In a groundbreaking 1998 behavioral economics study, Berkeley professor Terrance Odean found that as a group, investors tend to hold on to their losers, hoping for a rebound, and instead sell their winners.
That’s often a bad idea, and not just because losers may keep descending. Hanging onto those losers also keeps you from taking advantage of some smart tax planning.
Influential Yale economics professor Robert Shiller favors a system of taxation that would keep inequality in check. He argues that such a system would help maintain harmony in the United States and benefit all, including the well-to-do.
Shiller is especially well known as co-creator of the S&P/Case-Shiller home price indices, and for two prescient calls: a 2000 forecast of the dot-com bubble’s bust, and a 2005 prediction that the housing boom would cause a recession.
The U.S. Court of Appeals ruled Wednesday against a couple who claimed a sizeable deduction after donating their house to be burned in a firefighter training. Circuit Judge David Hamilton wrote in the opinion:
“Taxpayers Theodore R. Rolfs and his wife Julia Gallagher purchased a three-acre lakefront property in the Village of Chenequa, Wisconsin. Not satisfied with the house that stood on the $675,000 property, they decided to demolish it and build another. To accomplish the demolition, the Rolfs donated the house to the local fire department to be burned down in a firefighter training exercise. The Rolfs claimed a $76,000 charitable deduction on their 1998 tax return for the value of their donated and destroyed house. The IRS disallowed the deduction, and that decision was upheld by the United States Tax Court… To support the deduction, the Rolfs needed to show a value for their donation that exceeded the substantial benefit they received in return. The Tax Court found that they had not done so. We agree and therefore affirm.”
Apparently these types of claims, though unusual, are not all together unknown, and the court found that the value of the donation would need to take into account the fact that it was made with conditions. In this case, the condition is the house being burned to the ground left the house with “essentially no value” according to the decision.
On Tuesday, two Democratic U.S. senators — Carl Levin and Kent Conrad — piled a laundry list of long-standing proposals into their “Cut Unjustified Tax Loopholes Act.”
Monday, February 6
Comment letters due on the Financial Accounting Standards Board’s proposed accounting standards updating the cumulative translation adjustment following the sale of a nonprofit or foreign business.
Tuesday, Feburary 7
The U.S. Congress Joint Economic Committee (JEC) will hold a hearing on extending the two-percentage-point payroll tax cut and continuing emergency federal unemployment insurance benefits through the end of 2012, including examining the economic impact of extending these policies versus allowing them to lapse.
(Reuters) – Facebook, the social network giant on the verge of a huge initial public stock offering, pays an unusually high tax rate, but that is likely to change soon, analysts said.
At 41 percent on an effective basis, Facebook’s tax rate is well above rates paid by larger, more mature high-tech groups, and above the top U.S. corporate income tax rate of 35 percent.
A major IRS and Justice Department crackdown on identity theft shows how widespread and common it has become. Tuesday the tax collector announced that a national sweep had led to 69 indictments, targeting 105 people in 23 states, including cases where people are alleged to have impersonated the dead, the mentally disabled and citizens of Puerto Rico in order to get their hands on millions in fraudulent tax refunds.
The government asserts that it stopped $1.4 billion in bad refunds last year, up from $262 million in 2010.
(Reuters) – A U.S. government crackdown on suspected identity thieves filing false tax returns stopped $1.4 billion in bad refunds from being sent out in calendar 2011, the tax-collecting Internal Revenue Service said on Tuesday.
The IRS and the Justice Department together stopped 260,000 bad returns last year, IRS Deputy Commissioner Steve Miller said.
In his Saturday column in the New York Times, Pulitzer-prize winning reporter James B. Stewart tallied up his tax rate and found it to be a shocking 74 percent of taxable income. Is he possibly the most taxed man in America, he wonders?
Tax rates have been much discussed of late, with Mitt Romney’s tax returns disclosing his 13.9 percent tax rate, and the appearance of Debbie Bosanek, Warren Buffett’s secretary, at the State of the Union address last week to boost President Obama’s push for more tax equity. Bosanek is reported to pay a 35.8 percent tax rate, while her famous boss says his rate is 17.4 percent of his taxable income.
Tuesday, January 31
1. Senate Finance Committee Chairman Max Baucus to convene a hearing to discuss the 50-plus tax provisions that expire annually or biannually, termed “tax extenders.” The Joint Committee on Taxation has estimated that a one-year extension of all would cost $37 billion over the next decade. Witnesses will be:
Dr. Rosanne Altshuler, Professor and Chair of the Economics Department, Rutgers University
Dr. Jason J. Fichtner, Senior Research Fellow, Mercatus Center, George Mason University
Calvin H. Johnson, Andrews & Kurth Centennial Professor of Law, The University of Texas School of Law
Caroline L. Harris, Chief Tax Counsel and Director of Tax Policy, U.S Chamber of Commerce
2. The Financial Accounting Standards Board to hold an open meeting with its investors’ technical advisory committee in Norwalk, Connecticut.