The most recent Intuit ProConnection newsletter has some very useful and interesting content, including the following.

When Fraud Knocks on Your Door – Helping clients minimize the damage from being ripped off by “trusted” employees. This also includes a handy doc file to alert clients on the Top Ten Tips To Help Prevent Fraud.

New Tax Increase Prevention Act – A summary of some of the key components of the recently enacted legislation. This also has a handy doc file for clients on how this new law may apply to them.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/29/2006 02:46:00 PM Send this post:

For quite a while now, I have been advising other tax pros who want to increase their clientele that a blog is the most effective way.  I hope these exchanges with Gina in Texas are helpful for others who are considering doing the same thing.

From Gina: 

Kerry,

Thanks for the traffic to my blog :-) !  I've been trying to add more articles, a site feed and allow for comments as you suggested.  There are still a lot more things I can do with the blog and I'll add them as time allows.  Late yesterday I talked to the editor from my local paper and it looks like they may be interested in publishing an article or two after all.  So, things are starting to pick up for me.  You're a great mentor.

Thanks,

Gina

I wrote back:

Gina:

I'm glad to help.

Since I have also been using Blogger since the beginning for my blog, I can give you more suggestions than if you had chosen to use one of the other programs.  You should occasionally look over the various items under the "Settings" section of your Blogger page.  They are always adding new ones.  For example, they have a built in RSS capability, so you don't have to rely on outside services, such as the Feedburner one you have set up.

Blogger also has long had a built-in comments function. I have chosen not to use it because I barely have enough time to do regular posting and do not want the hassle of monitoring the comments, which will undoubtedly be bombarded with spam.  I have found that using the Q&A format based on actual emails readers send to me has allowed me much more control than an open comments section would.

If your experience turns out like mine and that of other bloggers around the country, you should see the readership grow exponentially.  Besides bringing in new clients, it will also bring in a lot of other media coverage, including requests to submit articles to other publications, as well as interviews specifically about your blogging experiences.  If there aren't a lot of people currently blogging in your local community, your local paper will probably want to do an article about your experiences for their local readers to learn from.  

And the end result will be like it was for me, that you will have more tax clients than you can properly handle and will be able to be very selective as to who you work with.

Good luck.

Kerry

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/29/2006 01:17:00 PM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/27/2006 10:18:00 PM Send this post:

This is a follow-up to this earlier conversation.

Subject: Re: just starting out on my own...

 

Kerry,

I took your advice and started a blog.  My blog is http://glgcpa.blogspot.com and I just posted my first article this morning.  I think I'm going to like blogging.

I have also tried to contact the editor of our local newspaper to see if she is accepting any freelance articles, but she has not gotten back in touch with me. 

I contacted our Chamber of Commerce and evidently their treasurer is a CPA and was the contact person and said that if they needed anyone to speak he would do it.  I had no idea it would be so hard to give away free information :-) .

The good news is that I do have a handful of clients and one of them is a gem.  They have already referred me to two other people who I am hoping will become clients.

Thanks again for your help and any advice you have to give me on my blog or whatever I appreciate it.

Gina

My Reply:

I'm impressed that you got onto that so quickly.  It looks very nice.

You should go into the "Site Feed" tab in your Blogger settings and set up for your blog to produce an RSS feed, and then post the link for that on your blog.  That is the most efficient way for people to read blog posts.  You can see the ones I subscribe to here.
 
You can slowly add other features as you see fit and after you check out what looks good on the blogs.  Almost all of the blog tools I use are free; so check those out.

Your articles are very good.  If you run out of ideas, you may want to consider giving some real life examples  of how you helped real life clients solve various tax problems, without revealing any client identities of course.  That will show people the areas in which you have experience.  I have also found that people appreciate real life stories of how the tax laws work more than the theoretical examples used by most academics.

You can also invite readers to submit questions, which could very easily turn into paying clients.  I literally receive half a dozen requests each week from my readers to take them on as clients, often after they have submitted a few questions that I have posted on my blog.  As far as I know, the only blogs that currently address reader questions are mine and Eva Rosenberg (www.TaxMama.com)  who actually answers her questions in her podcasts.

