Fuel tax credit- Australia and Mileage deduction USA

The Australian Taxation Office makes it easy for taxpayers to calculate the fuel tax credit. A website is provided to calculate the credit; http://www.ato.gov.au/fuelcreditcalculator. If you use fuel in your business; check out if you can claim fuel tax credits for the fuel used in your business at https://www.ato.gov.au/Business/Fuel-schemes/In-detail/Fuel-tax-credits---for-GST-registered-businesses/Calculating-and-record-keeping/Fuel-tax-credits-calculation-worksheet/. Australian taxpayers that file United States tax returns should be aware of the requirements for the vehicle deductions. The US returns requires detailed information on the vehicle and the miles driven. The following is the tax form for recording self-employment use of a vehicle: When did you place your vehicle in service for business purposes? (month, day, year) Of the total number of miles you drove your vehicle during 2013, enter the number of miles you used your vehicle for: a. Business, b Commuting (see instructions), c Other miles. Was your vehicle available for personal use during off-duty hours? Yes or No .Do you (or your spouse) have another vehicle available for personal use? Yes or No. Do you have evidence to support your deduction? Yes or No. Mileage is also deductible in the areas of medical miles, volunteer miles and moving miles. The standard mileage rates for 2013 are business 56.5 cents, medical/moving 24 cents and charitable 14 cent per mile. The preparation of a US return requires conversion to miles. Mileage booklets are available on request. Please see contact information below. For further questions, please contact me at 01 913-940-2646 or kkellogg123@gmail.com. http://www.expattaxes.net .

Tax Deferment on Gains under IRC Section 1031

Tax Deferment on Gains under IRC Section 1031 Tax Deferment on Gains under IRC Section 1031 Will the sale of your business or investment properties produce a net gain? Typically, taxes must be paid on that gain within the same tax year, and most people in the market to sell their business know that a gain is necessary to profitably retail the said business. However, most people do not know that Section 1031 sets forth an exception that may allow you to defer payment of the taxes from the gain to future tax years. Provided several conditions are met, many business owners could benefit from the deferment of gain-related taxes. Multiple authors on the subject state, “Professionals involved with advising or counseling real estate investors need to know about tax-deferred exchanges, including realtors, lawyers, accountants, financial planners, tax advisors, lenders, and escrow and closing agents.” Although a number of different business professionals should be familiar with tax deferred exchanges, advice should come from attorneys or accountants, not realtors, financial planners, escrow and closing agents and most lenders. These individuals may have “great ideas”, but in reality, they may have different priorities at stake, and generally speaking, one’s own attorney or accountant has the most information about how tax deferred exchanges would affect their specific assets. Some people do choose to seek help from other professionals; however, the ideas must be discussed with their accountant and/or attorney on how their assets and taxes will be affected. Section 1031 exchanges are excellent tax deferment tools. However, one must remember, professionals involved with advising or counseling real estate investors can be knowledgeable about tax-deferred exchanges, but attorneys and accountant should have the final say on the benefits of tax deferred exchanges on one’s specific portfolio. In order to be eligible for a tax deferred exchange, the properties in question must be like kind properties. Like kind properties are properties that are similar in nature, but this is viewed very broadly. The test for determining whether exchanged properties are of like kind is whether the property is of the same nature or character. A mere difference in grade or quality of the properties does not disqualify the exchange. . Section 1.1031(a)-1(b) provides that the fact that any real estate involved is improved is not material, for that fact relates only to the grade or quality and not its class or kind. Thus, exchange of urban real estate for a ranch or farm is an exchange of property of "like kind." Real property in the United States is like kind property in United States but not in foreign countries. A property in California is not a like kind property to a property in France because “Real property located in the United States and real property located outside the United States are not property of a like kind,” as stated in Section 1031(h)1. Apartment buildings may be exchanged with undeveloped land, fourplexes, single family homes and other real property, except for a residence of the taxpayer. Section 1031 states that no gain or loss shall be recognized if property held for productive use in trade or business or for investment, not including stock in trade or other property held primarily for sale, nor stocks, bonds, notes, chooses in action, certificates of trust or beneficial interest, or other securities or evidence of indebtedness or interest, is exchanged solely for property of a like kind to be held either for productive use in trade or business or for investment. Livestock of different sexes are not property of a like kind. A limited partnership interest and general partnership interest in real