HOW TO GET YOUR TAX REFUND BACK BEFORE LEAVING AUSTRALIA

Cheerio mate! Our holiday in Australia has come to an end and we want to get our tax refund before we say Toodle-oo to Australia. The Tourist Refund Scheme lets tourists reclaim some of the money they paid out on taxes, while visiting Australia. But the key is to do so, before we leave the country.

What purchases apply for this refund?

Really, who doesn’t love a tax refund, some extra money in our pocket? Lets first review what purchases apply for this tax refund. 1) It was purchased sixty days before leaving Australia 2) You spent more than $300 at certain store, may it be on one receipt or many receipts. 3) You have the original receipt, no photocopies, pictures, or handwritten memoirs of our receipts. 4) You, yourself purchased the item 5) You must be wearing or carrying the purchased items with you in your carry-ons, the only exception is if they are liquids or over-sized items, that have been previously verified by an officer. Now, that was easy, is there something that doesn’t apply for this wonderful tax return? Yes, there are a few items, as we will see in the following paragraph.

What purchases don’t apply for this tax return?

Actually, the list of purchases that doesn’t apply for the tax refunds isn’t too long. Click here.

1) Purchases of spirits, beer and tobacco products are not eligible, happily wine is allowed. 2) Any products that were already tax free, such as medicine and certain foods. 3) Any services that we received in Australia, hotel stays, transport, food, tours, etc. That is obvious because we can’t take them with us literally. 4) Gift cards or vouchers. 5) Any items that have previously been used inside Australia, such as perfume that we purchased in Australia and opened to use there. 5) Any items that will not physically be travelling with us out of the country, on our means of transport. We will need to review all our tax receipts to see if any GST or WET has been applied to them, then decide if it applies for a tax return or not.

How Can I apply for my Refund?

There are a couple of ways; oneway is you can make your claim in person as you are departing the country. You can make the tax return, at the international airports or at the departure area for the cruise liner terminal. Just make sure you give yourself enough time for your departure, as there could be long line-ups to receive your tax refundand you wouldn’t want to miss your flight or cruise ship. Also, make sure you have all your original tax receipts in order and ready to show to the clerk for your tax refund.  Another way, to apply for your tax refund is online at www.taxreturn247.com.au.

Australia has made some new apps that make the process of receiving our tax refund even smoother. You will need to enter the details of your purchases for your claim. Feel free to check out the above link for more information.

How much Will I Get Back and When?

It all depends on how much you spent on purchases that apply to the tax refund law. You will be refunded the total GST you paid and the total WET on items that apply to the tax return. Will I be refunded cash right there? No, you will receive a tax refund in about 2 months time to your credit card. What if I do not have a credit card for my tax refund to be deposited to? You can provide details to your bank account in your home country and it will be deposited there, in about 2 months after departing Australia.

So if, you are travelling to Australia soon, before you go, check out the requirements at www.taxreturn247.com.au and make sure you keep all your tax receipts to receive your tax return.

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5 Great Resources for Preparing Your Taxes

If you have not filed your taxes this year, a few weeks remaining to gather your financial paperwork and submit your tax return by deadlines. Check www.taxreturn247.com.au to interface with the Volunteer Income Tax Assistance system, or VITA, offering free expense readiness administrations. When you are doing your filing, ensure you are swinging to legitimate assets for answers and exhortation; committing genuine errors on your expense form could cost you in fines and penalties, and may even raise some warnings that trigger a financial audit of review.

Here are six incredible tips that can help you set up your charges effortlessly.

Make use of Free Online Tax Help from IRS

Before checking with a bookkeeper or tax expert, look at the free assets accessible individually from the IRS, which is attempting to make it less demanding than at any other time for citizens to document their taxes online and get the data they require through its online entrance. You can petition for nothing on the web, make utilization of the Interactive Tax Assistant get answers to particular inquiries and even utilize the IRS withholding number cruncher to ensure you are having a proper measure of tax returns with every paycheck.

Free Tax Return filing from the IRS

If you win $54,000 or less, are impaired or aren’t a local English speaker, you can get charge arrangement help from IRS-affirmed volunteers. You can likewise find a VITA site in your group or neighborhood; volunteers might be accessible at range libraries, shopping centers and schools for one-on-one help amid expense season.

