Saturday, May 19, 2012


Nail School - Day 5 - Summary of Week One

Yesterday was my fifth day of nail school and I'm happy to say that I've completed 1 out of 8 weeks. On Friday the only notable thing that happened was that the waxing students practiced on my legs, so now my legs are silky smooth from being waxed! Which is much better than the ultra hairy-ness that always seems to happen in winter. They were pretty good! At least, I think... I never had my legs waxed before.

Here are my overall thoughts on the first week. I think that this program is really inefficient and I'm disappointed that it is so easy. I knew that signing up for this would be completely different from my university experiences, but I really didn't anticipate it being this bad. I use the word bad for a lack of a better word, but I want to be clear that I don't think nail school is "bad," I'm just surprised at how it is run. I'm a firm believer that the harder school is, the more you learn, so I'm concerned (at this point) that I won't learn everything I need to know by the time I graduate. And I'm not saying that I won't pass the mandatory state exams by the time I graduate, I'm saying that I think I won't be as skilled as I hoped this program would make me. I'm starting off pretty much from zero, I have no idea how to file my nails, I am still not totally sure what a cuticle is, and I kind of stink at polishing my nails (yes, the actual POLISHING). Also, can anyone tell me what the heck the difference between a squoval and a round nail are? They look exactly the same to me! How can I possibly learn all of that by the time this program is over when I feel like I wasted the first week.

After attending this first week, I've decided to make a list of goals that I want to achieve by the end of the program. Let me know if you can think of other things that I have forgotten/

1. First and foremost, I want to get my nail technician license. This is really the only reason I'm taking the class to being with. I want to be able to practice nail art on others as a (sort of) career.

2. I want to be able to shape and file nails so that they are all the same length and shape. This has always been really hard for me. I depend too much on the nail bed and not enough on the length of the entire nail. I also really stink at filing. Once I tried to make my nails square and they were all sorts of crooked and crazy looking.

3. I REALLY want to be able to create obele nails (see picture below). I think that I could do so much awesome nail art on these nails and I have an idea of how to make them more wearable too. I'm also interesting in learning the edge nail, which is a less dramatic version of the obele.

4. I want to have a job opportunity that allows me to do more nail art than the average nail tech. 

5. I want to get faster at nail art so that when I'm doing others nails it isn't too long of a procedure.

6. I want to find out what types of designs other likes and be better at taking requests. I mostly do designs that are on my own nails so I really want to get used to doing nails that I'm not necessarily passionate about myself, but that my client will love.

I'll let you know if/when I achieve any of these goals. I'll continue to blog about nail school and my experiences most days. Luckily, I have Monday off, so I'll be posting more Tuesday. Until then, I'll probably be posting some more nail art!


Recap 2011

Not only is it the first day of a new year, but it is also approximately 1 year since I began doing nail art! To celebrate, I thought I would look back at some of my favorite designs. Here is a chronological list of my 15 favorite nail designs! I hope you enjoy looking at them as much as I enjoyed painting them. 

You can click on the title of each photograph to see my original post. 

Happy New Year!

These nails were inspired by the crazy Japanese horror movie  Hausu. They were the first nails that I  designed myself as opposed to using someone else's design.
2. Raccoon
I love the whole animal french tip phenomenon (like the pandas, pigs,  bunnies), so I decided to contribute by creating my own design and I came up with these adorable raccoons! The accent nails are their tails. 
Oh fruit nail art, how I love you! This is a simple summery set of nails that always make me smile! You can't go wrong with strawberries and kiwis! 
4. The Evil Dead 
As a huge horror fan, I can't *not* include these Evil Dead nails!  My index finger has a portrait of Ash, which was my first, and will be my last, attempt at portraiture!
5. Attack the Block 
Attack the Block is an awesome movie! A lot of people who were involved in Shaun of the Dead worked on Attack the Block and it's about an alien invasion in the 'hood of South London. These are by far my most famous nails as they were tweeted a lot. 
6. Asteroids
7. The Rolling Stones
I'm not always the most creative person, and it's usually easier for me to copy someone else's design than create my own. The Rolling Stones logo was perfect for nail art and I loved how these looked!
Initially these were inspired by M.C. Escher, but it was pointed out to me that they are also totally be the Q*bert background design, which makes them even more awesome! I do a lot of pattern designs, but these were my favorite of this year!
9. Life In Hell
It's possible that these are my all time favorites. These nails were inspired by one of my favorite people: Matt Groening (creator of The Simpsons and Futurama). And by one of my favorite comic series: Life In Hell. You can see Bongo, the one eared bunny, his father, and Akbar and Jeff. 
This was another set of insanely difficult nails. For these ones the difficulty was the layering. First I painted a solid gray base coat, then I painted a grid with has marks over all the nails, then I filled in the numbers, and finally the flags required outlining the boxes and then a little art work. But, these were totally worth it, I've wasted many hours playing Minesweeper and I was proud to sport these on my nails!
11. Nibbler/Futurama
My love of Matt Groening is probably well known, so included in this list are these Nibbler nails. On Futurama, Nibbler is Leela's pet  who poops dark matter (you'll notice my little dark matter piles of poo). I also really loved my first set of Futurama nails which can be seen here, but they didn't make the cut. 
11. Garfield
I have always loved Garfield. I think the comic is hilarious. My tribute to Garfield included Odie, some cat scratches, some markings, and of course creator Jim Davis' signature. 
12. Godzilla
Not only is Godzilla badass, but his representation of the atomic bomb is tragic. Here I depicted him trashing Tokyo by knocking his way through some power lines. 
13. Hamburglar
This was a set that was largely painted for Ron, the lover of all things hamburger. Hamburglar, from McDonaldland, dominated many a commercial in the 1990s and I have fond memories of being legitimately afraid that he would steal my hamburger. 
14. Eyeballs
I've done quite a few sets of eyeball related nails, but these are my favorite! I love that they manage to look cartoon-y and realistic at the same time! 
15. Taco Bell
How could a list of favorites not include Taco Bell? Taco Bell, is one of my favorite things ever and these nails made me really happy.

I hope you enjoyed this list of my 15 favorite nails! Thank you for reading my blog and I hope that I can impress you more in 2012! 


Gel Polish nails

Hello All
I recently got a red carpet manicure system from ulta - and i love love love it!!!! Super durable on nails, i also got few gelish polishes that work perfectly with RCM base and top.
Here are my most recent nails:


Tank Girl

I got into a really, really bad habit of not taking pictures of all my nails!! So here is another set of nails that I painted for the Peculiar Polish series with Leslie fromPolish Art Addiction. You can see my post about them here


Nail School - Day 9

I'm going to preface this post with some definitions:

In the past couple of posts and in some of my comments I've been discussing the difference between the eponychium and the cuticle. These two terms are used interchangeably but they are totally different. For a long time I thought I knew what my cuticle was, but I was totally wrong. Your eponychium is the living skin that is around the nail plate that helps protect and connect the nail to your finger. Often people believe that this is their cuticle. The cuticle is dead skin that is often in the same approximate area as the eponychium but it is only found on the nail plate itself, it doesn't connect anything to anything else. Here is a photograph of Ron's nails. Circled in red are cuticles and circled in black is the eponychium. Have you mistaken your eponychium for your cuticle too? (Enlarging the picture by clicking on it helps to see the difference)

School was not particularly productive on Friday, but it was an excellent day. I performed 2 manicures and 1 pedicure. I got 100% on two exams. But most of the excitement happened after I got home from school. I went out for drinks with a friend after school and when I arrived home I decided that I was going to figure out how to take care of a clients cuticles when performing a manicure.

