at the University of Pennsylvania, said to avoid the risk of overspending or an investment mishap, a safe option would be to take the annuity, guaranteeing a huge annual payout for three decades.

For those who want to invest the money themselves, Mitchell suggested setting aside part of the cash option to buy their own annuity that would give them a guaranteed income in case the return on the money they do invest comes up short.

Well it’s time for a break but stay tuned because we are going to tell you Top Housing Trends Coming Your Way in 2016.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, 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. My co-host, Licensed Financial Planner, Windus A. Fernandez Brinkkord, is on assignment today so in her place I have in the studio with me Bryan DeVore of Berkshire Hathaway HomeServices California Properties.

And before we get into this next segment I want to remind our listeners of Windus’ special offer … 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 to make an appointment to meet with Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Jeff states: Bryan DeVore is a realtor with Berkshire Hathaway HomeServices California Properties. You have been in the real estate business of over 12 years and your message is that you help clients achieve their real estate goals.

Top Housing Trends Coming Your Way in 2016.

So Bryan an article in Yahoo Finance caught your attention discussing the Top Housing Trends Coming Your Way in 2016. http://finance.yahoo.com/news/10-housing-trends-coming-way-143600162.html

Bryan talks.

Jeff states: So everyone wants to know what will 2016 hold for homebuyers, sellers and renters? Well I am going to read off each of the top real estate trends to watch for next year according to Yahoo Finance and let’s get Bryan’s take on this.

[Jeff to read off each trend and Bryan to comment]

1. Home prices will continue to rise…moderately.
2. Interest rates will inch up.
3. First-time buyers will continue to struggle.
4. Credit will get—a little—looser.
5. It will still be cheaper to buy than rent.
6. The suburbs will make a comeback.
7. Buyers will want green and smart homes
8. Videos will be the new photos.
9. All-cash sales will continue to decrease.
10. New homes will come back big time.

Jeff states: And so if you are looking for a realtor, you should call Bryan DeVore of Berkshire Hathaway HomeServices California Properties at 760-908-3838. That number is 760-908-3838.

Stay tuned because after the break we are going to tell you some valuable tax breaks of the past that are extended to the future. You will want to make sure you are taking advantage of Congress’ gift to you.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, 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. My co-host, Licensed Financial Planner, Windus A. Fernandez Brinkkord, is on assignment today so in her place I have in the studio with me Bryan DeVore of Berkshire Hathaway HomeServices California Properties.

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

Chit chat with Amy

Valuable Tax Breaks Of The Past Are Extended To The Future

Jeff states: Last month Congress before taking off for the Christmas holiday left a package of tax cuts under the tree by passing a Tax Extenders bill. This was picked up in many articles including one in Yahoo. https://taxes.yahoo.com/post/136611638293/valuable-tax-breaks-brought-back-to-life 

Jeff states: Now some of the goodies are the same ones Congress let die at the end of 2014 which Congress not only reinstated but also made them retroactively apply for 2015. In some cases, Congress actually made them permanent. And Congress even improved a few.

Jeff states: So we pulled a few of these goodies to discuss that may reduce your tax bill for 2015, 2016 and beyond. But before I have Bryan read off the first goodie I want to remind our listeners that …

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.

[Bryan to read off each goodie followed by Amy’s explanation and Jeff’s comment]

1. Deduction of State Sales Tax

For several years, taxpayers have been given the choice of deducting either the state income tax or the state sales taxes they pay. The chance to deduct state sales taxes, though, expired at the end of 2014. This option has now been revived retroactively for 2015 and made permanent. This is a no-brainer for itemizers who live in states with no (or limited) income tax. The nine states in this group are: Florida, Texas, Tennessee, South Dakota, Wyoming, Nevada, Washington, New Hampshire and Alaska. In some cases, it can even pay off for folks who live in states that collect income taxes. The IRS has tables to estimate how much sales tax folks with different incomes pay in different states. To the table amounts you can add sales tax paid on big-ticket items, such as cars or boats. Whenever the sales tax write-off is bigger than the income tax deduction, go for it.