The free tax filing programs

Experts will welcome a large number of free online assessment programming administrations accessible. Programs such as

  • TurboTax Federal Free Edition
  • TaxAct Free Federal Edition
  • H&R Block Free Edition

They walk you through the documenting process regulated with a progression of inquiries and structures you round out for every segment. The project will then run computations and populate your assessment recording shapes so you can print them off to mail to the IRS or e-document straightforwardly.

 

Charge Advice from Online Resources

While there are a great many individual fund bloggers and assessment masters out there sharing their tips and guidance about get ready expenses, you will need to swing to definitive sources like the IRS blog or different tips web journals from actual blue duty preparers or CPAs in your city or state. These online journals can be substantial wellsprings of data when you have particular inquiries regarding recording your assessment form, what you are permitted to discount and expense documenting due dates.

Some law offices likewise offer legitimate guidance on Tax return related matters. Examine their site or blog for nothing legal help on different duty issues.

Lastly, charge Advice and Resources from Your State’s Department of Revenue. These destinations can be profitable assets for discovering range fee planning locales and occasions, and also volunteer expense associated and free legitimate help for recording your state charges. A few states offer free life talk administrations amid business hours on the off chance that you just require somebody to point you in the correct bearing or send you a connection to frames and different assets such as www.taxreturn247.com.au.

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How Australian tax works

Every country has its own financial year. The financial year of Australia is from 1 July to 30 June. Hence the tax year 2015 is from 1 July 2014 to 30 June 2015. Same way the tax year 2016 is from 1 July 2015 to 30 June 2016.

It is compulsory for everyone who is working in Australia to file a tax return with ATO.

Tax return contains your personal details and sources of income received.

Anyone can prepare the tax return but in Australia only a registered tax agent is allowed to prepare and file a tax return on your behalf. They also help you for tax refunds.

One thing will facilitate you is to visit taxreturnco.com.au for more information.

Documents needed for tax:
The tax agents or the firms complete and lodge a tax return with ATO and they require only 2 things.

  1. Your details
  2. Payment summaries also called PAYG payment summaries.

Your details contain full name, Tax file number, your date of birth and address.

And the PAYG payment summary contains the gross amount before tax deduction and the amount of tax deducted. Usually these are issued in July but one can request when he leaves the job.

How we collect your details?

You can talk to the tax accountants of the firm. The tax documents will be prepared on the spot and you can review it before signing.

Phone our office:

You can also contact to the firm and can talk to one of the tax accountants. You can ask any question about the tax return. They will ask your detail and then email you the documents. You can take out the print, read the details and after signing you will have to return to their office.

Email:

Many firms give you the facility to ask questions via email. You just need to email the detail to them and then they will prepare the tax return and email you the tax documents. After checking them carefully you can print out the documents. Sign them and send them to their office.

If you email your details to our office we prepare the tax return and email you the tax documents. You just print out the documents. Check the details sign and return to our office.

Download:

After downloading the documents you will have to complete the details. Sign them and return to their office with PAYG payment summary. Then will prepare and file the tax return. This is the quickest method.

Submit online:

Some firms also give the facility of online submission of application. In this way they will prepare the tax return and email the documents to you for review. After careful checking you can print out the documents. Sign them and send them to their office.

Ask for a call back:

this is a big facility which is provided by the great firms. You just need to email them your phone number. They will call you when you have done the checking etc.

Conclusion

This article contains the material about how Australian tax works. We provided almost all the aspects for filing tax returns. After reading this you are now much more aware of many things about the system of taxation in Australia.

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Don’t Be Late In Submitting Your Tax Returns

Tax returns are complicated items and for many, they struggle to understand them and fill them out correctly. However, even if you get a few things wrong, it’s not half as bad as submitting after the final deadline! You really don’t want to do this because you will get into a lot of trouble and probably be hit with a fine. So, here are a few things you may want to consider to avoid getting your tax returns off late. Read more at https://www.taxreturn247.com.au/

As Soon As Old Tax Year Ends, Gather Up Your Papers

If you are able to, as soon as one tax year ends and another begins, start to file the returns then. Doing this would be a lot of help when it comes to ensuring the deadline isn’t missed because let’s face it, you are submitting months before which is always the best. However, don’t panic if you aren’t able to submit the returns form at once. Instead, gather up as much of your necessary documents and papers and have them all ready for when you do submit. If you would like to find out more about filing, check out www.taxreturn247.com.au.

