Q:  Will a lease on my commercial ground of over 30 years be considered a sale and trigger capital gains?

A:  Yes, in general, a 30-year lease is considered ownership of property for tax purposes and subject to capital gains treatment upon a sale.

Q:  I am a trustee of a testamentary trust that holds a club membership in which my father is a member. May I deduct the dues paid? We are holding the membership as an investment and expect its value to increase when the economy improves.

A:  The club dues are a personal expense and cannot be deducted by the trust. Any expenditures for club dues are income to the beneficiary and should be treated as though the trust earned income and passed it through to the beneficiary who then spent the money on the club dues.

Q:  My mother died and left me her house worth $60,000. I am going to sell it and give half to my sister. What are the tax consequences?

A:  If your mother left you the home and you give 1/2 to your sister, you've made a gift to your sister and will need to report the gift. You have an annual exclusion of $11,000 plus lifetime gift exclusion of $1,000,000 so you should not have to pay gift tax on the transaction, although you will reduce your lifetime exclusion. In your example, if you gave ½ of the property to your sister the amount of the gift is $30,000 (ignoring fractional-share discounts). The annual exclusion applies to $11,000 and your lifetime exemption applies to the $19,000 balance.

Q:  What are the consequences for taxes on a stock dividend paid to a non U.S. taxpayer from a U.S. corporation?

A:  Dividends from a U.S. company are considered U.S.-source income and are subject to a flat 30% tax which is collected through withholding by your withholding agent (usually the entity paying the dividend) who pays the tax directly to IRS. This is a flat tax and you cannot file a tax return to claim a refund.

The browsable version of this page: May, 2004 FAQ

All contents copyright © 1995-2004 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® is a registered trademark of Robert L. Sommers.