I've been struggling a lot with how to do a good manicure. In New York state (as with most states) it is illegal for a nail technician to cut any living skin and therefore when removing cuticles or hangnails you have to be incredibly careful. When I was giving a manicure to another student, I noticed that their nails still looked ragged and didn't look nice and neat like after a professional manicure. I figured that the issue was that all the students had already received several manicures this week and all the extra attention was drying out their nail plates. Boy was I wrong.

It turns out that when I was doing a manicure (and I assume this might have been the case for some other students in the class as well, since my nails were in similar condition to theirs) I wasn't actually removing the cuticle or hangnails because I was so concerned about cutting or pushing the eponychium. So last night, when I got home I got out my manicuring tools and started clipping and pushing back my cuticles and other dead skin. I had no idea that nails were as resilient as it turns out they are and you can really make a ragged nail look incredible!

Later today I am going to be giving Ron a manicure and I plan to take photographs, and possibly video, to show everyone what cuticle removal should look like and how much better your nails can look by following a few simple steps.


Nail School - Day 17

We began acrylic nails today. Whenever we start a new procedure, the day goes approximately the same: First we do all of our book work (which usually consists of an exam and "theory" which is the teacher reading us the important part of our book), then the teacher demonstrates the procedure, then we get to practice the new procedure. When our teacher demonstrates, we all gather around and watch her do the service on the fake hand. This is incredibly helpful as it helps to solidify the procedure and it is a chance for the teacher to give us tips and tricks.

I was really excited to start acrylics after discovering how much I love doing wraps last week, and I wasn't disappointed! They are tons of fun. During the day we get two 15 minute breaks and a 45 minute lunch. I usually don't take either of the two short breaks, and I'm typically done with lunch in about 20 minutes. This was awesome today because I got a head start on putting a set of acrylics on my fake hand. I think I did a great job for my first time. I didn't get the acrylic (which is made of a monomer liquid and polymer powder) on the hand at all and my application was really thin. Those of you who have worn acrylics probably know that thick acrylics are not very good.

After finishing my first set of acrylics I got to do nail art on one of the seniors! S is routing for the NY Giants in the Superbowl on Sunday because her boyfriend is routing for the Patriots. But her actual team is the Cleveland Browns. So we did the NY logo, some footballs, and brown thumbs with a bulldog for the Browns.

My favorite nails! I think these turned out great! The one on the left kind of looks like a girl dog though... not quite as mean looking! 
These are the logos. I didn't do as good of a job as I usually do, my lines were really shaky. I think it's because I'm not used to painting other people's nails. 
These are the footballs on the pinkies. I think they looked awesome! She ended up using a Shellac polish (which has the UV curing feature) to top coat these nails, and I didn't get a chance to photograph it. But this is what it looked like with one thin coat of top coat. 
EDIT: I forgot to say, I got my grade on the 100 hour practical exam that I felt I did so poorly on. It was a 98%. The good grade still does not make me feel better about what I consider a poor performance though.

