Refund Anticipation Loans

Many of the "Tax Shacks" offer high-interest Refund Anticipation Loans (RALs) sometimes called Rapid Refunds.  The people who obtain these loans are usually low-income people who are so impatient to receive their money that they will pay almost anything to get it a few days sooner.

If someone wants to pay an enormous amount of interest to obtain a loan, that's their business, but having the IRS aid and abet such a rip-off is where I take exception.  Apparently, the IRS has begun to realize the error of its ways and will no longer provide the banks which provide these loans a "debt indicator" so if the refund is denied by the IRS the bank would be left holding the bag.

One other feature of these loans were that the bank deducted the tax preparer's fee as well as their fees from the refund.  Since some people could not otherwise pay a tax preparer, the IRS is now considering allowing the tax preparation fee to go direct to the preparer and the balance to the taxpayer.  This would eliminate one other justification for RALs.

The only remaining incentive for anyone to take the RAL would be to get the money as soon as the return was prepared rather than waiting for a few more days.  After waiting 365 days for the refund, some people just can't wait another ten days!  So RALs may not entirely disappear but the banks will have to take a much bigger risk without the debt indicator, so this will greatly decrease this sort of fleecing the poor. 




 

FLORESCENT LIGHT FOR MY OFFICE

A few days ago I went to Home Depot and bought a florescent light fixture for my office.
I've been working in the dark too long with just the regular light bulbs.
I sent an e-mail to "maintenance" at the company that manages my condo. However, the e-mail was opened by the Manager of the company who thought I was trying to get free service. I had previously spoken to Jeff, the maintenance guru, who told me he could install a florescent light fixture. So, I called Jeff and he said he could install it on Tuesday after he got off work.
Jeff arrived on schedule.
He had to spend a lot of time on the light switch and finally had to get a new one since ths old one had a dimmer switch.
Finally, the got everything done and now I no longer feeling I am having to work in inadequate light.
I do accounting and tax work, and need adequate lighting in my office to work.
My home office was designed as a den, but we use the living room as our den.

We live near Turtle Creek which is where the expensive houses start.
Our condo unit is on Blackburn Street.

Section 1031 Exchange

1031 Exchange:
If you sell certain property and have a taxable gain, you can defer taxes if you structure it as a Section 1031 exchange. Equipment used in a business could qualify, but if old equipment is traded in on new equipment, it is not necessary to use a Sec. 1031 intermediary. In the case of a rent house, however, you are not likely to trade in an old house on a new house. You are more likely to sell the old house, then, after a delay, buy a new rent house which gives rise to the possible need to use the provisions of Section 1031.

The following example illustrates the process:

Day 1: Sell rent house FOR $ 110,000 with funds going to a qualified intermediary.
The house cost $ 100,000 and is fully depreciated so the basis for
gain/loss is zero. If there is no section 1031 exchange, then the entire $110000 would be taxable as ordinary income.

Day 45 (or earlier): [1] Identify the Replacement property ( new rent house) which
will cost of $ 200,000—consisting of $110000 down payment derived from the sale of the old house and a mortgage for $ 90,000.

[2]Complete the “identification of Replacement
Property” and give it to the qualified intermediary. NOTE: this can be
done before the 45th day if the replacement property is identified earlier.

Day 180: This is the deadline. The replacement property must be
acquired by the 180th day.
There will be a deferred gain of $ 110,000 on the old house.
The new house will have a depreciation basis of $ 90,000 ($200,000
minus the deferred gain). NOTE: The $ 90,000 basis assumes NO
value for the land. If the land was worth $25,000 then the depreciable
value would be reduced to $ 65,000.