Congratulations on getting started.  Keep up the good work.

Kerry

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/27/2006 09:36:00 AM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/26/2006 02:15:00 PM Send this post:

In a recent Jay Nordlinger column, he mentions this little warning about the current status of the estate tax law.

The estate-tax issue is multilayered, but I’d like to stress the macabre: A friend was saying the other day, “You know, there are people — not necessarily bad ones, either — who are kinda sorta hoping that their parents will die in 2010. They have to die sometime, goes the reasoning, and if they’re going to kick off — why not in 2010, when the estate tax is zero?” Another friend joked, “If you’re wealthy, be sure to protect yourself from your children, during 2010! Watch that they don’t put something in your Metamucil!” Certain heirs will feel like they hit the jackpot, four years from now.

A sick tax, this death tax — really.

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/25/2006 09:30:00 PM Send this post:

Q-1:

Subject: Clients

 

Are you taking clients? I have the tax bug bad!

A-1:

I wish I could help you fight your tax bug; but I already have too many clients to take care of; so we are still trimming back on the difficult clients and are not accepting any new ones at this time. 

Unfortunately, we don't have anyone to whom we could refer you. If you haven't already done so, you should check out my tips on how to select the right tax preparer for you.:

I wish I could be of more assistance; but I wish you the best of luck.  

Kerry Kerstetter

Q-2:

Thanks for your response Kerry. I was reading your tips on selecting the right preparer when I suddenly realized I needed one, or at least one like you where describing. Congratulations on your success and I can see from your web page and how you handle others why you're so busy. I bet you feel like one crying in the wilderness "there is a better way" I speak to others about these tips and tactics and they act as if I am giving them a virus. I don't think people relate tax savings to real money or that is my perception.

 

There is one thing you could help me with if you have any spare time. There is a company online called www.drewmiles.com who offers one year of coaching on aggressive tax strategies, tips and lawsuit protection. I listened to the audio version, which peaked my interest and then spoke with a representative. His ideas have weight and validity and now I am contemplating purchasing personal coaching and I would be interested in any opinions you may have about this move. It is fairly expensive (3,995.00) however the tax savings for me could be substantial (he has a 110% money back guarantee if I don't save at least $30,000.00 my first tax year) Have you ever heard anything about this company or this individual?  Thanks for your time and keep up the good work! It is our constitutional right to minimize taxes or at least the Supreme Court agrees it is.

A-2:

I am familiar with Drew Miles.  Several months ago, another CPA sent me some of his promotional material.  Here is my reply to him.

"That's just another one of the many so-called tax experts who claim to be the only ones who know how to help people lower their taxes; when in actuality every one of his ideas is something that I and many other tax pros have been using for decades for our clients.  It is insulting that he feels a need to belittle us CPAs in an effort to make himself sound smarter.  Nothing new."

 After that, I made the mistake of signing up for Drew Miles' email alerts and now receive a dozen or more high pressure emails each and every day. 

My opinion is still the same.  Drew Miles' ideas are valid, but are nothing unique that any competent and creative tax advisor can't accomplish for much less cost.  For example, I do those exact same kinds of things for my clients for much less, and I am one of, if not the, most expensive CPA in the area (an intentional but unsuccessful way of limiting the size of my client base).

While those of us in the tax practitioner community who believe it's our duty to do everything legally possible to help clients minimize their taxes are obviously in the minority, there are enough of us to be able to service those clients who desire our services.  If you are diligent in your search, you should locate such a person.

Good luck.

Kerry Kerstetter   

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/25/2006 10:05:00 AM Send this post:

Q:

Subject: Tax Guru-Ker$tetter Letter: Setting Up Corp

 

Kerry,

Since an LLC can choose to be taxed as a Corp and is a simpler form of organization that a C corp, doesn't the LLC provide the most flexibility?

 

Blog: Tax Guru-Ker$tetter Letter
Post: Setting Up Corp
Link: http://www.TaxGuru.net/2006/06/setting-up-corp.html

A:

Choosing the method of taxation is only one of many aspects to be considered when deciding on the appropriate business entity to work with. 