Thursday, May 17, 2012


The Tax Honesty Movement

The tax honesty movement (THM) is not a person or a single organization. The THM is a belief or way of thinking based upon freedom and accountability. The term "The Tax Honesty Movement" was coined in the mid 1990's, by an unknown author, to describe this growing segment of our society. There are some who have studied tax law, the Constitution, and Supreme Court tax cases, and have come to the conclusion that not everyone is subject to individual income tax. But more to the point is that they desire our government to answer the questions posed to them to show where the law makes the ordinary citizen liable for that tax and where in the Constitution they derive that power. This belief is founded upon the fact that Americans, as the rightful and just sovereigns of this nation, demand an open transparent government that is answerable to them, their creator, "We the People". In particular - honesty by the government on issues relating to taxation of the American people.
There are some who may be shocked to learn that the income tax, which is applied to people's wages, is a rather recent occurrence in American history. For the first 150 years of our nation there was no income tax. In fact, the first few times the government tried to enact such a scheme, the Supreme Court found it unconstitutional (1850-1913). If it was unconstitutional then, why is it constitutional now?
In the late 1800's and early 1900's, there were a number of corporate tax cases which ruled what was and what was not "income." In general the government can only tax via two methods - either directly or indirectly. Article 1, Section 9, of the Constitution says a direct tax is a tax that is levied directly upon a person or property, and therefore, it must be apportioned among the states based on the states population. (A primary reason we have a national census.) An indirect tax is levied upon a privilege or an action, such as a corporation, or a sales tax on certain products or business.
Congress passed the Income Tax Act of 1894 which taxed rental income from real estate. In 1895, the Supreme Court ruled the act unconstitutional, as it was a direct tax and must be apportioned.
In 1913 Congress passed the Sixteenth Amendment which authorized taxation of incomes without apportionment. To which incomes did this relate? As with all things in the legal world, context is everything; in the 1943 case of Halvering V. Edison Bros. Stores, the court stated that neither the Treasury Department nor Congress could "tax as income that which is not income within the meaning of the 16th Amendment."
What then is 16th Amendment income? In Corn V Fort, the court ruled "The individual, unlike the corporation, cannot be taxed for the privilege of existing", and "the individuals Right to live and own property are natural rights for the enjoyment of which an excise cannot be imposed." In Stratton's Independence, LTD V. Howbert, 1913, the Supreme Court stated that the 1909 corporate Tax Act "was an excise tax upon the conduct of business in a corporate capacity... measuring however, the amount of tax by the income of the corporation." Also, in the 1921 case of Merchants' Loan & Trust Co. V Smietanka the court stated, the word income must be given the same meaning in ALL income tax legislation as was given in the Corporate Tax Act of 1909. This being the case all "income" tax is based on "corporate" income. Within the 1909 Corporation Tax Law (Chap. 6, 36 stat. 11), it states that the income tax was levied "with respect to the carrying on or doing business by such a corporation..." It is therefore settled that 16th Amendment income must deal with corporate income. As wages are a person's property, and the right to work and own property cannot be taxed without apportionment, the direct tax against individual wages is unconstitutional.
There is also the question of WHO is made liable by the tax code. In Economy Plumbing and Heating Co. V United States, the Courts have stated that the revenue laws "relate to taxpayers, and not to nontaxpayers." Because Congress does not deal with nontaxpayers, their laws only cover those who ARE taxpayers. Therefore, you will never see any code which says what is not subject to tax, only what is subject to tax. This case shows that there are persons who are NOT taxpayers; how then do we know if we are one of them?
According to the IRS code for the taxpayer, taxes are paid on "wages" for "services performed by an employee for his employer." This sounds straight forward enough; But what is an employee? According to the IRS code Title 26, Subtitle C, Chapter 34, Section 3401, "Employee includes an officer, employee, or elected official of the United States, a state, any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing. The term "employee" also includes an officer of a corporation." Based on the IRS's definition for employee, are you an employee? Most of us are not. If wages are earned by employees; and you are not by definition an employee, then you are not a taxpayer (unless you volunteer to be one.)
As most of us do not earn "income" nor are we "employees", as defined by the IRS's own code; we should, therefore, not be subject to the tax. This short article cannot cover every aspect of the THM, but these examples illustrate the points which the THM endeavors to resolve, honesty between the government and the citizen. As we can see from the examples above, our laws are so convoluted, misleading, and vague, that the ordinary citizen may not be able to discern who is and who is not liable for the tax. The THM simply desires the government to answer such questions honestly and directly. As Citizens, we deserve nothing less.
The First Amendment states, "...and to petition the government for a redress of grievances." This right requires the servant government to answer the people's questions when they feel they have been wronged. Petition of redress goes beyond the history of our own government, as it was used by our founders to receive answers from the King of England to try and right the wrongs of the early colonists. However, history may be repeating itself. One of the primary reasons for our withdrawal from England, as stated in the Declaration of Independence, was: "In every stage of these oppressions we have petitioned for redress in the most humble terms: our repeated petitions have been answered only by repeated injury."
In 2001 a group of THM leaders led by Mr. Robert Schulz from "We the People Foundation", and others from around the country, coordinated a meeting with the IRS, members of the Department of Justice, and a member of Congress to discuss their grievances concerning individual taxes and tax law. It was agreed upon by all parties, the date was set, and it was even arranged to be web-cast live and recorded for posterity. A shrewd lawyer from the government decided they had better have a look at which questions would be asked at this forum, so they were provided a list of 299 questions. The government has consistently stated that the arguments of the THM are frivolous and without merit. They now had the opportunity deliver a knock-out blow and to crush every argument once and for all. Within a week of receiving the questions, the government stated they would not be attending the meeting; and they gave no other reasons.
When Robert Schultz and the "We the People Foundation" asked why the government would not answer their questions, the government's response was silence. Later, when the Treasury department was asked on camera why they did not answer the petition, they responded that they would answer the petition by enforcement. Meaning, they would use force against the people of the United States to make them comply. Mr. Schultz then brought suit against the United States to gain resolution to his petition. This case has risen to the Supreme Court to decide if the government has an obligation to answer the petition of the people. Currently the Supreme Court is deciding if they will accept the case. This will be the first time in our country's history that this question will be raised.
Who is involved in the THM? It is not one person or group. It is more an awakening by more and more American Citizens to the realization that something is not right with our tax system. The leaders of today's THM include Aaron Russo, a Hollywood film director and founder of, which is now managed by Gary Franchi from the Lone Lantern Society. Like so many of us, Mr. Russo came to the realization that something was not right in America, and he started to investigate. This culminated in a number of productions, such as Aaron Russo's Mad as Hell video presentation and the recent America Freedom to Fascism. Aaron Russo has brought more than a message of Tax Honesty, but he has awakened the American public to realize that without personal involvement, by each of us, to hold the government in check, we will continue to lose more and more rights.
Another THM leader is former IRS Special Agent Joseph R. (Joe) Banister. While working at the IRS, Mr. Banister started looking for answers to the questions posed to him by the people he was investigating. After much research and investigation he could not find the answers, so he asked his superiors in the IRS. After he was told basically to shut up and color like everyone else, Joe decided to do something else and to help bring the truth to light.
There are others from the IRS including Sherry Jackson, a former, highly decorated, revenue agent who wanted to answer the questions posed by the "We the People Foundation." We the People Foundation were offering $50,000 to anyone who could prove the average American was liable to pay taxes. Ms. Jackson wanted to prove them wrong and to collect the $50,000; but she could not find the law, even though she worked for years with the tax code while in the IRS, it just was not there. She now works to help the THM educate the American people.
People like Robert Schulz of the We the People Foundation have spent much of their own time, money, and hard work to bring the truth of individual taxation to all Americans. Mr. Schulz is taking the government to court and is fighting the battle to force our government to be honest with it's citizens and answer our questions.
Dave Champion is a paralegal and the creator of original intent, a web site dedicated to teaching all Americans the truth about America's tax scheme. Mr. Champion has spent years studying the tax code, Supreme Court case history, and the Constitution; and has determined that most of us should not be taxpayers subject to the tax code. He also assists people to live within the law as nontaxpayers.
Although that are its primary focus; the THM is about more than just taxes, it is about restoring our republican form of government. THM is about re-instilling transparency and honesty into the dealings between our government and it's people, it is about re-building trust.
The ideals espoused within the THM also kindle the desire for a return to a government that operates within the bounds set by the Constitution. Today our Constitution is ignored by our Government, unless it suits their needs.
The blame for the corruption of our current governmental system, however, does not lie totally with the government. We the People share the lion's share of the blame. We have allowed our government to go unchallenged year after year because of ignorance, cowardice, and apathy. Each session of Congress enacts more laws restricting our rights, and we do nothing. Each year the Executive passes more unconstitutional legislation, and we do nothing. Every time the legislature gives up more of its' responsibilities, we do nothing. It is time the Citizens of this great nation stop doing nothing. The THM are Citizens doing something to help restore accountability within our government.
In my opinion the THM is the last vestige of hope we have to guide this country back to being a Constitutional Republic and a freedom-loving nation. The efforts taking place within the THM and the cases being decided by the Supreme Court to determine if the government has an obligation to respond to the petitions of the people may by the last peaceful means left by the Citizen to hold its' government accountable. Once a government decides it is not accountable to the people, the people become serfs and are worth no more than chattel; and the only response becomes enforcement by the government.


Paid Tax Preparer Study on Deductible Items Without Itemizing

Common convention refers to all factors that lower taxable income as "deductions." However, paid tax preparer study teaches the existence of many expenses that adjust income regardless of whether taxpayers have itemized deductions.
The distinction is important because these adjustments - often called "above the line deductions" in tax preparation school - are available in addition to taking a standard deduction. Also, adjustments reduce adjusted gross income. Therefore, in addition to creating lower tax, income adjustments can help someone qualify for the itemized deductions that are limited by AGI.
Learning about adjustments to income begins with registered tax return preparer exam preparation. Especially common in today's economy is deduction of moving expenses incurred to take a new job. This income adjustment is allowed for costs to transport household property and any packing materials. The deduction also includes a standard mileage rate for driving a personal vehicle to the new location as well as lodging during the trip. A tax return preparer course reveals the qualification for this income adjustment. The move must occur because the new job is at least 50 miles farther from a former home than the old job was from the former home. An RTRP knows that the location of the new home is not relevant to the calculation.
An RTRP training course covers some other income adjustments. One is a deduction by armed forces reservists of expenses to travel more than 100 miles from home. These individuals are not subject to the limitations imposed on deduction of employee expenses that are itemized. Another profession benefiting from an income adjustment is teachers and other individuals who work at least 900 hours per year at a school. These employees can deduct up to $250 annually of their out-of-pocket costs for classroom materials.
Another adjustment to income is the amount of student loan interest paid during the year up to $2,500. In fact, taxpayers are entitled to this deduction even if their parents are paying the student loans. That's important because the deduction is eliminated for taxpayers with higher incomes. However, the adjustment for student loan interest is not available for anyone who is claimed as a dependent on another person's tax return or is married filing separately.
Parents who pay student loans for their children cannot take the income adjustment because only the students are legally obligated for payment of the interest. Fortunately, the IRS considers student loan payments made by parents as gifts to their children. The amount is too low for gift tax to apply. But, the consequence of receiving a gift and then having it pay a student loan means the interest is paid with the student's money. Therefore, the procedure in a registered tax return preparer job is to adjust the income on the tax return of the student.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.


