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

Topics Covered:

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

2. The Building Blocks to Financial Security

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

4. Questions:

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

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

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

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

Gary states:

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

Gary states:

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

For today’s show we have coming up:

Segment 2 material: The Building Blocks to Financial Security

Gary states:

Also coming up is:

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

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

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

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

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

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

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

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

So, What Are The Building Blocks To Financial Security?

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

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

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

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

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

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

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

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

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

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

Chit chat with Amy

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Gary asks: How do other countries tax this?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Gary Answers.

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

Gary Answers.

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