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  • Suppose a relative gives you an expensive painting. Several years later, your relative dies and you decide to sell the painting. Your accountant says you'll owe capital gain tax on the sale, and asks for your basis in order to reduce the amount on which you'll pay tax. What's your answer?

    When you sell property received as a gift, the general rule is that your basis is the donor's cost basis. If you sell at a loss, your basis is the lower of the donor's basis or the fair market value on the date you received the gift. These numbers are adjusted in some cases. But without cost records, you have no way of proving the donor's basis and no way of saving yourself tax dollars.

    If asking for records of the cost when you receive a gift seems inappropriate, explain why you want to know to help make the conversation less awkward. No one likes to pay unnecessary taxes. Having the same conversation about the cost of valuable gifts you received in prior-years is also worthwhile.

    If you're the gift-giver, offer the additional gift of presenting the cost records to the recipient at the same time. Otherwise, you may end up giving an unintended gift to the IRS in the form of unnecessary taxes.

    For more information on the steps you may need to take when selling property received as a gift, please contact us at This email address is being protected from spambots. You need JavaScript enabled to view it. or (630) 665-4440.

  • Are you wondering if your social security retirement, survivor, and disability benefits will be subject to federal income tax on your 2016 return? Generally, when these benefits are taxed is determined by your "provisional income."

    Provisional income (PI) is the product of a formula used for no other purpose than figuring out the taxable percentage of social security benefits. To compute your provisional income, total your adjusted gross income, any tax-exempt interest or similar nontaxable revenue, and one-half of your social security retirement benefits for the year. How much of your benefits are taxed depends on this "base amount."

    – Joint filers with PI below $32,000 ($25,000 for single filers) owe no tax on benefits.
    – Joint filers with PI between $32,000 and $44,000 ($25,000 and $34,000 for single filers) are taxed on a sliding scale that tops out at 50% of benefits received.
    – Joint filers with PI over $44,000 ($34,000 for single filers) are taxed on more than 50% and up to 85% of benefits.

    Note that supplemental security income payments (SSI) are not taxable. For answers to questions about your benefits, contact us at This email address is being protected from spambots. You need JavaScript enabled to view it. or (630) 665-4440. 

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By Dugan Lopatka - Accountants for Midsize Businesses in Chicago:  CPAs for Small Businesses

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Dugan & Lopatka, CPAs, PC, 104 E. Roosevelt Road, Wheaton, Illinois 60187 -MAP- T: (630) 665-4440 Fax: (630) 665-5030