Tax Tip Spotify Podcast and/or WordPress Blog Post by Don Fitch, CPA

This episode is also available as a blog post: https://paylesstax.com/2021/04/01/tax-tip-podcast-or-blog-post-for-real-estate-professionals-and-the-lifetime-learning-credit/

Please find the below text of the Podcast and/or Blog Post:  

Tax Tip Podcast or Blog Post for Real Estate Professionals and the Lifetime Learning Credit

Section 1.25A-4 Lifetime Learning Credit and the amount of the credit:

(1) Taxable years beginning before January 1, 2003. Subject to the phaseout of the education tax credit described in Section 1.25A-1(c), for taxable years beginning before 2003, the Lifetime Learning Credit amount is 20 percent of up to $5,000 of qualified tuition and related expenses paid during the taxable year for education furnished to the taxpayer (includes Realtor, Broker, and Real Estate Professional), the taxpayer’s spouse, and any claimed dependent during any academic period beginning in the taxable year (or treated as beginning in the taxable year, see Section 1.25A-5(e)(2)).

(2) Taxable years beginning after December 31, 2002. Subject to the phaseout of the education tax credit described in Section 1.25A-1(c), for taxable years beginning after 2002, the Lifetime Learning Credit amount is 20 percent of up to $10,000 of qualified tuition and related expenses paid during the taxable year for education furnished to the taxpayer (includes Realtor, Broker, and Real Estate Professional) , the taxpayer’s spouse, and any claimed dependent during any academic period beginning in the taxable year (or treated as beginning in the taxable year, see Section 1.25A-5(e)(2)).

(3) Coordination with the Hope Scholarship Credit. Expenses paid with respect to a student for whom the Hope Scholarship Credit is claimed are not eligible for the Lifetime Learning Credit.

(4) Examples. The following examples illustrate the rules of this paragraph (a). In each example, assume that all the requirements to claim a Lifetime Learning Credit or a Hope Scholarship Credit, as applicable, are met. The examples are as follows:

Example 1. In 1999, Joey BagaDonuts Taxpayer pays qualified tuition and related expenses of $3,000 for Sonny BagaDonuts Dependent to attend an eligible educational institution, and Joey BagaDonuts Taxpayer pays qualified tuition and related expenses of $4,000 for Charlie BagaDonuts Dependent to attend an eligible educational institution. Joey BagaDonuts Taxpayer does not claim a Hope Scholarship Credit with respect to either Joey or Charlie. Although Joey BagaDonuts Taxpayer paid $7,000 of qualified tuition and related expenses during the taxable year, Joey BagaDonuts Taxpayer may claim the Lifetime Learning Credit with respect to only $5,000 of such expenses. Therefore, the maximum Lifetime Learning Credit Joey BagaDonuts Taxpayer may claim for 1999 is $1,000 (.20 x $5,000).

Example 2. In 1999, Taxpayer D pays $6,000 of qualified tuition and related expenses for dependent E, and $2,000 of qualified tuition and related expenses for dependent F, to attend eligible educational institutions. Dependent F has already completed the first two years of postsecondary education. For 1999, Taxpayer D claims the maximum $1,500 Hope Scholarship Credit with respect to dependent E. In computing the amount of the Lifetime Learning Credit, Taxpayer D may not include any of the $6,000 of qualified tuition and related expenses paid on behalf of dependent E but may include the $2,000 of qualified tuition and related expenses of dependent F.

This episode is also available as a blog post: https://paylesstax.com/2021/03/29/tax-tip-podcast-or-blog-post-for-real-estate-professionals-and-basis-of-property-received-as-a-gift/

Please find below the text only of this podcast and/or blog post:

Tax Tip Podcast or Blog Post for Real Estate Professionals and Basis of Property Received as a Gift

Updated 03/29/2021

To calculate the original basis of property you receive as a gift, you must know:

the donor’s adjusted basis in the property immediately before the gift,

the property’s fair market value at the time of the gift; and

the amount of any gift tax paid on the gift.

