Archive for category: Podcast

Topics Covered:

1. One Caveat, Two Predictions: Issues that Could Be Affected by the Elections Outcome.

2. Myth-Busting: Clearing Common Misconceptions Off the Table.

3. Hot Tax Tips To Save You Money!

4. Questions from our listeners:

• I am about to turn 62, and I am thinking of electing my SS benefit. Is this the best thing to do?
• My family is originally from Cuba and I am interested in investing in that country now that the embargo has been lifted. What do I need to know when it comes to U.S. taxes?

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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.

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: Myth-Busting: Clearing Common Misconceptions Off the Table.

Gary states:

Also coming up is:

Segment 3 material: Hot tax tips to save you money!

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 for today’s top story:

One Caveat, Two Predictions: Issues that Could Be Affected by the Elections Outcome.

Credit to: Webman, Jerry Ph.D., CFA; Everything Investors Need to Know—and Should Ignore—About the Upcoming Elections, Election 2016 in Perspective, OppenheimerFunds.

Gary starts: Forecasting is not an exact science. It would be easier to predict the weather over a year from now than to predict who’s going to win the next presidential election. That being said, it’s still plausible to form practical expectations about how the November Elections will pan out.

Jeff continues: Let’s begin with prediction number one, shall we? Oppenheimer is predicting the Republican Party will likely retain control of the House of Representatives. At 247 Republican seats versus 188 Democrat seats, it’s difficult to see, but not improbable, that Democrats could win control of the House.

Gary replies: It sure looks that way, Jeff. Every ten years a census is conducted resulting in how the House’s 435 seats are allocated amongst the 50 states, according to the U.S. Constitution. The most recent census was conducted in 2010, resulting in political victories for the Republican Party.

Jeff continues: Even though all seats are up for re-election this year, we can likely be seeing an awful lot of red in coming years leading into the 2020 election. The odds of Democrats being able to win enough seats—218—to take over the majority are dismal at best, based on current projections.

Gary states: Which brings us to the number two prediction. Regardless of who controls the Senate, the next President isn’t likely to have the Filibuster-Proof Upper House. Republicans currently have control of the Senate with fifty-four seats, with Democrats occupying forty-four and Independents a meager two seats.

Jeff replies: In order to take the majority, Democrats have to gain an additional five Senate seats in the 100-member Upper House. Fifty-one isn’t the magic number though, sixty is.

Gary continues: With 34 total seats up for reelection this year, we could possibly be counting Senate seats into the wee hours of the morning on November 9th, with prospects of the Democrats realizing their fifty-one seats. Although, at this point the chance of that happening is doubtful.

Jeff states: Regardless of which party hold the House or the Senate though, there are six truths that won’t be affected by the elections outcome.

Gary replies: The first truth leads us to the understanding that gridlock doesn’t mean nothing gets done. Gridlock doesn’t equate inaction, it only curtails the volume of legislation that can be passed during a point when “the White House doesn’t have a majority in the House of Representatives and a filibuster-proof majority in the Senate”.

Jeff continues: Even during a point when experts remained out-spoken on their view that the extent of hostility between Democrats and Republicans was leading to stalemates, progress was being made. The Federal debt burden is gradually becoming more affordable.

Gary states: Progress on a Budget Deficit Reduction during a period of gridlock resulted in the Federal Budget Deficit being 10.8% of GDP for the 2009 fiscal year. The Budget Deficit came in at 2.3% as of late September 2015.

Jeff states: Number two on Oppenheimer’s list of truths reads, changes in Washington don’t typically come all at once but in increments. This is with few exceptions of course, like ObamaCare or Dodd-Frank.

Gary continues: The United States tends to change policy in small steps, rather than in leaps and bounds. Debates over energy, transportation and immigration policy have long been the top discussed issues, however for decades, we have seen few substantial changes.

Jeff replies: Campaign rhetoric, making number three on the list, doesn’t always influence what occurs during a President’s tenancy in the White House. Take Obama for example and his steps along the way with “The Promise”, “The Reality” and “The Reason”.

Gary continues: In 2008, The Promise was in support of environmental issues. Obama had then promised to limit carbon emissions, along with supporting the development of non-petroleum fuels.

Jeff replies: However, in 2008 when he made this vow, U.S. crude oil production satisfied 25.6% of domestic consumption. By 2015, U.S. crude oil production was satisfying 46.7% of domestic consumption.

Gary continues: The reasoning behind this was mainly the effect of an economic shift. Surges in oil production hit a 45-year high due to the effect of advanced techniques for oil extraction. Additionally, favorable tax treatment from the government had an influencing hand.

Jeff replies: How was Obama supposed to predict any of that happening? Like we said earlier, forecasting is not an exact science. Due to economic forces at work during any president’s time in office, we should not create expectations about any particular administration acting adversely to the petroleum industry.

Gary states: Number four of six brings us to consumers and businesses having a far greater impact on the economy that the government. Private consumption, private investment and foreign trade make up 82.4% of Gross Domestic Product.

