Lewis Financial Management

What Are the Tax Issues Associated With a Gain or Loss on a Primary Residence?

November 9, 2015

A homeowner may be able to claim a significant tax break on any gain from the sale of a primary residence. Here’s more on the break.

For U.S. federal income tax purposes, you may be able to exclude from income any gain up to $250,000 for a single taxpayer and $500,000 for a married couple filing a joint return. Generally, to exclude the gain, you must have owned and lived in the property as your main home for two of the five years prior to the date of the sale. If you lose money on a sale, the loss is not tax deductible.

Your Adjusted Basis
A dollar amount known as your adjusted basis determines whether you experience a gain or a loss. If you purchased or built your home, your initial cost basis typically is the cost to you at the time of purchase. If you inherit a home, the cost basis is the fair market value on the date of the decedent’s death or on a later valuation date selected by a representative of the estate.
The formula for determining your gain or loss is as follows:
Selling price – Selling expenses = Amount realized
Amount realized – Adjusted basis = Gain or loss
The cost basis may be adjusted over time due to the following conditions:
• Additions and other improvements that have a useful life of more than one year and that add to the value of your home. These may include a garage, decks, landscaping, a swimming pool, storm windows and doors, heating and air conditioning systems, plumbing, interior improvements and insulation. Note that repairs that keep your house in good condition but do not significantly enhance value, such as fixing gutters, repainting, or plastering, do not affect the basis.
• Special assessments paid for local improvements.
• Amounts spent to restore damaged property.
• Payments for granting an easement or right-or-way.
• Depreciation if the home was used for business or rental purposes.
• Others as determined by the Internal Revenue Service (See Publication 523 Selling Your Home).
The definition of a “main home,” according to the Internal Revenue Service, includes a private residence, condominium, cooperative apartment, mobile home or houseboat. It is to your advantage to maintain records of a home’s purchase price, purchase expenses, improvements, additions, and other issues that may affect the adjusted basis.

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This material was prepared by the Financial Planning Association®.

Securities offered through The Strategic Financial Alliance, Inc., Member FINRA/SIPC. Advisory Services offered through Lewis Financial Management, LLC which is not affiliated with The Strategic Financial Alliance, Inc.

Past performance may not be indicative of future results. Information presented here should not be considered a  recommendation to buy or sell a particular security. Lewis Financial Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. More information about the adviser including its investment strategies and objectives is available upon request. The material presented here is not financial advice.

What Happens to My Retirement Assets in the Event of a Divorce?

The disposition of assets within an employer-sponsored retirement plan typically is determined by a Qualified Domestic Relations Order.

Federal law requires that participants in employer-sponsored retirement plans designate their spouse as their beneficiary unless the spouse waives this right in writing. Assuming that you and your spouse adhered to this practice, a document known as a Qualified Domestic Relations Order (QDRO), which is part of a divorce settlement, specifies how retirement assets are divided.
A QDRO specifies the amount or portion of a plan participant’s benefits that are paid to a spouse, former spouse, child, or other party. A QDRO typically governs assets within a retirement plan such as a pension, profit-sharing plan, or a tax-sheltered annuity. Benefits paid to a former spouse typically are considered income for tax purposes. If you contributed to your retirement plan, a prorated share of your investment is used to determine the taxable amount.
Former spouses on the receiving end of a lump-sum distribution mandated by a QDRO may be able to roll over the money tax free to a traditional individual retirement account or to another qualified retirement plan. Following such a transfer, assets within the plan are subject to rules that would normally apply to the retirement plan. If you transfer assets within a traditional IRA to your spouse as part of a divorce decree, the transfer is not considered taxable and the assets are treated as your former spouse’s IRA.

Procedural Issues
QDROs are governed by rules established by the U.S. Department of Labor. In most instances, a judge must formally issue a judgment or approve a settlement agreement before it is considered a QDRO. The fact that you and your soon-to-be-former spouse have signed an agreement is not adequate for a QDRO to take effect. Also, following an order issued by a judge, the administrator of the retirement plan affected by the QDRO must determine whether the court order qualifies as a QDRO according to the rules of the labor department.
Note that retirement assets are part of a broader financial picture that may include your home, taxable investments, personal property, and other assets. It is not mandated that your spouse receive a portion of your retirement assets in the event of a divorce. You and your spouse may negotiate another type of arrangement that permits you to retain your retirement assets while granting other assets to your spouse. In addition, a prenuptial agreement, depending on its provisions, could potentially limit your spouse’s rights to your assets.
You may want to consult a divorce lawyer and your financial advisor to determine whether federal laws relating to retirement accounts apply to your situation.

