The Post reports that the Jobs family can avoid a lot of taxes on the Apple stock that they will inherit from Steve if they sell the stock right away. He held about 5.5 million shares, priced at just under $370 today. Of course he also was large shareholder in Disney, with shares worth about $4.4 billion. So between those two little grips, maybe Adrienne was right about SJ. [NYP via TaxProf]
Related Posts
John Kerry May Be Having Buyer’s Remorse re: $7 Million Yacht
Because people keep asking about it.
If pesky Boston reporters weren’t enough, the Wall St. Journal’s report is taking this to new hyperbolic levels with the headline: “John Kerry – A One-Man ‘Benedict Arnold’ Corporation”:
[T]here’s a smell of hypocrisy. In addition to sailing around the tax issue, Mr. Kerry chose to build his boat in New Zealand at a time when Bay State boat builders are having trouble keeping their work force employed. “I’m confident that anything constructed in New Zealand could be constructed here in the state,” Gregory Egan, who owns the Crosby Yacht Yard in Osterville, told the Boston Herald. Others noted that the Isabel was specially designed to be piloted without a crew — letting Mr. Kerry scrimp on employment costs and payroll taxes.
Jesus. A rich senator, married to a ketchup heiress, buys an expensive boat, does some not-so-fancy tax avoidance and all of a sudden he’s equated to, arguably, the most notorious traitor in the history of the United States? Yeah, that’s pretty much the same thing.
John Kerry – A One-Man ‘Benedict Arnold’ Corporation [WSJ]
Sen. Kerry Sails Around the Tax Issue [TaxProf Blog]
Earlier: John Kerry Saves $500k in Taxes By Dropping Anchor in Rhode Island
UPDATE: JK’s spokeswoman has said he will pay the tax if Mass. determines that he owes it.
Don’t Get Too Anxious to Stuff Just Anything into Your IRA
Individual Retirement Accounts are a taxpayer’s dream, with constraints. The income they earn isn’t taxed until you distribute it; with a Roth IRA, it may never be taxed. It’s only natural for taxpayers to stuff anything they can that might generate income into an IRA.
That can be a terrible mistake.
Not everything is tax free in an IRA. Interest, dividends, capital gains – that stuff is fine. But beyond that things can get ugly.
Most problems arise when taxpayers try to use their IRAs to finance business ventures. Because IRAs are shirttail relatives of qualified pension and profit sharing plans, many pension plan rules, like those for prohibited transactions, bedevil IRAs, with taxes that can exceed 100%.
When an IRA owns an interest in a “passthrough” entity – usually a partnership, because most S corporations can’t have IRA shareholders – another complication arises. The tax law frowns on tax-exempt competition for taxable business. The frown takes the form of the “unrelated business income tax,” or UBIT. The UBIT hits otherwise tax-exempt entities with an income tax on their “unrelated business income.”
If an IRA owns an interest in a partnership (most LLCs are taxed as partnerships) that operates a trade or business, the IRA’s LLC income may be subject to UBIT, which applies at corporate tax rates. UBIT can also apply to an IRA if it owns an interest in mortgaged rental real estate. Some IRAs even run into UBIT by investing in publicly-traded energy partnerships, like Buckeye Partners, LP. Many states also have unrelated business income taxes.
The partnership is required to break out unrelated business taxable income and report it to the IRA. The IRA in turn must provide a tax identification number to the partnership to make it easier for the IRS to follow the UBIT to the IRA.
When an IRA is subject to UBIT, it can cause some awkward moments between the IRA investor and the trustee. Most IRA trustees want nothing to do with filing Form 990-T, the UBIT return. Of course the IRA owner doesn’t like the idea either, but it needs to be done. Having income tax in an IRA is especially ugly when it’s a Roth IRA, which normally would otherwise be tax-exempt forever, inside and out.
The threshold for filing a 990-T is “gross income” of $1,000 or more. Gross income is normally higher than taxable income – it is the IRA’s share of gross receipts less cost of goods sold, not reduced for any other expenses.
So be careful what you stuff into your IRA. Just because you can put something in there doesn’t mean you should.
Joe Kristan is a shareholder of Roth & Company, P.C. in Des Moines, Iowa, author of the Tax Update Blog and Going Concern contributor. You can see all of his posts for GC here.
ACORN Stonewalled on VITA Funds but Questions Remain
Yesterday the IRS released the list of recipients of $8 million in matching grants for the Volunteer Income Tax Assistance program. Many of you participated in this fine program back when you were focused on developing a drinking problem, which may explain the high error rate but that’s neither here nor there.
Of the 360 applications submitted for funds, one notable organization that was DEEE-NIED was ACORN.
Despite the grave dancing that is likely going on in certain corners of the media, is anyone asking the important questions here? Including but certainly not limited to:
• Who will real sex workers depend on for tax advice?
• What non-profit organization will the two “investigators” entrap next?
• Will Glenn Beck finally calm down? He has appendicitis for crissakes.
Questions worth noting. If you have answers to any of these, kindly enlighten us in the comments (without suffering from an aneurysm).
IRS Leaves ACORN Off VITA Grant List [Web CPA]
IRS Awards $8 Million in Grants to 147 Organizations for Tax Prep Assistance — $0 to ACORN [TaxProf Blog]
No IRS VITA “Seed” Money for ACORN [Tick Marks]