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Financial Questions and Answers

Q: I plan on selling some vacant land to a family member for $75,000. I bought the land several years ago for $100,000. Can I deduct the loss?

A: Most likely, no. Even if all other requirements for claiming a capital loss have been met, tax rules prevent taxpayers from taking deductions for losses based on sales or exchanges between certain “related” taxpayers. These include brothers, sisters, spouse, ancestors, and lineal descendants. However, you might be in luck if you are selling the vacant land to a brother-in-law or to a sister-in-law, since in-laws are not considered members of a seller’s family for purposes of these rules.

Q: I want to introduce a retirement plan. How many years must pass before my employees would become 100% vested in their plan benefits?

A: For defined contribution plans (such as a 401(k)), employee contributions must be 100% vested at all times. However, vesting of employer contributions may occur over a schedule set forth in the plan. Such a vesting schedule may not, however, be longer than either the three-year “cliff” or the two-to-six-year graded schedules established by IRS rules. Moreover, employer contributions to any retirement plan must become 100% vested when the employee reaches “normal retirement age.”

August 2017 Newsletter Previous Article