Claimed Lawyer ProfileQ&A
- Tax Law
- Business Law
Additional Practice Areas
- Accounting for Business and Individuals
- Tax Preparation for Corporations and Individuals
- Tax Resolution and Settlements with the IRS
- Free Consultation
- Credit Cards Accepted
Jurisdictions Admitted to Practice
- 7th Circuit
- U.S. Bankruptcy Court Eastern Division Wisconsin
- U.S. Bankruptcy Court Northern District of Illinois
- U.S. District Court Eastern Division of Wisconsin
- U.S. District Court Northern District of Illinois
- U.S. Tax Court
- Chicago-Kent College of Law, Illinois Institute of Technology
- J.D. (2004) | Tax Law
- Honors: Cali Award
- Indiana University - Indiana University-Bloomington
- B.A. (1980) | Economics and Mathematics
- Activities: Intramural Basketball
- State Bar of Illinois
Articles & Publications
- Understanding and Beating the Means Test
- Jon Dowat
8 Questions Answered
- Q. If I receive money from sale of parent's home after their death, can I claim it on next years taxes
- A: Your are dealing with about three issues here and it is not that simple. First, income should be reported in the year it was received. Even if you do not cash the check the IRS treats it as if you received it, that is called "constructive receipt," which means we will pretend you received it so we can tax it. Second, if the proceeds of the sale of the home are paid to you the lender or title company will issue a Form 1099-S to you and they will send a copy to the IRS. Even if the IRS does not "catch" you on the constructive receipt rule, the IRS will know that you received the money because of the form 1099-S. The IRS considers the profit you receive from selling a home as "taxable gain." Cashing the check next year does not stop the 1099-S from being sent to the IRS. Third, there is some good news. If you inherit your father's home and you sell it there will be no gain. To understand see the tax lesson below. TAX LESSON: (READ THIS FIRST BEFORE CONTINUING). If one buys a home for $350,000 that is the basis. If the home has been upgraded, for instance an addition was added that cost $30,000 the the new basis is $380,000. Say the home is sold ten years later for $450,000 here is how one calculates the basis. $350K (purchase price) + $30K= $380K(new basis). Here is how the tax is calculated (be patient we are getting to the good news): $450K (sales price) minus $380K (basis) = $70K (taxable gain). Now stick with me here is the good news. If the above scenario applied to your dad when he sold his house he would have to pay tax on $70K taxable gain. READY, the good news is that you when you inherited the home you receive a "step up in basis." This means that the basis of your dad's home the at the moment you inherited the basis of the home was "stepped up" to the current market value or essentially the proceeds of the sale. So, you inherited the home at the sales price. Given that the proceeds of the sale are the same as the basis there is no gain, ergo... no tax. To review: If your dad sells the home the sales price minus the basis will be a taxable gain.
- Q. Discrepancies on Bankruptcy Filings
- A: If your allegations are true, your ex has lied to the Court. With all deference to Counselor Denison, that your wife is getting away with fraud should not be a concern of yours. You obviously could not live with your wife, that is why you got divorced. Why then do you attempt to undo the divorce by monitoring your wife's bankruptcy? Yes, it seems she has committed fraud. But unless the fraud impacts you adversely you should acknowledge that your wife's dishonesty is probably one of the reasons you got divorced and leave it at that. Your obsession about what your ex-wife, who lives in a different state, is doing or not doing is wasting your time. This activity is preventing you from living your own life, and is generally unhealthy. Hopefully, your concern about your ex-wife's apparent fraud is not motivated by catching her in wrong doing so you can extract revenge for the divorce. You have no legal obligation to report this, you do not have the experience or training to determine if she actually has committed fraud. Time spend pursuing your ex-wife's possible fraud robs you of life. Do not build your emotional life around the weaknesses of other people, let it go!
- Q. Along with my other debts, I owe back taxes to the IRS. Can Chapter 13 bankruptcy help?
