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June 2005 Newsletter continued |
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EDITOR'S NOTE: Should you have questions with respect to the information contained in this newsletter or need help with your personal or business financial, tax and accounting activities, please call. |
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E-Mail Halliday@hallidaycpa.com |
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This newsletter offers factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects. No party assumes liability for any loss or damage resulting from reliance or use of this material. |
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results of these audits to fine-tune the selection formulas for business returns.
And the IRS will expand its K-1 document-matching program. This project searches for unreported income by comparing information on K-1’s with the 1040s of S firm owners, trust beneficiaries and partners.
In the past, Congress used to object to big IRS audit initiatives. But not anymore. Huge deficits have changed quite a few minds. |
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Be careful if your main home was acquired in a like-kind swap |
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Gain on sales within five years of a like-kind exchange are taxed in full. The home-sale exclusion for as much as $500,000 of gain does not apply. This rule comes into play when the owner of rental property swaps it for another unit and later converts the home into a primary residence. The five-year ownership requirement replaces the normal two-year test.
This tightening affects homes sold after October 22, 2004. Thus, like-kind exchanges prior to October 23, 2004 trigger the five-year holding period. Such swaps are not grandfathered. |