It's early summer. The last thing you're thinking about is taxes. And that's good, because that's what you pay me for.
But occasionally when clients have a tax question, or are wondering how something they are doing will affect their tax situation - they don't take a minute to phone and ask me about it.
Many times actions you take and events which occur during the year can have a profound effect on your tax situation. Waiting till tax time to ask about taxes can be costly.
A client of mine inherited land in the 1970s. She sold it in 2018 for a large sum and reinvested the money in other real estate. A colleague of hers mentioned that "inheritances are not taxable." My client took this to mean that appreciated property, if it was inherited, could be sold tax free... There's a kernel of truth in that statement. When property is inherited, the person receiving it does not, in fact, owe any taxes on the inheritance.
But if the inherited property is sold 50 years later for $1 million more than it was worth when you got it, an enormous amount of tax will be due. But she didn’t call me. Everything turned out OK, but it would have turned out better if she would have just given me a short call before the transaction.
When I asked my client why she would take tax advice from a colleague (my client is an airline pilot) she really didn't have an answer.
Frequently when we hear an answer we like, we run with it. Don’t do that with taxes. Very few people who aren’t CPAs or lawyers know very much about taxes. Never was “A little information is a dangerous thing” more true than in the tax world.
You can count on maui.tax for two things:
1. Solid, accurate tax advice and counsel.
2. Our CPAs will never attempt to fly passenger jets.