estate firm are not like kind property. However, several courts have held that exchanges of real property with considerably different characteristics have been treated as of like kind. Properties that are held in a business or are investment properties are eligible for the tax deferment. Section 1031 exchanges are limited to owners of investment and business properties, and the form of ownership may be: individuals, s corporations, c corporations, partnerships, limited liability companies and trusts. A Section 1031 exchange requires an exchange of properties with the original form of exchange being a simultaneous transfer of relinquished property and the replacement property, with like-kind properties. Investment property includes real estate, improved or unimproved, which is held for investment or income producing purposes. Property used in a taxpayer’s trade or business includes his office, facilities, or place of doing business, as well as equipment used in his trade can also be eligible. The following properties do not qualify under the Section 1031 deferment properties: a personal residence or vacation home, land under development for resale, property purchased to flip or resale, inventory to sell, corporation common stock, partnership interests, limited liability interests and bonds. The IRS reviews the actions of the taxpayer to determine if the property is held for investment or business, and property that is immediately placed for re-sell is considered non-exchange property (for example, purchased property that is flipped). "The legislative history [of § 1031] reveals that the provision was designed to avoid the imposition . . . the non-recognition provisions further defer tax consequences when, notwithstanding an exchange, the taxpayer maintains a continuing interest in similar property.” In this case, the taxpayer attempted to avoid taxes by structuring four exchanges with a relative, and the taxpayer was allowed to void the contract if a Section 1031 exchange was disallowed. The transaction pulled out 13.4 million cash for the taxpayer. The House committee wrote: “Because a like-kind exchange results in the substitution of the basis of the exchanged property received, related parties have engaged in like-kind exchanges of high basis property for low basis property in anticipation retained property. The committee believes that if a related party exchange is followed shortly thereafter by a disposition of the property, in effect, 'cashed out' of the investment and the original exchange should not be accorded non-recognition treatment”. The Taxpayer received a notice of deficiency and appealed. The Court citing legislative history in its decision affirmed the Commissioner. A knowledgeable tax attorney would have advised against this transaction because of the legislative history, and it is crucial that individuals considering a tax deferred exchange consult their accountant or attorney before any decisions are made. In order for a tax deferred exchange to be approved, several conditions must be met in addition to the like kind property rule. The conditions in a tax deferred exchange that must be met are: a relinquished property must be sold, and a replacement property must be purchased with the new property and equipment being like kind properties. There are specific time limitations that must be complied with, and eligibility for tax deferred exchanges can be denied if these time limits are not met. The replacement property must be identified by midnight of the 45th day after the taxpayer transfers the relinquished property (45-day identification period). Secondly, the replacement property must be received by midnight of the earlier of the first of 180th date after the taxpayer transfers the relinquished property; or (2) the due date including extensions of the taxpayer’s income tax return for the taxable year in which the taxpayer transferred the relinquished property. Since the deferment of tax is governed by the IRC, there are exceptions. Originally, the IRS said the sale and purchase must occur at the same time or in other words, there could be NO amount of time between the transfer of the relinquished property and purchase of replacement property in an exchange. This was changed in Starker v. U.S. . The Starkers had a delayed purchase of a replacement property, and the IRS denied the tax deferment. The Starkers paid their taxes and filed a lawsuit in the District Court in Portland, Oregon.# District Judge Gus Solomon ruled in favor of the Starkers without mentioning the time of the transactions, and the IRS filed suit against Taxpayer T.J. Starker on a different exchange case. Judge Solomon reversed his prior decision. Under the SAME facts, he held there was no exchange and that a taxable sale had taken place. This case reversed the first decision. Judge Solomon wrote he was mistaken in Starker I and stated, “My opinion in Starker I has been given wide publicity. I believe that it is desirable that my opinion in this case be published to prevent the mischief that I believe Starker I has caused.” He further stated “that T.J. Starker had exchanged real property for a promise that was not like-kind under the statute and the growth was INTEREST.” The case was appealed to the Ninth Circuit which ruled that Starker I was precluded by collateral estoppels. Most importantly, the Court could not find a requirement for simultaneity in the 1031 tax code. The Starker trilogy opened the door for deferred exchanges. They are more complex but allow flexibility. A