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I am a writer and use our AOL for sending e-mail and Invoices to
clients. Can I claim a deduction for a portion of our annual fees to AOL as pertaining to
my (sole proprietor) business?
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 Fees for an interest service provider used in your
business and subject to the listed property limitations discussed below, may be expensed
(deducted in full in the year placed in service). "Business use" occurs when you
engage in a profit-making trade or business. You should (1) maintain records
systematically; (2) represent yourself as a business; (3) generate gross receipts; and (4)
have an actual profit or a reasonable expectation of profit from your business activities.
The "listed property" limitation prevents the deduction of your home computer
and its software unless it is used "predominantly" (greater than 50 percent) for
business during its first year of service. If the predominant-use test is met, you may
expense that portion of the computer's cost allocated to business. For example, an $8,000
computer used 60 percent in a trade or business in its first year of service can be
expensed up to $4,800.
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We bought $30,000 worth of stock in a company in 1984. In 1994 the
company reorganized and exchanged our shares, and we received 1188 shares. In 2001, the
company had a merger, and we received cash proceeds of $29,700. Does the exchange affect
my stock basis?
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No, you have a long-term capital loss of $300 which is reported on
Schedule D. The exchange of shares affected your basis in the shares received. The $30,000
purchase price is allocated ratably over the 1,188 shares received. Then when you sell
those shares, your gain or loss is calculated according to the basis of your 1,188 shares.
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I have approximately 15 million dollars in a foreign
account and I want to transfer it to a bank in the U.S. Will I have to pay taxes
immediately or do I wait and file at the end of the year?
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This would depend on whether
you've been declaring taxes on the earnings in your foreign account or whether you paid
taxes on this money in the first place. You could be in violation of income tax law and
anti-money laundering statutes if you have not declared the income and paid taxes on it.
If you have paid taxes and filed the proper information forms and tax returns, then it
doesn't manner if or when you transfer the money to the U.S. You are not taxed on
transfers of money if you've already paid taxes on the money.
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I'm a Mexican,
living in Mexico with a joint account at a U.S. Bank. What happens if one of the co-owners
or both co-owners die?
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It depends on whether the co-owner is a U.S. taxpayer (a U.S.
resident for tax purposes or a U.S. citizen). If the co-owner is a U.S. taxpayer, then the
asset will be part of the taxpayer's estate when he or she dies. The entire asset is part
of the U.S. estate, unless the surviving joint tenant can prove he or she made
contributions to the account in which case, the portion of contributions made by the
decedent will be included in the estate. If the person is not a U.S. taxpayer, then there
will be no estate tax. If there is no beneficiary (because both owners die), there will be
a probate to determine who inherits the account. The beneficiary does not pay death taxes.
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How do I report a loss incurred by the sale of a second residence?
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Losses on personal
assets, such as a principal residence, second residence or vacation home are not
deductible. If the property can be considered rental property, then you would deduct the
loss on schedule D.
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