Recent Posts

Crude rises as ECB governor says euro not overvalued

0
0
0
0
0
0
0
0
0
or copy the link

Crude rises as ECB governor says euro not overvalued

Investing.com – Bottom fishers snapped up nicely priced crude positions on Monday after a key European Central Bank official said the euro wasn't overvalued, which sparked demand for the single currency and sent the dollar falling. French industrial
See all stories on this topic »

read more

Your Questions About Investing In Restaurants

0
0
0
0
0
0
0
0
0
or copy the link

Steven asks…

Would a conflict of interest occur if you dined at the restaurant you invested in?

Justin answers:

No.

A conflict of interest is when you have to make a choice between doing what’s best for you as opposed to what’s best for the business.

Charles asks…

8008 upside down on a caluculator marked the beginning of a new era of technology?

That’s right kids…alien life. You know we discovered a water planet? That liquid mass is actually the creator and destroyer of worlds.

If you had money to invest in a restaurant franchise, which one would you choose?

Justin answers:

I would invest in a chipotle

Ken asks…

How much to set aside for taxes?

My husband recently invested in a restaurant where he is the proprietor and owns 10% of the business. He will start getting distribution checks on top of his salary – and these are not taxed. I want to have a certain percentage of each of these put in savings so when taxes come around for the 2009 year we’re not having to come up with a ton of money. These distributions on average are about $4,000.00.

Thanks

Justin answers:

You don’t just set it aside, you need to make quarterly estimated payments.

Robert asks…

how to bring more than 10k dollars to the US?

me and my aunt are going to buy a restaurant and my dad’s going to give me 50k dollars to invest in this restaurant. I’m 17 and I’ll travel by air from mexico to california. I know that you can only bring 10k without having to report it to US customs. but what happens if you bring more?? do you have to pay any kind of tax? bring any paperwork that says where the money came from? need answers ASAP… thank you!

Justin answers:

You can legally bring in more than $10,000 but it must be declared upon entering the US. Failure to do may mean asset seizure. Plus if you are given $50k then there are tax implications as well – since it vastly exceeds the annual gift amount.

Powered by Yahoo! Answers

read more

Your Questions About Investing In Gold

0
0
0
0
0
0
0
0
0
or copy the link

William asks…

What kind of market am I investing in if I invest in Gold Savings?

What kind of market would I be investing in if I keep part of my wealth in gold. Is it the commodity market? But in commodity markets, people buy and sell Contracts. Therefore, I don’t think keeping part of my savings in gold is similar to investing in commodity market. Any ideas?

Justin answers:

To invest in gold, check out:
Central Fund of Canada (AMEX:CEF) which holds nothing but gold & silver bullion so you get exposure to the physical, and you don’t have to worry about storage/delivery/insurance.
Www.apmex.com
www.bulliondirect.com
www.tulving.com
www.kitgo.com
www.gold-eagle.com
(Disclosure: This is not to be considered a recommendation for any of the above as I do not invest in gold and have not tried to research any of the above sites).

John asks…

How does investing in gold work and is it worth it?

I want to start making my money work for me. Is gold the best option?

Justin answers:

Gold is an option, but maybe not the best.

There are several ways to invest in gold.

Buy gold coins. Disadvantages: have to store them, have to pay mark up to buy and mark down to sell. Subject to theft.

Buy GLD. ETF that tracks the price of gold. Disadvantages: Has annual expenses.

Buy gold mine stocks. Disadvantages: subject to management mismanagement.

Instead I would think about investing in oil. Disadvantages: It is possible that another large field could be discovered. Subject to government seizures. Advantages: Demand continues to rise, production continues to fall.

Robert asks…

What are the most important rules/advices for investing in gold?

I have a girl who’s almost a year old. During the next years I would buy her gold from time to time. But I want to know what would be the best way? Whent to buy? Sell? And how to manage gold investment?

Justin answers:

Visit this site

http://free-gold-investing-info.blogspot.com/

To get free tips from Wall Street Professionals and receive reports, charts and strategies on investing in gold.

Steven asks…

How would one go about investing in Gold?

Do you buy stock??? What are the pro’s and con’s of owning gold?
How would you go about buying it???

