For tax purposes, am I married or not?

ADVICE ABOUT ADVICE
My husband and I have a stock secured loan for $150,000. We are trying to decide if we should cash in 3,000 shares of stock to pay off the loan. Are the tax consequences such that we would be better to pay $1,000 per month in interest or go ahead and claim the capital gains and get rid of the loan? I talked with our CPA and did not get a real clear answer.
-- Pam L., Hoover, Ala.

Go back and ask the CPA again until you get a straight answer. That’s what you’re paying for. Some financial advisors don’t want to take the time to explain things thoroughly — either because they don’t have the patience (which means you’ve got the wrong financial advisor) or because they aren’t sure of the explanation (which means they’re in the wrong business).

It’s really not possible to generalize: too much depends on the rate you’re paying on the loan, your tax bracket, how much capital gains you’ve booked on the stock, how well the stock is performing, etc. But your CPA should walk you through the math so you’re able to understand why you’re being told to do what they're recommending.

This is true for all financial advice. Never go along with it unless you understand it backwards and forwards. If the advisor rushes you, or ducks an explanation by saying “it’s a routine form, just sign it” — find another advisor.

GRANDMA'S WRONG
I have a grandmother who says she does not have to file taxes because she is disabled. She owns a rental property and says that since she does not have to file taxes then she does not have to claim the rental income. Is this true? Also, where can I find this information on the IRS Web site?
-- Tana N.

Grandma needs to file a return. The basic requirement is that anyone who has earnings above a certain amount has to file — whether the money was earned from a job or from an investment like a rental property. (She may have heard that some people who receive only Social Security income don’t need to file, which is true, but only if they get no other income.) To learn more about who needs to file a return, check the handy checklist on the IRS Web site.

She may not owe any taxes when she files — especially if she qualifies for an income tax credit because of her disability. For more information, see Publication 907, Tax Highlights for Persons with Disabilities. But even if she owes no taxes, she still has to file a return.

There are a number of expenses related to the rental property that she can probably deduct from her rental income. If she’s never done this before, she should have an accountant set it up for her. And if she hasn’t filed returns for past years, she’ll need to file those returns — and likely pay penalties. Depending on how many years are involved, she may want to get a good tax attorney to try to negotiate with the IRS.

    

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