From entity formation, income, and inheritance to losses, proceeds, and profits, Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.

Highlights/Topics:

How does a single, high W-2 earning individual take advantage of passive losses? It’s difficult because passive losses for a high earner are going to be subject to limitations

How are inherited stock shares treated when sold? If you inherit stocks, they are valued at fair market value now, not when they were bought due to the step-up in basis

Should an S Corp pay profits as dividends? An S Corp does not pay dividends; it passes on profits and losses to shareholders

Is it preferable to have a C Corp or an LLC as your holding entity? It’s better to have an LLC as your holding entity; there’s no tax treatment for an LLC

Are proceeds received from winning a court case ($20 million) taxable? It depends on the source of the claim, as a matter of rule, and attorney fees are no longer deductible

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Resources:

Anderson Advisors’ Infinity Investing Through Stocks and Real Estate - Free event on May 15

http://aba.link/iiw

Infinity Investing: How The Rich Get Richer And How You Can Do The Same by Toby Mathis

http://aba.link/infinitybook

Capital Gains and Losses

https://www.irs.gov/newsroom/capital-gains-and-losses-10-helpful-facts-to-know-0

Charitable Organizations

https://www.irs.gov/charities-non-profits/charitable-organizations

Wills and Trusts

https://andersonadvisors.com/living_trusts/

Entity Formation

https://andersonadvisors.com/entity_formation/

Retirement Plans

https://andersonadvisors.com/retirement_plan/

Real Estate Professional Requirements

https://www.irs.gov/pub/irs-utl/33-Real Estate Professionals.pdf

Home Office Deduction

https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

Kiddie Tax

https://www.irs.gov/taxtopics/tc553

1031 Exchange

https://www.irs.gov/pub/irs-news/fs-08-18.pdf

Step-Up in Basis

https://www.investopedia.com/terms/s/stepupinbasis.asp#:~:text=A%20step%2Dup%20in%20basis%20is%20the%20readjustment%20of%20the,for%20tax%20purposes%20upon%20inheritance.&text=The%20asset%20receives%20a%20step,of%20property%20transferred%20at%20death.

Bonus Depreciation

https://www.irs.gov/newsroom/new-rules-and-limitations-for-depreciation-and-expensing-under-the-tax-cuts-and-jobs-act

Depreciation Recapture

https://www.investopedia.com/terms/d/depreciationrecapture.asp

California Proposition 19

https://www.boe.ca.gov/prop19/

Self-Employment Tax

https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes

Old-Age, Survivors, and Disability Insurance (OASDI) Program

https://www.ssa.gov/policy/docs/progdesc/sspus/oasdi.pdf

121 Capital Gains Exclusion

https://www.irs.gov/taxtopics/tc701

CARES Act

https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf

Schedule A

https://www.irs.gov/forms-pubs/about-schedule-a-form-1040

Schedule E

https://www.irs.gov/forms-pubs/about-schedule-e-form-1040

Section 162 - Trade or Business Expenses

https://www.irs.gov/pub/irs-drop/rr-99-7.pdf

Form 1040

https://www.irs.gov/forms-pubs/about-form-1040

Form 1099

https://www.irs.gov/forms-pubs/about-form-1099-misc

Tax Cuts and Jobs Act (TCJA)

https://www.irs.gov/tax-reform

Rich Dad Poor Dad by Robert Kiyosaki

https://www.amazon.com/Rich-Dad-Poor-Teach-Middle/dp/1543626610

Insperity

https://www.insperity.com/

Payroll City

https://payrollcity.com/

Paycheck Protection Program (PPP)

https://www.sba.gov/funding-programs/loans/covid-19-relief-options/paycheck-protection-program

Toby Mathis

http://tobymathis.com/about-toby-mathis/

Anderson Advisors

https://andersonadvisors.com/

Anderson Advisors Events

https://andersonadvisors.com/all-events/

Anderson Advisors Tax and