Category Archives: Tax Strategies

Like Kind Three Party Exchanges – Paul Gaulkin CPA

different size buildings

In the event a taxpayer is unable to find a party with who to have a like kind exchange because the party whose property the taxpayer seeks wants to sell for cash instead of doing a trade. A three party exchange is basically a way for the taxpayer to still carry out a like kind exchange but with three instead of two people. Finding Third Party If the taxpayer can find a purchaser who is willing to pay cash and … Read more

Personal Holding Company Defined – Paul Gaulkin CPA

capital stocks together

To be classified as a personal holding company, a corporation must meet the following two tests for the tax year in question: 1. Five or fewer individuals must own more than 50 percent of the value of the outstanding stock, actually or constructively, at any time during the second half of the taxable year. 2. At least 60 percent of the corporation’s adjusted ordinary gross income for the tax year must be personal holding company income. It is possible for … Read more

IRA Withdrawal Rules Life Expectancy – Paul Gaulkin CPA

money exchanging hands

In the event the owner of a traditional IRA dies before the required distribution date, there are two options for which a beneficiary can choose to effectively begin taking distributions. These two options are: 1. The life expectancy rule; or 2. The five year rule Below we will go into detail of the differences of these two options and how they will effect a beneficiaries distributions from the decedents traditional IRA. Life Expectancy Rule The life expectancy rule basically states … Read more

Minimum Required Distribution during Lifetime – Paul Gaulkin CPA

rock pike with IRA and retirement writing

Once a taxpayer reaches the age of 70 and a half they are required by the IRS to start making minimum distributions from their traditional IRA. The taxpayer is allowed however to begin making the distributions on April 1st of the year following the year in which they have turned 70 and a half years old. It is important to remember that if a taxpayer waits until April 1st of the following year they will be required to take two … Read more

Eligible Rollover Distribution – Paul Gaulkin CPA

an egg inside a nest saying retirement

A rollover is basically a transfer of a distribution from one tax advantaged plan to another tax advantaged plan in which the individual is able to maintain the form plan’s tax advantage with respect to the amount transferred. Distributions that may be rolled over are distributions from: 1. A qualified plan 2. A 403(b) tax sheltered annuity 3. An IRS’ 4. A 457 governmental plan Once a distribution is made from one plan to another, the taxpayer does not have … Read more

Like Kind Exchange Qualifying Property – Paul Gaulkin CPA

night time office complex

A like kind exchange is an exchange of investment or business property that qualifies for non recognition of gain or loss. The main reason that the taxpayer does not have to recognize any gain or loss is because it is assumed that they will be in the same economic position after the exchange is completed. Qualifying Property Qualifying property for a like kind exchange must be held either for productive use, in a trade or business capacity or as an … Read more

Irrevocable Life Insurance Trust Pros & Cons – Paul Gaulkin CPA

a folder that says policy folder

The primary purpose for establishing an irrevocable life insurance trust is to remove life insurance from an estate which in effect helps avoid being subject to estate taxes. If a taxpayer owns an insurance policy, the value of the death benefits paid to the beneficiaries is added to their estate. It is this reason that individuals often transfer the ownership of the policy to their beneficiaries, or a trust created for the purpose of holding title to the insurance contract. … Read more

Section 1035 Exchange Explained – Paul Gaulkin CPA

Life insurance policy

Gains from the sale, surrender or lapse of a life insurance policy during the life of an insured taxpayer are generally considered ordinary income to the owner of the policy. Section 1035 allows for certain tax free exchanges of life insurance policies, endowment policies and annuities. This will allow for certain exchanges without the immediate recognition of gain. Types of Section 1035 Exchange Basically, the income tax consequences are deferred or postponed, and the basis of the old policy transfers … Read more

Bypass Trust Estate Planning Explained – Paul Gaulkin CPA

Document of a will

In estate planning, a trust known as a Bypass Trust is used together with a marital trust in order to pass the maximum amount of money to beneficiaries without having to pay estate tax. In this type of tax planning structure, both spouses are able to use their unified credit to offset estate taxes due. Bypass Trust Planning Basically, the way it works is the marital deduction trust receives all assets left directly to the surviving spouse or for their … Read more

Archer MSA Contributions – Paul Gaulkin CPA

Drugs on top of dollar bills

An Archer MSA is a trust created solely to pay the qualified medical expenses of the individuals who establish the trust. In this article we will discuss the specifics of making contributions to an Archer MSA trust. Archer MSA Contributions When a person makes a contribution to an Archer MSA trust, they must make their contribution in cash. Contributions of stock or other types of property will not be allowed. In terms of the maximum deductible contribution that can be … Read more