(2)  If I bought the car for $11.2K back in 1998 and I sell it for less than the book value, such as $1,  can I claim the difference as a loss (deductible) on next years taxes?

(3) What is the total amount one can claim as losses in one year, for both capital losses and  losses after 1 year has lapsed? [an error occurred while processing this directive] (1) You may give your father a gift in money or property to a maximum of $10,000 in any one calendar year.  If the car is worth $11,000 and you sell it to him for $1,000, the balance will be considered a gift.  Your father would have taxable income if he sold or received more than what he paid for the car - so any amounts over $1,000 received, as in my example above, would be considered income to him.

(2)  You cannot claim the balance as a loss.  If this car was used in business, then you have been depreciating it (or taking the standard mileage deduction) according to the automobile depreciation rules.

  (3)  Capital losses are netted against capital gain, plus $3,000 may be used against ordinary income, each tax year.  Losses are carried forward until they are used up. [an error occurred while processing this directive] The Tax Prophet section on Estate Planning [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] My wife and I plan to sell our current house  and rent a home where we plan to move.  Once we determine where we want to live in the new area, we will buy a home.  We owe $135K on our current home and expect to sell it for $320K, netting us $185K.

Question (a): The $185K placed in our savings account will earn interest and I believe the interest earned will be subject to tax.  Is my understanding correct?

 Question (b):  I know there is a tax relief act which states that a married couple is allowed up to a $500K gain on a principal residence without being subject to capital gains tax.  So, our "gain" of $185K is not subject to a capital gains tax, correct?

 Question (c):  If we buy a house for $250K, the capital gain would be $320K- $250K = $70K; again, less than $500K so the gain is not subject to a capital gains tax. Is this correct? [an error occurred while processing this directive] (a) The gain from the sale of your residence, provided you meet the exclusion requirements, is tax-free up to $500,000 for married couples - the earnings on those gains, however are taxable.

(b) Your gain is based on the difference between the selling price and your adjusted basis in the property (usually the purchase price) - in either event, you'll owe no tax if you meet the exclusion requirements. 

 (c)  The new $500,000 exclusion rule has eliminated the sale-repurchase rules so it does not matter whether you purchase another home.  The exclusion rules may be used once every two years. [an error occurred while processing this directive] The Tax Prophet Section Tax Class/Real Estate/Principal Residence [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] n the last year I have worked for three employers as a freelance assistant.  I have W2 forms for two of them.  The third, however, led me to believe that I was being paid "under the table."  I've just received a 1099 from her.  What should I do? [an error occurred while processing this directive] Check out the articles I've written about independent contractors vs. employees.   I have a tax class on the subject (see my home page sub-sections for the tax class).  If you are an independent contractor, complete Schedule "C" to the Form 1040 and take the appropriate deductions there.  If you are an employee, then your employer is obligated to withhold and pay the taxes (it is her burden).  You can request a ruling from IRS as to whether you were an independent contractor or an employee. [an error occurred while processing this directive] The Tax Prophet Section on Independent Contractors vs. Employees [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] We went from A C Corp to an S Corp in 1999.  Our current accountants claim our 1999 taxes had to be amended because of the tax consequences resulting from the switch (gains tax).  Another accountant has informed us that we do not have to pay any gains tax unless we sell our company within the first ten years.  We are very confused and don’t know who is right on this point. [an error occurred while processing this directive] A switch from a C Corp to an S Corp can cause accounting changes - usually with respect to inventory.  However, the switch is not treated as a sale for capital gains treatment.  The "C" assets have a "built-in" gain for 10 years, which means if they are sold within 10 years of the C-to-S conversion, there will be a corporate (C level tax) on the difference between the basis and the FMV on the date of the C-to-S conversion.  Therefore, it is important to obtain an appraisal of your assets at the time of conversion, because any post-conversion appreciation is subject to the more-favorable "S" corporation rules (no corporate level tax).  Once 10 years elapses, then all gains are taxed under the "S" corporation rules. [an error occurred while processing this directive] The Tax Prophet's Search Engine[an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive] Is there a special IRS form I must fill out to elect mark-to-market accounting for my trades?   What steps do I need to take to use mark-to-market on my return?  I am a full time day trader. [an error occurred while processing this directive] There is not a special form that you use, but you must attach a written election explanation with your 2000 return, or with the automatic extension form.  It cannot be send in separately.  Note: the election for 2001 must have been filed no later than 4/15/01. The election can be made by signing a declaration that you are electing mark-to-market accounting for tax year _________.   For example:   “ Election for Mark-to-Market Accounting, Attached to Form _______ I hereby elect mark-to-market accounting under IRC Sec. 475 (f) for my securities business for the tax year beginning ______________. ______________________ Joe Taxpayer, SSN: xxx-xx-xxxx dated: ____________________ ” [an error occurred while processing this directive] The Tax Prophet's Search Engine [an error occurred while processing this directive] [an error occurred while processing this directive] [an error occurred while processing this directive]