Jeff replies: Gary, the greater part of what happens in the U.S. economy is the effect of you, me and the businesses we’re employed by and support. Not to mention the enormous global output that is produced outside the U.S.

Gary states: The state of the economy influences who is president, not vice versa. This is a very important truth. The proof that the state of the economy determines the next commander-in-chief, can be found in decades of historical data.

Jeff replies: Very true, Gary. The fact of the matter is, a strong economy with declining employment and inflation equals a win for the incumbent party candidate. This can be seen in eleven out of the last thirteen elections, with only two exceptions.

Gary states: So what does that leave us with? Well, it leaves us believing that the stock market doesn’t care if the public is happy with whomever is currently president. History has been shown to suggest the market is resilient and even indifferent to a president’s approval rating. From Obama to John F. Kennedy, the ebb and flow of the market never seemed to match to the highs and lows of American satisfaction.

Jeff states: But what could be affected by the outcome of the election? Public Policy for one! On the healthcare front, we are likely to see changes to ObamaCare, even if there’s very little chance of its repeal.

Gary continues: In entitlement programs, it’s doubtful that we’ll see any reverse of policy that have been around for eighty years. On the same topic though, we could expect to see cost control measures for Medicare and Medicaid programs.

Jeff replies: With mandatory cuts to federal programs already being lackadaisical, we can anticipate debates over the best use of defense spending. It’s likely we’ll see a jobs argument added to the national security case in negotiations over whether or not to cut or keep each procurement item.

Gary states: We may see a few compromises on tax policy, such as treatment of offshore earnings, but we’re unlikely to see any changes in our tax code.

Jeff states: The Dodd-Frank regulations put in place to prevent another financial crisis, like in 2008, are unlikely to be repealed despite what many in the financial services industry may want. However, how aggressively the rules are enforced will all depend on the next resident of the White House.

Gary states: Judicial appointments by the next president will occur at least once as Justice Ginsburg is over 80 years old and both Justices Breyer and Kennedy will turn 80 over the next three years. There is a tremendous possibility that the next president will shape the court and its decisions for decades to come by appointing several new justices during his or her term.

Jeff continues: The executive branch of the government has substantial range to decide how to enforce existing laws. Just a few areas that executive direction can influence in the absence of legislative action include financial services, education, defense, healthcare, environmental protection and energy production.

Gary states: All in all though, it’s not wise to let your reaction to the new changes in government leadership shape your investment decisions. Stick with your long-term strategy. Realistically, most of us dislike the opposition more than we approve of our own party anyway.

Jeff states: Well it’s time for a break but stay tuned because we are going to shed some light on Myth-Busting: Clearing Common Misconceptions off the Table.

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.

Before we start with our next segment, Gary would you tell our listeners about how they can reach 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.

Jeff resumes:

Myth-Busting: Clearing Common Misconceptions off the Table.

Credit to: www.oppenheimerfunds.com/advisors/article/investors-clear-election-choice-stay-buckled-in

Jeff begins: Now that we’ve reviewed the basics of the market reactions to changes in the political arena, let’s take this time to further explore myth-busting and clear common misconceptions off the table.

Gary states: To paraphrase, Princeton economist Alan Binder once noted that “economic growth and financial market returns during a President’s term are explained by good luck with perhaps a touch of good policy. And even then, good policies might take years to have an impact, benefiting future administrations.

Jeff replies: Realistically speaking, implications of the elections for the global economy and the financial markets aren’t as significant as they seems. If you look at it this way, we are a nation of roughly 125 million households, yet ultimately it’s the other 2 billion some-odd households worldwide that stimulate the direction and strength of the global economy. It’s that vitality that fuels financial markets.

Gary replies: Consider this, in 2009 when Barack Obama was sworn in as the new president, many investors went on record saying they were going to “sit this one out”, given Obama’s positions on policy.

Jeff continues: At that point in time, the S&P 500 was trading at a historically low 12x trailing 12-month earnings; compared to the long-term average of 16x. The Federal Reserve was very accommodating with monetary policy, adopting a 0% interest rate. And the U.S. economic indicators seemed to be regaining their bearings following the worst recession in decades.

Gary states: That being said, how did things work out for all those investors on the sidelines? As we witnessed in the six years post-inauguration, stocks climbed to a 200% return. Reminding all of us, to not base our financial practices primarily on who so ever is occupying 1600 Pennsylvania Avenue.

Jeff states: Now, national elections are important, we’re not saying that they’re not. So are national policies, as they matter over time. When it comes down to four-year election cycles though, they should not be governing your long-term investment decisions.

Gary states: If we look at historical data, say, over a seventy year span of time, we can best see the outcome of your financial plan if you had only invested while your preferred party was in office.

Jeff states: Between 1945 and 2015, if you had been fully invested for the long-term with $10,000 in the Dow Jones Industrial Average, it would now have been worth $1.3 million. The market likes a divided government and provided a 7.0% annualized rate of return over the course of those 70 years.

