Broker Check
 October 30, 2002

Auto Mileage Allowance Drops        

          to 36¢ per mile for 2003, a decline from the 36.5¢ per mile for 2002.  The standard mileage rate for using an auto for medical reasons or in connection with a tax deductible move will be 12¢ a mile in 2003 down from 13¢ in 2002.  Revenue Procedure 2002-61

Assets Transferred as Part of a Divorce

          do not trigger gain or loss until the tax year when the recipient spouse actually sells the property. Normally, transfers must be made within six years of the divorce when transfers occur pursuant to a divorce decree or separation agreement. The period is one year, if not pursuant to a formal decree or separation agreement.

          Even more time may be justified as shown by an IRS private ruling involving the renegotiations of a twenty year old divorce decree. An ex-wife was to get part of her former husband's estate upon his death. But state law changed and she stood to get much more than first thought. Her ex-husband offered to buy out her stake in his estate and she agreed. Buyout is tax free according to the IRS even though long after the six year period. 
Kiplinger Tax Letter 8/30/02 p.3

Interest on Business Tax Deficiency

          is not deductible according to the IRS. A divided Tax Court has now held that the Treasury Regulation which denies a deduction for interest paid by an individual on a deficiency arising from an unincorporated business is valid.

          After taking a detailed look at the statutory and regulatory provisions involved, the Legislative history and the opinions of the Court of Appeals upholding the regulation, the Tax Court concluded the regulation was valid.  Internal Revenue Code defines personal interest as any interest allowable as a deduction for income tax purposes other than certain specified categories of interest. One category is interest paid or accrued on indebtedness properly allocable to a trade or business (other than a trade or business of performing services as an employee).

          The question for the Court was whether the interest paid by the taxpayer was "properly allocable to a trade or business". The Tax Court said that the statutory language of the Internal Revenue Code did not provide a clear answer to the dispute. Rather, like the Courts of Appeals that addressed the issue, it found the law silent or ambiguous on whether interest paid on a tax deficiency arising from an unincorporated business is properly allocable to a trade or business.

          We do not agree with the IRS and now the Tax Court's position but will follow it unless a client would like to challenge this bad decision and regulation.  Edward A. Robinson III 119 TC No. 4 (2002)


          You may have just lost the IRS tax research audit lottery. The IRS will soon be auditing 49,000 individual 2001 tax returns as part of its biggest tax compliance research project since 1988. Unlike regular audits which target suspect tax returns, these audits will hit random 1040s.  (Forbes 9/2/02 p. 54)

          We warn you that these audits are very EXPENSIVE if you are to be represented by us because the IRS is looking to verify every scintilla of information i.e. proof of marriage, proof of dependencies, everything!

Email Alert

          As of January 1, 2003 all of my newsletters will be sent by email. In order to continue receiving the newsletter please provide your email address.  The newsletter from the American Institute of Certified Public Accountants will be discontinued and not provided any longer. We have sent a test of the September Newsletter on October 28. If you thought we had your email address and you did not receive this test via email then we either don't have it or it was old and came back to us undeliverable. We have gotten six emails back as undeliverable. Please send your current email address to Audrey or call the office with it.

          Prior newsletters are saved at in the AOHL Newsletter Archives.

Attention New Jersey Residents

          The New Jersey Senate Race may determine whether your Federal tax rate goes up or down. Don't think your vote doesn't count and that you are powerless to affect your financial future.

Tony Soprano Seeks Financial Advice

          from a financial advisor at the request of his wife Carmela. This is very much in tune with real life as one spouse usually prods the other one who is in denial to seek planning advice. Tony, like many individuals, ask the financial advisor to "run it by my accountant".  Investment News 10/14/02 Vol. 6 #40 p. 1

          Howard Lisch is a financial advisor through Lisch Investment Services, where securities are offered through Securities Service Network, Inc. Member FINRA, SPIC.

          If you have any questions about these articles or any other financial matters, please call me.

          Remember, We're Here For You!