Victor Roberts <xxx[at]lighting-research.com> wrote:

- quote -

No. But if you colude with someone to pay you after the
first of the year, that would be considered to be improper
income shifting. Intentionally billing late for the purpose
of not being paid until the following year is not as strong
a case, but could cause a determination that the money
should be taxed in the earlier year.

Stu

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"Stuart A. Bronstein" <spamtrap[at]lexregia.com> wrote:
- quote -

There is no certainty that the client would have paid before
December 31 even if the bill for November had been submitted
in early December.

I have a client who paid each month's bill less than 30 days
after I mailed it in 2004, until I sent a larger than normal
bill on October 1. This bill was not paid until January
2005. In spite of the delay with this bill, the bill sent on
November 1 was paid before November 30 and the bill sent
December 1 was paid before December 31. Bills do get lost or
held up by clients for various reasons. The IRS has no right
to assume that the bill would have been paid in December
just because this client had a history of paying bills
promptly.

--
Vic Roberts
Replace xxx with vdr in e-mail address.

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sethb[at]panix.com (Seth Breidbart) wrote:

- quote -

Ok, there has to be an element of intent and knowledge.
Otherwise the IRS might try to tax you on stock that went up
after you sold it.

- quote -

In that case, if caught, he could be forced to recognize the
income in the earlier year.

Stu

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Stuart A. Bronstein <spamtrap[at]lexregia.com> wrote:
- quote -

What if, say, you sell a book for $5 because you don't know
it was worth $500? You "could have had" the $500, but you
didn't get it.

Or a consultant with a client who always pays promptly on
receipt of bill, who is on a cash basis, chooses to send his
bill for November's work on December 28, so he receives
payment on January 4. He could have sent the bill December
7 and received payment on December 14.

Seth

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- quote -

I can find court rulings about "form over substance".

And the issue isn't whether you'll get caught, but whether
something is actually illegal. (If the son tries claiming
the lower price as a basis for real estate taxes, he could
get in trouble.)

On the other hand, for a $2 million property, selling to a
family member at a $150K discount is a reasonable
transaction, with no gift involved: you save the real estate
agent's commission off the top, do the sale immediately
instead of at some unknown future time (and unknown
negotiated discount), etc.

But for a $500,000 property, a 30% discount is a lot harder
to justify without a gift being involved.

Seth

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- quote -

So it's ok to cheat as long as it's so small that you're
unlikely to get caught?

Stu

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- quote -

I think your bark is is worse that your bite.

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Rick Merrill <rick0.merrill[at]gmailNO.SPAMcom> wrote:
- quote -

If it's an arm-length transaction, you're right. But if
it's between family members, there are ways to determine
fair market value. And if the sale price is below that, the
difference is a taxable gift.

Stu

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- quote -

Twaddle. Economic reality, which can be considered in the
enforcement of tax law, says that if it walks and quacks
like one it is one. A sale to a family member for $150K
under FMV clearly has a gift aspect even if they call it
barking at the moon.

--
Phil Marti
Clarksburg, MD

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D. Stussy wrote:
- quote -

That sounds reasonable, except that the "gift" exists ONLY
in the minds of the participants. There is no external
evidence of said "gift". There is no check with the gift
amount. There is no receipt saying "gift" or "gratuity".
Hence there was no gift, just a good transaction.

Rick
Merrill

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Phil Marti wrote:
- quote -

Maybe that's a convoluted way of thinking of this: There's
an amount actually paid, plus a gift made (and potentially
gift tax). Therefore, the basis is the SUM of the FMV of
the gift + gift tax (if any) + amounts actually paid. Since
the gift portion is computed as FMV less actual sales price,
it seems to me that it all still equates to a basis equal to
FMV (plus any gift tax). Therefore, Mr. Carreiro's
conclusion seems correct - even if he arrived at it a
different way: The basis is FMV, and the amount of the gift
is $150k.

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sethb[at]panix.com (Seth Breidbart) wrote:
- quote -

Because the son takes the same basis as the father, so the
tax will be paid when he sells it.

- quote -

Interesting analysis. In that case father may not have to
recognize taxable income.

- quote -

Sure, when you apply it to situations the code explicitly
states that no income is recognized (when you have an asset
and do not sell or otherwise transfer ownership).

Stu

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Stuart A. Bronstein <spamtrap[at]lexregia.com> wrote:
- quote -

But it's clear that if he just gives the house to his son,
there's no income tax due.

Now suppose the house is worth $600K, and he sold it to his
son for $450K. His basis is $300K.

Someone might claim that he gifted 1/4 of the house to his
son, and sold 3/4 for FMV. He's have a gain of $225K, and
his son would have a basis of $525K.

And I'll completely disagree on the "could have had".

I bought a painting for $100. It's now worth $20,000. I
could have had that income; but I chose to keep the painting
instead. Nothing is taxable. (But you might argue that I
can still have the income in the future.)

After her divorce, a woman threw her wedding ring into the
river. She could have had income from selling it instead.
Now she can't have future income from it, but there's still
no taxable event.

Seth

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"Rick Merrill" <rick0.merrill[at]gmailNO.SPAMcom> wrote:

- quote -

I'm not sure how this one got past the moderator, but for
OP's consideration, this response advises fraud. Whether
the IRS can catch you or not is not a determining factor in
applying the law.

--
Phil Marti
Clarksburg, MD

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- quote -

Taxes don't depend on the IRS knowing underlying facts,
unless you want to risk a lot of money (or your freedom). I
wouldn't be surprised if an IRS agent read this newsgroup.

Seth

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"Phil Marti" <prm20871[at]verizon.net> wrote:
- quote -

Whenever you can have taxable income but choose not to
(unless subject to a specific exclusion or deduction) you
will generally be required to recognize the income when you
could have had it, even if you didn't.

It's the IRS's way to make sure that they get what they are
entitled to.

Stu

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Brian Gordon wrote:

- quote -

Yes: you have (probably) a capital gain on the house, but it
depends on the actual amount. There is no gift tax because
the IRS doesn't know what the market value is, do they?

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"Rich Carreiro" <rlcarr[at]animato.arlington.ma.us> wrote:

- quote -

What is that argument? It seems to me that the sale is what
the sale is, and the difference between FMV and the sale
price is the gift. Why would they have to consider FMV as
the sale price AND calculate the gift aspect?

--
Phil Marti
Clarksburg, MD

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"Brian Gordon" <briang[at]panix.com> wrote:

- quote -

are you inquiring about income or gift taxes? probably not
an income tax issue probably is a gift tax issue so, go see
your CPA promptly

--
<<< Benjamin Yazersky CPA [NJ & NY] > > ---> real address on hobokenx or hobokeni <---

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briang[at]panix.com (Brian Gordon) writes:

- quote -

Definitely not for him.

But there's a very strong argument that you should be
treated exactly the same as if you:
(a) sold the house for full fair market value, and
(b) made a $150K cash gift to your son

So you would have to compute the gain/loss on the sale of
your house as if you sold it for what it was really worth,
and you need to file a gift tax return (though you won't
actually pay any gift tax at this time).

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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