It is also something that is generally only available for the first year of operation.  If you were under the impression that you could switch back and forth each year, that is not how it works.  Changing the classification has some very messy requirements, often resulting in immediate taxation of certain types of gains; so it is not to be done without the careful consideration of competent professional advisors.

Kerry Kerstetter

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/25/2006 09:45:00 AM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/24/2006 09:42:00 PM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/24/2006 09:05:00 PM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/24/2006 08:00:00 PM Send this post:

Jeff Parnell, a congressional candidate up North of us in Missouri, is also a singer song-writer. He has some funny political songs available for download on his website. The one called “Red State Blues” is very funny, making good use of the widely known insane screams by the head DemonRat, Howard Dean.

The song that most caught my attention is obviously the one addressing the current state of our tax system, “Perhaps We Need A Tea Party Again,” which I first heard about from some of the FairTax supporters, who have this song playing on their website, as well as available for MP3 download. They also have the lyrics, which make a lot of sense.

"Perhaps We Need a Tea Party Again"
Lyrics and music by: Jeff Parnell

One night in Boston Harbor, the tea flew overboard.
They said, "We don't owe King George a thing, we answer to our Lord."
They built this land of freedom, but things have changed since then.
Perhaps we need a tea party again.

They passed the 16th amendment, and the income tax was law.
But it punishes achievement, and that's just one of many flaws.
Then along came withholding, we don't know what we pay in.
Perhaps we need a tea party again.

There's a better way to pay the bills, and the Fair Tax is its name.
We can fully fund this government, and end these silly games.
We can save Social Security, and Medicare it's true.
And the Congress needs to hear all this from You.

Career politicians love the power of tax and spend.
And it's time that all of us take a stand and reign them in.
This country is worth saving, and I'm telling you my friends,
"Perhaps we need a tea party again."

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/23/2006 06:38:00 PM Send this post:

Q-1:

Subject: RE: Sale of Personal Residence

Kerry,

 

I'm puzzling over this discussion.

 

I'm not sure when the questioner is assuming Sec 121 kicks in.

 

When is the property "sold" for purposes of Sec 121: when "sold" to the LLC for the note or when the units are sold by the LLC? For tax purposes the LLC is disregarded so is it possible to even "sell" to the LLC from the IRS point-of-view?  Would the answer be the same or different if an S-corp were used in that it is a unique "person" under the law?

 

In my case I am considering transferring my personal residence condo to an LLC or S-corp and converting to a rental and would want the liability protection of the LLC or S-corp; but how/when would it be reported to the IRS for purposes of Sec 121? Or would I lose the benefit of the Sec 121 exemption if I hold it for rental beyond three years after converting it to rental?

 

I've searched everywhere and this question is the closest I've come to a discussion about this scenario. I can't find anything on the IRS site that seems to give a definitive response.

 

Thanks,

A-1:

The gist of that Q & A was to highlight the fact that the Section 121 exclusion is available to be used when a home is sold outright to a related party.  According to the IRS Pub quote, the only time it's not available is when a remainder interest in the home is sold.

This means that a sale to a controlled C or S corp would be eligible for the Section 121 exclusion, assuming all of the normal conditions are met.

As always, you should be working with an experienced tax professional before setting up any of these kinds of transactions.

Good luck.

Kerry Kerstetter

Q-2:

Kerry,

 

Thank-you for your reply. You didn't say but I take it from your reply that you don't think that sale to an LLC would qualify for Sec 121 treatment; is that correct?

 

Can you recommend a tax professional in Denver, or anywhere, that is competent and can answer questions? I have tried to find one to discuss this with and have not been able to find anybody that knows what they are talking about. Or maybe they just want to deal with the easy and usual.

