Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, March 22, 1993 TAG: 9303230321
SECTION: MONEY PAGE: 6 EDITION: METRO
SOURCE: Mag Poff
DATELINE: LENGTH: Medium
CONSUMER TAX MOSTLY MATTER OF CONSCIENCE
Q: How seriously are we to consider paying the Virginia Consumer's Use Tax for Individuals on the new Form CU-7 included in tax forms for 1992? Is this really enforceable? Are people actually reporting their out-of-state purchases?A: Do you really think that anyone is going to advise you publicly to avoid paying a tax that is owed by law? That statute, which has been in effect for many years, requires people to pay use tax in lieu of sales tax on items purchased out of state.
As a practical matter, however, the state acknowledges that few people actually pay this tax. That's the reason for the emphasis placed on the tax in this year's state form package. The chances of the state's learning about your out-of-state purchases - or raiding your home to audit - are dim at best. So you have to let your conscience guide you when you fill out your returns.
It's rarely too late to appraise property
Q: My father died in 1972 and willed a third of his farm to my mother, a third to my brother and a third to me.
In 1976, my mother died and willed her interest in the farm to my brother and me. At neither time of death was there a fair market appraisal made on the property.
My brother died in 1990, leaving his half of the farm to his wife.
My sister-in-law and I are now selling the farm. We need a fair market appraisal of the property based on 1972 and 1976 values. Our accountant wants to use the values that were stated on the respective tax tickets; the values stated on those tax bills were not fair market values.
How can we get a true fair market appraisal of this property for the years of 1972 and 1976?
A: The executors of your parents' estates had the legal duty to evaluate this property. How did the executors submit their reports to the court and file tax returns without a current appraisal? You should check the estate records with your local circuit court. The problem is that people want values low for estate tax purposes but high for establishing their tax basis as heirs.
If it is true that no appraisal was made to establish your tax basis, it is not too late.
Earl G. Robertson of Commonwealth Appraisal Co. in Roanoke said it is commonly done. He said appraisers are sometimes called on to value Indian property back in the early 1800s.
He warned, however, that an appraisal for an earlier date requires research and, depending on the circumstances, can be expensive.
You should call certified real estate appraisers in your community and ask about the costs involved. It may be well worth while if the tax tickets significantly undervalue the property.
Tax must be paid on IRA earnings
Q: I have invested the maximum limit of $2,000 every year in my IRA account and taken a tax deduction.
When I prepared my federal tax return for 1987, however, I found that my sale of some stock raised my adjusted gross income over $50,000 so that I could not take a deduction for that year. At that time, I filed the Schedule 8606 form to report this.
I am now 67 years old and retired. How do I get my $2,000 from this account without paying federal and state taxes again?
A: That $2,000 is exempt from tax, although you must pay on its earnings.
Harry Schwarz, a certified public accountant with H. Schwarz & Co., said Schedule 8606 shows the tax basis of all of your contributions.
You must fill out the form each year and carry forward the amount of your IRA withdrawals. This will help you keep track of your records.
Some people keep separate IRAs for taxed and untaxed contributions. Schwarz said, however, that many people co-mingle the funds. This doesn't matter as long as you file Schedule 8606 and keep up with the amount of your taxed and untaxed withdrawals.
You will be required to withdraw some of each kind of money in proportion to the amounts of each in your account. You must prorate taxable and non-taxable withdrawals based on your total IRA assets.
See professional to cancel trust
Q: I have a revocable trust agreement that I want to cancel the first of the year. Do I have to go to an attorney to revoke it?
A: You are talking about a legal matter, so you should see a professional to ensure that you are handling the matter properly. You would not want your action attacked years later.
In addition, you might face tax ramifications that you should weigh in advance of such an action.
Mag Poff will help find answers to your personal finance questions. Send them to her at the Roanoke Times & World-News, P.O. Box 2491, Roanoke 24010.