The Laws of your Money with Ann-Margaret Episode 18

Episode Transcript

Speaker 1 (00:00):
The following is a paid podcast. iHeartRadio's hosting of this
podcast constitutes neither an endorsement of the products offered or
the ideas expressed. The following program is sponsored by New
York Priority Medical Care. Now it's time for the Laws
of Your Money, a weekly call in show with legal

(00:20):
tips to help you protect your money. Here's your host
and Margaret Carosa.

Speaker 2 (00:25):
Hello, and welcome to the Laws of your Money. This
is a show dedicated to protecting you from legal and
financial mayhem. I believe that legal protections are the single
most important element of personal finance, because what does it

(00:46):
matter how brilliantly I save and invest if I have
a greater than forty percent chance of losing assets in
an expensive divorce, long term care climes. Taxes This can
be estate taxes, capital gains taxes, not to mention ordinary lawsuits.

(01:10):
I am asset protection attorney and Margaret Carosa joined today
by my esteemed colleague, the Reverend Paul Slapists as co host.
Welcome to the program, Paul, Thanks am so last week
we had special guest William Duke, who I don't know

(01:31):
if I properly thanked at the end of the program,
but we had a great discussion about longevity and you know,
designing our later years on our own terms and how
we can promote our wellness and living longer. I really

(01:54):
think that we are living longer today, don't you.

Speaker 3 (01:58):
See to think that?

Speaker 2 (02:00):
Statistics stated, Yeah, you know, I'm practicing for more than
twenty years, and I see more and more what we
used to think of as super elderly folks coming into
the office on their own steam and no hearing aids,
And it's just it's really exciting.

Speaker 3 (02:22):
Turning to seventy six on June.

Speaker 2 (02:24):
That's nothing today.

Speaker 3 (02:26):
I'm working the equally as hard as I did when
I was eighteen.

Speaker 2 (02:31):
You know, I can't attest to that. You're you're involved
with eight million things, all of which are designed to
make the world better and promote peace. And it's good stuff.

Speaker 3 (02:42):
Share the girl, share the good in the world, which
most of the world is yes, love it.

Speaker 2 (02:47):
So a couple of weeks ago, I had a long
term client come into the office eighty six years old.
That's nothing today, And during the conversation she said something
about mother, like she had to get home and make
mothers lunch. Really, yeah, mother is alive and well, and

(03:12):
you know. It really underscores I think the importance of
saving our money.

Speaker 3 (03:21):
Right Centurion.

Speaker 2 (03:23):
Yeah, yeah, we're gonna need the money to carry us
through many more years than our parents and grandparents did.

Speaker 3 (03:33):
I better get a job that's entrepreneurial thing for forty years.
Another job question mark.

Speaker 2 (03:41):
So, speaking of money, we have April fifteenth around the corner.

Speaker 3 (03:48):
I heard I heard it that date, So it seems
seems very interesting that date.

Speaker 2 (03:53):
So for those of you who have not yet gotten
your taxes together, we're going to talk about a few
tips and some pitfalls to avoid. So one of the
things you want to tell your tax preparer is if

(04:14):
you have sold real estate in the prior year. So,
if you sold your primary residence in calendar year twenty
twenty four, how do you figure out the capital gains
taxes that will be due. So the traditional rule is

(04:37):
that if you sold your primary residence and you were
living there for two out of the five years prior
to the sale, you get two hundred and fifty thousand
dollars excluded from what would otherwise be your gain. So
if this is a couple who owns the home, or

(04:58):
two sisters who own the home, you get five hundred
thousand forgiven. So you start with your original purchase price,
you add the two fifty if you're single, or the
five hundred if you're a co owner, and then you
add to that any capital improvements hopefully that you can document,

(05:22):
and then that aggregate number is your cost basis, and
you will pay long term capital gains on anything over that.

Speaker 3 (05:33):
And in most real estate situations, if you had something
well five years, if you had something fifteen or twenty years,
forget about it. You bought it for one hundred and
now it's got to be eight hundred or something significant.
So you're saying you could be paying taxes if say
it's a single person, I bought a house twenty years ago,
it was one hundred, now it's eight hundred, so I
get one hundred, and then I get two fifty, I

(05:56):
got three fifty, and at three fifty from eight hundred
for four four hundred fifty paying taxes on.

