How is Cost Basis Calculated on an Inherited Asset?
If the beneficiary of a trust receives an asset valued at $500,000 but was purchased for only $100,000, does the beneficiary incur a big tax bill? For many, this could be a crippling tax bill. However, the IRS code does provide some relief for beneficiaries of inherited assets. This relief comes in the form of an adjustment to the original cost basis.
What is IRC Section 1400Z-2 Gain?
The Qualified Opportunity Zone Program was introduced under the Tax Cuts and Jobs Act of 2017. The focus is to funnel capital gains toward federally designated Qualified Opportunity Zones (QOZs) by way of Qualified Opportunity Funds (QOFs). Investors, in turn, benefit from tax incentives which encourage them to invest in QOFs.
What Causes a Deferred Tax Liability?
It's a given that individuals and companies must pay federal taxes on income earned in a given year. But sometimes those taxes are recognized, and paid, at a future point rather than the year in which a sale occurs or income is earned. This concept is known as deferred tax liability, or DTL.
What is the Difference Between Raw Land and Vacant Land?
People with longtime roots in one place may often drive by a new subdivision or retail strip center and wish they’d had the foresight to purchase that particular piece of land 20 years ago when it was still located far from their hometown’s urban core. Buying land can be a risky investment – especially raw land that’s located well outside of currently developed areas. Let’s take a closer look at the differences between raw and vacant land and some important considerations that come with both types of investments.
Does Guardianship Override Medical Power of Attorney?
Sometimes a person can no longer make their own decisions and needs another person designated to do so. The authority can be partial, as in a medical power of attorney, or comprehensive, as is the case with guardianship.
Do Trusts Avoid Estate Taxes?
Establishing a trust can help you achieve many different estate planning objectives, especially preserving wealth from estate taxes. With the federal estate tax exemption exceeding $12 million for 2022, only a small percentage of Americans need to worry about having to pay estate taxes at the federal level. However, 12 states, along with the District of Columbia, impose estate taxes at the state level.
What Can Offset Depreciation Recapture?
Depreciation can be an extremely favorable and advantageous tax benefit for real estate investors. Depreciation is a tax deduction that allows property owners to lower the costs associated with purchasing and making improvements to income-producing properties. This deduction lowers the amount of taxable income (but not cash flow) generated from rental properties.
At What Rate is Boot Taxed in a 1031 Exchange?
When an investor earns a profit through selling an asset, the IRS taxes the income as a capital gain. If the owner held the investment for less than a year before selling, the growth is classified as short-term, and the tax rate is the same as that taxpayer’s ordinary income. Depending on the individual’s income level, that tax rate may be as high as 37 percent.
What is Distributable Net Income (DNI) and How Do You Calculate It?
Most trusts eventually distribute their assets to beneficiaries. Whether taxes are owed on those distributions depends on a number of factors. Distributable net income is one of those factors. It can also help in reducing a trust’s tax bill.
What is Title Vesting?
For many people, buying a home or an investment property is the culmination of years of dreaming, hard work, and saving. Purchasing real property comes with some important decisions, most notably, how to hold the title for the residence or asset. This decision, known as title vesting, affects the legal rights of the property owners, as well as directs the flow of payments if the asset is sold.