File Whenever You Are Able To

It doesn’t need to be immediately for you to file in order to avoid being late, however, it does help if you submit whenever you can. For example, if you can file for the previous year in June, do so, don’t put it off because you mind end up forgetting and it isn’t something you want to forget. Also, if you can’t file immediately, do so whenever it is possible. Tax returns can take a bit of time so you maybe want to get to it whenever possible. Click here to read more info about late submission of tax returns.

Don’t Be Late In Submitting Your Tax Returns

Get Reminders

Fill in as much as you can when you can. You can fill in personal details about yourself and then wait until you have other relevant information before adding that. You don’t have to complete it all at once and you don’t have to wait until the very last second either. Adding information as and when you can, could prove to be useful when it comes to avoiding a late fee. To know more check out www.taxreturn247.com.au.

Don’t Wait Until the Last Minute

A lot of people have a bad habit of waiting until the very last day of the last deadline to submit and that is crazy. You are going to run around in a panic looking for your documents and you could end up making a mistake. This is the crazy way to do it and let’s be honest; it’s going to be bad on your health and stress levels. If you have no other choice but to wait until the deadline, that is fair enough but if you have all necessary information, submit tax returns without delay.

Missing the Deadline Causes Headaches for You

The only thing you achieve by waiting until the deadline of returning your tax forms is a nightmare for you. You are going to be left worried and if you actually miss the deadline, you could be fined! You never want this and you have to act fast when the tax year is up. Some may say filing in June is OTT but actually, it’s the smart way to avoid trouble with your tax returns.

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Ensure You Get Your Refunds

For thousands of people they wait for a tax refund but for some, it doesn’t come! This can be both frustrating and annoying but there is probably a reason why you aren’t getting a refund. However, what steps can you take to ensure you get your refund? Here are a few things you may want to consider when it comes to getting back a tax refund.

Submit the Right Forms

The number one way for you to ensure you get any refunds owed to you, is to submit each and every necessary tax form. Too many people get their forms wrong and end up getting no returns back, so what you need to do, is to ensure your tax return forms are correct in order to get any refunds back. This can be difficult at times but hopefully you won’t struggle too much. Click here to read more info about tax refund.

Don’t Owe Money to the Inland Revenue

This one might not be something most are aware of however, if there is a lot of money owed to the Inland Revenue service; it may be recovered via refunds. Now, it does happen and it may happen to you if you have outstanding debts. In fact it doesn’t even need to be a great deal of money, it can be a small amount and it can be recovered via a refund. This is something you need to be wary of when you are waiting for a tax refund. However, if you clear up any and all monies owed, you should be able to get your refunds without any delays or problems whatsoever. Have Direct Deposit as an Option Read more at http://findlaw.co.uk/law/bankruptcy/other_debt_and_bankruptcy_topics/9793.html

If you really don’t want to wait long for refunds, then you are going to need to select the bank transfer or direct deposit option. The reason why is simple, it will be a lot quicker to get the tax refund sent out to you via electronic transfer than for you to wait for the check or another method. When you have direct deposit available, whatever refund from your tax return can be gotten to you quickly.

Ensure You Get Your Refunds

Will You Wait Long For A Tax Refund?

Let’s be honest, the waiting time for a refund to be processed can vary. There will be some people who are able to get any refunds owed to them within a matter of weeks. Then again, there have been occasions when people are left waiting for months. This may be a problem for you however, just think about it this way – its money you weren’t going to have. However, you shouldn’t wait too long and hopefully the tax refund will come through to you quickly.

Get Your Refund

There is a bit of waiting time when it comes to your tax refunds but they will get to you eventually. Now, in most cases, refunds are given within a matter of weeks and this is good because it means you won’t have to worry too much about. Don’t panic however, if your refund isn’t with you as quickly as you would like. Your tax refund will get to you sooner or later.