Gary replies: Whereas, if in the same 70 year time-frame you had decided to only invest when your preferred political party was in office, your $10,000 investment would be worth a much smaller amount. About $1 million less, actually, depending on which party you sided with. The unified government plan only provided a 4.6% annualized rate of return.

Jeff continues: The other one we’re always hearing is that financial markets in general would be far better off if opposing political parties acted more cooperatively and were willing to compromise in order to get things accomplished. This is most definitely myth!

Gary replies: Realistically speaking, markets do better during times of political stalemate. If legislature isn’t getting passed and change is occurring at a very low level, the market reacts in a more confident and steady way, seeing as how no big changes are stirring up market volatility.

Jeff states: The fact of the matter is, our founding fathers designed the government in such a matter to create gridlock. The three co-equal branches of the government, legislative, executive, and judicial, in addition to a commanding federalist system, were created to inhibit tyranny. In the words of Henry David Thoreau, “that government is best which governs least”.

Gary finishes: What should investors do, then? Sit back, relax and enjoy the show. You should be in this for the long-run and be maintaining your long term strategies, regardless of what happens in November. If you’re not sure what that long term plan should look like, call me….

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.

Jeff states: Stay tuned because after the break we are going to tell you hot tax tips to save you money!

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

Jeff states: In before we continue with this segment, 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.

Hot tax tips to save you money!

Jeff states: So now that we at the beginning of March or about half-way through tax season, I thought we would cover today some hot tax tips to save you money.

Home Energy Credits Save Money and Cut Taxes

Gary states: For taxpayers who own their home, consider this – you can trim your taxes and save on your energy bills with certain home improvements. So here is what you need to know about home energy tax credits.
Greg asks Amy: Please explain what is the Non-Business Energy Property Credit.

Amy replies:
Non-Business Energy Property Credit

• Part of this credit is worth 10% of the cost of certain qualified energy-saving items you added to your main home last year. This may include items such as insulation, windows, doors and roofs.
• The other part of the credit is not a percentage of the cost. It is for the actual cost of certain property. This may include items like water heaters and heating and air conditioning systems. The credit amount for each type of property has a different dollar limit.
• This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.
• Your main home must be located in the U.S. to qualify for the credit.
• Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. You can rely on it to claim the credit, but do not attach it to your return. Keep it with your tax records.
• You may claim the credit on your 2015 tax return if you didn’t reach the lifetime limit in past years. Under current law, this credit is available through December 31, 2016.

Jeff comments: With things always tending to break when you least expect it, it is good to keep these tax rules in mind. After all, if you can save $500.00 in taxes it does help offset the cost of that unexpected repair.

Greg asks Amy: Please explain what is the Residential Energy Efficient Property Credit.

Amy replies:
Residential Energy Efficient Property Credit

• This tax credit is 30% of the cost of alternative energy equipment installed on or in your home.
• Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.
• There is no dollar limit on the credit for most types of property. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
• The home must be in the U.S. It does not have to be your main home, unless the alternative energy equipment is qualified fuel cell property.
• This credit is available through December 31, 2016.

Jeff comments: Clearly the Residential Energy Efficient Property Credit has a lot more bang for the buck than the Non-Business Energy Property Credit since you are not dealing with any dollar limitations and we know that installing solar systems and the like can be very pricey. To claim these credits use Form 5695, Residential Energy Credits.

Tax Tips about Debt Cancellation

Gary states: If your lender cancels part or all of your debt, it is usually considered income and you normally must pay tax on that amount. However, the law allows an exclusion that may apply to homeowners who had their mortgage debt cancelled in 2015.

Gary asks Amy: Since a lot of taxpayers who own a principal residence may have benefited from a reduction in the principal mortgage, how does the tax law treat that debt cancellation?

Amy replies:
1. Main Home. If the cancelled debt was a loan on your main home, you may be able to exclude the cancelled amount from your income. You must have used the loan to buy, build or substantially improve your main home to qualify. Your main home must also secure the mortgage.
2. Loan Modification. If your lender cancelled part of your mortgage through a loan modification or ‘workout,’ you may be able to exclude that amount from your income. You may also be able to exclude debt discharged as part of the Home Affordable Modification Program, or HAMP. The exclusion may also apply to the amount of debt cancelled in a foreclosure.
3. Refinanced Mortgage. The exclusion may apply to amounts cancelled on a refinanced mortgage. This applies only if you used proceeds from the refinancing to buy, build or substantially improve your main home and only up to the amount of the old mortgage principal just before refinancing. Amounts used for other purposes do not qualify. The rules are confusing which is why it is best to seek advice from tax counsel.

Jeff comments: This exclusion has been around for a few years and Congress has extended it several times. The current extension expires December 31, 2016 and with a new Presidential administration starting next year who knows if it will be extended beyond 2016. Keeping in mind that these modifications take a long time to process through the lender and get approval, you should be working on this now to make sure you complete the process before year-end.

