The Tax Questions Blog

Archive for March, 2009

Question: If someone gave me stock to pay off a debt how does that work for tax purposes.?

If a person pays me off with stock for a debt and transfers it into my account and I in turn sell it for the debt then how does that work tax wise. The IRS sees it as a capital gain sent on 1099-b but I didn't profit..I just got my debt back. How would I handle that for tax purposes? Any help is appreciated? Thanks

Answer: If the stock had value over the amount of the debt, then the difference can be considered a capital gain. If the stock is received for the debt then the basis for cost is the amount of the debt. If it sold for more than the debt you would have a capital gain. If it sold for less, you are entitled to a capital loss.

Support Groups

LDS Family Services Addiction Recovery Program

Nouveau Riche Univeristy

More than a Million innocent children are orphaned or abandoned to live on roads in Zimbabwe due to the devastating effects of HIV/ AIDS crisis. These kids have lost their both parents and all elders in family to the AIDS pandemic and experts fear that 1 out 5 children will become orphan by the end 2010 in Zimbabwe. 90 % of these children are raised through extended families and not in orphanage. Efforts to provide basic food, education and health facilities to these children are getting hampered because of the current political, economic and humanitarian crisis in Zimbabwe.

These children are facing triple threat of cholera, Influenza A H1N1 and measles outbreaks while Zimbabwe is having second highest monthly inflation rates in the History of Mankind. Every 1 of the 7 living in the age group o 15-40 years is suffering from AIDS in Zimbabwe. More than half of adolescents are in fear of getting infected with HIV virus in a few years of time.

Absence of social safety, parents or guardians, spiraling inflation, deteriorating physical infrastructure, erosion of livelihoods, food insecurity, rising malnutrition, inadequate fund to support education, the severe impact of the HIV/AIDS pandemic is having a dramatic impact on the overall well-being of the children in Zimbabwe. These orphans struggle for the basic necessities: food, clothing, education and medicine.

Around 120,000 children are living with HIV in Zimbabwe along with the most of the taxable population of the country. They are living on margins, mostly on the Food Aid. The School attendance has declined from 85 % in 2007 to less than 20% in 2009. The student turn-out is low as a majority of public schools have pegged school fees to match the running costs.

Consequently, a majority of Zimbabwean children can not afford to pay these fees, have stopped attending classes and access education; even if schools are open and teachers conduct lessons. These orphan children (and others infected by the virus) are particularly affected by the multiple traumas of chronically ill caregivers, orphan hood, lack of quality education and high food insecurity.

Many NGOs have come forward to address this issue along with UNICEF and other helping bodies. One such organization, Heart4Kids is working for the cause since 2003 in Zimbabwe.

Heart4Kids is a non-profit 501 3(C) organization dedicated to improving the quality of life of children around the world whose lives are shattered by the HIV/AIDS virus. Heart4Kids seeks to protect these children by providing them with food, clothing, educational and medical assistance, and above all hope.

Liberals' corporate tax freeze panned

The Liberal Party’s pledge to forgo planned corporate tax cuts was widely panned Monday by business leaders, policy analysts and Finance Minister Jim Flaherty

Question: Financial aid & untaxed social security benefits?

My mom receives social security benefits that aren't taxed because she has no income. This week, my college decided to take away some of my financial aid grants because they said that my mom was not eligible to file a 1040A because none of her social security benefits were taxable. I filled out a 1040 for my mom because that was the only form left in the library the day I went to pick them up.

I've looked on the IRS site though for form 1040A and there is a line for taxable income. That means my mom was eligible to file a 1040A because it would give her the option of writing -0-, right? I've even called IRS and they said she was eligible to file a 1040A. ON my FAFSA, I indicated that although she filed a 1040, she was eligible to file a 1040A. I hope my financial aid counselor is wrong because they took away about $1500 from my awards package

Answer: This is the info you need:

If your parents have filed or will file a 1040, were they eligible to file a 1040A or 1040EZ? (Q78)

"In general, a person is eligible to file a 1040A or 1040EZ if he or she makes less than $100,000, does not itemize deductions, does not receive income from his or her business or farm, and does not receive alimony. A person is not eligible to file a 1040A or 1040EZ if he or she makes $100,000 or more, itemizes deductions, receives income from his or her own business or farm, is self-employed, receives alimony, or is required to file Schedule D for capital gains. If you filed a 1040 only to claim Hope or Lifetime Learning tax credits, and would have otherwise been eligible for a 1040A or 1040EZ, you should answer “Yes.”"

If you mom had any of these circumstances above, this is prob why. Does she own a farm or a business? Receives alimony because of a divorce? Is she also self employed? Notice it doesn't say anything about her SS being taxable. I'll bet they changed it for a different reason, or you misunderstood. Are you sure you put her social security benefits on worksheet A? If you did not, they prob added it and this is why your aid was reduced.

Tax Tips Archive More>>

The Internal Revenue Service has a tax tip to college students and first-time filers: use IRS Free File to prepare and file their federal tax return. This and other suggestions can help new tax filers avoid the April 15 rush and maybe even get any refund due within 10 days.

Question: Why does Obama and his people keep saying that they are cutting capital gains taxes for businesses?

Since when is a business' income taxed under capital gains taxation?

Answer: It is if they sell it and make a profit on the sale. He better give them something because he sure wants to take a lot away from them.

Secondhand Hate

"They have ardent supporters who are nearly hysterical at the very election of President Barack Obama," Senator Sheldon Whitehouse roared about his Republican opponents in the closing hours of the Senate health care debate on December 20. "The birthers, the fanatics, the people running around in right-wing militia and Aryan support groups.

The Death Tax: Burden on American Business (Reliable)

Question: Why is there an undercurrent opinion that the 16th amendment was never ratified making income tax is illegal?

I keep hearing consipiracy theories stating that the income tax is illegal because the 16th amendment was never actually ratified. Wouldn't this be fairly easy to put to rest? I don't particularly like the idea of an income tax (I'd prefer a consumption tax myself) but I just don't know what it is that makes so many claim we have an amendment that isn't actually an amendment?! This isn't suppose to be a debate over tax systems, just WHAT keeps fueling this conspiracy.

Answer: The courts have put it to rest. It is the tax protester movement that is basically driven by stupidity and greed that simply won't accept it.

In U.S. v. Thomas, 788 F.2d 1250 (7th Cir. 1986), the court explains and refutes the 16th amendment issue.
You can read it at http://bulk.resource.org/courts.gov/c/F2/788/788.F2d.1250.85-2120.html
Read paragraphs 3 through 6.

Opinion: Higher education in California should better reflect the times

As the crisis persists, it's time for a new master plan that would streamline curriculum, bring funding in line with students' ability to pay and put UC, Cal State and community colleges in sync. California's Master Plan for Higher Education is history. State officials and politicians don't want to admit it, but it's true. Blame it on a severe recession, a dysfunctional state government or tax ...

How Tax Money Should Be Spent