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Do You Understand Your Tax Refund Amount?

No one really likes to wait to get a tax refund. It is something very few people across Australia like simply because they want the refund they deserve. However, many people end up confused when it comes to their refund as many believe they should get more. Refunds aren’t too difficult to understand however when you know a little more about them. So, do you really understand your tax refund amount? Read more at http://business.time.com/2013/03/18/why-were-so-irrational-when-it-comes-to-tax-refunds/

Tax Refunds Direct Deposit

In most cases, there may be any refunds deposited into your bank account. This is one of the fastest methods to get back a tax refund and of course, it saves on a lot of hassle as well. It is much easier to deal with electronic bank transfer than having to write out checks and posting them in the mail for thousands of people. However, you can in fact make a special request if you do not want the refund to be deposited into your bank account. On your returns form you will need to specify that however.

Not As Much As You Expected?

If however, you think there is something wrong with your tax return amount, you may need to ask yourself what debts you owe to the Inland Revenue service. If you owe debt in Australia to the government, you may find the amount is deducted from any tax refunds you are eligible for. This may happen to you; and even though you probably don’t want the money to come off in one go, it may actually be best to help you clear any debts faster. You have to remember, you don’t want any debts lingering over your head especially from the tax office.

Check Your Refunds As Quickly As Possible

Whenever you receive your refund, you should note the final amount. It is always important to check on how much you have received back. However, if you don’t get as much as you expected, it may be down to a number of factors. You could find out what those factors are if you really wanted to. You can however use your tax refund for whatever you like once it is nestled in your bank account. Click here to read more info about tax refund.

Do You Understand Your Tax Refund Amount?

What Will The Waiting Time Be?

In most cases, refunds are handled very quickly, usually within a good few weeks. However, there may be delays due to problems with processing because of errors on returns forms. It could also be down to a busy period where there are many forms to get through and many tax refunds to handle. Also, if you aren’t getting the money to you via bank transfer or direct deposit it could mean additional wait for a check to arrive in the mail.

Understand Your Refunds

It doesn’t matter whether you are going to receive a little sum or a large sum, a refund can be important. However, some people are not going to get any back so while you may believe so, don’t count on it at all times. You may be one of those unlucky people who aren’t eligible for a tax refund for the year.

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What You Need To Know About Waiting for a Tax Refund

When it comes tax time, everyone hates it because it’s full of people getting panicked and frustrated, especially when it comes to their tax refund. However, submitting a return can be difficult at the best of time and people just seem to lose their heads. The long wait for the refund makes it seem as though you aren’t going to get anything back and it can be frustrating. So, here are a few things you may want to know about getting a tax refund.Click here to read more info about tax refund.

Most Will Need To File Each Year

In most cases, those who have been working will need to submit a tax returns form at the end of the tax year; however, there may be some exceptions. It may depend on your exact circumstances but you may not need to submit a returns form. However, you should contact a tax office to be sure and cover yourself nonetheless. If you have been unemployed for several years or for the past year, you may not need to submit a return but, always check. Don’t assume.

The Wait for a Tax Refund

To be honest, the time in which it can take to receive a refund can vary considerably. For most people, they will receive their refunds within a relatively short period of time but for others it can be a longer wait. The reason for longer waiting times varies from person to person but if you are entitled for a refund, then you will get it sooner or later. Sometimes, it is a delay with tax returns forms that cause the long wait for the refund to come through. Read more at http://www.news.com.au/finance/australian-taxation-office-advises-waiting-until-august-to-lodge-returns-because-of-system-glitch/story-e6frfm1i-1227433991464

What You Need To Know About Waiting for a Tax Refund

If You’ve Heard Nothing in Months

If tax time has passed and you still haven’t received anything then you may want to enquire what has happened to your tax refund. Now, it may be a slight error somewhere or it could be that you aren’t receiving a refund but no matter what it is, you want to know more. If you strongly believe you should get a refund, you need to ask the Australian government why it hasn’t been issued. It may be an error.