If the fair market value of the property at the time of the gift is less than the donor’s adjusted basis, your basis depends on whether you have a gain or a loss when you later dispose of the property:

Your basis for calculating gain is the same as the donor’s adjusted basis, plus or minus any required adjustment to basis while you held the property.

Your basis for calculating loss is the property’s fair market value when you received the gift, plus or minus any required adjustment to basis while you held the property.

Business Property: If you hold the gift as business property, your basis for calculating any depreciation, depletion, or amortization deduction is the same as the donor’s adjusted basis, plus or minus any required adjustments to basis while you hold the property.

If the fair market value of the property is equal to or greater than the donor’s adjusted basis, your basis is the donor’s adjusted basis at the time you received the gift.

You increase the basis by all or part of any gift tax paid, depending on the date of the gift. Also, for calculating gain or loss from a sale or other disposition of the property, or for calculating depreciation, depletion, or amortization deductions on business property, you must increase or decrease basis by any required adjustments to basis while you held the property.

Received before 1977: For a gift you received before 1977, you must increase your basis in the gift (the donor’s adjusted basis) by any gift tax paid on it, but not above the fair market value of the gift at the time of the gift. For a gift you received after 1976, you must increase your basis in the gift (the donor’s adjusted basis) by the part of the gift tax paid on it that is due to the net increase in value of the gift. You calculate the increase by multiplying the gift tax paid by a fraction. The numerator of the fraction is the net increase in value of the gift, and the denominator is the amount of the gift. The net increase in value of the gift is the fair market value of the gift less the donor’s adjusted basis. The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift.

As you can see, there are many issues to consider in computing the basis of property you received as a gift.

Brenda Fitch Real Estate Professional

Brenda Fitch Real Estate Professional

Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email [email protected] if you have any questions or would like additional information.

DON FITCH, CPA

74478 Highway 111 #3

Palm Desert, CA 92260

Toll Free: (877)CPA-Help or (877)272-4357

Cell: (760)567-3110

Fax: (760)836-0968

Email: [email protected]

Website: https://www.paylesstax.com

P.S. My firm is based upon referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.

This episode is also available as a blog post: https://paylesstax.com/2021/03/18/tax-tip-podcast-blog-post-for-real-estate-professionals-expansion-of-child-tax-credit-for-2021/

This episode is also available as a blog post: https://paylesstax.com/2021/02/21/tax-tip-capital-gain-rates/

This episode is also available as a blog post: https://paylesstax.com/2021/03/18/tax-tip-podcast-blog-post-for-real-estate-professionals-covid-increases-in-earned-income-credit-in-2021/

Bs episode is also available as a blog post: https://paylesstax.com/2021/03/26/tax-tip-podcast-blog-post-for-real-estate-professionals-protective-equipment-are-qualified-medical-expenses/

The following is the text of the podcast:

Tax Tip Podcast or Blog Post for Real Estate Professionals with Protective Equipment being Qualified Medical Expenses

IRS Announcement 2021-7 notifies taxpayers (including Realtors, Brokers, and Real Estate Professionals) amounts paid for personal protective equipment for the primary purpose of preventing the spread of the Coronavirus Disease 2019 are amounts paid for medical care under § 213(d) of the Internal Revenue Code. As a result, the announcement confirms that these amounts are qualified medical expenses eligible to be paid or reimbursed without being included in gross income under health flexible spending arrangements (health FSAs), Archer medical savings accounts (Archer MSAs), health reimbursement arrangements (HRAs), or health savings accounts (HSAs). In addition, the announcement notifies administrators of group health plans regarding the ability to make certain plan amendments pursuant to the announcement.

Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email [email protected] if you have any questions or would like additional information.

DON FITCH, CPA

Toll Free: (877)CPA-Help or (877)272-4357

Email: [email protected]

P.S. My firm is based upon referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.