Gary asks Amy: Does this exclusion apply to any other types of cancelled debt?

Amy replies:
Other Cancelled Debt. Other types of cancelled debt such as second homes, rental and business property, credit card debt or car loans do not qualify for this special exclusion. On the other hand, there are other rules that may allow those types of cancelled debts to be nontaxable so if you are in this situation, you should seek tax counsel.

Gary asks Amy: Are there any particular forms that taxpayers should be aware of?

Amy replies:
Form 1099-C. If your lender reduced or cancelled at least $600 of your debt, you should receive Form 1099-C, Cancellation of Debt, by February 1st. This form shows the amount of cancelled debt and other information that you may need to reflect on your tax return.
Form 982. If you qualify, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. This form gets included with your federal income tax return so you will need to let your tax preparer know to check to see if you qualify for this benefit.

Jeff comments: Again remember that the law that authorized the exclusion of cancelled debt from income was extended through December 31, 2016.

Early Retirement Distributions and Your Taxes

Gary states: Many people find it necessary to take out money early from their IRA or retirement plan. Doing so, however, can trigger an additional tax on top of the income tax you may have to pay.

Gary asks Amy: What are the key points to know about taking an early distribution?

Amy replies:
1. Early Withdrawals. An early withdrawal normally means taking the money out of your retirement plan before you reach age 59½.
2. Additional Tax. If you took an early withdrawal from a plan last year, you must report it to the IRS. You may have to pay income tax on the amount you took out. If it was an early withdrawal, you may have to pay an additional 10% tax.
3. Nontaxable Withdrawals. The additional 10% tax does not apply to nontaxable withdrawals. They include withdrawals of your cost to participate in the plan. Your cost includes contributions that you paid tax on before you put them into the plan.

Jeff comments: Now even though you may withdraw from your retirement account, if you rollover those funds to another retirement account that may be a nontaxable event. A rollover is a type of nontaxable withdrawal. A rollover occurs when you take cash or other assets from one plan and contribute the amount to another plan. You normally have 60 days to complete a rollover to make it tax-free.

Gary asks Amy: Are there any exceptions to the additional 10% tax?

Amy replies:
• Death – after death of the participant/IRA owner.
• Disability – total and permanent disability of the participant/IRA owner.
• Education – qualified higher education expenses.
• Homebuyers – qualified first-time homebuyers, up to $10,000.
• Tax Levy – because of an IRS levy of the plan.
• Medical – amount of unreimbursed medical expenses (>7.5% AGI; after 2012, 10% if under age 65). Also health insurance premiums paid while unemployed.
• Military – certain distributions to qualified military reservists called to active duty.

Jeff comments: Keep in mind though that some of the exceptions for retirement plans are different from the exceptions for IRA’s so you will want to check with your tax advisor and make sure you include Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, with your federal tax return.

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, 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 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.

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.

Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser. Additional advisory services offered through Trilogy Capital, a Registered Investment Adviser. Trilogy Capital and NPC are separate and unrelated companies.

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 Gary, what questions have you pulled for us to answer?

Question from Dee of Orange County asks: I am about to turn 62, and I am thinking of electing my SS benefit. Is this the best thing to do?

Answer: Frankly, there is no single “right” answer because it depends on each individual’s unique circumstances. Social Security is supposed to be used in conjunction with other sources of retirement income. Unfortunately, for a significant number of individuals, the decision about when to file for Social Security comes down to “As soon as I qualify.” Even though they know their monthly benefit will be smaller, they may be concerned that it’s not going to be there in the future, so they figure “I’d better get it while I can.”

While there can be no guarantee that the future program will operate as it has in the past, for many people Social Security has historically amounted to a government-guaranteed, inflation-adjusted, lifetime annuity. The decision to file early can have significant lifelong consequences. Filing to begin benefits at 62, the earliest age possible, results in a 25% less benefit than waiting until Full Retirement Age, which for most of us is 66 and 2 months. Delaying until age 70 produces a significantly higher monthly benefit. In fact, waiting until age 70 to begin receiving Social Security results in a monthly benefit that is 76% greater than the amount an individual would receive at 62.

If this is a question about ensuring that you get the absolute most out of the system, that answer will be dictated by your longevity. Unfortunately most of us don’t have that answer. Generally speaking, waiting to elect benefits will probably result in getting more out of the system. This is a complex question and one’s decision should not be taken lightly, and I would recommend making this decision within the entire scope of your overall financial situation.

Question from Carlos of Chula Vista: My family is originally from Cuba and I am interested in investing in that country now that the embargo has been lifted. What do I need to know when it comes to U.S. taxes?