Speaker 2 (06:04):
Yeah, there's a big misconception out there, and this was
the law in the nineteen eighties, and they must have
done some bang up education job on this because a
lot of people think the following is still the law,
and it is not. You cannot sell your primary residence

(06:26):
and buy a new primary residence within eighteen months and
defer that capital gain. You used to be able to
do that, and the law that gives us the two
hundred and fifty thousand dollars break that's Internal Revenue Code
Section one twenty one that replace the old rollover. The

(06:47):
only rollover that exists now is for investment property. You
can do what's called a ten thirty one exchange.

Speaker 3 (06:58):
So more question because if I have four hundred and
fifty thousand gain here based on the eight hundred thousand number,
and say my tax rate is tax rate twenty percent,
twenty five percent, so I'm going to pay twenty percent
of four hundred and fifty thousand dollars.

Speaker 2 (07:16):
To the Yeah, so the long term capital gains rate
is typically less than the ordinary income text rate. But
you're still looking at combined federal and New York State,
you're at around twenty three percent. So it's no choke.
And you know the advice save us, save us. What
I do. What you should not do, Paul, is sell

(07:40):
your price the Manhattan or Montalk places you want to
hang on to.

Speaker 3 (07:44):
That true, I'm good, I have to.

Speaker 2 (07:47):
Okay, So the only other thing to be aware of
when you go to sell your primary residence is did
you have a spouse die? So if you are a
widow or widower selling the home, you get an additional break,

(08:08):
and the benefit is going to depend on when you
purchased the home. If you purchase the home after on
or after January of nineteen seventy seven, and my husband died,
I will get a so called step up in basis

(08:32):
on his one half of the house. So with your
eight hundred thousand dollars fair market value number, my late
husband's half of the house went up to four hundred thousand,
I am still able to use my two hundred and
fifty thousand dollars on my half, and I will add

(08:56):
to that one half of the original purchase price. To
add to my column. Now, there's a special loophole that
you may qualify for if the home was purchased before
January of nineteen seventy seven, and this has to do

(09:17):
with the tax code of nineteen seventy six that took effect.
Don't worry, I'm coming to the finale here. It's a
really good break. The tax code of nineteen seventy six,
which took effect January first of nineteen seventy seven, holds
that the decedents one half of the property gets that

(09:41):
elevator ride up to one half of the fair market
value when the widow or widower sells. But if you
bought the house before January of seventy seven, the widow
or widower may be entitled to a full step up
in basis. All right, be sure to run that by

(10:04):
your tax preparer. If they've never heard of this, you're
free to reach out to me and I can help
educate the tax preparer. I am certified Paul to give
continuing education credits to CPAs in New York State. You are,

(10:25):
I am, Yeah, that's one of my sidelines.

Speaker 3 (10:30):
Have a lot. But I have a question going back
to this. Can't you help us in with a trust
or a will in this what we're talking about?

Speaker 2 (10:39):
Well, a will isn't going to help us because we're
dead right.

Speaker 3 (10:43):
No, I'm talking now about the whole concept here, the
whole thing eight hundred and two fifty. Can't we put
our deal with our house and the trust and things
like that.

Speaker 2 (10:51):
Well, if we have the home in a trust and
it goes to the named beneficiaries, the trust they get
all of the capital gains eliminated. So yeah, totally eliminated.
So it's a great benefit and it's certainly head and

(11:12):
shoulders above the tax disaster if I simply transferred the
property to the kids outright, where does trust? Yeah? No,
you know what, it's bananas to own real estate in
your own name today because it's all a public record,

(11:34):
and in the city of New York, you can go
on to the Acress site and enter an address and
you can find out everything you might want to know
about who owns it, and they can be targeted for
lawsuits and fraud. Okay, we also want to tell the