Justin answers:

Two possible ways. Buy GLD, a gold index fund where 1 share is equivalent to 1/10 oz of gold. Or buy ABX the largest gold mining company. The advantage of ABX is leverage if the price increases dramatically.

Mark asks…

How do I go about investing in gold mutual funds?

I have considered doing this many times but have yet to make up my mind.

Justin answers:

The attached link has a good article comparing the various gold mutual funds. Another option would be gold etf (exchange traded fund). It is bought and sold like any other stock. This link has information on the gold etf.
Http://finance.yahoo.com/q/pr?s=GLD

Joseph asks…

Investing In Gold: How Practical Is It?

I’m considering long term investment in gold. I heard that during tough economic times private residents and even corporations invest in precious metals. Lately I have seen television advertisements about a gold Indian head, the company producing the coin says that the gold is 24 karot. Although the company is not backed by the US Mint, I would like to purchase some Indian head coins. Would this be a good investment? Is gold really a good long term investment?

Justin answers:

Americans are investing in gold like never before. With the weakened dollar, people are finding that investing in gold is a smart decision. Try this site

http://free-gold-investing-info.blogspot.com/

To get free tips from Wall Street Professionals and receive reports, charts and strategies on investing in gold.

Richard asks…

Is investing in gold a good idea?

I have a lot of money invested in mutual funds and am concerned with the recent drop in the stock market as well as the recent concerns with subprime lenders….do you think that investing in gold is a good hedging strategy? Do you think that the price of gold would rise if some of these lenders tank?

Justin answers:

When you say “invest in gold” you have to separate your ideas into “investment” and “Survival”

Gold as a metal is for Survival…If a catastrophic event hits the capital makets, or if WW 3 happens etc, you will need actual gold for some things (like jews fleeing the Nazis in WW 2) .

Gold in the form of ETFs or “GoldMoney” or certificates , or even gold coins or bullion in your safety deposit box, is not a good “Investment”. Shares in gold producing companies, or shares in a precious metals mutual fund is a good “Investment” if gold goes up. This is because shares in gold companies have leverage to the price of gold.

If you have an ounce of gold $650US and it goes up $100, you clear $80 after selling commission.

If you had $650 US in Producing gold shares, if the gold price went up $100, your gold shares would probably go up $200. Why? Because It cost $X to produce an ounce of gold.
If it sells for $650, that price minus $X gives profit per ounce. Sell it for $100 more and the profit is $100 more per ounce, cause it still costs $X to get it out of the ground

SO, IF you beilieve gold is going up, buy Gold shares or a Gold Mutual Fund, But beware .this is a volitile sector and hence has it’s own particular set of risks. This should contain a small part of your investment portfolio, Most advisor say 5-10 %.

That being said, I am a gold bug, I beleive in gold, but at the moment I own 1 Gold maple leaf coin which I will never sell, I sold my gold shares at gold $680 and am waiting to buy back in as I expect a further drop from here.
When I am happy about the timing, I will go back into shares with $600,000

Paul asks…

How do I get started in Gold investing? Is it a smart move?

Justin answers:

It is easy to get started in gold investing and it can be a smart move–maybe. First, the ishares gold exchange traded fund trading symbol is IAU (Silver is SLV). So you can buy gold (or silver) just like a stock–and sell it short, just like a stock. In this way you get to play both directions as you choose (short sales, remember, generally have to be issued on the price uptick, so if it is trending down then when it bumps up sell short then).

There are two primary factors involved with precious metals investing: (1) industrial, and (2) sentiment. When jewelry sales or specialty electronics sales are rising then that adds to industrial demand. When world uncertainty changes, some people move to gold in a sentimental connection to its traditional role as a base value for money. Wars or disasters? Gold rises. Peace and prosperity? Gold falls–except as industrial uses outweigh those who were buying for more sentimental-styled reasons.