 

Twice I was referred to the related party rules that govern 1031 exchanges. When I pointed out I wasn't looking at a 1031 exchange they both told me the rules still apply to my case. When I asked where in the regulations I could find that they just said its too complicated and I don't want to get into it. In response to my questions I've been asked why I want to do it, told not to do it, sell it to a third party, etc. etc. but never just an answer to my questions. So I go hunting through IRS pubs and the internet trying to find answers.

 

I want to explore my options: where do I find someone who is competent and can answer questions?

 

Thanks,

A-2:

Actually, it was the opposite.  That sale to the LLC should qualify for the Sec. 121 tax free exclusion. 

There are obviously some gray aspects to this issue. For example, a sale to an LLC that is being reported on the owner's Schedule C (disregarded entity) would probably not qualify; but a sale to an LLC that files its own 1065 or 1120 should be okay.

The rules for related parties are stricter for 1031 exchanges than they are for primary residence sales.

You will need to work directly with an experienced tax pro who can analyze your unique circumstances. I wish I could help; but I already have too many clients to take care of; so we are still trimming back on the difficult clients and are not accepting any new ones at this time. 

Unfortunately, we don't have anyone to whom we could refer you. If you haven't already done so, you should check out my tips on how to select the right tax preparer for you.

I wish I could be of more assistance; and I wish you the best of luck.  

Kerry Kerstetter

Labels: 1031

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/23/2006 04:25:00 PM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/23/2006 04:06:00 PM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/23/2006 03:53:00 PM Send this post:

Q:

Subject: Leasing semi-trailers

 

Mr. Kerstetter,

 

I have been in the semi-trailer leasing business for over 17 years.  Naturally one of the biggest obstacles I face on a daily basis is competing against the bank or other financial institutions who offer typical financial arrangements, conditional sales or leases with purchase options.  The arrangement we offer is an operating lease.  Most companies seem to want to own the asset and shy away from the operating lease.

Is there any way to target companies that an operating lease would be to their advantage?  Also where could I go to find out further tax advantages of leasing vs. owning and have it presented in laymen’s term for the sake of an easy, understandable presentation.  Any help or suggestions you might have would be greatly appreciated!!

A:

There really is no universal answer to the lease versus buy question.  It really boils down to the terms involved in a particular deal, especially the interest rate built into the lease payments.  As I've mentioned on several occasions, I am not a fan of leasing cars and trucks because the leasing companies often have interest as high as 30% built into the payments.  Comparing that to the interest charged on normal purchases makes that decision practically a no-brainer.

Other than the Section 179 expensing allowance for purchases, the tax breaks between leasing and depreciating are pretty close to the same for each.

From a business and financial perspective, one of the selling points for leasing instead of buying is the ability to often keep the debt off of the company's balance sheet, improving the important debt to equity ratio.  We covered this point 33 years ago in my college accounting classes and it is still used today.  In fact, I remember stories about Enron, before it crashed, mentioning how they artificially kept their debt levels low by leasing assets from subsidiaries and other entities that were owned by Enron executives.

I'm sorry I couldn't be more help.

Kerry Kerstetter

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/23/2006 02:21:00 PM Send this post:

Flimsy Pro-Estate-Tax Arguments

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/22/2006 11:15:00 AM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/21/2006 09:31:00 PM Send this post:

Q-1:

Subject: your article

 

I would like to take this opportunity to thank you very much for your informative article.  I found your “S” vs. “C” article using a google search.  Your insight has made my decision of which way to go as I incorporate my medical office very simple.  I wasn’t entirely sure of all the facts, but now I am definitely going with the “C” corp.  Thank you again, as your help is much appreciated.

A-1:

I'm glad that you found my article informative.  I must caution you that using that as your only reason to set up as a C corp is as dangerous as someone taking a medicine based on something he read on the web.  You absolutely need to work with a tax pro who is experienced in utilizing corporations to maximize tax savings. 

This is especially important for anyone in your profession because there are some important steps you need to take in order to avoid having your corp classified as a Personal Service Corporation (PSC) which is subject to much higher tax rates than normal C corps.  There are easy ways around this, often by the use of two entities.  A competent tax advisor should have no problem in helping you set things up properly.

Good luck.