- A: I am an Illinois attorney, since I am a tax and bankruptcy attorney I have experience with how to treat taxes in chapter 13. Here are some things chapter 13 can do for your tax problems. > The Chapter 13 will put an immediate stop to IRS collection activities. > The Chapter 13 will Allow you to pay back the Federal and State taxes without interest (zero interest ). Outside the Chapter 13, if you do an installment plan with the IRS, you would pay interest to the IRS over the entire time you are paying them back. > If the taxes are old enough the bankruptcy code will allow you to pay back the taxes for "pennies on the dollar." This is called a bankruptcy "cram down." > Chapter 13 will allow you to strip your second mortgage from your title and pay back tje second mortgage like a credit card. That means you may be able to "cram down the second mortgage. You are in Illinois call me for further information: Thinking Outside the Box Law, Inc./Jon Dowat attorney at law.
- Q. If I sell a condo for a $40,000.00 loss, how much of that can I write off on my taxes & over what time span?
- A: The amount of the "write off" depends on the nature of the Condo. Was the Condo you personal residence or was it an investment property. If it was a personal residence you will not be able to claim the loss. If it was an investment property you will have generated an ordinary loss. One can use this loss ($40K) up to 100% of your taxable income. For example if it was an investment property your $40,000 loss can be used to offset up to $40,000 of taxable income regardless of the nature of the income (dividends, interest, capital gains etc). If you have only $30,000 of income you can use $30,000 of the loss to offset. You will have to carry the remaining $10,000 to the following year and in some instances you can carry the loss back.
- Q. I'm a student -- how much can I make before I have to file taxes?
- A: The answer is simple. Under the new tax code you no longer receive a personal exemption. However, the good news is your standard deduction went from $6,300 to $12,000. If you have no other deductions then you can earn $12,000 and pay no taxes. However, if you are in the 25% tax bracket and you pay college tuition you may be able to earn another $10,000. The college tuition tax credit can offset up to $2,500 in taxes allowing you to earn another $10,000 in income with no tax. (assume 25% tax bracket) Depending on your particular circumstances you might be able to earn $22,000 and pay zero taxes to the IRS>
- Q. I'm sliding further into debt and want to know when is the most strategic time to file for bankruptcy, if necessary.
- A: The ideal time to file bankruptcy is when your personal or business debt is so overwhelming that would not be a able to pay it off, also when you desire a fresh financial start. By your hesitancy to file bankruptcy, is like a lot of people, you think that bankruptcy is somehow a negative event. The doctors says "you have a severe lung infection, which could lead to more serious lung diseases. You will have to take a very strong ant-biotic and it may have some side effects, ... but it will cure the lung infection and you will feel much better." YOU respond by saying "what would be the most strategic time to take the medicine?" The doctor replies "When do you want to get better?" You have a basic misunderstanding of bankruptcy and perceive the bankruptcy as the problem. This is not the case. You have multiple creditors calling all hours of the day, credit card companies suing you, the bank threatening to foreclose on your home. Bankruptcy is not the problem... it is the medicine that cures your financial problems, stress, and worries about how you are going to pay all your debt etc. The question is not when is the best time to file the bankruptcy, the real question is when do you want to be free from financial worries and stress about your future.
- Q. My 2016 taxes were rejected... What do I do?
- A: It is not clear from the question what the problem is. The IRS does not send a tax return back saying it was rejected. However, the one exception is when a taxpayer submits a non traditional tax return. For instance a tax return that states that the taxpayer "is a sovereign nation" and not subject to to income taxes, or a tax return has all zeros, or the part of the return says signed under penalty of perjury is scratched out or otherwise modified. Therefore, save for the "TAX PROTESTER" type tax returns the IRS does not outright reject a tax return. Something else must be going on, please submit a more well formed question.
- Q. How in debt do I need to be for it to be a good idea to file for bankruptcy?
- A: Bankruptcy is a very powerful solution to problems with creditors. Regardless of who the creditors are, credit card companies, mortgage companies, car finance companies, the Internal Revenue Service, the Illinois Department of Revenue etc. How much debt is enough debt? It depends if bankruptcy can relieve the financial pressure and stress that you are suffering then any amount of debt is appropriate for the bankruptcy. In addition debtors will have to keep in the the basic COST/BENEFIT ratio of bankruptcy in minde to determine is bankruptcy is warranted. If the bankruptcy costs you $2,500 and you are only discharging $5,000 of debt then don't do the bankruptcy. Conversely, If a friend will do your bankruptcy for $500 and you are discharging $5,000 in debt then do the bankruptcy! In general if the debt is small and your income is small the problem is not your debt. The problem is your income. Look of a better paying job, get a second job, skip the bankruptcy and pay off the debt yourself.
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