Career Choice - Becoming a Business Tax Attorney

A lot of us had wanted to become lawyers back when we were kids. There is always an attractive appeal about wearing expensive suits and standing in front of a judge and a large audience, arguing a point and doing a very impressive job of it. This glamorous (or maybe unglamorous for the seasoned criminal lawyers) job is not exactly the nature of a business tax attorney.
What is the job description?
There is a load of studying involved in this field, not just because studying law does mean going through volumes of law books, but also because the IRS is a system labyrinth in itself. It is a complex system that most business owners would rather avoid and prefer to unburden over their tax attorneys. More than studying the standard requisite to be well versed in the country's constitution and laws, knowing the ins and outs of the taxing system is the priority. These lawyers handle the tax issues of individual people and/or business companies, smoothing over any potential problems with the IRS before they escalate into serious cases. It is also their job to make sure that the person or company they are working for is protected from the additional tax charges that the IRS might unduly issue towards them. This is not to discredit the Inland Revenue Service, but these things do tend to happen.
Is this job in demand?
Yes, it is. Everyone is duty bound to pay their taxes accurately and punctually. It is easy to do tax monitoring yourself because the basics at calculating due taxes is general knowledge among the working class. However, for those people with larger assets, it is more difficult for them to keep track with the complicated processes and legalities that concerns the IRS if they do it alone. This is why they hire a business tax attorney. What's more, companies and rich individuals have the means to pay for the services of one. It can be expensive for the average earner, but the fees are an investment for the security of the paying company or individual when it comes to their tax obligations and in dealing with the IRS.
What does it take to become a good business tax attorney?
You have to be clever and intelligent in dealing with the IRS and following their tax computations and procedures. You must possess charisma, aggressiveness, clout, and thorough knowledge of the law, the IRS and the tax system in order to be successful in this career.


Significant Facts From Paid Tax Preparer Study Apply to Taxpayers With Foreclosures

As home foreclosures remain a major problem, a tax preparer job continues to entail addressing an affected individual's consequences with the IRS. Many taxpayers fail to understand the impact of forgiven mortgage debt and capital gain reporting for a foreclosure.
A foreclosure is the same as a sale by the homeowner. Unfortunately, any loss for a foreclosed primary residence is not tax-deductible. However, a gain might escape tax. The same rules about sale of a homestead covered in a tax preparer training course apply to foreclosures. If the house was the taxpayer's primary residence for at least two out of the preceding five years, up to $250,000 of gain is excluded from taxable income. This amount rises to $500,000 for a married couple filing a joint tax return.
Determination of gain or loss for a home is the same process learned for sale of any capital assets from paid tax preparer study. The basis for the house is the original purchase price plus closing costs. Added to this is the amount spent for major improvements that increased the life of the home.
To identify the sale proceeds in tax return preparer work with foreclosures, a taxpayer will usually have a Form 1099-A from the former mortgage company. This provides the details about the foreclosure needed to calculate a gain or loss.
With a normal mortgage the lender has recourse against the debtor if a balance is owed after the house is seized. The sale amount in such a case is the lower of the property's fair market value or the amount of outstanding debt at the time of foreclosure less any recourse balance for which the borrower is still personally liable. A non-recourse mortgage only allows the lender to foreclose on the house and not pursue any further action against the borrower. For these mortgages, the sale amount realized is simply the mortgage balance upon foreclosure.
However, in many cases, a mortgage lender simply writes off any debt balance remaining after seizing the house instead of pursuing recourse against the borrower. This creates additional tax preparer duties to address the forgiven loan amount. Lenders report cancelled debt on Form 1099-C. This is reportable income for the taxpayer with certain exceptions.
Forgiven debt on a primary residence is not-taxed when the amount is less than $2,000,000. The figure is $1,000,000 for a married taxpayer filing separately. This legislation ends in 2012 unless extended. Amounts excluded from tax must comprise only borrowing to buy, build, or improve the property.
In addition, tax return preparer education covers other instances where forgiven debt is non-taxable. Cases of bankruptcy or insolvency permit exclusion of cancelled debt from taxable income. A bankruptcy situation requires specific discharge of the indebtedness by the court. Insolvency claims necessitate proof by filing a form with the tax return.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.


Tax Lawyer: The Ins and Outs

What is a tax lawyer (or a tax attorney)? It is a profession that is one of the most difficult to attain in the United States and elsewhere. It requires excelling both as an attorney and an accountant at the very same time. If you are either thinking of becoming a tax lawyer or wondering what is involved in the education and qualifications of one, here is a brief summary.
  • A lot of time is required to study and master tax law in law school. Of all the areas of law, this may be the most complex. It is always changing, and it seems to get more complicated all the time with the addition of new rules and regulations. The student needs to begin his course toward eventually becoming a tax lawyer by obtaining a bachelor's degree, taking courses in government, public speaking and a variety of law courses.
  • Then, about a year before graduating with his bachelor's degree, he needs to start applying to law schools. An LSAT test (Law School Admission Test, part of law school admission in the United States, Canada, Australia and a growing list of other countries) needs to be taken, and he should be thoroughly prepared for the exam. The LSAT exam takes a half a day to complete and is offered four times a year, but it cannot be taken buy a student more than three times in a two year period, so he should take great care to study and do well the first time if possible. It tests the student in three areas: 1. reading comprehension, 2. logic, and 3. verbal reasoning. Law schools that are American Bar Association accredited require an LSAT score with the student's application. Which law schools should be chosen? Law schools that have tax law programs are required.
  • Then, an internship is required. That trains a young tax lawyer in the ins and outs of tax law as he prepares for his new profession. Veteran tax lawyers are invaluable at this point to the young student, and it can help very much with boosting a career, as well as look good on a resume or in a letter of recommendation.
  • If a tax law student gets involved in a political club, law review, university tax club or other student activity while he is at school, he is likely to improve his chances of finding employment as a tax lawyer after he graduates. Don't let your busy schedule keep you from taking advantage in this area. You'll develop a network, help one another, and make like-minded friends and future colleagues for decades or even life.
  • In the United States, he must pass the bar exam, which is not easy to do. He should give himself a few months to study for the important exam. Each state has its own exam for that particular state, or a multistate exam for practicing tax law beyond that state. He should register for a testing date with his state's bar association. Resources are available to help with that endeavor.
  • Lastly, jobs should be applied for. He can contact tax legal firms in his community, or use more common resources such as online job placement services. Plus, those veteran tax lawyers and fellow tax lawyer students he met earlier can help him now. He should make sure his resume is constantly updated along the way, and he should also make sure he includes memberships, associations, and anything else that will help him get a great job. Tax lawyer professionals usually earn $64,000 and $116,000 per year. Understanding the salary range will assist him in negotiating the best compensation offer.
Once a tax lawyer graduates and gets a job, he will most likely be used more by businesses of all sizes than by individual tax payers. Accountants are normally used alone before tax lawyers are called for help for individual tax payers. And both tax lawyers and accountants can sometimes be used in conjunction by businesses with very complex cases. But since tax lawyers have greater insight into tax laws, they are most helpful in finding ways for businesses to save tax money. A tax lawyer has his work cut out for him, but he will greatly appreciated if he does a good job.

