Bond Insurance, Verifying Income, and Tax Deductible Expenses
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Bond Insurance, Verifying Income, and Tax Deductible Expenses Hello, I know I am asking alot of questions here, but it's tax time, and things must be correct! 1. In 2010, our club paid $80 for bond insurance for our club portfolio, from our brokerage cash account. In reviewing the transaction, I handled it as a tax deductible club expense. When I did, it appeared in the Misc Income Column of the Bivio Income Report for 2010. Should this be so? 2. Step 3 of the Bivio Audit guide (sorry don't have the exact title) involving verifying Income. In step 3, we verified our total dividend income, and interest on our money market (cash) account in Bivio and the 1099 form. These all matched. But shouldn't there also be a verification of the income generated by stock gains minus stock losses, especially if there has been capital gains? Or is this handled in the step where you verify all stock transactions, and then your portion of the taxes shows up on the K-1? 3. I read in a recent post here about how to handle the transaction related to the club's membership in Better Investing. Did you say that these routine expenses are better handled outside of Bivio, in each member's individual tax return? Are these all considered tax deductible? 1. Membership in Better Investing (both Club and individual fees) 2. Bivio subscription 3. Cost of Manifest Investing subscription (if required by the partnership agreement). 4. Cost of software (Toolkit) Thanks so much! Cynthia Johansson, Treasurer Hi Cynthia, Here are lots of answers for you! 1. Your bond insurance is a deductible expense and is shown as such on your income statement. 2. The total proceeds in bivio should line up with the total proceeds you will find on your 1099B. If you verify all the details of your stock transactions are correct, bivio will correctly be calculating your capital gains and losses. Starting next year, brokers will be trying to report these also on 1099's so you will have another thing to double check and verify. But again, if you have verified that all your transactions and reorganizations have been entered correctly, bivio will calculate your correct gains and losses. 3. Any expense which does not apply to all the members of the club and which cannot be easily and allocated to everyone either by ownership share or by an equal dollar amount is not something you should (or have any reason to) enter in your club accounting. This includes things like the individual portion of BI dues (unless your club splits the cost of all the individual dues) 4. If your club purchases Toolkit or Manifest Investing subscriptions for all your members once a year, it would certainly be appropriate to enter these as a tax deductible club expense. If, however, each member purchases them on their own, it is much easier for that to stay outside your club records. They can pay for it and deduct the expense as an Investment expense themselves They receive no benefit from having it go "through the club". 5. All the expenses you listed are tax deductible as investment expenses. If you itemize deductions on your personal taxes, they will be considered Miscellaneous itemized deductions. You will only benefit from that category, if the total expenses you can claim exceeds 2% of your Adjusted Gross Income (AGI) -- Laurie Frederiksen Invest with your friends! www.bivio.com Become our Facebook friend! www.facebook.com/bivio Follow us on twitter! www.twitter.com/bivio In a message dated 02/28/11 14:30:56 Eastern Standard Time, skyfox@bivio.com writes:
Could you provide the exact title of the report you are looking at since I don't see any expenses appearing in an income section of any report. It's also possible you entered the transaction incorrectly.
I don't have the audit guide, but you can verify your capital gains using the capital gains report. Unfortunately, you can only truly verify the sales proceeds. Your broker's cost basis information may not be accurate, though that should be improving as brokers are now required to track cost basis.
Yes, the individual portion of BI dues is better handled outside of bivio. The one exception would be if your club's Partnership Agreement states that the club will pay for all dues out of club funds. Not many clubs operate this way.
All of the above are deductible investment expenses.
Ira Smilovitz Join me at InvestEd 2011 |
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