Another way of investing in gold is by buying into gold producers. Perhaps one of the biggest is Newmont Mining (NEM) and one of the oldest is Randgold Resources (GOLD). Its pretty fickle business with the smaller ones, I held Richmont Mines (RIC) for a while but they had to down grade when one of their fields was closed and while they had a big one it wasn’t opened up yet (hint, there’s something to watch for). Another I still have, though I sometimes wonder why, is Liberty Star Gold (LBTS), because they staked out an enormous amount of land to develop but have never gotten around to digging up more than samples. The thing to remember about gold mining companies is akin to some advice that Mark Twain once wrote from his experience, ‘A gold mine is a hole in the ground surrounded by liars.’–so stick with the proven producers unless you just feel like taking a risk on those who “claim” to be looking for gold. Good luck.

Thomas asks…

Is investing in gold a good idea?

what is the best way to invest 5k?
do you think one day it might just sky rocket?

Justin answers:

First off I am not a financial advisor so check with a licensensed profession before investing. As far as gold skyrocketing, yes quite likely. Fundamentally and technically it is highly suggestive it will go up. The world economy, and yes, especially the US economy are far from out of the woods. Banks are still holding onto very large amounts of toxic assets. They may be off the books but they aren’t gone. The Government is spending far more money than is coming in. Taxes are going to go higher, and the Treasury keeps printing money like it is Monopoly money. This is going to cause inflation at some point.

As far as the best way to invest 5k you really need to research gold ETF’s. Much better than investing in physical gold, unless there is a total banking meltdown.

Hope that helps.

Powered by Yahoo! Answers

read more

Your Questions About Investing For Dummies

0
0
0
0
0
0
0
0
0
or copy the link

Chris asks…

How does a person begin to invest in the stock market?

What are the steps? What u need to pay for? What benefits? Can someone let me know cause been thinkin about investing in the stock market?

Justin answers:

There are a lot of different ways. For people just starting out an excellent way is to invest in mutual funds or index funds. Index Funds can be purchased like stocks, by entering an order with a stock broker. Mutual funds can be purchased directly from the mutual fund company.

First I suggest that you go to the library or book store and get a copy of “investing for Dummies”. It will answer many of your questions and it is not expensive.

The main advantage of mutual funds and index funds is that they provide a person with a diversified portfolio with a limited investment and diversification is good. 70% of mutual funds do not perform as well as the market in general. Consequently, index funds have become very popular. They attempt to mirror the return of the portion of the market they are attempting to index such as large cap stocks, mid cap stocks, small cap stocks, etc. There are hundreds.

Yahoo Finance has a good tool to screen mutual funds and here is a good site to evaluate index funds and closed end funds.

Http://www.etfconnect.com/

William asks…

What type of professional would I consult to help me invest in individual stocks?

I have about $700 dollars to invest on a monthly basis. I have been learning about stocks for a few months now but it really takes time to research a company’s finances and track performance. This is time that I just don’t have. Would I consult with an investment banker or someone who does financial planning?

Justin answers:

I understand your frustration. There are several problems with finding someone who will do this for you.

First, a professional charges a minimum fee for each transaction, therefore one fee for buying and one for selling. Assuming the minimum is $35 it will cost you $70 per stock. Therefore, you will need a 10% return before you begin to make any profit. It also narrows your choice of stock as you would need to limit your choices to stocks that are less expensive. Some ‘professionals’ are simply investment representatives who have been hired for their sales skills and have no background in financial planning. They will recommend whatever their company is pushing or whatever they have heard someone else is selling. Their sales skills will be top notch but their knowledge will be less than yours. Make sure that they have at least achieved the status of Certified Financial Planner and not just their license to sell. You will notice that some of these salesmen answer questions on this site as a way to promote their company.

Most of that fee goes to the company and very little goes to the advisor. As he is only performing one transaction for you in every month, he will make very little time for you. It is not worth his time and effort until your account grows to a substantial amount.

Many advisors do not have the education or inclination to research stocks and recommend them to clients. Large financial firms have research departments that recommend particular stocks that the advisor can choose from. These picks are usually large companies that are a safe bet.

You could, with minimal research, choose to buy either a mutual fund, where you pay a money manager to make the buys and sells, or an ETF which is like owning a piece of the market.

Many of the online brokerages have excellent research material available. With a little time and effort, you could do your own buys and sells at a much lower cost to you. As you would only be buying one stock per month, you could set aside one evening to do research and choose a stock.