Kerry Kerstetter

 Q-2:

Thanks again for all of your help.  Do you have anyone that you would recommend to work with in the San Diego area?

 
A-2:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/21/2006 09:11:00 PM Send this post:

Q:

 Subject: SUV

Kerry

I stumbled upon your web site while searching the web trying to find a list of SUV's that Qualify for the section 179 $25,000 deduction for my business.  The IRS does't have one (How do they check our returns?).

Would you have such a list?

Thank you for your time.

 

Sincerly

A:

A few years ago, I posted some sources of such a list on my blog. 

I haven't checked them lately; so some may not be valid or up to date any more.

Good luck.

Kerry Kerstetter

 

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/21/2006 08:13:00 PM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/21/2006 08:08:00 PM Send this post:

Is Genghis Khan a UM accounting professor's forefather? – Talk about breaking the classic stereotype of accountants!

Update: It seems they were very premature (and wrong) in declaring a genetic link. Let the student hazing begin.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/21/2006 07:17:00 PM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/21/2006 11:49:00 AM Send this post:

As I've long pointed out, the best return on investment in this country is available from campaign contributions (aka bribes). Out rulers will return millions and billions of dollars in special programs in exchange for a tiny fraction of that. Unfortunately, the GOP rulers are just as generous with our tax dollars as are their DemonRat partners in crime.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/21/2006 09:53:00 AM Send this post:

I refuse to be put on the defensive by opponents of the efforts to repeal the estate tax, such as in this article sent to me by Ohio CPA Dana Stahl, along with the following note. 

Mr Guru - any comments?  Some arguments here to keep the estate tax going.

DS

My reply:

Dana:

I happen to be one of those who consider Communism and all of its planks to be inherently evil.  Just because one of its planks (confiscating inheritances) only affects a limited number of people doesn't make it right.  Neither does doing immoral things for the sake of money.

Kerry

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/20/2006 09:33:00 PM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/20/2006 08:21:00 PM Send this post:

(Click on image for full size)
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/20/2006 05:54:00 PM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/19/2006 10:49:00 PM Send this post:

California Moves to Ease Oversight on Accountants. Regulatory officials take steps to promote the profession and roll back tough post-Enron standards. - Looks like creative accounting may soon be back in vogue out on the Left Coast.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/19/2006 09:42:00 PM Send this post:

This would also be so appropriate at the PRC border crossings for those who enter legally.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/19/2006 09:32:00 PM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/17/2006 11:16:00 AM Send this post:

Get Real About Real Estate for Your IRA – Gail Buckner looks at some of the complications involved in doing this properly.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/17/2006 09:56:00 AM Send this post:

I’m pretty sure the following question has to do with how many professionals, including some accountants, bill based on a 50 minute hour.  I have always included a note on our bills that we use 60 minute hours, which we keep track of using actual stop-watches while working on clients’ projects.

Subject: What is .1

 

Hi Kerry,

 

What is .1 when talking about billable hours. 

 

Thanks,

My Reply:

.1 is 6 minutes; one-tenth of an hour.

Kerry Kerstetter

Follow-Up:

Thank you so much! 

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/16/2006 11:39:00 AM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/15/2006 10:36:00 PM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/15/2006 10:31:00 PM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/15/2006 10:16:00 PM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/15/2006 10:08:00 PM Send this post:

From a CPA in Texas:

Subject: just starting out on my own...

I'm just starting out on my own and according to my business plan...my goal is to be where it appears you are today. 

Anyway, I just wanted to thank you for your website and blog as they have been tremendous resources for me.

Also, since you are no longer taking clients, I was wondering if you would feel comfortable passing on any new Texas leads my direction?  Since I am just starting out on my own, I am limiting my practice to just the state of Texas (where I live).  Since you don't know me I would understand if you wouldn't feel comfortable doing as I request.

If you have the inclination and time, my website is here: and I'd appreciate any and all comments, advice, suggestion, etc.

Thank you again,

My Reply:

I checked out your website and think it is well laid out.

I particularly like how you have carved out a specific niche for yourself, both geographically and in the services you provide.