Patience Is Key

A lot of people jump to the wrong conclusion when it comes to waiting for a refund. However, it might be a simple case of not getting anything back immediately due to long processing times. Going through tax forms is never easy, even to a trained professional and depending on when you submit the delays could be considerable. That is why it’s important to wait a while before storming out to find out what’s happened to your tax refund.

Waiting Is the Hardest Part

Most people find waiting for them to receive a refund to be very difficult. It’s just something most people hate because it’s technically their money and they want to receive it as quickly as possible. However, there is going to be some form of waiting time, whether it’s going to be a few weeks or a few months for extreme cases. If you are entitled to a tax refund, you will get it eventually.

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Quarterly Tax Payments

Whether you like it or not, taxpaying is an inevitable obligation that everyone of has to carry – the purpose of which is not because we are blindly following somebody else’s whim, but rather because our taxes are what keeps our society rolling. Hence it’s a rather bittersweet responsibility. Of course you might not appreciate the idea that basically everyone, in essence, has an obligation of quarterly tax payments. Whether you are an employee with a regular job, or an independent contractor running your own business, you are responsible to make these payments. But the question that might be lingering in your heads right now is why and how. Read more at https://www.taxreturn247.com.au/

To start with, if you are a regular employee, this quarterly tax payment is most likely being withheld from you in your paycheck – so you need not to worry or hassle yourself with the know how. On the other hand, if you are managing your own industry or business, then you have the obligation of accomplishing this payment on your own capacity. If you are situated in the latter, then you would have to make quarterly tax payments four times a year, approximately on the following due dates: April 15, June 15, September 15, and January 15. The first step in accomplishing this payment is to fill out a Form 1040ES, which is used in paying estimated taxes on your income as well as self-employment tax.

As an additional information, form 1040ES is a simple payment voucher wherein you list down your names, social security number as well as yourCharts address. After having estimated such taxes, you then have to pay 25% of that amount each quarter. However, if you are not in any way liable to pay estimated taxes before a given due date, but later on you become liable prior to the next due date, then you only have to file for the quarter on which you have become liable.

Quarterly Tax Payments

As a final note on quarterly tax payments, in case you have over paid on your estimated taxes and you expect a refund, then you may just opt to carry it over in your next year’s estimated payments. Underpayment, on the other hand, might incur for you a tax penalty – the same applies to late payments.

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Instant Tax Solutions knows what IRS tax debt relief to use for tax debt

Internal Revenue Service is willing to accept any IRS tax debt relief as a settlement to the unresolved tax debt. But we also have to understand how it works because without any knowledge on how to use IRS tax debt relief as an advantage then we can never resolve our tax debt and the Internal Revenue Service will have the opportunity to use their collection tool in order to get control of what we have. Click here to read more info about IRS tax debt.

We need desperate help to stop Internal Revenue Service from bleeding us out with our hard earned money. We have to find a firm that knows how to deal with Internal Revenue Service as well as knows how to get the IRS tax debt relief. Although we have access in the internet but why bother to look for other tax firm if we know that Instant Tax Solutions is one phone call away.

Instant Tax Solutions has been in the business for so long that they already know what to do if our problem is about Internal Revenue Service. They have been head batting with the Internal Revenue Service for quite sometimes and by the end of the day Instant Tax Solutions win and got their client the resolution that they want.

Instant Tax Solutions knows what IRS tax debt relief to use for tax debt

To make the story short our worry has to stop now because we are getting the help of Instant Tax Solutions. We can reach them anytime and they can come to us even we are miles away because they can and they have the license to prove it. All we need now is to think about the future and how to spent the money that we have save because we know that Instant Tax Solutions can get our tax debt reduce by getting the IRS tax debt relief at Internal Revenue Service. Read more at https://www.irs.gov/uac/Newsroom/IRS-Fresh-Start-Program-Helps-Taxpayers-Who-Owe-the-IRS/

However there is one thing though we should be considerate to other people that are in dire need of a resolution to their tax problem but because Instant Tax Solutions Complaints has an attached negative comment against Instant Tax Solutions who will they turn to if they believe what is on it? Sure they can hire other tax firm but can they still get the same service that Instant Tax Solutions are offering for their clients?