Article Source:

Monday, May 14, 2012


Tax Planning for the Small Business

Tax planning for the small business owner involves negotiating a maze of local, state and federal regulations. Smart owners conduct feasibility studies first before making any other kind of investment. Failure to do so could result in substantial losses.
Some businesses have failed completely because of excessive taxes. In most cases, the companies failed to create a payment schedule. The company directors failed to estimate the amount of taxes that would be owed. When tax-time came, they lacked sufficient funds to pay the taxes owed. Their only alternative was to declare bankruptcy.
A thorough feasibility study could have prevented the company's failure. The directors would have been able to reduce the amount of taxes owed, which is perfectly legal.
A tax planning analyst would have advised the directors to pay the company's taxes on a quarterly basis. Reducing costs in other areas, such as salaries, might have been necessary to ensure funds were sufficient to pay the quarterly taxes. An analyst might also have suggested where cuts could be made in order to protect against future losses.
If you are a small business owner or you plan to become one in the near future, you have many things to think about. You are the entrepreneur.
You could be involved in every aspect of running the company. You might need to find suppliers, hire employees and select a location. One of the first things you should do is prioritize, that is, select the things that you alone must do and delegate the rest.
Unless you happen to be trained in tax planning and analysis, this is one of the things that should be delegated. The laws concerning taxes are complicated and they change on a frequent basis.
An analyst could find that running your company in the location you selected is unfeasible. That's rare, but it does happen. If you have yet to commit to a lease, you can easily move your small business to a more tax-friendly location.
Federal, state and county credits are available for businesses opening up in specific locations. You might even qualify for a grant. Right now, a small business located in specific areas of the US qualify for federal grants and tax credits for installing renewable sources of energy, such as solar power.


Tax Relief For the Innocent Spouse

Boy meets Girl. Boy marries Girl. After five years, Boy files for divorce from Girl and skips town. Shortly thereafter, IRS contacts Girl, because Boy didn't report all his income on their last joint tax return. Girl signed the return, so she was liable for the tax. Girl screams.
Okay, so it's not exactly a classic love story. But, sadly, it's a story that rings true for many an unfortunate taxpayer -- with some variations. Sometimes, Boy passes away, leaving Girl with the unpaid taxes. Sometimes Boy is available, but bankrupt. Sometimes it's Girl who underpays her taxes and leaves Boy with the bill. Whatever the circumstance, the IRS ends up collecting tax from someone who's liable only because he or she filed a joint tax return.
But, wait -- don't ALL married couples file joint tax returns? Isn't that in the vows somewhere, right after "til death do us part" or "in sickness and in health"? Well, it's true that most married couples do file jointly, simply because it's usually simpler and cheaper to do so. But it's important to keep in mind that filing jointly is an elected practice, and can sometimes create problems.
Filing a joint return means that both individuals are responsible for the taxes owed, even if one person made the majority -- or even the entire amount-- of taxable income, and even if they later divorce. Signing a joint return means consenting to joint and several liability. Joint liability means Boy and Girl are both liable; several liability means Boy and Girl are EACH liable for the entire amount. If the IRS determines there was a deficiency in tax after the return is filed, it is authorized to go after each spouse individually. What does that mean for poor Girl? The IRS doesn't know or care that Boy and Girl are no longer married; it simply is trying to collect back taxes. If the spouse responsible for the erroneous items is inaccessible for collection, then the IRS will look to the "innocent" one.
This is where Innocent Spouse Relief comes into play. Under normal circumstances, the IRS holds both spouses equally responsible for any taxes and penalties on a joint tax return, regardless of who made a mistake. However, a taxpayer may be relieved of responsibility for paying tax, interest, and penalties because a spouse or former spouse failed to report income properly (which can include leaving out income, or claiming improper deductions or credits), if he or she meets all of the following conditions:
1) The spouses must have filed a joint return with an understatement of tax directly related to the spouse's erroneous items.
2) The taxpayer seeking relief can establish that at the time he/she signed the joint return, he/she did not know, and had no reason to know, that there was an understatement of tax.
3) Taking into account all the facts and circumstances, it would be unfair to hold taxpayer liable for the understatement of tax.
The bottom line? It's possible to keep from getting stuck with your ex's back taxes, if you can prove definitively that you were unaware of the error, and that it would be unfair to hold you responsible for the penalty. Girl may still have to deal with the pain, but at least she won't have to get stuck paying for Boy's tax mistake. And that's a happy ending all it's own.
EA Exam Review Tool tip
The rules for innocent spouse relief fall under the category "Specific Types of Representation". Approximately 25% of the questions on the Representation, Practice, and Procedures exam are from this category. A quality EA exam study guide or EA exam preparation course should provide a detailed analysis of these rules. Information on Innocent Spouse Relief is also available in IRS publication 971. If you are like me and prefer something a little easier to follow, you may prefer the streamlined explanations that quality EA exam review courses provide. Regardless of your preference in EA exam study materials, it is important that you have a solid understanding of innocent spouse relief and other specific types of representation before you sit for the IRS Special Enrollment Examination


What is a Cost Segregation Study

A cost segregation study is something that can help you determine if your business can benefit from the process of cost segregation. If you do not know what this is, it involves using a depreciation method over several years and then recalculating the amount of taxes that are paid each year due to the depreciation. You may think that it sounds too good to be true, but this is a relatively risk free process. The IRS will not examine you more closely and this can be the deterrent why many people avoid cost segregation.
You may want to have your study conducted during the construction or remodeling phase. This is the recommended time frame and when you can expect to see the best results. If you start the cost segregation study during the new construction phase you will be saving money from the beginning and this can give you a tremendous advantage.
If you are an investor you may find that the taxes you pay each year can be completely overwhelming and you may want to use this IRS approved method to help you save on all of the properties you are associated with. This can help you free up some money that you can use for other things and many investors are looking for as many ways to save money as possible.
You may want to contact a cost segregation service directly and find out how much you can save with a cost segregation study. You should never be afraid or embarrassed to ask about the financial aspects of any deal you are a part of and if you find out about the financial aspects in the very beginning, there will be no surprises later.
You may also want to use other tax deductions to help you save even more money and there may be many other things you can do to lessen the financial burden of property ownership. This is something you will want to talk to your accountant further to find out if you can do other things to save you money on your taxes each year.
A cost segregation study can be a very eye opening experience and you may be pleasantly surprised at the money you can be saving. If you have been having any type of financial difficulties a tax relief may be just what you need to help you get back on your feet.
Todd Strumpfer is a Cost Segregation Services Inc representative who is passionate about helping business owners in keeping as much of their money as possible. He provides personal service, a quarterly newsletter on the benefits of using this powerful tax-reducing strategy, and a free quote on how much tax money can be saved.


Canadian Students Claim Used University Textbooks at Tax Time

Haven't you heard? Canadian students are eligible to claim income tax credits on new and used university textbooks.
Okay. Now we'll slow down, 'cause we don't want you to miss out on this.
You can save money and earn tax credits when you trade textbooks or buy and sell used textbooks online.
Really, it's as easy as it sounds. Trade used university textbooks directly with other students and save - why buy new? Then just claim your "textbook credits" on your yearly income tax form at the end of the year, file your taxes, kick back and relax. You'll get some money from the government if or when you have some income.
If only exams were that simple.
Used textbooks for tax credits
Since January 1st, 2007 Canadian students are eligible to claim tax credits on their textbooks without filing receipts. That's right - without receipts! Whether you buy your books used or new, you get the same credit (so why buy new?)
So, how does it work?
Well okay, here's the secret. Tax credits on Canadian textbooks are calculated based on the number of months you attend part-time or full-time studies.
Just visit your university student service center and ask for a copy of your T2202A:
o Part-time students: claim your number of study months x $20
o Full-time students: claim your number of study months x $65
This is as long as you are a part-time or full-time student who studies at a recognized post-secondary in Canada and you complete your courses.
If you think you'll end up owing taxes to the government, the deadline to submit your taxes is April, 30; otherwise, there is no deadline. But, obviously the sooner you complete and submit, the sooner you get money back. And often times there are free tax clinics on your campus to help file your tax - so ask around for them.
Need more information? Check out Revenue Canada's site and search for T2202A.
Trade Textbooks Online
Don't forget the best part about this Canadian tax credit program for university students.
You don't need your Canadian textbook receipts in order to claim your tax credit. So that means you're home free. Why purchase textbooks full price at the Campus bookstore when you can cut out the middle man and buy and sell used textbooks directly from other students?
I think you know the answer to that one.
Save money. Make money. We recommend you file these notes.
Important Note: We are not tax advisors, nor do we dream of being tax advisors. So talk to your accountant. A lawyer made us say this.


