Revenooer Rants: All that glitters…
Isn’t necessarily gold, but tax due to Uncle Sam and Jerry Brown! That’s what the “anonymous” Northern California couple who stumbled across $10 million of the stuff under a tree in their yard is quickly finding out.
They may think it a lucky find — indeed it was, but true to form, the government long ago found a way to clip the unsuspecting finder for a share.
The Internal Revenue Code itself has long defined gross income as “….all income from whatever source derived.” Aside from the little problem of defining a term as itself (which most of us learn not to do, in about the first grade) this little phrase is likely going to be good enough to entitle the Revenooers to take their share. Indeed the IRS’ own regulations go even farther, in noting that “Treasure trove, to the extent of its value in United States currency, constitutes gross income for the taxable year in which it is reduced to undisputed possession.”
Not to be dissuaded, taxpayers in the past have attempted to cleverly sidestep the rule, but to no avail. Such as Ermenegildo Cesarini, whose hand was slapped in 1969 by an Ohio court on several grounds, including a rebuke to a suggestion by the taxpayer that even if the find did constitute income, it should be treated as a (lower taxed) capital gain.
Oh well, we guess a find of something like $5 million or $6 million (net of tax) is still better than none.
And here comes House Ways and Means Committee Chairman Dave Camp, last week, with a yawner of a proposal to overhaul the present Federal tax system, including mostly a rehash of “more of the same” proposals which have been batted around for years, including:
• Reduction in the tax rates from the present seven brackets down to three (the usual first volley in support of tax “simplification,” which is anything but).
• Taxation of long-term capital gains and qualified dividends at the same rate as ordinary income (after exclusion of 40 percent of the gross total — again, a blast from the past).
• Increased standard deduction to $11,000 for individuals and $22,000 for marrieds (yawn).
• Reduction in value of charitable contribution deductions by suggesting deduction only to the extent the contributions exceed 2 percent of income (we’re sure the nonprofit community will flip over this one).
• Repeal of the alternative minimum tax (an idea whose time has come).
• Elimination of the deduction for state and local taxes (not good if you live in California or other tax-grabbing jurisdictions).
• Reduction in the value of the home mortgage interest deduction to interest on only $500,000 of debt (sure to offend realtors far and wide).
No reason to get too worked up over all of this just yet, as the politicians seem to be preoccupied with the upcoming elections. The more things change, the more they remain the same, right?
CONSULT YOUR TAX ADVISER — This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation. Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He can be reached at 831-7288 and welcomes comments at email@example.com .