Levine, Katz,
Nannis + Solomon, P.C.
DECEMBER 2001
For a brief period of time, the capital gains tax rule that went into
effect last January favored high-end homeowners in an unexpected way.
The new rule, which permits special lower
capital gains rates for property acquired after January 1, 2001 and held for at
least five years, offers an opportunity for people who owned property on
January 1, 2001 to treat the property as if was sold on that date and restart
the capital gains clock. This deemed sale would occur on the tax return only -
the owner of the capital gains property would never relinquish actual ownership
of the property.
The potential tax effect of this rule for
a homeowner facing a taxable gain on the sale of a personal residence that
exceeds the $250,000 exemption, and for a married couple whose gain exceeds the
joint $500,000 exemption, is that it appeared it was possible for the deemed sale
to apply to a home, the owner could take advantage of the exemption that
applies to gains on home sales, then a new exemption would apply when the home
is finally sold, more than five years later.
To make things perfectly clear, the IRS
has closed this loophole, now spelling out the fact that, although taxpayers
are entitled to use the deemed sale with personal residences, the
$250,000/$500,000 exemption on the sale of a personal residence does not apply
in the case of the deemed sale.
Taxpayers who intended to exercise the option to use a deemed sale on their residence on their 2001 tax return, report the deemed sale of the home and take advantage of the exemption on the gain, may want to revisit this issue before filing their 2001 tax return next spring.
The IRS has authorized e-mail as an appropriate delivery method for
2001 W-2 forms. Proposed and temporary regulations (REG-107186-00; T.D. 8942)
on the delivery of W-2 forms do not specifically allow the use of e-mail,
however George Blaine, IRS representative from the chief counsel's office, in a
recent speech to the Information Reporting Program Advisory Committee,
indicated that the regulations were intentionally vague on the subject, thus
allowing for a variety of secure electronic delivery mechanisms including
e-mail.
Mr. Blaine stated that employers can
provide all W-2s to employees via e-mail, regardless of employee consent for
such a delivery choice, as long as security measures are addressed.
Employers are still required to provide a
paper copy of a W-2 form if an employee requests it.
The IRS has requested that the law
requiring first class mail delivery of paper W-2 forms be eliminated,
indicating that the war on terrorism may cause anxieties about mail delivery.
Part of the $100 billion tax stimulus package passed by the House
includes a plan to offer a second wave of income tax rebate checks, this time
to lower income people who may not have qualified for the rebate checks that
were dispatched earlier this year.
The Senate is currently deliberating on a similar tax stimulus bill that also includes a tax rebate program.
But the IRS is balking at the proposal and IRS Commissioner Charles Rossotti is warning that issuing a new set of rebate checks in such a short time frame "poses an extremely high risk to the tax system," and could cost the agency an unbudgeted $58 million in processing expenses.
In addition, Mr. Rossotti suggests that a new rebate program, designed to be coordinated with year-end holiday shopping, will cause up to 23 million of the normal spring income tax refund checks to be delayed three to five weeks and may result in the agency being liable for interest payments to taxpayers for the late refunds.
Senator Max Baucus, chairman of the Senate Finance Committee, is taking all of this information into consideration as the Senate moves forward on this legislation. "We're re-examining it," he said of the rebate program, "but I do know that the faster we get it done, the faster the checks can go out."
Both Republicans and Democrats in the Senate are supportive of the proposal to issue a new round of $600 rebate checks to taxpayers who did not qualify for the first rebate. Senator Baucus stated that the program to mail an additional 50 million rebate checks is on a "must pass" list before the year-end.
Do you need to provide quick access from an Excel worksheet to a network file or to a location on the Internet? Perhaps the instructions for filling out the worksheet reside on a network directory, or maybe you need to show the Excel user where timely information can be found on the Internet.
You can provide a hyperlink right in your Excel worksheet that will connect the user with links to another file on your computer, a network file, or an Internet site. Follow these steps to add a hyperlink to a cell in your worksheet:
Special
Feature: New Mileage Rates for 2002
The standard rate of mileage for business use of a vehicle is set to
increase again, effective January 1, 2002. The current rate is 34.5 cents per
mile. For 2002, the new rate for business mileage will increase two cents to
36.5 cents per mile.
The mileage rate for medical and moving expenses is also set to increase. The following changes will go into effect on January 1:
· Business mileage rate
increases from 34.5 cents per mile to 36.5 cents per mile.
· Deductible mileage rate for
medical expenses increases from 12 cents per mile to 13 cents per mile.
· Deductible mileage rate for
moving expenses increases from 12 cents per mile to 13 cents per mile.
· Deductible mileage rate for
charitable services remains the same at 14 cents per mile.
The rate increases stem from the rise in gasoline costs over the past year. This information is being reported in Revenue Procedure 2001-54.