Reduce Your Income Taxes and Increase Your Cash Flow

It just beats the heck out of me why every commercial property owner is not taking advantage of Cost Segregation because they should be. This tax strategy is a very lucrative opportunity for commercial property owners to accomplish many of their financial goals simply by accelerating the depreciation on their property.
Yes, that's the key to Cost Segregation. Cost Segregation is an IRS-approved tax application by which commercial property owners can accelerate depreciation and reduce the amount of income taxes owed. This savings generates substantial cash flow that owners often use to reinvest in the business, purchase more property, apply to their principle payment or spend on themselves.
The Cost Segregation engineering analysis reclassifies the property assets such that 30% to 50% of the cost basis of the property can be depreciated over 5, 7 and 15 years instead of the entire cost over the traditional 39 years. This means that the property owner will typically realize $70,000 to $100,000 in tax reduction (cash flow increase) per million dollars of cost basis in their property. Not only are the property's assets properly classified, according to the IRS, but a significant tax savings (cash flow) is available for other uses.
Five year and 7 year categories might include such items as decorative building elements, electrical for dedicated computer equipment and carpet. The fifteen-year items might include site utilities, landscaping and paving.
More common today than just a few years ago, Cost Segregation is being used by more and more commercial property owners, CPAs, financial advisors and other financial and real estate professionals on behalf of their clients. Of course, the problem has been, and continues to be, a lack of recognition of the benefits and understanding of Cost Segregation by these financial professionals.
By now you should be asking "What commercial property qualifies for this tax strategy"? Well, that's pretty easy. Any type of commercial property qualifies that has been built, bought or renovated since 1987. That means office buildings, warehouses, self-storage facilities, retail strip centers, malls, medical facilities and any other commercial property.
Your next question might be "What, at a minimum, does my cost basis have to be to make a cost segregation study viable"? Also a pretty easy question. As a rule of thumb, the cost basis of the property should be $500,000 or more. That does not mean that property with a lower cost basis would not make sense. In many cases, properties with a cost basis as low as $250,000 make sense for many property owners. These lower cost basis properties normally become an owner decision based on the benefits that will be realized.
Okay, another frequently asked question is "I have owned my property for a few years, does it still qualify"? The answer is, yes. There is a provision in the code that allows owners to claim the cost segregation benefits retroactively as if they had started the process on the date they built, bought or renovated the property. Best of all, there is no requirement to amend any previous returns.
Many owners also ask "Can my CPA do these studies?" The fact of the matter is that, in virtually every case, your CPA does not possess the engineering skills to perform cost segregation studies as defined by the IRS. They normally will contact a qualified third party engineering firm on their client's behalf to explore the financial benefits for their client.
One final question, for this article, is "Why hasn't my CPA told me about this tax strategy?" The answer, in most cases, is that they don't know about it or they don't have a relationship with a third party engineering that can actually perform the engineering analysis.
There are only a couple of reasons that cost segregation does not apply. First, if the owner do not have a tax liability (such as a commercial building owned by a non-profit organization). Secondly, "flipping" properties creates substantial depreciation recapture issues as well as capital gains issues. We normally tell our clients that they should intend to own their property for at least five years. Because it is not always possible to control all circumstances, we also suggest that the owner have an exit strategy such as a 1031 exchange.
In summary, I hope it is clear that, as a commercial property owner, you should be taking advantage of cost segregation. If you are not taking advantage of this tax strategy, you most likely should be because you are foregoing a significant infusion of cash.


Tax Help For Small Business Owners

Tax tips and tax help to assist taxpayers by describing options for tax reduction and tax cuts through lawful tax deductions.
Small business owners need all the tax help which is available. Tax deductions allow small business owners to keep more of what they earn. With a 35% marginal tax rate, the government is a silent partner who takes no risk and over one-third of the profits. Tax deductions are neither simple, straight forward, or intuitive. However, the effort to increase tax deductions is well worth the effort.
Tax Help Tip 1: Tax deductions reduce taxable income for small business owners but do not directly reduce federal income taxes. (Tax credits, such as low income housing investment tax credits, directly reduce federal income taxes) Both cash and non-cash tax deductions merit review.
Tax Help Tip 2: Cash disbursements can be expensed (used as a tax deduction in the current year) or depreciated (capitalized and depreciated or amortized over a period of years). Due to the judgment required to determine what should be capitalized, there is some discretion. For example, a local gang paints graffiti on a portion of the side of your building. You decide to repaint the entire side of the building instead of just the portion with graffiti. Is this a repair (can be used as a tax deduction) or should it be capitalized (and depreciated over time)? Some owners would elect to expense repainting the entire building. Business owners should seek counsel from their advisor regarding discretionary tax deductions.
Tax Help Tip 3: Real estate provides bountiful tax deductions for small business owners. Most real estate owners inadvertently understate depreciation and thus forego available tax deductions. The common practice is to simply separate land and long-life property (depreciated over 39 years for commercial property and 27.5 years for rental residential property). Real estate owners can typically increase depreciation by 50-100% in the first 5-7 years of ownership by utilizing cost segregation. Cost segregation can separate up to 130 items that can be depreciated over 5, 7, or 15 years (instead of 27.5-39 years). These short-life items typically comprise about 20-40% of the improvement cost basis. The increased depreciation increases tax deductions.
Cost segregation can be utilized for recently purchased or built properties and for properties owned for a period of years (1/1/87 or later). Long-term real estate owners can claim a one-time tax deduction windfall using catch-up depreciation.
Tax Help Tip 4: After a cost segregation study is prepared, the owner can "catch-up" previously under-reported depreciation (without filing any amended tax returns).
Tax Help Tip 5: Another source of "hidden" tax deductions is a careful review of your fixed asset schedule. Many fixed asset schedule include items which should have been expensed or which have been discarded (or should be thrown away). Misclassified items are another source of additional tax deduction. In some cases the depreciation life for an asset has been overstated through clerical error. A fixed asset audit typically generates meaningful tax deductions.
Other Tax Help Articles: Other non-cash sources of tax deductions are amortization, casualty losses, and charitable contributions, which are addressed in separate articles. Planning tax deductions requires a modest effort but the rewards are worth the effort. You work hard to serve your clients and earn a profit; don't give more than is legally required to your silent partner.
Cost segregation produces tax deductions and reduces federal income taxes across the country and in every size market. Below are just a few examples of cities where cost segregation generates meaningful tax deductions.
  • Memphis, TN
  • Baltimore, MD
  • Las Vegas, NV
  • Boston, MA
  • Miami, FL
  • New Orleans, LA
  • Atlanta, GA
  • Washington, DC
  • Phoenix, AZ
  • Houston, TX
  • Albuquerque, NM
  • Sacramento, CA
  • Sarasota, FL
  • Salt Lake City, UT
  • Albany, NY
  • Virginia Beach, VA
  • Oxnard, CA
  • New Haven, CT
  • Chicago, IL
  • Kansas City, MO
  • Buffalo, NY
  • Jackson, MS
  • Tucson, AZ
  • Raleigh, NC
  • Dayton, OH
  • Pittsburgh, PA
  • Scranton, PA
  • Jacksonville, TN
  • Portland, OR
  • Birmingham, AL
Cost segregation produces tax deductions for virtually all property types, including the following:Property Type:
  • Veterinary clinic
  • Single-tenant retail
  • Auto dealer
  • Amusement park
  • Community shopping center
  • Convenience store
  • Airplane hangar
  • Research and development
  • Shopping mall
  • Office warehouse
Almost every industry, including the following, can generate cost-efficient tax deductions by using cost segregation.Industry:
  • Arts, Entertainment, and Recreation
  • Frozen food manufacturing
  • Real estate lesser
  • Plastic and rubber products manufacturing
  • Warehousing and storage
  • Building supply dealers
  • Electronic and appliance stores
  • Food and beverage stores
  • Durable good wholesalers
  • Electrical component manufacturing
O'Connor & Associates is a national provider of investment real estate consulting services including commercial real estate appraisals, comparable sales land abstraction [], comparable sales units of measure [], business purchase price allocations, business valuations, cost segregation studies, due diligence, and insurance valuations. Appraisal services are provided for all commercial property types including nursing homes, discount stores, truck terminals, tennis clubs, supermarkets, country clubs, medical offices, mini-warehouses, restaurants, vacant lands, skating rinks, community shopping, centers, power centers, car wash facilities and service stations.
Patrick C. O'Connor has been president of O'Connor & Associates since 1983 and is a recipient of the prestigious MAI designation from the Appraisal Institute. He is also a registered senior property tax consultant in the state of Texas and has written numerous articles in state and national publications on reducing property taxes.