reverse exchange allows for acquisition of replacement property through an exchange accommodation title. The replacement property may be held for up to 180 days while the relinquished property is sold. Qualified exchange accommodation services are used to assist in a Section 1031 exchange. The services will provide the qualified exchange accommodation agreement (QEAA), closing agent, land title holder, to assist in the location of a replacement property. The service costs are extremely high. Most title companies will provide the QEAA for a minimal cost of preparing the agreement. The IRS allows an additional 5 days if a QEAA agreement is used. The additional five days; originates in basic contract law, that a contract is voidable within the first three or five days. The IRS will treat an exchange provider as the beneficial owner of property for federal income tax purposes if the QEA provider holds title . The property held in a QEAA may qualify as either replacement of relinquished property. The QEAA may receive cash on an exchange, without triggering a boot or gain, and the cash shall be included in the replacement property’s basis. Because of the Starker and Terayu case, the Internal Revenue Service continues to review transactions that “park” properties due to the increased risk of tax fraud. A parked property is one that is originally owned by one family member, then exchanged and sold to another family member and resold to the original family member. While the property was “parked” the lot becomes improved or family members remove cash as in the Terayu case. A 1031 exchange requires an exchange of properties with the original form of exchange being a simultaneous transfer of relinquished property and the replacement property. To receive the full benefit of the tax deferment, the replacement property should have a greater value then the original property. If cash is received, then the taxpayer will have taxes due on the amount of the cash. Cash may also be described as the “boot” and include money, debt relief, or the fair market value of "other property" received by the taxpayer. The term “Boot” is not defined in the Internal Revenue Code but has its roots in old English meaning cash or equivalents. The equivalents are notes, or debt instruments that reduce the value in the exchange. When the value of the exchange is reduced then the tax benefit is reduced. For the maximum tax deferral, the value of the replacement property should be greater than the relinquished property. The IRS allows for postponement of specific acts in Section 1031 when the taxpayer is serving in the Armed Forces of the United States or serving in support of such Armed Forces, in a combat zone, or with respect to a contingency operation. Presidential disaster areas receive postponement as the Service may authorize postponement. To use IRC Section 1031, Form 8824, Like-Kind Exchanges must be filed with your tax return of the year of the exchange. The form requires: a description of the property, dates the property was identified and transferred, the value of the property, value of the property received, gain or loss on the transaction, boot, adjusted basis and whether there is a relationship between the parties to the exchange. If a taxpayer does not meet one of the time exceptions, then the limit must be complied with. For example, Orville and Helen Christensen, taxpayers, appealed the tax court's decision of deficiency in tax of $ 218,789 for 1989. The tax court found that the taxpayers' transfer of a rental property did not qualify as a like-kind exchange under 26 U.S.C. § 1031(a) because the exchange was completed after the due date for their tax return. Taxation laws require that the time limitations be met. The tax court found that the taxpayer presented no credible evidence that they had identified the Pleasant Hill or Skyland properties as replacement properties during the applicable 45-day period. That finding is not clearly erroneous. Attorneys understand the procedural issues when time requirements are not meet. The Court has ruled that citizens need to know the filing dates of individual, and probate estates. If used correctly, tax deferred exchanges can be very beneficial to business owners and investors because it allows deferred taxation. Deferred taxation can assist in investment growth for the future. Although Section 1031 was a long legal history with set rules and guidelines about the specifications of exchanges, a knowledgeable taxation attorney or accountant can provide the necessary knowledge to enhance exchange deferment. 26 USC § 1031 - Exchange of property held for productive use or investment (a) Nonrecognition of gain or loss from exchanges solely in kind (1) In general No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment. (2) Exception This subsection shall not apply to any exchange of— (A) stock in trade or other property held primarily for sale, (B) stocks, bonds, or notes, (C) other securities or evidences of indebtedness or interest, (D) interests in a partnership, (E) certificates of trust or beneficial interests, or (F) choses in action. For purposes of this section, an interest in a partnership which has in effect a valid election under section 761 (a) to be excluded from the application of all of subchapter K shall be treated as an interest in each of the assets of such partnership and not as an interest in a partnership. (3) Requirement that property be identified and that exchange be completed not more than 180 days after transfer