Video Summary

Is retirement income taxable to a beneficiary? I’m assuming that retirement income is coming from an individual retirement account or an IRA. If it is, then it may not be taxable. If it comes from an Roth IRA account, those, uh, distributions are not taxable. Uh, as far as they’re just not taxable. If it’s not a Roth IRA, then the money received from a retirement income is taxable. And so you do have to pay tax on whatever the distributions are. There are usually various options as to how you can take that. If someone passes away and you inherit an IRA, whether or not you can defer that or take it in a lump sum, depends on what type of IRA is involved. As far as retirement income is concerned as to whether an audit is taxable. If you have any questions, give me a call at (727) 847-2288.


Video Summary


I’m Tom Mitchell. I’m a law partner at Waller and Mitchell in New Port Richey, Florida and I want to speak to you this afternoon for a minute or two about capital gains taxation.  The capital gains tax is a tax that is levied on the sale of appreciated assets, based on the profit that you make when you sell.

There are two types of capital gains: short term and long term. Short-term are for assets held less than a year. Those get taxed as ordinary income. Long-term capital gains are those held more than a year and they get taxed at a special rate somewhere between 10 percent and 15 percent, depending on your other income.

So exactly what can be a capital asset that is subject to the tax?  Pretty much anything, other than something you hold in inventory in your business or as stock and trade, so even cars and personal effects in your house are technically capital assets that could be subject to the tax. Of course, nobody keeps any records on those kinds of things, so very seldom do we see that, unless you have a very expensive painting or something with documentation. But the most common things that we talk about are stocks, bonds, mutual funds and real estate.

Now, real estate includes your personal residence. However, there’s a specific exemption in the law for personal residences, for a married couple of gain of less than $500,000.00 and for a single-person gain of less than $250,000.00, but that’s the single exemption that’s specific to the Internal Revenue Code.

So what happens in a capital gain transaction? How do they compute the tax? Well, they take the purchase price that you paid for the property to start with and they call that “basis” in the tax trade and they add to the basis any structural improvements that you may have made to the property, then when you sell it they subtract that from the selling price to come up with the gain. Then they apply a 15 percent tax rate to the gain to get you the tax.

So let’s take an example. You buy a vacation home up in North Carolina and you pay $100,000.00 for it. The next year you put a deck on the back of the property. The deck’s worth $10,000.00, so you have got $110,000.00 invested in the property. In 2002, more than one year later, you sell the property for $210,000.00, so your gain is the $210,000.00 minus the $110,000.00, or $100,000.00 and the tax due on that transaction at the 15 percent rate is $15,000.00.

So, if you have any questions about capital gains tax or any other tax issues, give me a call. This is Tom Mitchell at Waller and Mitchell, my telephone number (727) 847-2288.



Video Summary


Good afternoon.  I’m Tom Mitchell, a partner at the law firm of Waller and Mitchell in New Port Richey, Florida; I wanted to talk to you this afternoon for a minute or two about IRAs. Everybody knows what they are, but very few people know exactly how they work.

Basically, there are two types of IRAs. There is the traditional IRA and the Roth IRA, and there are differences between them. In the traditional IRA, you get to make contributions in to the plan. The money that you put in there accrues interest or dividends and its tax free while it’s in there but when you take the money out, then it’s taxed to you as ordinary income.

On the other hand, with the Roth IRA, when you put the money in, there is no current deduction on your income tax return. The money still grows tax-free while it’s in the account but you get to take it out tax exempt at the end of the time when you retire.

So the next question is who can have an IRA? Basically, anybody who is 70 1/2 and with earned income can establish and contribute to an IRA.  When you establish and contribute to an IRA, the account is held by a person called a custodian and they will send you statements every year exactly what the balance of your account is. They also report that to the Internal Revenue Service.

So the next question is then when can I start taking money out? And the first answer is you can take money out at 59 1/2 and that’s awesome. You don’t have to take it out then but you can. And the maximum time that you can delay to take out any money out of your account is 70 1/2. And each year the custodian that I spoke of earlier calculates the balance in your account, divides it by your statistical life expectancy and then they send you a check for that amount.

If you take money out before you’re 59 ½, there’s a penalty. If you take money out after 70 1/2 that’s not sufficient to cover your required annual distribution, there’s also a penalty.

So if you have any questions about your IRA account, be sure to give me a call.  This is Tom Mitchell with Waller and Mitchell. My number is (727) 847-2288.

Taxes Video Index


Video Summary

Do I have to pay taxes on long-term capital gains?  The answer is yes, you do have to pay taxes on long-term capital gains.  But the good news is that the long-term capital gain rate at this time is 15 percent.  It may be phased out with the Bush tax cuts at the end of this year, so that’s something that you need to be cognizant of.  If you want to make a deal to sell it, you may take advantage of the 15 percent rate- it may not be here forever.  Ordinarily, your long term capital gain rate is half of what your ordinary tax rate is.

If you have long-term capital losses you can offset them against the gains.  However, long-term capital losses cannot be taken all in one year and offset against ordinary income.  I think you’re limited by $3,000.00 a year and need to carry it over year to year, but that’s something you can discuss with the accountant.  Carrying over those long-term capital losses can be a problem.

Long-term capital gain versus short-term capital gain: short-term capital gains are taxed at your same tax rate versus the reduced rate for long-term capital gains, again, offset by short-term capital losses.  So if you’d like to discuss this, give me a call at (727) 847-2288.