The key to making money is to diversify and to have an exit plan. Diversification is more than buying different stocks. It means that you have investments that include cash, bonds, equities, etc. Chosen from different countries and in different fields. Your exit plan could include stop losses, options, etc. Always remember that “what goes up, must come down”.

There is a book called Investing for Dummies which is an excellent book to get you started. It would also be a good idea to use one of the accounts with play money so that you become familiar with procedure and the wisdom of your choices.

For a fee, you can consult with a financial advisor who charges you for their time but does not sell any products. They can set up a plan for you to help you get started, taking into account tax consequences, etc. You could make this an appointment that you keep on an annual basis.

You can also visit the websites of a number of financial planners in your area. What stocks do they have listed on their sites? What items do you buy on a regular basis? Are there any items that you have recommended to others? Do some research on the company that produces those items – would they be a good investment? Do you want solid blue ship stocks or a shooting star?

Thomas asks…

how does investing in stock work?whats the recommended book to read in order to learn how to do this?

am plannin on investing in stock but i have no idea how to do that.i mean i have never done this b4 so am just tryin to grow some couple of hundred dollars?can i start with 4 dollars?

Justin answers:

“Investing for Dummies” No disrespect intended but it is a good primer.
Investing in stock means you buy a small piece (stock) in a company. The price varies with the public’s desire to have those shares – more desire means the price rises. Investing in a single companey’s stock is a little risky (and the smaller the company usually means even more risk).
You may want to look into investing into mutual funds. Mutual funds are like a package of all different types of companey’s stock put together by a fund manager. This lessens the risk since you are more diversified. (If a few of the companies do poorly than several others within the mutual fund may do well offsetting the poor ones.
Stock you may buy in share increments and mutual funds usually by a dollar amount – say $1000 worth. Usually the brokerage firm you use for investing has a minimum purchase amount – unless you do it online yourself.

Charles asks…

How can I invest to increase my money? And what are the best things to invest in?

Many people say that investing is a great way to increase your money, however I have no clue where to go or what to do to invest.
Thank you all so much for your answers 🙂

Justin answers:

You’re getting a lot of self-serving responses, here. Try this formula instead.

An introductory book like _Stock Markets for Dummies_ is a good place to start. This will give you a basic explanation of most things there are to know about the mechanics of stock investing.

Investors Business Daily (IBD) is a solid daily resource (and its complement, www.investors.com ). It’s a better newspaper than the Wall Street Journal and it is built around a particular approach to trading. You could read _How to Make Money in Stocks_ by William O’Neil too–he’s the founder of IBD.

Search your local library for other books on stock investing. Try to absorb as much knowledge and understanding as you can.

After you have extensively researched and gained a solid foundation/education then look to open a brokerage account and paper trade–this is trading with play money before you put real capital at risk. You should do extensively before you eventually place your first trade live. Your early live trades should be with a very small position size. Only increase position size when you have done well to limit losses when the market has turned against you.

Robert asks…

How to get started with investing?

I’ve recently become interested in starting some small investments. The only somewhat applicable knowledge I have is from micro/macroeconomics classes in high school a couple years ago, but that’s not enough to really get a good start on investing. I’m not looking to invest in anything specific yet, but I do want to be knowledgeable about it and informed, so what are some good resources be it websites or books to go about starting?

Justin answers:

I got a book called
Investing for Dummies
^ not an insult – it was a great book
I already traded stocks and ETF’s – but this book had quite a bit on info I did not know
It also had a chapter on different discount brokers, what they offered and their fees

Michael asks…

How should i begin investing in the stock market.?

I’m interested in investing some money in the stock market and have never done it before so i wanted to know how to start abd how much i would need for my initial investment

Justin answers:

Actually a better book is “Stock Investing for Dummies”, author Paul Mladjenovic.

Http://www.amazon.com/Stock-Investing-Dummies-Paul-Mladjenovic/dp/0470401141/ref=sr_1_2?ie=UTF8&s=books&qid=1246322261&sr=8-2

$500 would be the minimum needed to open an account (at Scottrade.com).