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Income Tax Aspects of Non-business Capital Gains and Losses

Wash Sales

A wash sale occurs when the same securities are purchased 30 days before or after the sale. If a loss results, all or part of the loss is disallowed. If an equal or greater number of the same securities that were sold are purchased, the entire loss is disallowed. If fewer shares are purchased than were sold, part of the loss is disallowed. The disallowed loss is added to the basis of the securities purchased. Read more at https://www.taxreturn247.com.au/

Example 1-total loss disallowed.

On February 15, 2013, Joe sold 200 shares of Microsoft for $7,000 that he purchased on July 15, 2010 for $8,500. On March 10, 2013, he purchased 300 shares for $13,500. Joe’s has a $1,500 long-term loss ($8,500 – $7,000) on the sale. But, since he purchased more shares than he sold within 30 days of the sale, the $1,500 loss is disallowed. The basis of the new shares will be $15,000. ($13,500 + $1,500). The basis per share will be $50 ($15,000/300) and his holding period begins on March 10.

Example 2-partial loss disallowed

On February 15, 2013, Joe sold 200 shares of Microsoft for $7,000 that he purchased on July 15, 2010 for $8,500. On March 10, 2013, he purchased 150 shares for $7,500. The loss disallowed is the ratio of new shares purchased to the number sold multiplied times the loss. In this case, the loss disallowed is 150/200 x $1,500 = $1,125. The basis of the new securities will be $8,625. ($7,500 + $1,125). The basis per share will be $ 58,750 ($8,625/150) and his holding period begins on March 10.

Sale of Gifts

When a taxpayer sells securities that were received as a gift, the gain or loss and holding period depends on whether they were sold for more or less than the donor’s basis (cost or other basis, plus the gift tax paid). The gift tax adjustment depends on the donor’s acquisition date. If the shares gifted were acquired by the donor between 9/2/58 and 12/31/76, the entire amount of gift tax is added to the donor’s basis. If the shares gifted were acquired by the donor after 12/31/76, a portion of the gift tax is added to the donor’s basis. The amount added is the gift tax paid multiplied by the ratio of the donor’s appreciation in value (value at date of gift less cost) divided by the value at date of the gift, less the annual gift tax exclusion-$13,000 for 2012. The gift tax adjustment applies regardless of a gain or loss on the sale.

Income Tax Aspects of Non-business Capital Gains and Losses

If the donor realizes a gain (sales price is more than the donor’s basis), the donee’s basis will be the donor’s basis. The donee’s holding period will be the donor’s holding period (from date of acquisition to date of gift) plus the time held by donee. If the donor realizes a loss (sales price is less than the donor’s basis), the donee’s basis for determining the allowable loss, is the lesser of the fair value of the securities at the date of the gift or the donor’s basis. The reason for using the value at the date of the gift, if it is less than the donor’s basis, is that the donee should not benefit (a greater loss) for a decline in value not suffered by the donee (the donor suffered the loss in value while holding the securities).

The holding period of the securities sold by the donee depends on whether the donor’s basis or value at date of the gift is used for the donee’s basis. If the donor’s basis is used, the holding period begins on the donor’s acquisition date. If the value at the date if the gift is used, the holding period begins on the date of the gift.

Example 1- sale for gain-donor acquisition date before 1/1/76.

Colette purchased 1,200 shares of IBM on 7/1/73 for $30,000. On 10/1/12 she makes a gift of the shares to Jason, her grandson. On that date, the value was $180,000. She paid gift tax of $1,500. The entire $1,500 gift tax is added to Colette’s basis since she purchased the shares before 1/1/76. This makes her adjusted basis $31,500. On 8/1/13 Jason sells all the shares for $192,000. Since the shares were sold for more than the donor’s basis, Colette’s adjusted basis is used for Jason’s basis. Jason has a long-term capital gain of $160,500 ($192,000 – $31,500). Even though Jason held the shares for only 10 months, the gain is long-term because his holding period starts with Colette’s purchase date.

Example 2-sale for gain-donor acquisition date after 12/31/76.

