Frequently Asked Tax Questions - December 23, 1996 - Sidebar

This column, in slightly different format, originally appeared in The San Francisco Examiner Newspaper, Monday December 23, 1996


Note: This exercise is for educational purposes only and is not intended to be legal or tax advice. Your particular facts and circumstances must be considered when applying the U.S. tax law. You should always consult with a competent tax professional with respect to your particular situation.

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Although it is extremely late in the year, the following might apply to your situation:

Accelerated Death Benefits: Beginning in 1997, death benefits paid to the chronically or terminally ill may be received prior to death on a tax-free basis. Delay receiving these benefits to 1997.

Spousal IRA: In 1997, a non-working spouse will be entitled to fund an IRA with up to $2,000 (up from the present $250). Do not fund a non-working spouse's IRA with more than $250 in 1996.

Delay Adoption Expenses to 1997: A new $5,000 tax credit for qualified adoption expenses such as legal fees and court costs ($6,000 for the adoption of a special needs child) goes into effect in 1997. Note: expenses for a surrogate parent are not considered qualified adoption expenses.

Suspension of Excise Tax on Excess Distributions from Retirement Plans: The 15% excise tax on excess distributions (currently, the tax applies on distributions over $150,000 a year) has been waived for 1997, 1998 and 1999. Wait until next year to take an excess distribution from a retirement plan.

Sale of a Home: Both President Clinton and Senator Dole proposed a $500,000 exclusion for selling a home. Anyone contemplating the sale of a home should wait until 1997 to see if this legislation passes.

Deferred Tax-Free Exchanges -- Watch Out!: The deadline to complete a deferred exchange is 180 days or the due date of the tax return (with extensions). Those selling property late in the year may run afoul of this rule if they fail to acquire the replacement property by April 15, 1997 or fail to obtain an extension on their tax return.


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**NOTE: The information contained at this site is for educational purposes only and is not intended for any particular person or circumstance. A competent tax professional should always be consulted before utilizing any of the information contained at this site.**