How you invest depends on your age, your goals, and how much risk you are willing to accept. But, a good lesson is to “Buy what you know”. If you are familiar with Wal*Mart and like shopping there, you can buy their stock. Also, stay in tune with the President’s initiatives. Obama is all about clean energy, so think about investing in solar companies, or wind farms (harder to find), or things like that. And lastly, DON’T listen to Jim Cramer or people like me!! Lol

Ken asks…

Are there any good websites or books about investing?

I’m only 14 but looking to invest around $400, I know just a little bit about investing and was wondering what good websites or books are out there for beginners.

Justin answers:

Here’s some books that will help educate you about the investing world and the stock markets
Investing for Dummies by Eric Tyson
24 Essential Lessons for Investment Success by William O’Neil
Beating the Street by Peter Lynch
Common Stocks, Uncommon Profits, by Philip A. Fisher
From Riches to Rags, by I.C. Freeley
How to Make Money in Stocks” by William O’Neil
One Up on Wall Street by Peter Lynch
Stocks for the Long Run, by Jeremy Siegel
The Battle for Investment Survival, Gerald Loeb
The Intelligent Investor, by Benjamin Graham
The Interpretation of Financial Statements by Benjamin Graham
The Lazy Person’s Guide to Investing by Paul B. Farrell
What Works on Wall Street by James O’Shaunessey
You Can Be a Stock Market Genius by Joel Greenblatt
Your Money and Your Brain by Jason Zweig

Get into the habit of making daily visits to some websites like MSN Money and Yahoo Finance. (http://moneycentral.msn.com/home.asp , http://finance.yahoo.com/
Other website that can provide instructions and help with procedures and terminology are Investopedia – http://www.investopedia.com/ http://www.investorshub.com/
Visit some of the more professional websites like Zacks Research – http://www.zacks.com/ Smart Money – http://www.smartmoney.com/ Schaeffer’s http://www.schaeffersresearch.com/ Investors Business Daily – http://www.investors.com/default.htm?fromad=1
Naveller – http://navelliergrowth.investorplace.com/portfolio-grader/
Some of these web sites will have advertisers who are worth looking into also. And remember, if they offer free information, get it.

Good luck, even though you can not open a brokerage account or use a brokerage account until you are 18, there’s no reason why you can not start your education now.

James asks…

Is it good to invest in stocks at this economic times being a rookie ?

I am completely new to stocks
I never brought a single stock in my life
I never invested in stocks or in any other thing.

I have around 10K in savings and wanted to know if investing this in stocks is a good decision or not?
especially at this economic downturn in USA.

I live in Chicago USA

Any best site where you suggests for a rookie stock purchaser like me ?

Justin answers:

If you want to get started, Fidelity is a good broker. You should read a copy of “Investing for Dummies”. That will get you started learning the basics.

This is not in my opinion a real good time, but there have been worse times. There have also been better times. There are what appear to be some real good bargains out there now, but that might be a mirage.

Powered by Yahoo! Answers

read more

Your Questions About Purpose Of Investing In Real Estate

0
0
0
0
0
0
0
0
0
or copy the link

George asks…

How can I prove physical/legal feasibility of a Real Estate Investment Proposal??

I have to do a project for a class where i have to propse a real estate investment project. I need to prove that the investment is physically and legally feasible. Any suggestions or ideas on things i could include to prove this?? The investment will be for the purpose of rental income and I was assigned a single family residence.

Justin answers:

I think what that means is that you need to show the title is clear, the home has no liens, the home passes an inspection and possibly an engineers report. That the home is a bargain show the land value, and home value from the county tax office. Search google for (county name) tax appraisal district, and then search by address. Show that the taxes are current or of nominal balance owed. Do a market analysis of the area, you may get lucky and a realtor might help you out by giving you a copy of a recent one they already did. If the house needs work but is in a good area you can resale it and make a profit. Any lender likes that because if the property forecloses they can get money back on it. You have to show every aspect of why they SHOULD invest in your investment. Make them believe that if they pass it up they will be making a mistake. Since this is a class, you may say that you have already received a voucher from a lender, so your credit is good. You may add in something like consideration of the age of the home and what sort of maintenance costs your looking at that would be above the income you would make renting the property. Your income vs. Expendature ration should be in the black. If you can’t get a real market analysis, just make one up. You could say that as a backup plan if you can’t find a renter you are willing to rent section 8. Good Luck and HAVE FUN!!!