of exchanged property For purposes of this subsection, any property received by the taxpayer shall be treated as property which is not like-kind property if— (A) such property is not identified as property to be received in the exchange on or before the day which is 45 days after the date on which the taxpayer transfers the property relinquished in the exchange, or (B) such property is received after the earlier of— (i) the day which is 180 days after the date on which the taxpayer transfers the property relinquished in the exchange, or (ii) the due date (determined with regard to extension) for the transferor’s return of the tax imposed by this chapter for the taxable year in which the transfer of the relinquished property occurs. (b) Gain from exchanges not solely in kind If an exchange would be within the provisions of subsection (a), of section 1035(a), of section 1036(a), or of section 1037(a), if it were not for the fact that the property received in exchange consists not only of property permitted by such provisions to be received without the recognition of gain, but also of other property or money, then the gain, if any, to the recipient shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property. (c) Loss from exchanges not solely in kind If an exchange would be within the provisions of subsection (a), of section 1035(a), of section 1036(a), or of section 1037(a), if it were not for the fact that the property received in exchange consists not only of property permitted by such provisions to be received without the recognition of gain or loss, but also of other property or money, then no loss from the exchange shall be recognized. (d) Basis If property was acquired on an exchange described in this section, section 1035 (a), section 1036(a), or section 1037 (a), then the basis shall be the same as that of the property exchanged, decreased in the amount of any money received by the taxpayer and increased in the amount of gain or decreased in the amount of loss to the taxpayer that was recognized on such exchange. If the property so acquired consisted in part of the type of property permitted by this section, section 1035 (a), section 1036(a), or section 1037 (a), to be received without the recognition of gain or loss, and in part of other property, the basis provided in this subsection shall be allocated between the properties (other than money) received, and for the purpose of the allocation there shall be assigned to such other property an amount equivalent to its fair market value at the date of the exchange. For purposes of this section, section 1035 (a), and section 1036 (a), where as part of the consideration to the taxpayer another party to the exchange assumed (as determined under section 357 (d)) a liability of the taxpayer, such assumption shall be considered as money received by the taxpayer on the exchange. (e) Exchanges of livestock of different sexes For purposes of this section, livestock of different sexes are not property of a like kind. (f) Special rules for exchanges between related persons (1) In general If— (A) a taxpayer exchanges property with a related person, (B) there is nonrecognition of gain or loss to the taxpayer under this section with respect to the exchange of such property (determined without regard to this subsection), and (C) before the date 2 years after the date of the last transfer which was part of such exchange— (i) the related person disposes of such property, or (ii) the taxpayer disposes of the property received in the exchange from the related person which was of like kind to the property transferred by the taxpayer, there shall be no nonrecognition of gain or loss under this section to the taxpayer with respect to such exchange; except that any gain or loss recognized by the taxpayer by reason of this subsection shall be taken into account as of the date on which the disposition referred to in subparagraph (C) occurs. (2) Certain dispositions not taken into account For purposes of paragraph (1)(C), there shall not be taken into account any disposition— (A) after the earlier of the death of the taxpayer or the death of the related person, (B) in a compulsory or involuntary conversion (within the meaning of section 1033) if the exchange occurred before the threat or imminence of such conversion, or (C) with respect to which it is established to the satisfaction of the Secretary that neither the exchange nor such disposition had as one of its principal purposes the avoidance of Federal income tax. (3) Related person For purposes of this subsection, the term “related person” means any person bearing a relationship to the taxpayer described in section 267 (b) or 707 (b)(1). (4) Treatment of certain transactions This section shall not apply to any exchange which is part of a transaction (or series of transactions) structured to avoid the purposes of this subsection. (g) Special rule where substantial diminution of risk (1) In general If paragraph (2) applies to any property for any period, the running of the period set forth in subsection (f)(1)(C) with respect to such property shall be suspended during such period. (2) Property to which subsection applies This paragraph shall apply to any property for any period during which the holder’s risk of loss with respect to the property is substantially diminished by— (A) the holding of a put with respect to such property, (B) the holding by another person of a right to acquire such property, or (C) a short sale or any other transaction. (h) Special rules for foreign