Tax and financial advice from the Silicon Valley expert.

Not much time to protect assessed value of California real estate

Effective for transfers after February 15, 2021, the exemption from reassessment only applies to the excess of the fair market value of a primary residence (qualifying for the homeowner's real estate tax exemption) over the transferor's assessed value up to $1 million.

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Tax highlights of the Consolidated Appropriations Act, 2021

President Trump changed his mind and signed The Consolidated Appropriations Act, 2021 on December 27, 2020.  The Act is more than 5,000 pages.  There were not very many tax law changes in the Consolidated Appropriations Act compared to the CARES Act enacted during March 2020. Here are a few highlights

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Does waiting to apply for PPP loan forgiveness change the time for the expense offset?

the IRS clarifies that when a taxpayer satisfies all of the requirements (having qualified expenses during 2020) and expects to apply for forgiveness of the related PPP loan, those expenses aren't tax-deductible for 2020, even when the application for forgiveness isn't made until 2021.

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Due date to “undo” 2020 IRA required minimum distributions is August 31, 2020

Normally distributions from IRAs that are required minimum distributions aren’t eligible to be rolled over.  Required minimum distributions are amounts that are required to be distributed that are based on the life expectancy of the account owner once the account owner reaches age 70 ½ or usually based on the initial beneficiary’s life expectancy for an inherited IRA account.

As a relief measure, the CARES Act suspended required minimum distributions for 2020.  The reason was the value of many IRAs had fallen and distributions would deplete the value of the account.  The CARES Act was passed on March 27, 2020, so many IRA owners and beneficiaries had already taken distributions.

In addition to the prohibition from rolling over required minimum distributions, there are two other restriction blocking potential rollovers of the distributions.  (1) Beneficiaries of inherited IRAs are prohibited from making rollovers and (2) Taxpayers are limited to one IRA rollover for a 12-month period.

The IRS provided additional relief from these requirements in Notice 2020-51.  The IRS designates restoration of 2020 IRA required minimum distributions as “repayments.”  As repayments, the restoration of the funds to an IRA is not a rollover.  Since they are not rollovers, beneficiaries of inherited IRAs are permitted to make restorations and the limitation to one IRA rollover for a 12-month period doesn’t apply.

In order to qualify for this relief, a restoration must be completed by August 31, 2020.

If the deadline is missed, the only way to restore the funds will be as a rollover, subject to the once in a 12-month period limit and not available for inherited IRA accounts.

If you have a question about this matter, consult your tax advisor.

Tax and financial advice from the Silicon Valley expert.