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Financial Planning / Tax Strategies
|Subject: A good day||Date: 4/7/2011 10:44 PM|
|Author: ptheland||Number: 113024 of 121061|
or - Why I do this
So today's (or is it this year's?) story features a widow. Husband died a couple of years ago and their tax preparer of many years followed suit late last year. A friend of hers refers her to me for her 2010 taxes.
At first, it seems pretty ordinary for a retired widow: interest, dividends, social security, some pension income - all well organized. Then there's a rental property.
I start dropping all of the info into my tax program almost by rote. I get to the rental and realize I need to pick up depreciation from last year's return. She brought the last 3 years returns, as I requested.
So I open up that return and start praying that the prior preparer was kind enough to include depreciation schedules with the return. I don't find them. I look at the 2008 return, hoping to find them there. No luck. Ditto for 2007.
I take a closer look at the 2009 schedule E. No depreciation expense. None on 2008 or 2007, either. No wonder I can't find the depreciation schedules.
So I call up the client and ask her when they bought the rental house. She couldn't remember exactly, but was pretty sure it was 1961 or 1962. They lived in it for a couple of years, then moved to the house she currently lives in and started renting out the former residence.
Does she remember claiming depreciation on the house? Oh, yes. It was fully depreciated many years ago. I thank her for the info and head back into the return.
And then it hits me like a ton of bricks. It's not fully depreciated any more. Her husband died in 2008. The property got a step up in basis at that time. And she gets to start depreciating the property all over again. Being in California - a community property state - it's even better. The WHOLE property gets a step up, not just his half.
I take a quick look at Zillow just to get a idea of the house's value so I can run some rough numbers. Claiming the depreciation saves her a couple thousand dollars in tax. And I can amend the prior two years to get a couple thousand for each of those years as well.
Then I get to make one of the easier phone calls of the season, to let her know what I found. She is absolutely astounded. After reassuring her several times that this is perfectly legal, she agrees to get an appraisal as of the date of death and to let me amend the prior returns.
I've now got a very happy client, I'm feeling pretty good to catch something like that, and I get paid to boot. It doesn't get much better than this.
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