(11:55):
tax preparer if we've made gifts in the prior year,
we may have to do a gift tax return. It
does not mean that we have to pay gift taxes
if we make a gift of over the annual exclusion,
which is now nineteen thousand per person per year. When

(12:17):
we go over that number, we simply have to file
an informational return where we use part of our federal
thirteen point nine million dollar exclusion. Okay, so let's go
to the number one. And I'm hearing this from my

(12:38):
CPA friends. All of whom we're too busy, understandably to
be with us on the show today. The number one
audit red flag out there has to do with donating
art and claiming a charitable deduction. So what people are doing,

(13:01):
what wealthy people are doing, They're buying price the art,
they're holding it for a while, they're getting an inflated appraisal,
and then they're donating it and deducting that inflated number
from their taxes. So if you're donating art, that right now,

(13:22):
my friends, is a red flag for an audit. There
are also a lot of tax prep scams going on
out there, and the single best piece of advice is
that the irs will never contact you via email. Okay,

(13:44):
they're going to send snail mail. And I've been the
recipient of some of that correspondence over the years, and
it's unmistakable what that envelope is when it's in the mailbox.
All right, So, Paul, I know how you love pop quizzes.
Here we go, Oh no, no, no. I'm asking you

(14:07):
these things because I think you're a super smart guy
with a ton of common sense, and a lot of
these things when it comes to taxes aren't necessarily logical.

Speaker 3 (14:20):
So we oh, I actually started as an accounting major
into intermediate accounting. Yeah, and intermediaccounting is what separates the
men and the women from the boys and the girls.
If you can get through intermedia county, you're going to
be an.

Speaker 2 (14:36):
Account You are a renaissance man.

Speaker 3 (14:38):
But here's what happened. Bernie Volaine up at Quinnipiac said,
slapkis stand up and he pointed at me. These are
the old days that you didn't get sued, and he said,
slapkis marketing. You either can understand or you can't. It's well,
very complicated.

Speaker 2 (14:55):
Well, Paul I had it worse. I went to Catholic
school where the nuns were allowed to whack you around.
So ye, knucklehead, Yeah, I was actually by a nun
picked up by my two braids one day. Oh yeah,
that was fun. Okay. AnyWho, back to the pop quiz.
You're trying to stall for time on this pop quiz.

(15:16):
So in terms of charitable deductions, there was a taxpayer
who claimed a charitable deduction for donating blood to the
Red Cross. Do you think that's kosher? Yes or no?

Speaker 3 (15:35):
I'm gonna say yes because I think it's good to
do that.

Speaker 2 (15:38):
This was disallowed. Okay, all right. What what if you
go to your boss's daughter's wedding? Okay, so it's this
invitation you get that you roll your eyes. You don't
really want to go to, but you feel like you
have to, you know, to engender the goodwill of the boss.

(15:59):
So you buy an ice, you buy a nice gift
off of the registry. Are you able to deduct the
cost of the gift because you're only going to that
wedding so you don't think you should be able to
Oh okay, well the IRS agreed with you and they
disallowed that deduction. Do you think you can deduct alimony

(16:24):
payments to your ex?

Speaker 3 (16:28):
I think that should be considered a yes.

Speaker 2 (16:30):
It used to be a yes, and now it's a no.
So now the law is that your alimony payments are
not deductible to you, but on the flip side, they
are not counted as income to your X, So that's
important to know. Do you think that the cost of

(16:54):
installing a swimming pool is tax deductible.

Speaker 3 (17:00):
With a doctor's.

Speaker 2 (17:01):
Notice one hundred paul, you are on the money. It
was allowed when there was a diagnosis of arthritis. Yeah,
it was a medical expense. Can a body builder deduct
the cost of body oil? No, yes, they allowed it. Yeah. Okay,

(17:29):
do you think that you can deduct cosmetic surgery?

Speaker 3 (17:37):
I mean with the doctor's I mean, well it's cosmetic,
but still even cosmetic could have been health related. But
the question is probably no, they probably won't accept that.

