By month: October 2006
Incorporated and unincorporated businesses can use the solo 401(k) to benefit the owner (including a husband and wife). In most cases, the solo 401(k) allows the one-owner or husband-and-wife owners to put away more than they could in other plans (up to $49,000 this year, depending on age and earnings—adjusted for inflation in future years).
New rules increase the tenant’s ability to first use shorter depreciation periods during the life of the lease and then write off the undepreciated balance of leasehold improvements at the end of the lease. The proper application and intertwining of the new rules enable both landlords and tenants to put cash in their pockets.
Meals served to your employees and independent contractors at training sessions and incentive award trips are subject to the 50 percent cut that applies to entertainment and meals. To qualify for a 100 percent deduction, you need to include the meal as compensation to the employee or independent contractor. That’s what many Fortune 500 companies do.
The tax rules make your vacation home either a personal residence or a rental property. When you qualify the vacation home as a rental property, you then may use the Section 1031 rules to defer taxes and build more net worth.
If your tax records are destroyed in a fire, the IRS allows you to reconstruct the records. Reconstruction takes a big effort. Protect your records so that you don’t have to reconstruct them.
Four Major Rental Property Questions Answered: (1) Deducting Rental Losses, (2) Grouping Properties, (3) Tracking Rental Property Time, and (4) Material Participation
To treat your rental property as a tax shelter and deduct your rental property losses against non-passive income, you first need classification as a real estate professional and then you need material participation on the individual properties, or if grouped, on the group. Good and proper tracking of time spent by you and, if married, your spouse is required to prove both your real estate professional status and material participation.