Assume the same facts as Example 1 and the gift tax annual exclusion in 1975 was $8,000. Colette’s gift tax adjustment is the gift tax paid multiplied by the ratio of the donor’s appreciation in value divided by the value at date of the gift, less the annual gift tax exclusion: $1,500 x [($180,000-$30,000) / ($180,000 – $8,000)] = $1,305. Jason’s basis for gain will be $31,305 ($30,000 + $1,305) and his long-term capital gain is $160,695 ($192,000 – $31,305).

Example 3-sale for less than donor’s basis.

On 6/30/2008 Grace purchased 500 shares of Dell for $22,500. On 12/25/2012 she gives them to Joe. At that date, the shares value was $17,500. On 7/31/12 Joe sells the shares for $15,500. Since the value of the shares at the date of the gift was less than Grace’s cost, Joe must use the value at the date of the gift for his basis and the date of the gift is the start of his holding period. Joe has a short-term capital loss of $2 ,000 ($17,500 – $15,500).

Sale of Inherited Property

When a taxpayer sells property received as an inheritance, the basis for determining the recipient’s gain or loss is the fair vale at the date of death or the alternate valuation date, if the executor elects to use that date to value the deceased’s property for the estate tax. There is no adjustment for estate tax paid as there is for the gift tax. When securities are distributed, the executor should always provide the appropriate value. The IRS regulations state that the holding period will always be LONG-TERM, regardless of how long they were held by the deceased and recipient.

Example. On 7/15/13 John received 1,000 shares of IBM stock from his grandfather’s estate who died 11/15/12. His grandfather purchased the shares for $85,000 in 2002. The executor elected the fair value at date of death for estate tax purposes. At that time, the fair value was $155,000. On 12/27/13, John sold 500 shares for $175 per share (total $87,500). John will report a long-term capital gain of $10,000 [$87,500 – (500 / 1,000 x $155,000)]. Note that even though John held the shares for only five months, the holding period is still long-term. If John sells the shares for $70,000, he will report a long-term loss of $7,500 ($77,500 – $70,000). His basis in the remaining 500 shares is $77,500 (1/2 x $155,000). Basis per share is $155 ($77,500/500)

Non-Business Bad Debts

A non-business bad debts is treated as a short-term capital loss, regardless of how long it has been owed to the creditor. The debt must be bona fide. If the creditor cannot substantiate that the debt is bona fide, and reasonable efforts were made to collect it, the IRS may consider it as a gift and no deduction will be allowed. This is particularly true for debts involving related parties. To be able to substantiate and validate the debt, the debt agreement should be in writing and signed and dated by the debtor and creditor. The creditor should have documentation (such as letters and records of phone calls to the debtor) for attempts to collect it. A very good way to document the worthlessness of a debt is to obtain a court judgment against the debtor and show proof of follow-up attempts to collect the judgment. Non-business debts are not limited to loans. They could be for amounts paid on behalf of another person.

Example – On February 15, 2012, Harold purchased a computer for $1,200 for his friend Barb and made $100 monthly payments for 12 months. There was a written agreement that Barb would repay the amounts that he paid starting in July 2012. Harold had copies of the cancelled checks for the payments. Barb did not make the payments despite many oral and written requests. On September 15, 2013, Harold sued her in small claims court and obtained a judgment for $1,200. Despite many attempts to collect the judgment Barb did not pay him. Harold was able to document the legitimacy of the debt by the written repayment agreement, cancelled checks for payments made, and letters requesting payment. Harold can take a $1,200 short-term capital loss in 2013.

Note that even though the debt agreement was held for 19 months (February 2012 to September 2013), the loss is still a short-term capital loss per IRS regulations.

The creditor could have a partial loss if any amount has been collected from the debtor or a collection agency. If the creditor takes a capital loss for part or all of the debt and in a later year collects part or all of it, the amount recovered must be reported as ordinary income in the year received.

Worthless Securities

A corporation may go out of business and it securities become worthless. This results in a capital loss equal to the taxpayer’s basis in the securities less any recovery. Regardless of when during the year the loss became evident, the holding period ends on the last day of the tax year in which the security became worthless.

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