Daniel asks…

Is it the best time for invest in real estate in USA?

I am going to start my own business. I want to invest in real estate in USA. is it appropriate time for invest in this sector? and also want to know about Real Estate Investors Association (REIA) of USA.

Justin answers:

Real estate investment isn’t cut and dry. So just because it SEEMS like a good investment doesn’t mean it is.

Are you hoping to be a landlord and collect income that way or are you talking about flipping? If you’re thinking about being a landlord, I highly recommend you get acquainted with your state’s tenancy laws so you make sure everything you do is above board (ranging from how much security deposit you can ask for, minimum notice required, lease stipulations, late fees, pet deposits etc).

If you’re thinking about flipping, well the market hasn’t recovered to the point that you can do flipping, even in major cities like NYC and LA. The thing about flipping is it takes time. You have mortgage payments to make as well as property taxes the longer you own the property. Also, in this market where things are still relatively cheap, people can afford to buy and do their own renovations rather than pay jacked up prices from renovations made for the sole purpose of flipping. With shows on tv now, people can identify a cheap for-sale renovation and a quality one. So the idea of flipping is great, but it’s not as easy as it looks. On top of all the expenses, you also have to get a profit. Your profit is also subject to capital gains tax.

Donald asks…

When is the next stock market and real estate crash expected?

Stocks and real estate both are getting out of reach of middle class, want to know should I wait or just invest my money at current rate.

Justin answers:

No one can foretell either the stock market or the real estate market, if any one claims they know, they are a fool and if any one belives them they’re bigger fools.

The stock market is not now, nor never has been out of reach for anyone. The are many investment programs available to those that have modest means. Actually, the sole purpose of mutual funds is to prove an opportunity for investors from all financial means..

Yes you should invest, There are many people just like you that are, or were looking to invest and those that did bought Mutual Funds and/or Exchange Traded Funds (ETFs). One purpose of mutual funds is to help investors like you, who are either just entering the investment world or who have no investing experience. Once you feel you at least have an understanding of investments you should look into ETFs which are similar to mutual funds but are traded on the exchanges.

Mutual Fund companies as well as ETFs have an entire array of products many will fit your needs. You can go to the MSN.Money website
http://moneycentral.msn.com/home.asp it has an entire section on mutual funds and Exchange Traded Funds. Read about the various products and in doing so you will be getting investment ideas and at the same time educating yourself about investing.

You could also contact the funds companies for more information. I have found that Vanguard & Fidelity can meet your needs for mutual funds. The service and information they provide is all free and you will find it helpful.

Regardless of what you decide, do not ever let anyone tell you not to invest, especially those that do not invest themselves.

Joseph asks…

Are there any solid books on Real Estate investing evaluation and Analysis?

Hello

I’m looking to learn about evaluating properties for development purposes.

Please don’t recommend stupid books that are “top sellers” by swindlers who write playing to emotions and hopes of instant millions.

What I want is a thick ‘dry’ textbook that will teach me how to evaluate the value of property. Hard core.

The real estate equivalent of “Security Analysis”?

Does it exist?

Justin answers:

Hi Kavemons,

I dont have a specif title for you, but I do have an idea.

Why dont you start you search by looking for articles on the internet about that subject.

This way, you can hunt down authors of your mentioned subject !

Kind regards, LASSE

Robert asks…

How hard is it for a US citizen to get a green card in another country for business purposes?

Is it possible to get approved for a green card in exchange for plans to start a small business in the country you want to immigrate to.

Like, let’s say that I have two lifelong dreams:

1. To open a sports bard

2. To move to Australia

I now have enough capital to open a sports bar, but I want to do it in Australia instead of the US.

Since my bar in Australia would mean hiring multiple full time employees and investing in Australian Banks and real estate, is there any Green Card program available for someone like that?

Like since providing jobs in Australia is beneficial to them?

Justin answers:

Not hard (see link below).

Michael asks…

How hard is it for a US citizen to get a green card in another country for business purposes?

Is it possible to get approved for a green card in exchange for plans to start a small business in the country you want to immigrate to.

