Friday, February 8, 2013

How to Hold Title

Q.  How should I hold title to the motor home I plan on purchasing this month?

A.  This is a legal question I am not qualified to answer.  Several states have different options, so be safe, and seek legal counsel if you feel it is an issue in the state you are planning on licensing it. Generally, (my opinion) I see no difference in the way you hold title to your car. If concerned, buy an hour's worth of time from a reputable attorney to put your mind at ease.

Thursday, February 7, 2013

Exchanging an RV

Q.  Will an RV qualify for an exchange the same as an apartment building?

A.  Technically it could qualify for an exchange under code section 1031, but the likelihood of that happening is between zero and zilch.

First, when is the last time you heard of anyone selling an RV at a gain? If you don't recognize a gain on sale, there is absolutely no point in an exchange.

Second, an exchange only pertains to business property. Even if you had established a percentage of business use for your RV, after allocating the business vs the personal usage, you are down to a very small number.

Third, you would need to establish business usage of the property (RV in this case) you exchange into. This is no easy task.

Rather than wave every shade of red flag on your tax return daring the IRS to scrutinize it, I personally would pass.

Wednesday, February 6, 2013

Business Returns Waiting Game

Q.  Why is it taking so long to be able to file business returns? I can download forms, but I've been told we can't efile them and if we mail them it, the IRS won't process them. Doesn't the government want to get paid?

A. As a business person, we all know that keeping revenue flowing in is our number one priority. Apparently Congress hasn't grasped this theory. To answer your question seriously however, there are several factors at work here.

Congress waited until 2013 to pass laws retroactive to 2012

Once legislation is passed, someone, somewhere has to read through the myriad of pages (this can be several hundred and more) and try to condense it to a 1 or 2 page form. This can't be an easy task.

Next, the programmers need to get to work on it

Then the IRS needs to do the testing to make certain the forms and programming are compatible with their new e filing system.

Finally, the professional software I use, and the off-the-shelf software consumers use, all need to be tested to make certain they work all the way through the system.

Whew! I've tired myself out just thinking about it. Admittedly it's an extraordinarily frustrating year for everyone. All we can do is be patient and wait it out.

P.S. Since my original answer, depreciation has been disallowed on RVs. See Jackson, T.C. Memo 2014-160, August 7, 2014.

Tuesday, February 5, 2013

Q.  I am a working artist traveling in my 5th wheel. I'm moving from Texas to Florida for a few months. It seems I should be able to deduct the cost of travelling from Texas to Florida, but reading your prior posts, I'm confused. Can you please straighten me out?

A.  It is confusing. If you are a full-timer, what you are actually doing is relocating. As a full-timer, this would be considered commuting mileage, as you are moving your tax home from Texas to Florida. Commuting mileage is non-deductible.

If however, you plan to return to Texas and you are not a full timer, have a specific business reason to travel to Florida, and your visit is totally work related, you may be able to deduct this mileage as travel expenses.

As a full timer, you most likely won't qualify for moving expenses, unless you work full time in the general area for at least 78 weeks during the 24 months right after the move. Don't you wonder who dreams this stuff up?

Monday, February 4, 2013

2013 Standard Mileage Rates

Q.  Is there any increase of standard mileage rates in 2013? Gas prices seem to go ever higher!

A.  Yes, but it won't offset the higher gas and diesel prices. Beginning 1/1/13 business mileage rates are 56.5 cents per mile, charitable mileage rates remain at 14 cents per mile, and medical and moving mileage increase from 23 to 24 cents per mile. Please remember to keep proper records or you may lose this deduction entirely!