I will definitely keep you in mind for Texas clients that I come across.  One of my goals is to eventually have a list of tax pros with whom clients can work with around the country.

You didn't mention what your marketing plan is to build up your client base; but I can share what has worked for me. 

Both back in my old stomping grounds in the San Francisco Bay Area, as well as here in the Ozarks, I was able to quickly build up a large client base by giving speeches on new tax topics to local service groups (Lions, Rotary, Kiwanis, etc), as well as presenting seminars on various tax topics for chambers of commerce and Realtor groups.  This did entail a lot of driving around, but by the time I got back to my office there would always be calls from new potential clients.  Since you have a very specific geographic area in mind, you can limit your coverage accordingly.

When I gave my speeches and seminars, I did no specific selling of myself.  I just spoke about the topics.  Hard selling speakers who claim to the be the best in the world are huge turn-offs; so I kept that very low key.  People would actually come up to me afterwards and ask if I just spoke about taxes or actually did tax work.  

Those were before the internet had grown to the coverage it has today.  As you have noticed, I do receive at least three or four requests each week from people who want to work with me based on what they have seen on my website and blog.  Unfortunately, I do have to turn them away.  However, for anyone wanting to attract new clients, a blog seems to be much more powerful a  tool than personal speeches.   Just as speeches and seminars allow potential clients to see what you know and your attitude (like a mini-audition), blog postings accomplish the same thing, with no travel time. 

If you are interested in starting your own blog,  I would be glad to share my experiences.  If you want to write an article on a certain tax or accounting topic, I would also be glad to post it as a guest column on my blog, either to jump-start traffic for your own blog or just to steer some visitors to your website. 

I wish you the best of luck.

Kerry Kerstetter

Follow-Up:

Kerry,

Thank you so much for taking the time to look at my site and respond to my email.  It means a lot to me.  I also appreciate that you are willing to refer potential Texas client's in my direction.

To be honest, I don't have much of a marketing plan right now.  I've been making cold calls - dropping by businesses.  I'm planning on sending out postcards during the 2nd week of January in hopes of gaining individual clients.  I'm gathering that address list now.

Your advice on speaking engagements is a very good one.  I have contacted the Chamber of Commerce asking for information about becoming a member (real small town here - the chamber doesn't have this information on it's website).  When I apply for membership I will inform them that I'm available if they would like me to speak at their next meeting.  As for the other local groups I will have to check out what my area has to offer.

I don't know much of anything about blogs, but I keep hearing more about them daily so I will have to do some research.  So yes, I would love to hear your experiences with blogs.  I've never written any articles so I would have to read some with that in mind (as opposed to just reading them for content), before I would feel comfortable writing any - I guess this would go for my blog as well.

Thank you again,

 

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/14/2006 10:39:00 PM Send this post:

Being Good With Numbers Won't Guarantee Success – Some tips on starting a new tax practice from the Wall Street Journal. 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/14/2006 10:35:00 PM Send this post:

Q:

Subject: Section 179 Deduction

 

Dear Kerry,

 

Just a short question.  If I set up a company (sole proprietor or partnership) and purchased a large piece of machinery (punch press for $90,000.00), then lease (5 years) it to a corporation (that I own 15%) does it qualify for a Section 179 Deduction on my 1040?

 

Thanks in advance for your prompt reply.

A:

As always, this kind of thing needs to be discussed and evaluated with your own personal professional tax advisor.

The short answer to the way you described your proposed investment is probably not.  If you look at this excerpt from IRS Pub. 946  you should be able to see the fatal flaw in that particular arrangement.

Leased property.   Generally, you cannot claim a section 179 deduction based on the cost of property you lease to someone else. (This rule does not apply to corporations.) However, you can claim a section 179 deduction for the cost of the following property.

1. Property you manufacture or produce and lease to others.

2. Property you purchase and lease to others if both the following tests are met.

1. The term of the lease (including options to renew) is less than 50% of the property's class life.
   
2. For the first 12 months after the property is transferred to the lessee, the total business deductions you are allowed on the property (other than rents and reimbursed amounts) are more than 15% of the rental income from the property.

