Q:  In a two-person partnership, can one person, deduct all of the interest on a loan?

A:  Yes, but you will need to draft and sign a partnership agreement that permits special allocations and follow the rules under IRC Sec. 704 and the comprehensive regulations thereto to accomplish the proposed allocation.

Q:  My friend, a non-US resident, wants to wire $20,000 to my account and then I am to deposit the funds into his stock account. Are there any tax reporting requirements for such a transaction?

A:  Why doesn't he wire the funds directly to his own account? Doing it your way will entail documentation that he is wiring the money to you as his agent, and that you'll be depositing the funds into his account - otherwise, your could have a gift-tax liability arising from the transfer from your account to his.

Q:  A former employee exercised stock options in 2004. Since he is no longer an employee, are the proceeds subject to FUTA?

A:  There could be an obligation on behalf of the employer to report the payments on a timely basis. If the service recipient (company) timely complies with applicable Form W-2 or 1099 reporting requirements, the employee is deemed to have included the amount in gross income for this purpose.

Q:  My wife is a non-US citizen. May I gift my share of our house to her, utilizing the $110,000 annual gift tax allowance for a non-citizen spouse?

A:  Yes. The marital deduction for gifts from a U.S. taxpayer to a non-U.S. taxpayer is $140,000 per year for tax year 2004. There is no reporting requirement if the gift is below the annual marital deduction allowance; otherwise, file Form 709.

Q:  We live in California and hold our residence in joint tenancy. To obtain a full step-up basis evaluation for marital assets in the event of the death of either spouse, do we need to change title to community property?

A:  Yes. There is a new type of title in California - Community property with rights of survivorship. You need to sign a deed changing the title of your property in accordance with the new law.

The browsable version of this page: June, 2004 FAQ