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I'd like to sell part (25% to 50%) of the equity in my condo to a
friend because I am having difficulty keeping up with the payments. Would he be able to
claim a tax deduction for interest he would pay?
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 No. You will not comply with the
requirements for the residency exclusion by selling only a part of your residence so the
transaction will be taxable to you to the extent you have a gain on the sale. Your friend
should be able to deduct the interest expense as an investment unless he lives there as
his principal residence, in which case he could qualify for the mortgage interest
deduction for the purchase of a first or second home.
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My
husband and I plan to incorporate our computer consulting business and set up a
home-office. What are the tax implications when we sell our home?
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Any depreciation taken
on the residence will be recaptured at 25% federal (plus applicable state taxes) and the
residency exclusion will not apply to that portion of your gain. For example, if you have
a $500,000 gain on the sale of your home, you could exclude the entire amount under the
residency exclusion. If, however, you depreciated your home $50,000, you must recapture
the depreciation at 25% federal and pay $12,500 in taxes; the balance of your $450,000
gain will be excluded by the residency exemption.
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I
am interested in taking part in a net-based high-yield-investment "game". The
game offers an unbelievable 200% return after only 14 days. Will I need to pay US taxes on
the profits?
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Yes, if you are a U.S. resident or citizen. Regarding the so-called
"investment," remember P.T. Barnum's famous remark, "There's a sucker born
every minute!" Also, "A fool and his money are soon departed!" This sounds
like an illegal pyramid scheme. There is simply no legitimate investment that would return
such a whopping profit and if there was, there would no need to peddle it on the Internet.
Check out all the scam watch websites before giving up any money. If you are a U.S.
resident or citizen, then you are taxed on your world-wide income. If you are a foreign
person, then you do not pay taxes on gains and profits. This so-called investment sounds
like it is foreign source and if you are a foreign taxpayer, then you'd have no income tax
obligations to the U.S.
| See Also: The TAx Prophet's Section on Tax
Scams |
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I have been doing two different jobs for the same company
for four years now. The second job has always been paid as a bonus. Now the company wants
to pay me with a W-9 (as an independent contractor). It this proper?
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No. Your company is
changing your status to an independent contractor for part of your pay and such a change
is improper and could be illegal. Your company must understand the tax laws with respect
to independent contractors verses employees. A company cannot convert an existing employee
to an independent contractor if the worker continues to perform the same services. Also,
You'll pay higher payroll taxes as an independent contractor.
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