Your personal tax pro should be able to help you set up thing in such a way as to work around this restriction, such as by possibly setting up a new corp to buy and lease the machinery.

Good luck.

Kerry Kerstetter

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/14/2006 03:27:00 PM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/14/2006 02:20:00 PM Send this post:

Created with the assistance of the Warning Sign Generator

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/13/2006 01:05:00 PM Send this post:

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/13/2006 12:02:00 PM Send this post:

From today’s excellent batch of Thomas Sowell’s Random Thoughts:

More than half of all people filing income tax forms use someone else to prepare the forms for them. Then they have to sign under penalty of perjury that these forms are correct. But if they were competent to determine that, why would they have to pay someone else to do their taxes for them in the first place?

That actually may be connected to another of his points:

If you read all the fine print in all the documents you have to sign, you would have no time left to live a life. 

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/13/2006 11:20:00 AM Send this post:

Q:

Subject: from Brice at TradingMarkets.com

 

Hello Kerry-

 

I’d like to invite you to be a part of  www.themoneyblogs.com/.  It’s gonna be big—we expect it to be the largest money blog site on the Web. The entire site was built around maximizing page views—to our knowledge, no one else has done this. Best of all, it's free and it would not require any additional work at all from you—we can use your RSS feed to post. You could drive additional traffic to your blog and get even wider exposure. I have a media campaign starting shortly, and it would be nice to have you in there to receive the benefits from this.

 

What do you think? Can I set you up today?

 

Brice

A:

Brice:

I appreciate the offer; but must respectfully decline.  I value my independence and the ability to openly express my uncensored opinions far too much to be able to handle being part of a blog that is controlled by anyone else.

However, I wish you the best of luck in your endeavor.

Kerry Kerstetter

Follow-Up:

OK. Just to let you know, we are just repostintg blogs, not doing any editing.

 

Brice

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/13/2006 11:05:00 AM Send this post:

From an interested reader:

Subject: Re: outsourcing to India

Mr. Kerstetter,

Just a note to say I liked what you said on June 12 about outsourcing.  I support anything that promotes an informed consumer.  I feel the same way about genetically modified foods.  I have no problem buying and eating them, but will support anyone who bothers to put that information on the label because it increases my choices.

Also, on the 11th you told a couple they would each qualify for the exemption on their home sales.  You might want to add that it is a per person exclusion, not really a 500k per couple exclusion.  In other words, if they were hoping that if one fell short of the exemption the remainder could be credited toward the other, they are out of luck.

My reply:

That was the point I was trying to make regarding the tax free home sale exclusion; but your explanation makes it even clearer that each spouse's exclusion stands alone and they can't be added together in the way that you mentioned.

Thanks for writing.

Kerry Kerstetter

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/13/2006 10:59:00 AM Send this post:

India picks up accounting work as part of outsource trend – More on an issue I have discussed on several occasions. 

I still think it’s a good idea for tax and accounting firms that don’t farm their work out to other countries to explicitly state that fact in their promotional and advertising materials.  Since I doubt that most clients are aware of the extent to which accounting firms are using Indian sub-contractors, having that item mentioned in firm literature should hopefully make them more aware to the point that they come out and ask firms that don’t cover it and expose those that are keeping their use of Indian outsourcing a secret.  

Of course, if USA firms openly disclose their use of outsourcing to current and potential clients, and those clients have no problem with that fact, there should be no problems.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/12/2006 12:01:00 PM Send this post:

Q:

Subject: Love your blog; have a question

Hi Kerry - I've been reading your blog this evening trying to see if you've already answered this question... I can't seem to find it answered already, so here goes:

 

My partner and I are planning to get married.  Each of us owns a primary residence (I've owned my house about 4 years; he's owned his house 2 years.) We'd like to sell both houses this year, and we each want to be able to take advantage of the primary residence exemption from capital gains tax.

 

The question:  can we sell the houses and get married in the same year (and still have the tax benefits on our real estate sales)?  or do we need to wait to get married until next tax year?

