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Question: What is a pass-through tax in reference to a Limited Liablity Company?
Answer: A pass-through as used in your question means an LLC that is taxed as a partnership (as opposed to a C corporation). The income and loss is "passed through" to the owners, i.e., the owners pay the tax on the income, not the entity. For example, if an LLC is owned equally by two individuals who also share the income and losses equally, and the LLC has $1,000 of income, the LLC issues each member a K-1 form showing $500 of income. Each member then reports the $500 on his individual tax return. The LLC does not report the income.
Question: When a citizen spouse moves money from an individual brokerage account (established during the marriage) to a joint tenancy brokerage account, is any of that money considered a "gift" to the non-citizen spouse in terms of gift taxes? All of the money transferred was compensation earned by the citizen spouse during marriage in California, therefore is community property if I understand correctly, and should not be considered a "gift" even though transferred into joint tenancy.
Answer: IRS could treat the transfer as a gift and gift taxes could be owing. It depends on how the income that is placed in the individual brokerage account was reported. If the couple filed a joint return and declared all the income on the joint return and paid taxes on it, then the income would be considered community property (absent an agreement to the contrary) and the transfer into a joint account would actually be a transfer of each partys 50% community property interest in the individual brokerage account to a joint account, thus no gift tax would occur.
If IRS concludes that the funds belonged to the U.S. citizen spouse, then a gift-tax would be imposed on amounts exceeding $103,000 per year. Gift taxes depend on the citizenship of the spouse (not the domicile or residence for income tax purposes of the non-citizen spouse).
Tax Protester Arguments Schiff and Merideth
Question: I was doing a search on Irwin Schiff after he did his show on 20/20 stating that one doesnt have to pay taxes. I had previously purchased a book by Lynn Meredith who proclaims the same thing that Irwin does -- that you file exempt, and by this act you unvolunteer yourself from the IRS obligation and do not need to file a Form 1040. I started filing exempt from federal taxes when I read Lynn Meredith's book. Are these people correct?
Answer: No. Irwin Schiff is a convicted federal tax evader who has spent time in prison. Lynn Merideth, the so-called darling of the Patriots movement, also has IRS troubles, according to a report published in the Orange County Register, which stated that 40 armed federal agents raided her home as part of a criminal tax investigation, carting off files, computers and $200,000 in cashiers checks, gold and silver coins.
Anyway, if you believe in the U.S. constitution and the power of the courts, then the answer is clear - more than 500 reported court cases say you must pay your federal income taxes or risk going to jail. If you want to believe people like Schiff, you are taking the risk that if IRS catches you, you could wind up broke and in jail. I have written extensively on this topic on my Tax and Trust Scam Bulletin Board - especially about the legal follies of Mr. Schiff. Merideth's webpage contains the typical tax-protester non-sense that has been consistently rejected by every court in the land.
Question: I received $35,000 from my mom when she died last year, do I have to claim that on my taxes this year?
Answer: If the money you received was an inheritance (and it sounds like it was), then you probably owe no taxes. Generally, you inherit property tax-free. It is the estate of the decedent which must pay estate taxes, if any are due. Currently, decedents have a $675,000 exemption (increasing to $1 million after 2006). If your mothers estate was $675,000 or less, then no estate taxes would be owing.
Question: I did not file taxes for 1999. Do I have to file for two years. Or should I just file for this year?
Answer: If you have a tax-filing obligation (you earned more than a certain amount - $7,050 for a single person in 1999), you need to file a tax return. If you need to file a tax return, IRS has back tax year returns (1998, 1999) on its website available for downloading. The same applies for the year 2000 (the threshold amount is $7,200 for single filers).
Question: What Statute requires the responsible individual of a company to withhold income tax on its employees? Can you tell me why IRS does not make it clear that income taxes are mandatory?
Answer: First, the penalty imposed on a responsible individual is for the failure to pay the withholding to the IRS. The company holds the withholding in trust for the U.S. government and these are called trust fund taxes. IRC Sec. 6672(a) states as follows:
Any person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over.
As far as taxes being mandatory, Section 1 of the Internal Revenue Code says:
There is hereby imposed on the taxable income of--
1(a)(1) every married individual (as defined in section 7703) who makes a single return jointly with his spouse under section 6013, and
1(a)(2) every surviving spouse (as defined in section 2(a)),
a tax determined in accordance with the following table:
The same clause applies to other filers such as an individual, married filing separately, or head of household.
This provision makes taxes mandatory. Taxes are imposed on the taxable income of taxpayers in accordance with the tax tables. There is nothing discretionary about this language, and every court that has ruled on the matter agrees that taxes are mandatory.
Question: I am renting a house from my grandmother. She does not want to sell it to me because she can't afford to pay taxes on it right now. Is there some way we can get around paying the taxes or make it easier for her to pay them so that she will sell or give the house to me?
Answer: Your grandmother does not have to pay taxes on the sales proceeds until she receives the money from you, so she will have the money to pay her tax obligation. Federal taxes would be 20% on the gain (25% on any recapture of depreciation previously taken). If she sells the house on a installment basis (for example, one payment a year for 10 years) shell pay capital gains taxes on the profit when you pay her each year.
In the alternative, she can gift you the house and shell have a $675,000 exemption against gift taxes which can be used (provided she has not made taxable gifts in the past)
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|All contents copyright ? 2008 Robert L. Sommers, attorney-at-law. All rights reserved. This internet site provides information of a general nature for educational purposes only and is not intended to be legal or tax advice. This information has not been updated to reflect subsequent changes in the law, if any. Your particular facts and circumstances, and changes in the law, must be considered when applying U.S. tax law. You should always consult with a competent tax professional licensed in your state with respect to your particular situation. The Tax Prophet(TM) is a trademark of Robert L. Sommers.|