Answer: Since a foreign government will typically charge income taxes earned on income in that country, taking advantage of Foreign Tax Credits allow U.S. taxpayers to avoid or reduce double taxation. You may choose to take a deduction for foreign taxes paid instead of choosing a credit. In most cases, it is to your advantage to take foreign income taxes as a tax credit. The U.S. government until recently did not allow for this tax credit to be available for Cuba but that has all changed because starting January 1, 2016 the Foreign Tax Credit is now available.

File Form 1116, Foreign Tax Credit, which gets attached to your Federal Individual Income Tax Return to claim the foreign tax credit if you are an individual, estate or trust, and you paid or accrued certain foreign taxes to a foreign country or U.S. possession. Now the Foreign Tax Credit provisions are complex as there are limitations and exclusions which are either established by statute or by the tax treaty with that country so you will want to check with tax counsel to make sure you are getting the full tax benefit allowed.

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!

Topics Covered:

1. Estate Planning for the Stars.

2. How to Own a T. rex?

3. Tax Scams To Avoid and Tips On Choosing A Tax Return Preparer.

4. Questions from our listeners:

• What are the different types of trusts and how do the benefits differ? Also, who do I go to in order to set up a trust? An accountant, financial planner, lawyer?
• If I made a bet on the Super Bowl and I won, is that “taxable income”?

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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: How to Own a T-Rex!

Windus states:

Also coming up is:

Segment 3 material: Tax Scams To Avoid and Tips On Choosing A Tax Return Preparer.

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:

Estate Planning for the Stars: How best to organize your finances so you family doesn’t struggle with estate litigation.

http://www.crainsnewyork.com/article/20150318/CUSTOM/150319825/estate-planning-mistakes-lessons-from-the-stars; http://www.forbes.com/sites/trialandheirs/2014/02/10/five-estate-planning-lessons-from-the-paul-walker-estate/#6e07d11e5ffc; http://wmtoday.com/2015/03/05/5-epic-hollywood-estate-planning-fails/

Jeff states: We’ve had a rough start to 2016 and I’m not just talking about the global economy. We’re not even sixty days into the New Year and we’ve had to bid farewell to quite a few of our popular culture icons.

Windus replies: Our feelings aside, their families and loved one’s have been hit with even stronger grief. Dealing with the emotionally difficult parts of life is very trying and it only makes it harder if you haven’t prepared.

Jeff states: That’s right Windus, but we can learn from some of these epic Hollywood estate planning mistakes. And just in time too! Its tax season after all, time to get ahold of your local wealth management and tax experts.

Windus starts: Let’s look at a few example of estate planning gone wrong. First off, Phillip Seymour Hoffman was a beloved Hollywood icon. From The Big Lebowski to the role that earned him an Oscar in Capote, he was a very talented and versatile actor. Unfortunately after a drug overdose in 2014, his partner and mother of his three children, Marianne O’Donnell was left with a pretty hefty tax burden.

Jeff states: Despite his accountant’s advice, Hoffman decided not to create trusts for his children. Then by not marrying O’Donnell, a $15-million tax burden was tacked on to the transfer of the estate to his beneficiary. That amounts to around 40% of his $35 million net worth.

Windus replies: Not only would the estate have been transferred tax-free to O’Donnell had the two been married, but alternately, by not setting up a revocable trust, Hoffman fated his estate proceeding to probate. This is not only inefficient and expensive, but it also exposes family financial information to the public.

Jeff continues: Hoffman went wrong by relying on a Will rather than trusts. However, he also had not kept his Will up to date. The last revision of the document had been ten years prior to his departure, before his second and third child were born. In addition, he did not mention his mother, brother or any of his philanthropic causes, including non-profit theaters.

Windus states: No one will ever forget this next estate, or the memorable actor whose name headlined. James Gandolfini, aka Tony Soprano, died of a heart attack at the age of 51. No one expected that the IRS would end up being the biggest beneficiary of the estimated $70 million estate.

Jeff replies: Gandolfini also relied primarily on his Will instead of a more sophisticated estate taxing trust. In it he divided his estate between multiple beneficiaries including his friends, two sisters, and his son from a previous relationship, his most recent wife and his toddler daughter.

Windus continues: Regrettably, much of the estate that was being gifted was property and not liquid. When the IRS came knocking for its multi-million-dollars cut, the family had to succumb to fire-sale mode. The sole tax-free inheritance was the $7 million life insurance policy which was left to his teenage son.

Jeff states: The next notoriously eccentric actor, who had once rejected an Oscar because he felt Hollywood had mistreated Native Americans in films, illustrates an estate planning fiasco. Marlon Brando’s estate was already involved in more than two dozen lawsuits, five years after his death.

Windus replies: Most of these lawsuits arose from current and past employees of the actor’s estate who claimed that Brando had promised them particular assets, which were not mentioned in his estate plan.

Jeff states: Brando relied on his Will in this situation, too. The problem with his estate however, was that he had drafted a Will but ultimately his plans remained indeterminate.