2. Tax-Free Discharge of Home Mortgage Debt

Generally, the tax law treats the forgiveness of debt as taxable income to the debtor. But as a wave of foreclosures followed the housing bust that began in 2006, Congress decided to cut some slack for homeowners who lost their homes. A new rule allowed up to $2 million of debt discharged by lenders in foreclosures or short sales, for example, to be excluded from income. That provision expired at the end of 2014, but it has now been revived retroactively to cover 2015 and extended for 2016, too. This break does not apply to the discharge of debt on second homes or rental property.

3. Tax Deduction for Private Mortgage Insurance

This on-again, off-again deduction is for homeowners who bought after 2006 and are required to pay private mortgage insurance. The right to deduct those premiums expired at the end of 2014 but has now been revived retroactively for 2015 and extended for 2016. You must itemize deductions to claim this write-off, which is now scheduled to expire after 2016.

4. Tax-Free Donations From Your IRA

The past several years have brought nail-biting anxiety to taxpayers older than age 70½ who wanted to make charitable contributions using part or all of the required minimum distributions from their IRAs. Congress has allowed up to $100,000 of a traditional IRA to be donated directly to charity tax-free. But the break has often been allowed to expire, only to be brought back to life retroactively at the last minute. Congress did that again this year, eventually allowing tax-free donations for 2015. And now, finally, the lawmakers have made this tax break permanent.

5. Buy Computers Tax-Free With 529 College Saving Plans

These state plans allow parents (and others) to save for college expenses in a tax-favored account. Earnings accrue tax-deferred and are tax-free when withdrawn if used to pay college expenses, such as the cost of tuition, books, and room and board. In 2009 and 2010, computers counted, too. That provision disappeared five years ago, but the new law brings it back retroactively for 2015 purchases. What’s more, it’s permanent: From now on, 529 distributions used to buy computers and pay for Internet access are tax-free. There’s no federal tax deduction for contributions to 529 plans, but most states offer tax incentives.

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.

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, 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. My co-host, Licensed Financial Planner, Windus A. Fernandez Brinkkord, is on assignment today so in her place I have in the studio with me Bryan DeVore of Berkshire Hathaway HomeServices California Properties.

And Windus 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 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.

Jeff continues: 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 to make an appointment to meet with Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Jeff continues: 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.

OK Bryan, what questions have you pulled for us to answer?

Bryan states Question: Denis from Carlsbad asks I saw a property that I am interested to buy but it is a bank owned home. What are some of the questions I should be asking?

Jeff replies: That sounds like a great question for Bryan to answer.

Answer: [Bryan’s talking points]

• How long has it been vacant?
• What are some of the defects?
• Ask for property disclosure.
• Make sure you get your own property inspection.
• Don’t let them get you a property inspector.
• If anything is wrong with the house it should be on property disclosure.

Jeff states: And so if you are looking for a realtor, you should call Bryan DeVore of Berkshire Hathaway HomeServices California Properties at 760-908-3838. That number is 760-908-3838.

Bryan states Question: Mark from Los Angeles asks I am getting ready to do my 2015 taxes and want to know what is required to deduct business-related entertainment expenses.

Answer: You may be able to deduct business-related entertainment expenses you have for entertaining a client, customer, or employee if you show they are both ordinary and necessary and meet one of the following tests – the “Directly-related test” or the “Associated test”.

To meet the directly-related test for entertainment expenses you must show that:

• The main purpose of the combined business and entertainment was the active conduct of business,
• You did engage in business with the person during the entertainment period, and
• You had more than a general expectation of getting income or some other specific business benefit at some future time.

Example: I meet my client at a coffee shop where we discuss business.

To meet the associated test for entertainment expenses you must show that the entertainment is:

• Associated with the active conduct of your trade or business, and

• Directly before or after a substantial business discussion.

Example: I have a late afternoon meeting with a client to discuss business. Afterwards we go out for dinner.

The concepts are not difficult to apply and you could probably justify must interactions as having some sort of direct or associated business purpose. Where most people lose out is they do not document these meetings and/or expenses so that years later when they are selected for audit they cannot substantiate the deductions and IRS denies them.

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.

Jeff states: Have a great day everyone!