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TMF TaxesRoy

Motley Fool is a great site. Thank you for the vast array of financial information available on the Motley Fool web site. Over the past two years I have purchased Motley Fool books for seven family members and referred countless others to the web site for further information. On almost any financial subject I have been able to find information that broadens my understanding in clear and concise manner. The questions others ask often have a vague parallel that causes my own understanding of a subject to be improved.

<< But if you believe that you will have passive income problems in your S corporation, run...don't walk...to a qualified tax pro to help you out with your issues. This is not something to try on a "do it yourself" basis. >>

Been there done that with three different CPA's over the last year. Passive earnings were not the primary focus of the meetings but was part of the discussion. The advisors are believed to be good, intelligent and successful people. There is not a current problem and no one raised the red flag about a future problem. Now that I am beginning to have some notion of the rules an almost certain future problem will exist if care is not exercised.

It seems almost impossible get an overview from a professional until one already has the question formulated in exact terms. By the time the question is exactly formulated the answer is usually obvious. Any advice you have on getting advice from professionals would be most appreciated.

<< Check out IRS Publication 589 at the IRS web site. >>
The question was asked here in desperation. No one in their right mind researches the tax laws for fun. First it is ten times more expensive to research for one time use. Second the material is not in English. After much wondering around I find reference to 585 586 591 592 593 but not 589 in the Internal Revenue Code: Section Index. Could you steer me in the correct direction.

The S corp. does have substantial C corp. retained earnings. S corp. has MM interest and rental income and sometimes capitol gains. Something as simple as investment in S&P index in an up year would be sufficient to create a problem. The commercial software business is inherently unstable especially when Apple products are involved and any number of events beyond our control could create a problem.

The only solution as I see it is to become sufficiently understanding of the rules to be able to calculate and watch the threshold as it moves up and down. With a known threshold capitol gains earnings can be avoided at inappropriate times. Also at some expense to profitability I can move the revenue numbers up or down over a three month time frame. So you do not misunderstand this is not through funny accounting but through promotions, temporary price reductions, timing of new releases and updates, etc.

In all fairness to the tax professionals I believe them to be good to excellent with stationary or unchanging circumstances. They appear to be clueless about the dynamics of the software industry and to the dynamics of investments. None to my knowledge have any interest in the web. None appear to have serious interest in their own personal investments. None have the background to seriously consider the real effects of Apple's precious circumstances. Even when mentioned none seem to fathom that X money market earnings at 6% might be turned into 5 X capitol gains earnings in a space of thirteen months simply through S&P indexing.

<< Gross receipts basically means income. >>
OOPS, not sales which one professional lead me to believe. Changes the threshold considerably.

Thanks for all of your help. Your answers are clear, concise, and in English which I find refreshing.

Bill Stanley
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