 

Thanks in advance!

A:

Whether you are married or not won't make any difference. 

If you each meet the tests for your respective residences, you will each qualify for the tax free exclusion of up to $250,000 of profit, either on a joint 1040 or on two separate ones.

You can see more on this issue in the IRS's Publication 523. 

Your own personal professional tax advisor can give you more specifics for your particular situation.

Good luck.

Kerry Kerstetter

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/11/2006 05:04:00 PM Send this post:

From a CPA in California:

Hi Kerry

One if my clients sent me the article you wrote about The negatives of Sub-S corporations.  With what you say you have some valid points i.e. the used of Multiple Section 179 deductions.  Which would be valid if you have a machine shop or other company with a lot of new equipment purchases. 

What you did not mention is the high cost of Social security taxes  (15%) of the earned income also the Double taxation of retained earnings distribution and the deferred taxes for the retirement contributions.

While I can see why you did not go into detail on them you should least give them mention as being considered in the overall picture of the clients tax situation. 

If I can be of any help please call or e-mail.

My Reply:

Having to address each of those issues, plus dozens more, is the very reason I insist that nobody make decisions on what entity structure to use without consulting with a qualified tax pro.

Thanks for writing.

Kerry Kerstetter

 

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/11/2006 05:00:00 PM Send this post:

Q-1:

Subject: tax-exempt partnership

 

I got some info today about the 5 Cees Compaines and a "tax-exempt

partnership" for use in real estate holdings.

I dislike anything sold as seminars. But I usually research the ideas they

pitch in their marketing.

I can't find much info on tax-exempt partnerships and hope that you might

enlighten me. Could it be a tool for long held real estate? Could this be

used with existing partnerships? What exacty is it.

A-1:

I'm not clear on what kind of arrangement you're referring to.

Please send me a link to the company you are working with and I will check out their info.

Kerry Kerstetter

Q-2:

I can't find much about the company or the technique.
http://5cees.com/

Here is the 'plan'
http://5cees.com/UsersWeb/WPP_Strategy.htm

How it works

1.        The owner establishes a family Limited Partnership with two types

of family interests.

a.    One is the general partner who has total control

b.   The other is the limited partner who has no voting rights or control.

2.     Forming a corporation that holds the general partners interest can

provide the owners "Limited Liability Benefits".

3.      By gifting limited partners interest to a tax-exempt organization -

creates a tax-exempt partnership.

4.      The owner exchanges the property for partnership interests and

maintain 100% ownership of the general partners

5.       The owner now acquires a large income tax deduction, avoids estate

tax and grows tax-free based upon percentage gifted.

a.   When the property is sold it avoids capital gains tax and the owner

maintained 100% control to buy more property or other assets of choice.

I checked out the website and it doesn't give me a lot of confidence of being legitimate with no names of real people.

Also, the basic premise is completely flawed.  Giving a share of a partnership to a tax exempt entity doesn't make the entire partnership tax exempt.  Whoever came to that conclusion is completely nuts and not to be trusted.

Unless there is more to back up this plan, I would stay as far away from it as possible.

Kerry Kerstetter

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/11/2006 04:54:00 PM Send this post:

And any tax advisor who recommends intentionally losing real money in order to save on taxes should be avoided at all costs.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/10/2006 05:35:00 PM Send this post:

Exotic Mortgages Remain Popular Despite Their Increasing Risks

Why the super-rich don't mind the death tax – Interesting take on the matter, even though the supporters of Karl Marx’s wealth confiscation program seem to currently be winning the debate with their exploitation of class envy.  As always, the big winners from retaining this form of grave robbery will be those of us in the wealth preservation profession.  For those practitioners who fear a loss of business due to do it yourself tax and accounting programs, I constantly have to remind them that, as long as the government wants to confiscate anyone’s money, there will never be a shortage of clients for us to work with.

Mutual Fund Investors Unite! – Gail Buckner looks at a pending bill in Congress that would allow deferral of taxes on reinvested income.

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/10/2006 04:01:00 PM Send this post: