Dr. Friday Radio Show – June 7, 2025

Welcome to another episode of the Dr. Friday Radio Show! In this episode Dr. Friday Show emphasizes one key theme: planning ahead! Whether you’re considering selling stock, dealing with inherited property, or navigating retirement accounts, making decisions before the fact can save you thousands in taxes. Dr. Friday breaks down complex topics like capital gains, recapture of depreciation on real estate, and the rules around 1031 exchanges. Plus, she provides a critical update for all Tennessee residents regarding the federal disaster extension and what it means for your 2024 tax filing and 2025 estimated payments. Tune in to hear answers to listener questions on Roth conversions, overseas property, and IRA contributions.

Summary Points

• The Power of Planning Ahead: Dr. Friday shares a client story illustrating how planning a stock sale across two tax years (2025 and 2026) can keep you in a lower capital gains bracket and save thousands of dollars.
• Navigating Capital Gains: Learn the difference between short-term and long-term capital gains and how you might qualify for a 0% tax rate on long-term gains if your income is below certain thresholds.
• Understanding Real Estate Tax Implications: Dr. Friday discusses often-overlooked taxes like the “recapture of depreciation” on rental properties and how rezoning an inherited property after the owner’s passing can create a massive, unexpected tax bill.
• Big News for Tennesseans: Due to a federal disaster declaration, the deadline for filing 2024 taxes and making the first three 2025 quarterly estimated payments has been extended to November 3, 2025. This also extends the deadline for 2024 contributions to IRAs, SEPs, and HSAs.
• IRS Compliance is Key: You can’t make a deal or payment plan with the IRS unless you are in compliance. Dr. Friday explains how this applies to offers in compromise and what to do if you receive a CP-2100A notice about incorrect 1099 information.
• Listener Questions Answered: Can you do a 1031 exchange for an overseas property? Do you need to make estimated payments after a Roth conversion? Can you contribute to both a Traditional and a Roth IRA? Dr. Friday answers these and more.
• Common Pitfalls to Avoid: Are you and your spouse filling out your W-4 forms correctly? A simple mistake on the “spouse also works” checkbox is a common reason W-2 employees end up owing taxes.

Episode FAQ

Q: If I do a Roth IRA conversion this year that will cause me to owe taxes, do I need to make a quarterly estimated payment to avoid a penalty?

A: Not necessarily. The IRS requires you to pay in either 90% of the current year’s tax or 100% of the prior year’s tax liability. If your regular income and withholdings already meet 100% of what you owed last year, you can typically pay the extra tax from the conversion when you file without a penalty.

Q: Can I sell a property in the U.S. and use a 1031 “like-kind” exchange to buy a property overseas and defer the tax?

A: No. A 1031 exchange is only permitted for properties located within the United States. You would have to pay capital gains tax on the sale of the U.S. property.

Q: Do I need to report large vacation expenses to the IRS, like if I take my whole family on a trip?

A: No. Spending your own money on a family vacation is not a taxable or reportable event. It is considered a personal expense, not a gift or income.

Q: I contribute to a traditional IRA for the tax break. Can I also start and contribute to a Roth IRA?

A: Yes, you can contri