Advisor Today > > April 2001: Lighter Side of Life: A Kindler, Gentler IRS

Lighter Side of Life: A Kindler, Gentler IRS

Tax preparation: the nation's annual reality check

Ron Hauenstein, CLU, ChFC

Welcome, Mr. Hauenstein. It's so good to see you.

Thank you. I appreciate your taking the time, especially on April 16.

No problem. It's always a pleasure to meet one of our customers personally.

Perhaps we could talk out on the solarium? Or maybe you'd be more comfortable in our spa? Our objective is to meet your every need, since, after all, you are the one who pays the bills.

Yes, I suppose that's right.

Can I get you some juice? How about some pastries? A cheese Danish, perhaps?
No, thank you. Really, I'm fine. I just have a few questions about - Of course, you realize that if we were a business, we could only deduct one-half of our entertainment expenses and meals with clients.

Yes, it's a pity you don't have the burden of keeping track of your expenses. Now, on Schedule D'

You're an investor?

Actually, this is my daughter's account. We experienced some capital gains because every month . ..

I just love capital gains calculations. They are so time-consuming. Can you think of a better way to keep a bureaucrat occupied?

No, I mean, yes. Actually, your publication says there are several approved methods for calculating'
Oh, we don't expect you to read all those publications. I mean, you'd have to study Pub. 564 on mutual fund sales, exchanges and redemptions, and Pub. 550 on investment income and expenses, and you'd also have to bone up on Pub. 544, sale and disposition of assets. Who can keep it all straight? How about some chips and salsa?

No, thank you. And you do have to admit that you folks have a reputation for throwing people in jail who - Are you still hung up on that? Don't let that Marc Rich business intimidate you. After all, he got off, didn't he? Look, all we want in this country is for the rich to pay their fair share. Are you rich?

Well, I guess that really depends on your definition.

If you don't say yes immediately, you're not rich - But the top five percent of taxpayers already pay more than 50 percent of the income taxes in this country. Don't you think that! Why don't you just use the average cost method that your mutual fund company sent you?

Actually I thought with the way the market performed last year, I might be better off with the double-category method. You see, each month my daughter sold shares to pay life insurance premiums. It makes the calculations rather, well, taxing.

You're not trying to be difficult, are you?

No, no, not at all. I just thought I could get some help - (smiling) Of course. That's why we're here. Chocolate chip cookies?

No, thank you. It's just that President Bush said in his budget message that Americans have been overcharged and he was representing us in asking for our money back. So, if I could just get -

Are you one of those?

One of what?

One of those people who still think it's your money. Haven't you read what Bush's tax cut will cost? One-point-six-trillion dollars! Do you want to carry that burden? This government can't afford to write a check for $1.6 trillion.

You don't understand. Tax cuts don't cost the government money. They just give the money back to the people who' Look, I just came in to get some help with a small capital gains tax calculation, but if you're trying to shake me down - Just remember, Mr. Hauenstein, some tax loopholes become nooses.

I'm not looking for any loopholes. I just want to know this: In part IV, it says at line 38 to enter the smaller of - Let's make a deal.

A deal?

Yes. I'll figure your capital gains tax for you. You write a letter to the editor at USA Today and you tell America what wonderful assistance you received from the IRS.

Let's just stick with Schedule D. It says in the instructions, "If you disposed of (a) an asset used in an activity to which the at-risk rules apply or (b) any part of your interest in an activity to which the at-risk rules apply, and you have amounts in the activity for which you are not at risk, see the instructions for Form 6198." I certainly considered my daughter's money to be at-risk. Can you explain this rule to me?

Yes. If you have to ask an IRS agent about the rules, you are at-risk. An at-risk taxpayer is one who is not eligible for Mr. Bush's tax cuts.

Maybe we should just forget that I ever came in here today.

(smiling) Cheesecake?

Ron Hauenstein, CLU, ChFC, is a veteran New York Life agent, serving clients for more than 17 years. Comments on his column may be addressed to Ron at 818 W. Riverside Avenue, Suite 500, Spokane, WA 99201, or rhauenstein@ft.newyorklife.com.

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