Speaker 2 (17:49):
Well, there was a case of an exotic dancer who
had breast enlargement and the IRS allowed her to depreciate
breast Yeah, she was able to advertise them. She was

(18:10):
she was able to depreciate the cost of the breast.

Speaker 3 (18:14):
Enhancements of doing business.

Speaker 2 (18:16):
Yeah, and the taxpayer's name was Chesty Love. So I
don't know, maybe you don't want to google that because then,
right now, then the algorithm will really put a lot
of questionable things in your inbox.

Speaker 3 (18:35):
That's fine with me.

Speaker 2 (18:37):
Okay, what about donating clothing?

Speaker 3 (18:41):
Yes, and that's what I do, And that's what I
do a lot of just thirteen bags of clothing just
last week.

Speaker 2 (18:49):
Yeah, so you can the duct yeah, but certainly not
the original purchase price. But it's a very good idea
to hang on to receipts. And I keep a file
folder by year of clothing receipts, and that's at least

(19:13):
a starting point for when you deduct it. I don't
think you should really be greedy here and go for
more than let's say, twenty percent of the original purchase
price of the clothing.

Speaker 3 (19:29):
You know, somebody asked me a question about can they
do something with their home? Can I sell my home
to my son for ten bucks and avoid big concerns
with regard to taxes.

Speaker 2 (19:43):
Well, a lot of people come up with, you know,
I'm doing air quotes, brilliant ideas for how to get
around all of these tax issues. And if it were
so easy, the government would simply not collect any taxes. So, yes,
you can sell your home to your child for ten dollars,

(20:07):
but the treatment of that for tax purposes is part gift,
part sale. So it's really the same as making a
gift to the child, which saddles them with carryover basis
for capital gains purposes.

Speaker 3 (20:26):
I have another question, this is a good one, this
regarding your book. Okay that doctor Phil says I highly
recommend this, but and did the forward? Okay, be good?
Here you go love and money, and people love that
doctor Phil. He's a smart guy and He's helped a
lot of people protecting yourself from angry ex's, wacky relatives,
conn artists, and inner demons. Who's an inner demon?

Speaker 2 (20:48):
I think we all have inner demons, you know, as
it relates to finances. We know what we're supposed to
be doing, and sometimes we don't do what we know
we're supposed to be doing. And you know, I share
this story when I'm speaking, you know, typically to groups

(21:08):
of women about getting their finances together, whether you're starting
out or starting over, we need to think about getting
our financial lives in order now. In my twenties, I
was and out of control, you know, credit card wackado.

(21:31):
I had very nice clothes, by the way, well that's good,
but I would literally be up at night wondering, you know,
do I have fifty dollars in open credit on that
you know, Bloomingdale's card. Okay, let me go to Bloomingdale's
tomorrow and get a sweater. You know, I was so

(21:55):
up to my eyeballs in debt that as a dually
elected state legislator I was elected in my twenties, but
it's still no excuse. I would literally have to hold
my breath checking out of the quality in in Albany.
You know, when we were done with a three day

(22:15):
legislative session, I was never sure if my credit card
was going to go through. And you know, it's just
not a great way to live. And I think for
those of you out there who are expecting a tax refund,
you know, this is really a great test for what

(22:36):
to do with a windfall, right, whether it's an inheritance,
whether it's latto or a tax refund. So most of
my clients are not getting tax refund. Most of my
clients are you know, high net worth people who pay
estimated quarterly taxes. But I tell my clients, look to

(23:02):
see what your adult children do with their tax refunds,
because it's going to speak volumes as to the likelihood
that they can manage an inheritance one day. Right, So
if you have a windfall, whether it is a lottery

(23:24):
win or an inheritance, we look first to pay down debt.
So you want to do three things, pay down debt,
put some into savings, and donate some. Now a lot
of people say, yes, it's important to donate, but I

(23:49):
don't really have a lot of money or I'm in debt,
so I'm going to wait until I'm out of debt,
or I'm going to wait until I'm making more money
before I donate to a good cause. But the act
of donating, whatever amount you are able to donate to
someone less fortunate, I think really puts some important forces

(24:15):
in motion. And you know, at the risk of sounding
very new Age, when you give to someone, it is
definitely returned to you.