Like, let’s say that I have two lifelong dreams:

1. To open a sports bard

2. To move to Australia

I now have enough capital to open a sports bar, but I want to do it in Australia instead of the US.

Since my bar in Australia would mean hiring multiple full time employees and investing in Australian Banks and real estate, is there any Green Card program available for someone like that?

Like since providing jobs in Australia is beneficial to them?

Justin answers:

Only the US has green cards other countries have there own version
you need to look at investment visas

http://www.immi.gov.au/immigration/

http://www.immi.gov.au/visawizard/

Mark asks…

Is there a tax peanalty for taking out too much cash from the equity on your primary residence over time ?

My accountant says there is some penalty about taking out too much equity over a long period of time on our primary residence.

My husband bought our home in the 1970s for around $50K and we’ve refinanced it several times over the years. In terms of cash, we took out $200K in 2004 (having taken $600K over the years prior to then) and have a $200K unused home equity line. Does anyone know what she’s talking about?

I know we’ve long maxed out on the mortgage interest deduction, but will we be taxed on our cash out?

We took the $ out to invest in real estate, which we have not yet done, but are now looking at doing. Thanks!

Justin answers:

There is no actual tax “penalty” for borrowing money based on the equity in your primary residence, BUT there are two other tax consequences that can catch you by surprise: The AMT and the gain on the sale of your home (see below).

As you mentioned, you have maxed out on the home mortgage interest deduction which is based on (a) borrowings to purchase the home, (b) additional borrowings used to improve the home and (c) and up to $100k in home equity debt used for any purpose. Interest beyond the $100k home equity debt limit may be deductible as investment or business interest (see page 10 of IRS Publication 936)

Surprise 1 – The AMT (alternative minimum tax) disallows the interest deduction on home equity debt not used to buy, build or improve your home UNLESS it is deductible for AMT purposes as investment or business interest.

Surprise 2 – The GAIN ON SALE with no cash to pay the tax. Let’s say you sell your principal residence for $850k, selling costs including commissions are $50k and you have mortgage debt on it of $800k. You will end up with no cash from the sale. HOWEVER, you will have a taxable gain of $230k equal to the sales price $850k, less cost to sell of $50k, less your original purchase price of $70k, less your $500k home gain exclusion (if you qualify) on a joint return. Paying the tax on the $230k without receiving any cash from the sale is a BIG surprise for many people. If you live in a community property state and your home is community property AND one of you die, the other will inherit the home with a step-up in basis for tax purposes. With this step-up and a $250k exclusion, you will likely avoid any taxable gain.

Richard asks…

When a S-Corp buys another corp and changes its status to S too, how will the parent corp be taxed?

I wanted to know if a person owned a s-corp and bought a aged corp with good credit and used it to obtain the funding it needs to invest in like real estate how will the profits be funneled to the parent corp be taxed. I know that an s-corp’s income is not taxed while the employees are taxed on the pass thru income. My question is is the profits from subsidiary s-corp passed up to the parent s-corp tax free until its passed to its employees?

Justin answers:

Tax effects of mergers and acquisitions is a tricky area of law. Generally, if you make a Q-sub election (qualified Subchapter S subsidiary) for a subsidiary of an S corporation, then for tax purposes it is as if the subsidiary does not exist and all the income would flow through the parent company S Corp to its shareholders. However, you really need someone who knows the tax laws to look at your particular situation because the tax code contains tons of exceptions to every rule, especially if you have a corporation that in previous years was a C-Corp.

Powered by Yahoo! Answers

read more

Forex – Weekly outlook: April 15 – 19

0
0
0
0
0
0
0
0
0
or copy the link

Forex – Weekly outlook: April 15 – 19

Investing.com – The yen rebounded against the dollar on Friday, recovering from four-year lows as weak economic data out of the U.S. underlined expectations that the Federal Reserve will stick with its quantitative easing program. The dollar tumbled
See all stories on this topic »

read more

How to Invest $1000 Right Now

0
0
0
0
0
0
0
0
0
or copy the link

How to Invest $1000 Right Now

Investing is an essential of building financial security, but it can be intimidating when you're first starting out. Saving up $1,000 to invest can take a long time and a lot of effort, and you definitely don't want to make mistakes in your first
See all stories on this topic »

read more