Category: finance

Palos Verdes, CA. Recently, Trump was asked to make his tax returns public. However, he refused because he said that he was under audit. When the audit is complete, he says he will release them. I believe there are two major strategies used on his tax returns that make him reluctant to release them to the public. Here they are: As you know, "The Donald" invests heavily in real estate. One of the biggest deductions for real estate investors is depreciation. The way they maximize the deduction for depreciation is to:

1) Increase the depreciable basis of the asset; take the higher of either the tax role or an independent appraiser’s evaluation.

2) Decrease the length of time the asset is depreciated, identify personal property assets. They can be depreciated over shorter lives.

Mr. Trump mostly likely has not paid taxes throughout the years by using a tax strategy known as the "Tax Deferred Exchange". This is a fantastic way to take all of one’s profits from a sale of real estate and put it into a new property without having initially to pay taxes. When his property is transferred at death, the basis is adjusted to current market values, thus all or mostly all of the deferred capital gains tax liabilities can be eliminated.

How could you accomplish the same thing?

1) Funds from the sale should be held by a qualified intermediary or an accommodator until the exchange transaction is complete and the requirements have been met.

2) You have 45 days from the date escrow closes to identify an "up property" and 180 days to complete the exchange. The 180 days includes the 45-day identification period.

3) If you receive cash or reduction in the mortgages, it’s considered "boot" and you have to pay capital gains taxes on it.

One of the advantages of doing a tax-free exchange is that you retain more of the funds for investment and defer taxes to a later date. Postponing the taxes is a good tax strategy because, when the taxes are finally paid, they’re generally paid with inflationary dollars. The longer the payment is delayed, the lower the present value of the taxes and the larger the benefit of the deferment.

Donald Trump is proposing four tax brackets topping out at 25% No tax on individuals earning less than $25,000, couples earning less than $50,000. Replace the corporate rate with a maximum 15% tax. End tax break for business earnings overseas. Note how he would not eliminate the two major strategies for real estate investors.

Hillary Clinton wants to increase the capital gains rate. Bernie Sanders wants to tax capital gains and dividends taxed at the same rates as incomes for annual incomes over $250,000 at 52%. Ted Cruz wants a flat tax of 10% on capital gains and wants to abolish the Internal Revenue Service. Marco Rubio wants to eliminate capital gains taxes.

Trump’s tax returns will show us many new strategies to reduce income taxes using real estate. The return, if it’s forthcoming, will make interesting reading. It will point out the difference between taxable and nontaxable profits. You may even be able to verify his billionaire status and determine if he is a huge taxpayer, or uses legitimate rules to avoid huge levies.

Most of us prefer to not think about the death of a loved one. Unfortunately, like paying tax, it really is inevitable. But what are the results if you are the beneficiary of your deceased estate? In this article we discuss basic principles of receiving an inheritance:

A loved one is long gone away. What happens now?

A person generally known as an Executor is appointed to assemble the assets from the deceased person, pay the money they owe, and distribute the balance amongst their beneficiaries. If they had a will, this person will be appointed prior to the deceased's wishes. If the died with no will (referred to as "intestate"), an Executor is appointed by the State.

What include the tax implications of receiving an inheritance?

As there won't be any death duties in Australia, death itself doesn't incur any extra tax. However, if you inherit an asset and then sell on it, you may well be answerable for Capital Gains Tax (CGT). One of your aims being a beneficiary will probably be to minimise or avoid this tax.

The home: Normally the home is exempt from CGT. The same applies should you inherit a family house provided you market it within a couple of years. Outside of this period, choosing assessed increasing fast in value since date of death during the time of sale.
Other assets: If you inherit other assets including property (other than the family home), shares, as well as other investments, you might be accountable for CGT should you sell them. It depends on whenever they were purchased. You can save money and hassle by finding out their price or their value on the date of death.
Tax returns: In the year of the deceased's death two tax returns are required - one for that deceased person up to the date of death, then one for that estate for the remainder of the financial year. Both tax statements qualify for the full tax-free threshold. Less tax may be payable if the estate sells a property and provide you the cash instead of you having the asset and selling it.
Getting financial advice for inheritance
Knowing how to proceed after receiving an inheritance can be hard. A professional financial planner may help you in managing your inheritance to ensure that you maximise your investment potential whilst minimising the possible tax implications. For more information in order to arrange your free first financial planning selecting a financial planner inside the Sydney CBD, call us on 02 8238 0888, or complete our online form. Make sure your adviser can be a member in the AIOFP - the Peak Body for Independently Owned Financial Planners in Australia.

Financial Spectrum is a privately owned fee for service financial planning business based in Sydney, Australia. We are excited about helping website visitors to achieve their financial and life goals through holistic financial planning advice.