Speaker 3 (24:26):
I'm really in on this one because first we are
Good News corporations, nonprofit, and even our nonprofit has people,
and we're giving to others who are in need from
what our nonprofit ever receives. So I think donation even
with the Salvation Army when I gave them thirteen bags
last week of clothing, you know, and I'm I'm worried

(24:48):
about the even almost the receipt. I mean, it's important
to get in or whatever. But you know, it is great.
It's just like volunteering. You volunteer, it's humanitarian. We win
more than equally to the people that you've been kind
enough to yo.

Speaker 2 (25:04):
It's been said, I did not come up with this,
but I like it very much. Givers gain, you know,
if you are elevating your plane of existence when you
give to other people. And now I feel like I
sound a little bit like an evangelist and I'm about
to tack into how you can give to me. But no,

(25:27):
I'm not doing that. You should give to other people.
You remember all of the TV evangelists. Remember Jimmy Swagger. Yes, yes,
he said that he was locked in a tower and
only when the good people donated eight million would God
let him out of the tower.

Speaker 3 (25:48):
Yeah, there's some stories out there, no doubt about it,
in some ways of people handling these things. But I
want to ask you a question. But if you don't mind, no, okay, because.

Speaker 2 (25:56):
We're nothing's off limits here, Okay.

Speaker 3 (25:58):
All right, because it's really back to you. It's really
back to you as an elder care lawyer and as
a lawyer overall. And you know, we're talking about serious
issues here. We're talking about taxes, you're talking about losing
money here, losing money there. You know, similar to your
book Angry ex Wax, you really got to protect yourself

(26:18):
from these kinds of things. And you know, we've talked
a lot about wills and trusts, you know, and really
especially this trust thing. You really got to be serious
about this because everything you're talking about can be a
little bit dealt with.

Speaker 2 (26:31):
Well, I think it starts with education. And for many
people these topics or are just so daunting and the
refrain that I hear very often in my office when
clients come in, they say, I want to keep things simple, right,
I don't want a big complicated trust. Well, keeping things

(26:56):
simple now is going to resolve in a lot of
complexity later. So I want people to change the conversation
from who am I leaving my stuff to to how
am I leaving it to them? If I have a

(27:17):
child who is an absolute financial train wreck, I'm doing
him no favors by leaving him one third of my
estate outright if I know in my heart that he
will blow through it within two years and then he's
going to make my daughter's life a living hell, calling

(27:37):
her all the time for money. You need to erect
some guardrails. We all know the cast of characters that
we have in our lives, and the estate plan is
where we can erect some guardrails to keep our loved
ones and our money from colliding. You know, the results

(28:03):
can be absolutely explosive, and.

Speaker 3 (28:07):
It's education, I think as well. For the parties of concern.
The three children or whatever it is. And if you're
telling them absolutely, you're cleaning the slate. You're so.

Speaker 2 (28:19):
I have a lot of educational materials on my website
and there are some documents you can do on your own.
Get started at my website, my Asset Protection Attorney dot com,
download the healthcare proxy the living will get information on

(28:40):
all of this other stuff. And before we say goodbye, Paul,
where are we with your Earth Day event? And how
can people get involved?

Speaker 3 (28:49):
Okay, Earth Day Times Square April twenty second, eleven thirty
to four concert. Come on down physically or go to
good News Broadcast on YouTube YouTube dot com slash Goodness Broadcast.
If you want to learn a lot about it, go
to Pause the World for Peace dot org and please
join in. We need volunteers, we need more participants. It's

(29:10):
a big show, important show, Mother Earth.

Speaker 2 (29:13):
Thanks for what you're doing, Paul, and thanks to all
of you for listening. I hope you tune in next Sunday,
ten thirty am seven ten woor Take care of everyone,
have a great day.

Speaker 1 (29:38):
The preceding program was sponsored by New York Priority Medical Care.
The preceeding was a paid podcast. iHeartRadio's hosting of this
podcast constitutes neither an endorsement of the products offered or
the ideas expressed.