real and personal property For purposes of this section— (1) Real property Real property located in the United States and real property located outside the United States are not property of a like kind. (2) Personal property (A) In general Personal property used predominantly within the United States and personal property used predominantly outside the United States are not property of a like kind. (B) Predominant use Except as provided in subparagraphs (C) and (D), the predominant use of any property shall be determined based on— (i) in the case of the property relinquished in the exchange, the 2-year period ending on the date of such relinquishment, and (ii) in the case of the property acquired in the exchange, the 2-year period beginning on the date of such acquisition. (C) Property held for less than 2 years Except in the case of an exchange which is part of a transaction (or series of transactions) structured to avoid the purposes of this subsection— (i) only the periods the property was held by the person relinquishing the property (or any related person) shall be taken into account under subparagraph (B)(i), and (ii) only the periods the property was held by the person acquiring the property (or any related person) shall be taken into account under subparagraph (B)(ii). (D) Special rule for certain property Property described in any subparagraph of section 168 (g)(4) shall be treated as used predominantly in the United States. (i) Special rules for mutual ditch, reservoir, or irrigation company stock For purposes of subsection (a)(2)(B), the term “stocks” shall not include shares in a mutual ditch, reservoir, or irrigation company if at the time of the exchange— (1) the mutual ditch, reservoir, or irrigation company is an organization described in section 501 (c)(12)(A) (determined without regard to the percentage of its income that is collected from its members for the purpose of meeting losses and expenses), and (2) the shares in such company have been recognized by the highest court of the State in which such company was organized or by applicable State statute as constituting or representing real property or an interest in real property.

IRS delays tax filings.

United States Australia Tax Service is a boutique international tax firm, focused on assisting individuals, expatriates, and businesses with US, AU, and NZ tax planning, consulting, and return preparation where there is a connection with either the United States, Australia, and/or New Zealand. While the IRS does not have offices in Australia, we serve clients all over Australia and the United States from offices in Adelaide, Sydney, and Los Angeles California. The IRS announced it will begin processing tax returns on January 30, 2013. The best option for taxpayers is to file electronically. The IRS will not process paper tax returns before the anticipated Jan. 30 opening date. There is no advantage to filing on paper before the opening date, and taxpayers will receive their tax refunds much faster by using e-file with direct deposit. Most of our clients will be filing later in the season. However, if you have any questions please call or email us at USAUTAX.COM. The following tax forms will be accepted by the IRS in late February or into March after updating forms and completing programming and testing of its processing systems. A specific date will be announced in the near future. • Form 3800 General Business Credit • Form 4136 Credit for Federal Tax Paid on Fuels • Form 4562 Depreciation and Amortization (Including Information on Listed Property) • Form 5074 Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands • Form 5471 Information Return of U.S. Persons With Respect to Certain Foreign Corporations • Form 5695 Residential Energy Credits • Form 5735 American Samoa Economic Development Credit • Form 5884 Work Opportunity Credit • Form 6478 Credit for Alcohol Used as Fuel • Form 6765 Credit for Increasing Research Activities • Form 8396 Mortgage Interest Credit • Form 8582 Passive Activity Loss Limitations • Form 8820 Orphan Drug Credit • Form 8834 Qualified Plug-in Electric and Electric Vehicle Credit • Form 8839 Qualified Adoption Expenses • Form 8844 Empowerment Zone and Renewal Community Employment Credit • Form 8845 Indian Employment Credit • Form 8859 District of Columbia First-Time Homebuyer Credit • Note: this is for carryover credit for homes purchased before 2012; the credit expired 12/31/11 • Form 8864 Biodiesel and Renewable Diesel Fuels Credit • Form 8874 New Markets Credits • Form 8900 Qualified Railroad Track Maintenance Credit • Form 8903 Domestic Production Activities Deduction • Form 8908 Energy Efficient Home Credit • Form 8909 Energy Efficient Appliance Credit • Form 8910 Alternative Motor Vehicle Credit • Form 8911 Alternative Fuel Vehicle Refueling Property Credit • Form 8912 Credit to Holders of Tax Credit Bonds • Form 8923 Mine Rescue Team Training Credit • Form 8932 Credit for Employer Differential Wage Payments • Form 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit Australian tax returns for the tax year ending 30 June are generally due on 31 October of the same calendar year. Extensions can be made available. Each year, the Australian Taxation Office (ATO) publishes TaxPack, a free document designed to help individuals complete their return. TaxPack is available free from most newsagents and can also be downloaded. Extensions are automatically available to those individuals using a Registered Tax Agent operating on an extended lodgement system.