REDUCING CAPITOL GAINS - Posted by shawn

Posted by Frank Chin on July 09, 2005 at 05:39:26:

Dave:

A neighbor at a former neighborhood had a car with PA plates parked on the streets on our block for a number oof years. Turned out he bought a place in the Poconos, had no kids, worked for an out of state trucking company, and registered to vote in PA. Told me he had the thing all figure out. He paid no NY income tax, even though he’s been living in NYC, in the building 2 doors down from me for over 20 years.

When I told the auditor neighbor of mine about this he laughed and said he can’t fool ATM records, phone records etc.

In fact, I had another friend who both worked in a company that went bankrupt, and we both started businesses with the severance pay. He went ahead to collect unemployment, and I didn’t telling him that the laws at the time were strict about looking for work while collecting. He laughed at me and said “how are they to know what I’m doing at home”.

A year or two later he said the state is taking him to court alleging that he wasn’t looking for work. Wanted him to pay everything back. He told me he’s not paying because he can’t see how the state can prove it.

Some months later, he told me he was found guilty. They asked him to bring the phone bills from a certain months to court. Then they asked him to take a typical day, and explain who he spoke to, and what they spoke about. Since he had a phone# dedicated to his import’export business, all were calls for the business. They asked him to point to any calls he made looking for work. He found none.

He was ordered to pay everything back PLUS a heavy fine but jail avoiding jail. He told me he never thought his phone records can prove where he was, and what he did.

Thinking about it, all they need are phone records to prove where you REALLY live.

Frank Chin

REDUCING CAPITOL GAINS - Posted by shawn

Posted by shawn on July 05, 2005 at 10:23:00:

My wife and I own 3 homes and are looking to sell 2 and use the money to invest in rental properties. I understand that it is possible to eliminate capitol gains if you have lived in a house for at least 2 of the past 5 years.

How does the IRS determine which property you are actually living in? Is there a simple way for me to make it appear that the one I am selling is the one we have been living in? We have not been renting any of the houses and we have only been occupying the other 2 houses on weekends for the past 3-5 years.

Re: REDUCING CAPITOL GAINS - Posted by DoubleJ

Posted by DoubleJ on July 11, 2005 at 13:29:15:

Sell the home that you live in, and one of the rentals. You wont pay gains on the one you actually lived in. Unfortunately, the one that you rented will be charging you not only gains, but depreciation recapture . From what I have understood in the tax code, whether or not you claim depreciation, you must claim the recapture when you liquidate the rental property.

You definitely want to be straight with the IRS, even if you werent straight with the lender about how much you actually lived in a home. In other words, even if you lied on your loan app, you still shouldnt lie to the IRS.

Good luck to you!

Re: REDUCING CAPITOL GAINS - Posted by River City

Posted by River City on July 11, 2005 at 06:06:25:

I cannot believe that you are asking the people on this forum to help you commit fraud. You should take heed to the things Frank is telling you, or hopefully you will end up like his friend. When you cheat the IRS, the rest of us have to pay for it, one way or another.

Re: REDUCING CAPITOL GAINS - Posted by Natalie-VA

Posted by Natalie-VA on July 08, 2005 at 09:47:04:

Shawn,

Maybe you can convert the two to rental properties, hold them for another year, and then use a tax deferred exchange to trade them into the rental properties that you really want to have.

–Natalie

Re: REDUCING CAPITOL GAINS - Posted by Frank Chin

Posted by Frank Chin on July 07, 2005 at 04:53:38:

Shawn:

My next store neighbor is an auditor for NY the State tax department. His audit unit checks on folks that claims to live at their vacation homes, such as FL, or the Poconos, not at their actual homes. These people saves money on NYS income tax, and also register their cars at their vacation locations to save on insurance.

He says on the Federal and State levels, they don’t go out of their way to look for such cheats. They’re all turned in by anonymous tips.

How do they do it?

First, they figure that if you live and work in your area, you probably have a bank account where you live, and withdraw cash from local ATM’s. They get this info checking local bank records. ATM’s usually takes a photo, and logs the time and location of your withdrawals.

Second, they check your credit card transactiosn, particularly where you do your purchases, presumably near where you live.

Third, they check phone records. If you have phone service at your vacation home also, they can compare the volume of calls made and received at each location. I assume no one uses the phone at your vacation home while you’re not there.

Then, they can audit utility bills, and make the same comparisons. I guess you don’t turn on the AC or the heating system on high when you’re not at your vacation home.

If you have children, I would assume they don’t go to school where the vacation home is.

So, that’s how they check.

Frank Chin

Re: REDUCING CAPITOL GAINS - Posted by John K Haslach, CPA, MST

Posted by John K Haslach, CPA, MST on July 05, 2005 at 15:46:48:

Are you asking for someone to help you commit fraud? Consider the penalties. People do go to jail for tax fraud. Al Capone did.

Re: REDUCING CAPITOL GAINS - Posted by brian, ut

Posted by brian, ut on July 05, 2005 at 12:15:05:

Shawn,
What address did you use on your tax returns the last several years? You think maybe this might give the IRS a clue?

Re: REDUCING CAPITOL GAINS - Posted by David Krulac

Posted by David Krulac on July 08, 2005 at 18:43:52:

and voter registrarion, where you work, what state issued your drivers licence, what church you belong to, clubs or other fraternal organizations, etc. etc.etc.