Windus replies: Yet another Oscar worthy actor, Heath Ledger. Like Hoffman, Ledger fell to substance abuse in an accidental overdose of prescription drugs in 2008, just a few months after filming as The Joker in The Dark Night. The Australian actor and director did a horrible job at planning for his legacy.

Jeff continues: Once more, like Gandolfini, Ledger failed to update his Will after his daughter, Matilda Rose, was born. After that tragic night in his New York apartment, all of the 28 year old actor’s assets went to his parents and three sisters, in accordance with U.S. law. You guessed it, Matilda and her mother were left without any claim on the estate.

Windus replies: Fortunately, since Ledger was an Australian citizen, Matilda Rose’s guardians have filed for probate in the West Australian Supreme Court so that a judge might carve out a portion of Ledger’s fortune. Ledger’s estate was mostly held in Australian trusts and is more or less worth up to $20 million.

Jeff states: Our next icon never got to finish his last job. The passing of “Fast & Furious” series star, Paul Walker, was an ironically tragic death. The 40-year old actor died in 2013 in a car racing accident, as a passenger in a Porsche.

Windus states: Now Walker had a Will, a trust and $25 million in assets at the time of his passing. The issue was how it was set up. Walker had what you call a pour-over structured Will that had not been updated in 12 years to reflect current intentions.

Jeff replies: This means that his wealth-transfer was not only going to be a public affair but informed the public that his $25 million estate would be transferred to a trust that named his teenage daughter as the sole-beneficiary.

Windus continues: This brings to light key points when estate planning. For one, having a Will is only the beginning. The best estate planning tool for most people is a revocable trust, creating a simpler and less troublesome probate process.

Jeff replies: Furthermore, to be most effective, trusts need to be fully funded during life and not left to be funneled in through the Will afterward. If there is nothing to pass through the Will then the probate court process could be completely avoided.

Windus replies: In the case of Paul Walker leaving everything to his teenage daughter, naming a guardian for a minor is always a good idea. Walker did assign guardianship, but if he didn’t courts still favor custodial parent unless deemed unfit or the parent agrees to relinquish custody.

Jeff states: Most importantly, if all of these tragic young deaths haven’t emphasized this, do not wait until you’re older to have an estate plan in order. It pays to plan for the unexpected and not leave your loved ones with greater burdens.

Windus finishes: Finally, keep your estate plan up to date! So many things happen in life, whether it be marriages, children, grandchildren, close friends or other life events. It’s so very important to keep all of your documents up to date so your family doesn’t suffer the consequences.

Jeff states: Well it’s time for a break but stay tuned because we are going to tell you How to Own a T. rex.

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.

Windus states: And before we continue with this next segment, I want to remind you that: 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.

A T. Rex of One’s Own: From movie stars to hedge fund managers to sheiks, how everyone wants their own dinosaur

(Credit: February’s issue of The Week, Vol. 16, Issue 758)

Windus states: Laurie Gwen Shapiro had a very interesting article about private dinosaur collecting in Issue 758 of The Week this month. Definitely not ideal for the humble estate plan, however movie stars, hedge-fund moguls and oil rich sheikhs are shelling out top dollar for dinosaur fossils at auctions.

Jeff replies: Desire for dino bones isn’t a trend either. In the 1870’s, the fossil frenzy began in Great Britain before spreading across the Atlantic, driving westward toward Wyoming. Interest intensified when The New York Journal and Advertiser ran the headline, “Most Colossal Animal Ever on Earth Just Found Out West.”

Windus continues: Although more false than factual, the real findings were of only a single leg bone of a creature. However, this sparked interest from philanthropist Andrew Carnegie who financed great discoveries in Wyoming and Utah.

Jeff states: Following Carnegie’s example, dinosaur collectors today make it difficult for museums to compete financially as the cost of fossils discovered on private lands are being astronomical. After all, who do you think is going to win in a bidding war with Nicolas Cage?

Windus replies: Glad you asked, Jeff. Remember back in 2007 when actors Leonardo DiCaprio and Nicolas Cage were trapped in a bidding war over a 32-inch Tyrannosaurus skull? Well, Cage triumphed over his opponent with a $276,000 offer.

Jeff continues: Other big name collectors include film directors James Cameron and Ron Howard, actor Brad Pitt, and Microsoft’s former chief technology officer Nathan Myhrvold who has a T. rex skeleton in his solarium in his large home in Washington.

Windus states: Keep in mind since these are priceless collectibles, they aren’t exactly liquid investments. What I mean by that is, if you’re in need of funds it’s not exactly easy to just find another home for your dinosaur. Honestly, some people are collectors and some people aren’t.

Jeff replies: Take Sue for example, the largest T. rex specimen ever found. It was offered by a private seller back in 1997 and even attracted the attention of Michael Jackson. After the excitement died down, it was the Field Museum of Chicago that walked away with the highest-priced dinosaur ever, with the closing bid at $8 million.