Taxes - The Bane of Civilization

Taxes are a levy imposed upon people or legal entities by a governmental entity. There are many forms of taxes including income taxes, property taxes, capital gains taxes, consumption taxes, excise taxes, retirement taxes, sales taxes, tariffs, toll taxes and transfer taxes. This article focuses on reducing income taxes for real estate owners.
Income taxes often seemed unavoidable. However, real estate investors have multiple opportunities to defer and reduce federal income taxes. Real estate owners receive income tax breaks not available to investors for many other asset classes. These include depreciation, income tax rate reduction, and the like-kind exchange. This article discusses how real estate owners can reduce income taxes by increasing the level of depreciation, using tax-deferred changes, casualty losses, maximizing expenses and planning to minimize estate taxes.
Depreciation is a non-cash expense which can both defer and reduce the level of federal income taxes. In some cases, depreciation actually eliminates federal income taxes. When an owner claims depreciation, and does not sell the property before it passes into his estate, the income deferred by the depreciation is never taxed.
Most real estate owners know depreciation defers federal income taxes. Few know real estate depreciation also reduces federal income taxes. The common perception is that depreciation simply shifts payment of income taxes from when income is earned until property is sold. However, depreciation often changes the character of income from ordinary income to capital gains income.
Consider the following example: George purchased an apartment complex in 2005. After obtaining a cost segregation study, approximately 20% of the cost basis of the improvements was allocated to 15 year property, such as landscaping, paving, sidewalks, parking lot striping and exterior signs. If George sells the property in five years, one-third of the cost basis of the 15 year property will have depreciated. Isn't it also reasonable the market value of this property will be one- third less than when the property was purchased?
More often than not, tax preparers believe the market value of short-life property is similar to the remaining basis when property is sold. This means there is no gain upon sale. Hence, additional depreciation was taken for short-life property (which could be used to reduce income taxable as ordinary income rates) while George owned the property. At time of sale, the portion of the gain equal to the short-life depreciation is taxed at the capital gains rate. This is how cost segregation reduces federal income taxes. Hence, federal income taxes are both deferred from the time income is earned until a sale occurs and the tax rate is reduced from the ordinary income tax rates to the capital gains rate.
Cost segregation can lead to meaningful deferral of federal income taxes. However, its most significant power is its ability to convert income taxed at the ordinary income rates to income taxed at the capital gains rate.
A like-kind exchange allows you to defer recognizing gain after selling of property if you purchase a "like-kind" property. Most exchanges of real estate for real estate qualify as a like-kind exchange. It is not possible to exchange real property for personal property and receive the benefits of a like-kind exchange. There may also be some limited interests in real estate, other than a fee simple interest, which do not qualify as real estate for purposes of a like-kind exchange. This might include exchanging the interest in leased land with five years remaining on the lease for fee simple title to another parcel.
The basics of executing a tax-free exchange are fairly simple. You must identify the replacement property within 45 days of the time you sell your property. You can identify up to three replacement properties or an unlimited number of replacement properties whose market value does not exceed twice the value of the property you sold. The replacement property must be purchased within 180 days of selling your property. A qualified intermediary must handle the exchange. To defer all of the gain, the market value, debt and equity of the replacement property must be equal to or greater than the market value, debt and equity of the property that was sold. Rules for like-kind exchanges are rigid, but there are experts who can guide you and allow you to legally defer substantial amounts of income.
A casualty loss for real estate investment property could include fire, flood, hurricane, tornado, or mudslide. Real estate owners incur both financial and emotional distress following this type of casualty. There's also a significant amount of work involved to coordinate with the insurance adjuster, tenants, contractors, vendors and lender. Even if the owner has complete insurance for building repairs and business interruption, a casualty loss deduction can legitimately be taken.
Casualty losses provide the opportunity to depreciate a large portion of the cost basis of real estate. The basis for calculating a casualty loss is the value of the property immediately before the casualty versus the value of the property immediately after the casualty plus insurance proceeds.
Consider the following example: a 200 unit apartment complex in Beaumont Texas was flooded with 3 feet of water on the first of two stories. The owner has casualty insurance expected to cover 100% of the cost to recover repair the property. He also has business interruption insurance to cover lost income while construction occurs and the property is leased. The initial reaction in reviewing this situation may be there is no casualty loss since the physical repairs and lost rents are covered. However, the market value of the property immediately after the casualty is substantially less than the market value of the property before the casualty. It is highly unlikely someone would purchase the property and agree to undertake the work required to negotiate with the insurance company, contractors, tenants, vendors and the lender without expecting a profit for their work. The magnitude of the casualty loss would have been much larger if the owner did not have business interruption insurance. In either case, a real estate investment group seeking to purchase the property immediately after the casualty would likely require an appropriate return for their capital and an entrepreneurial profit for the effort to renovate and lease the property.
Operating expenses are a tax deduction. Increasing operating expenses reduces taxable income and income taxes. Reviewing all cash expenditures annually can reveal operating expenses which have inadvertently been coded as a capital expenditure. Correcting this error prior to filing a tax return increases current year deductions. A fixed asset review can uncover errors which allow for substantial current year deductions. It is possible to claim current year depreciation or deductions after correcting a fixed asset listing. Corrections can be as a result of classifying operating expenses as capital expenditures. Another option for generating current year deductions is identifying assets which have been ascribed in excess of depreciation life. For example, if the cost to install substantial new landscaping was given a 39 year life, depreciation can be increased by correctly assigning a 15 year life and catching up previously under reported depreciation. Combining business and personal travel can increase deductions. Perhaps you need to schedule a business trip. If you add several days for leisure, the cost of the business trip can still be deductible. Scrutinizing personal expenses for lawful deductions can generate additional deductions. Any costs related to investment activity are deductible. This can include a computer at home for maintaining records for rental properties, mileage related to maintaining rental properties and memberships and publications related to investment activity.
Perhaps the most distasteful type of tax is the estate tax. For that tax, advance planning is necessary to substantially reduce estate taxes. While the current year exemption for 2006, 2007 and 2008 is $2 million, those with the states substantially in excess of $2 million need to consider detailed planning to minimize estate taxes. Options for reducing estate taxes include gifts during your life, partial interests, gifts upon death, bypass trusts, and a variety of other options.
Real estate investors are subject to income taxes, capital gains taxes, estate taxes, property taxes, and sales taxes. Real estate investors are fortunate that federal tax laws provide more opportunities to reduce income taxes than are available to most other business owners. In some cases simply consulting with a tax preparer may allow real estate investors to minimize taxes. However, in most cases utilizing a team of tax advisers with specialized knowledge enhances the investor's ability to minimize taxes.
The appraisal division of O'Connor & Associates is a national provider of commercial property real estate appraisal services including cost segregation studies, due diligence, insurance valuations, business personal property valuations, business purchase price allocations, Austin Commercial Comparable Sales Data [], San Antonio Commercial Comparable Sales Data [].
All commercial property types benefit from our appraisal services including multi-family housing, retail stores, hospitals, hotels, industrial properties, manufacturing facilities, medical offices, commercial offices, restaurants, self-storage units, shopping malls, shopping plazas and warehouse/distribution centers.
Patrick C. O'Connor has been president of O'Connor & Associates since 1983 and is a recipient of the prestigious MAI designation from the Appraisal Institute. He is also a registered senior property tax consultant in the state of Texas and has written numerous articles in state and national publications on reducing property taxes.