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This material was prepared by the Financial Planning Association®.

Securities offered through The Strategic Financial Alliance, Inc., Member FINRA/SIPC. Advisory Services offered through Lewis Financial Management, LLC which is not affiliated with The Strategic Financial Alliance, Inc.

Past performance may not be indicative of future results. Information presented here should not be considered a  recommendation to buy or sell a particular security. Lewis Financial Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. More information about the adviser including its investment strategies and objectives is available upon request. The material presented here is not financial advice.

An Investors Dream-World, A Traders Nightmare

August 27, 2015

The headlines in the Wall Street Journal are amazing: “Wild Ride Leaves Investors Gasping”, “Risks Rise in US as World Staggers”, “Chinese Economy is a Black Box”, “The DOW Drops Over 1000 Points”, “Oil Prices Slide”, “Economic Forecasts for Personal Consumption in the US Very Positive”, “Will Biden Run? Drama Creates Dilemma for Obama”

The conflicting headlines and events are creating a nightmare of volatility alternating panic and greed, panic and greed. Traders trying to take advantage of this volatility are creating a self -fulfilling disaster. However, beneath the noise, investors with a Financial Independence Feasibility goal, should see this volatility as a wonderful opportunity to dollar-cost-average. Regular purchases over the next 14 months, before the election, may in hind-sight be seen as the best of times.

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Dollar Cost averaging does not assure a profit or protect against a loss in declining markets. Such plans involve continuous investment in securities regardless of fluctuating price levels. Investors should consider their financial ability to continue purchases through periods of low price levels.

Securities offered through The Strategic Financial Alliance, Inc., Member FINRA/SIPC. Advisory Services offered through Lewis Financial Management, LLC which is not affiliated with The Strategic Financial Alliance, Inc.

Past performance may not be indicative of future results. Information presented here should not be considered a  recommendation to buy or sell a particular security. Lewis Financial Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. More information about the adviser including its investment strategies and objectives is available upon request. The material presented here is not financial advice.

IN CHINA MARGIN ACCOUNT UNDER FIRE

July 15, 2015

China’s security regulator has tightened scrutiny of trading on margin. This is borrowing money to buy stock. The Chinese government is trying to stabilize its wild stock market which has dropped 20% in the last month. The government crackdown is on peer-to-peer lending (also called P2P). Maybe the Chinese are learning the lesson that all our clients know, margin is high risk and we don’t recommend it.

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Securities offered through The Strategic Financial Alliance, Inc., Member FINRA/SIPC. Advisory Services offered through Lewis Financial Management, LLC which is not affiliated with The Strategic Financial Alliance, Inc.

Past performance may not be indicative of future results. Information presented here should not be considered a  recommendation to buy or sell a particular security. Lewis Financial Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. More information about the adviser including its investment strategies and objectives is available upon request. The material presented here is not financial advice.

First REIT in China

June 26, 2015

After years of talk, China’s regulators approved the first REIT to begin trading tomorrow. The announcement stated that this would “provide an alternative way for small investors to invest in the real estate market and lower barriers to entry for investors.”

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Securities offered through The Strategic Financial Alliance, Inc., Member FINRA/SIPC. Advisory Services offered through Lewis Financial Management, LLC which is not affiliated with The Strategic Financial Alliance, Inc.

Past performance may not be indicative of future results. Information presented here should not be considered a  recommendation to buy or sell a particular security. Lewis Financial Management, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. More information about the adviser including its investment strategies and objectives is available upon request. The material presented here is not financial advice.

Wall Street Journal says ”Universities Go on a Tear”

June 25, 2015

A rapid expansion of college and university campuses is happening. Last year construction on developments were over $11 billion, the highest amount since 2008. With low interest rates, many feel that any college thinking about capital expansion should realize that now is a very good time. Cornell University, Columbia University, Univ Texas at Austin, etc. This is probably why the REITs have their eye on student housing. Expect to see more of this in more REITs.

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Source: Wall Street Journal June 24, 2015