Windus continues: That kind of sale has never really happened again, though. More recently in fact, a couple of guys who had excavated a tetrapod and a large horned ceratopsian locked in mortal combat, tried their luck at Bonham’s in New York. There was a ton of publicity, the two men thought they’d be relaxing on a beach in the Bahamas for the rest of their lives but the piece didn’t even make reserve.

Jeff states: If by this point you’re thinking, “Man! I have to have a dinosaur!” You may want to consider going to Tucson, Arizona this month for that city’s annual mineral and fossil convention. People come from all over the world and they always have someone from Homeland Security and ICE there to deter the shadier dealers.

Windus replies: It should not be a surprise that in this industry there are sellers out there that knowingly are skirting the law. And when the government finds out that a buyer even in good faith acquired a piece that is contraband, the government will order its return to its rightful owner. Such was the case with the Tyrannosaurus skull that Nicolas Cage won in his bid over Leonardo DiCaprio which unbeknownst to him, had been smuggled out of Mongolia. He had to surrender it for return to Mongolia and so he lost the $276,000 he paid!

Jeff continues: Nevertheless there is still a lot of legal trade going on. As stated in an interview with Mark Norell, the world’s most famous paleontologist, of the American Museum of Natural History in New York, “crazy stuff goes to Dubai, to Qatar, and pretty regularly to Singapore. And there are all sorts of big odd collections in Germany.”

Windus states: Now if you are not able to get to Arizona this month, you can try the Astro Gallery of Gems, located in Manhattan on Fifth Avenue. It is the world’s largest gem and mineral store with a dinosaur dealership on the side.

Jeff continues: Owner Dennis Tanjeloff describes his ideal dinosaur customer as a grown-up boy who never got over the revelation that prehistoric animals were real. Salvador Dali and John Lennon were some of his most devoted clients.

Windus replies: Tanjeloff explains that many of his clients take pride in their collecting choices, most of them eventually donating their collections to research.

Jeff states: Ultimately, these pieces end up at a museum or university after the initial craze wears off. This is actually not a bad thing as it creates a write-off for the owner who is making a charitable contribution and now the public will have access to these pieces.

Windus replies: Looking back thirty years when you compare the prices for these pieces and even taking inflation into account, the increase in value is astronomical.

Jeff continues: Moving forward, Tanjeloff believes very strongly that this isn’t just a craze. He’s selling thousands of fossils a week and is looking forward to the investment opportunity of a relaunch of a section in FAO Schwartz that sells fossils next year. According to Tanjeloff, “boys who love dinosaurs, they’re our future customers.”

Windus concludes: So how are you going to afford all those amazing fossilized investments? You can figure that out by contacting me. At…

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 Tax Scams To Avoid and Tips On Choosing A Tax Return Preparer.

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

Scam Calls and Emails Using IRS as Bait Persist

Jeff states: Just yesterday I got a call to my office where the person said in response to a threatening call he received from someone who said he was from the IRS, he sent a $3,000.00 money gram to the person to avoid arrest. He did this even though he did not owe any taxes to the IRS and never received any letters from the IRS that there was a problem.

Windus asks: Jeff then why did he call you if he thought by paying the $3,000.00 he resolved this perceived problem?

Jeff replies: Because he then received another call from the same person acknowledging receipt of the $3,000.00 but saying that he made a mistake and that he should be sending $6,000.00!

Amy states: Scams using the IRS as a lure continue. They take many different forms. The most common scams are phone calls and emails from thieves who pretend to be from the IRS. They use the IRS name, logo or a fake website to try to steal your money. They may try to steal your identity too.

Amy continues: Be wary if you get an out-of-the-blue phone call or automated message from someone who claims to be from the IRS. Sometimes they say you owe money and must pay right away. Other times they say you are owed a refund and ask for your bank account information over the phone. Don’t fall for it.

Windus asks: Amy what tips do you have that will help our listeners avoid becoming a scam victim?

Amy replies: The real IRS will NOT:
• Call you to demand immediate payment. The IRS will not call you if you owe taxes without first sending you a bill in the mail.
• Demand tax payment and not allow you to question or appeal the amount you owe.
• Require that you pay your taxes a certain way. For example, demand that you pay with a prepaid debit card.
• Ask for your credit or debit card numbers over the phone.
• Threaten to bring in local police or other agencies to arrest you without paying.
• Threaten you with a lawsuit.

Jeff states: If you don’t owe taxes or have no reason to think that you do:
• Contact the Treasury Inspector General for Tax Administration. Use TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.
• You should also report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” to the comments of your report.

Jeff continues: And if you think you may owe taxes, you should be calling ….

Jeff 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.

Jeff asks Amy: Now the IRS also warns about phishing scams. What is that all about?

Amy replies: In most cases, an IRS phishing scam is an unsolicited, bogus email that claims to come from the IRS. They often use fake refunds, phony tax bills, or threats of an audit. Some emails link to sham websites that look real. The scammers’ goal is to lure victims to give up their personal and financial information. If they get what they’re after, they use it to steal a victim’s money and their identity.