Can Anyone Invest in Tax Liens

Do you need any special background or education in order to invest in Tax Lien Certificates? In order to answer this question for you, I'd like to tell you a little bit about my background and how I got involved in tax lien investing. I think that when you hear my story you'll realize that you don't have to be a millionaire in order to invest in tax lien certificates or tax deeds and that you don't need any special education or background in order to get started. I'm not a millionaire yet and I wasn't when I started to invest in tax liens. But I do have something now that I didn't have before I started doing this, and that is a positive net worth. I didn't have a positive net worth before I started investing in tax liens. So, how did I get started?
I do not have a background in real estate, I do not have a background in finance, and I didn't have a lot of money. How I got interested in this is a long story, but I'll condense it for you. My story starts in the beginning of 1989. My husband and I had our first child, and purchased our first home (a 2 bedroom condominium). Shortly after we moved into our new home, my husband lost his job, and became self-employed. Then the bottom dropped out of the housing market in New Jersey. We had negative equity in our condo.
It wasn't until more than 10 years later that we were finally able to sell our condo. When we moved into our condominium, we had one baby. When we moved out about 12 years later, we had three growing boys. Our only saving grace was the finished basement. We were finally able to move out and I thought, "I'm going to get out while the getting's good," and rent for a while. We couldn't find a house to rent in the community that we lived in. We even looked to buy a house, and we couldn't find anything in our price range. My parents owned a house in the town that I grew up in, Millburn, New Jersey, in Essex County. This was a very desirable suburban township to live in, about 30 minutes or less from New York City by train. We were only able to live there because we rented the top half of a house from my father. During the four years that we lived there, we looked all over the central New Jersey area, trying to find a house that we could afford to buy. And as we were looking, the values of homes were rising at an incredible rate. In the four years we lived there, home prices nearly tripled!
During this time, other things were happening in my life that made me wake up and smell the coffee, and start taking our finances into my own hands. I started studying different ways to build wealth. I studied the stock market and how to trade stocks and options. I really wanted to get involved in real estate because I thought that was the quickest way to get wealthy. I thought I would try the foreclosure market and I went to foreclosure sales, but in New Jersey you need to have 20% of the selling price in certified funds at a Sheriff's sale.
I went to foreclosure sales in two different counties. These houses were selling, on the average for $300,000. These were foreclosure properties; distressed houses and most of them were not very large houses either. Because of the increasing price of houses and property throughout the state, investors were paying close to market price to get these properties. I found myself locked out of the foreclosure market, so I thought I would try the pre-foreclosure market, but at this time there was a lot of interest in that as well. I sent a lot of letters out to people that were in default, that were going to be foreclosed. And they were getting these same "letters" from many other investors as well. I did not get any good responses from my efforts, but I did get a couple of bad responses; people telling me that I was a shark and not to bother them. I didn't even bother them. All I did was mail them a letter. I didn't call them on the phone or knock on their door, but they called me to tell me how awful I was.
All I was really trying to do was get a house that I could afford for my family. After a few years I decided, well, if I can't buy my own house I'm going to buy an investment property, after all from everything that I had been studying, that was the best way to accumulate wealth.
In looking for an investment property, we found a house that we decided to purchase for ourselves. We purchases a house in Pennsylvania and for less than half of what we would have to spend for a little tiny house in New Jersey that needed to be fixed up. We bought a 2,700 square foot house on an acre of property. We decided that's where we were going to live.
Instead of investing in a home, we actually bought a home to live in. At the same time, I had been investing in tax liens. When I could not get into the real estate market, the foreclosure market or the pre-foreclosure market, I decided to try tax liens. With tax lien investing, I didn't need as much money as I did for other real estate investments. I had been reading about tax liens and tax deeds, and what a great investment they are, but there was nothing available to tell me how to do it. I had to figure it out for myself so I just started going to tax lien sales.
I happened to meet somebody else who was also trying to figure out how to invest in tax liens. We kept running into each other at tax sales. I came to find out that he was someone with a lot of money to invest, much more than me. He was after larger liens than I was. He wanted to put together a sizable tax lien portfolio. We were figuring this out together and I started working for him and building his portfolio at the same time I was building mine. I was buying smaller liens for myself and I was buying larger liens for him.
We were investing in New Jersey where typically there could be a few sales on the same day, in different municipalities. There are over 500 municipalities and they have sales throughout the year. Each municipality only has a sale once a year, but with 500 municipalities, that's a lot of sales. There are quite a few sales throughout the year so I hired a handful of people to do due diligence and bid at tax sales for me. We didn't even go into all the counties. We went to five or six counties in New Jersey and I was able to put together a large portfolio of tax liens for my new business partner over the course of the next couple of years, and a smaller portfolio for myself. As I was doing this, I started my Web site,, I wrote my own e-books and I even helped my business partner to develop a software product for tax lien investing in New Jersey.
While I was in the process of looking at properties in Pennsylvania I also went to a couple of tax deed sales there and purchased my first tax deed. When we moved in to our new home, we also owned a building lot in a desirable community, free and clear. That's how I got started in tax lien and tax deed investing. The reason that I'm telling you this is so that you can see that if I can do this with no background in real estate, no background in investing or finance, then really, anybody can do it. The first thing that I suggest you do if you want to get started investing in tax lien certificates or tax deeds, is to go to a tax sale and see what it's like.
Joanne Musa is a Tax Lien Investing Coach and Consultant who works with investors who want to learn how to buy profitable tax lien certificates and tax deeds. She is the president of Tax Lien Consulting LLC, a consulting firm for tax lien investors. She is the author of the e-books: Tax Lien Investing Secrets and Tax Lien Lady's State Guide to Tax Lien and Tax Deed Investing, available at For more tips on investing in tax lien certificates send an e-mail to