Amy continues: If you get a ‘phishing’ email, the IRS offers this advice:
• Don’t reply to the message.
• Don’t give out your personal or financial information.
• Forward the email to phishing@irs.gov. Then delete it.
• Don’t open any attachments or click on any links. They may have malicious code that will infect your computer.

Tax Scams Involving Fake Charities

Jeff states: The IRS is warning taxpayers about groups masquerading as charitable organizations to attract donations from unsuspecting contributors.

Amy states: Fake charities set up by scam artists to steal your money or personal information are a recurring problem so taxpayers should take the time to research organizations before giving their hard-earned money.

Windus asks Amy: What tips do you have for taxpayers making charitable donations?

Amy replies:
• Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. IRS.gov has a search feature, Exempt Organizations Select Check, which allows people to find legitimate, qualified charities to which donations may be tax-deductible. Legitimate charities will provide their Employer Identification Numbers (EIN), if requested, which can be used to verify their legitimacy through EO Select Check. It is advisable to double check using a charity’s EIN.
• Don’t give out personal financial information, such as Social Security numbers or passwords to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money. People use credit card numbers to make legitimate donations but please be very careful when you are speaking with someone who has called you and you have not yet confirmed they are calling from a legitimate charity.
• Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.

Impersonation of Charitable Organizations Alleging To Help Victims Of Natural Disasters

Jeff states: Impersonation of Charitable Organizations is another long-standing type of abuse or fraud involves scams that occur in the wake of significant natural disasters.

Amy states: Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds.

Amy continues: They may attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources. Bogus websites may solicit funds for disaster victims.

Jeff states: To help disaster victims, the IRS encourages taxpayers to donate to recognized charities. If you are a disaster victim call the IRS toll-free disaster assistance telephone number (1-866-562-5227) if you have questions about tax relief or disaster related tax issues. And don’t forget to find legitimate and qualified charities with Select Check search tool on IRS.gov. (EINs are frequently called federal tax identification numbers, which is the same as an EIN when using Select Check.)

Tips For Choosing Your Return Preparer.

Windus states: It is important to choose carefully when hiring an individual or firm to prepare your return. Well-intentioned taxpayers can be misled by preparers who don’t understand taxes or who mislead people into taking credits or deductions they aren’t entitled to in order to increase their fee. Every year, these types of tax preparers face everything from penalties to even jail time for defrauding their clients.

Windus asks Jeff and Amy for tips when choosing a tax preparer.

Amy replies: Ask if the preparer has an IRS Preparer Tax Identification Number (PTIN). Paid tax return preparers are required to register with the IRS, have a PTIN and include it on your filed tax return.

Jeff replies: Inquire whether the tax return preparer has a professional credential (enrolled agent, certified public accountant, or attorney), belongs to a professional organization or attends continuing education classes. A number of tax law changes, including the Affordable Care Act provisions, can be complex. A competent tax professional needs to be up-to-date in these matters. Tax return preparers aren’t required to have a professional credential, but make sure you understand the qualifications of the preparer you select.

Amy replies: Check the preparer’s qualifications. Use the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. This tool can help you find a tax return preparer with the qualifications that you prefer. The Directory is a searchable and sortable listing of certain preparers registered with the IRS. It includes the name, city, state and zip code of:
o Attorneys
o CPAs
o Enrolled Agents
o Enrolled Retirement Plan Agents
o Enrolled Actuaries
o Annual Filing Season Program participants

Jeff replies: Check the preparer’s history. Ask the Better Business Bureau about the preparer. Check for disciplinary actions and the license status for credentialed preparers. For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For Enrolled Agents, go to IRS.gov and search for “verify enrolled agent status” or check the Directory.

Jeff states: Even using a competent and honest tax return preparer, remember that taxpayers are legally responsible for what is on their tax return 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.

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

1. Stephanie from Newport Beach asks: What are the different types of trusts and how do the benefits differ? Also, who do I go to in order to set up a trust? An accountant, financial planner, lawyer?

2. Steve from Los Angeles asks: – If I made a bet on the Super Bowl and I won, is that “taxable income”?

Answer: Taxpayers must report the full amount of their gambling winnings (with no reduction for gambling losses) for the year as income on Form 1040, and then deduct their gambling losses (up to the amount reported as gambling winnings) for the year separately on Schedule A (Form 1040) as a miscellaneous itemized deduction not subject to the 2 percent floor. When spouses file a joint return for the tax year, their combined gambling losses are deductible to the extent of their combined winnings. Gambling losses in excess of winnings are not deductible.

Professional gamblers, like casual gamblers, can deduct their gambling losses only up to the amount reported as gambling winnings. However, whereas casual gamblers must claim their gambling losses (up to the amount of their gambling winnings) as an itemized deduction, a professional gambler can deduct his or her losses (up to the amount of his or her winnings) as an above-the-line deduction in arriving at adjusted gross income.

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. 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.

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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!