Frequently Asked Questions

Q: I am about to sell my house. We have lived here for 20 months. Do I have to worry
about paying any capital gains?

A: I would advise you to wait four months before selling; so you will have lived in the house at least two years. When you sell your primary residence, there is an exemption from the capital gain of $250,000. To qualify for this exemption, generally, you must have owned the home (home, condominium or co-operative apartment) for at least two years, and must have used it as your primary residence for two of the prior five years, before selling.

Q: What is a STAR Exemption?

A: STAR is the New York State School Tax Relief program that provides an exemption from school property taxes for owner-occupied, primary residences.

When a New York State resident purchases a new primary residence, he or she should contact the City or Town Receiver of Taxes to file the appropriate documents with the Receiver to obtain the STAR Program exemption.

If you are a senior citizen living on a fixed income, you should also contact the Receiver of Taxes as you may be eligible for additional STAR benefits.

Q: Is the STAR Exemption filed automatically when I purchase?

A: No. The local government does not automatically file this information on your behalf since it would not know if this is your primary residence.

Q: My father insists that he doesn't need a will. How can I convince him that he's wrong?

A: Everyone needs a will. This is the easiest way to make sure that the individuals and charitable organizations receive what you want them to have.

Your home state has prepared a will for you if you do not have a will, or feel you do not need a will. But the state provisions do not provide for charity. Additionally, the state does not give all of your assets to your surviving spouse, and does not name a guardian for the care of your minor children.

The best way to make sure your father's intentions are known is for him to have a will.

Q: I've seen software that allows you to create your own will. Are these recommended?

A: When preparing a will or any other estate planning document, you should be working with an attorney who is completely familiar with estate planning and the related estate planning documents. This assures that a knowledgeable individual is providing you guidance and expertise, and that your estate plan will be implemented properly.

Q: I'm about to purchase some tax exempt bonds. Are these really tax exempt?

A: Be careful of municipal bonds. Some of these bonds (known as "AMT Bonds") may be taxable on your federal income tax return. These are bonds issued by states that do not meet all of the requirements for complete exemption from income tax. They are generally issued for a specific purpose, i.e. the construction of a stadium or other building.

The income from these bonds is exempt from the regular federal income tax. However, the interest is considered an item of “Tax Preference,” and becomes part of the income in determining your “Alternative Minimum Tax.”

Q: I have more than one IRA. How do I know which one to take annual Required Minimum Distribution from?

A: Most individuals have more that one IRA account. If you are over age 70½, generally, you are required to receive annual distributions from IRA accounts. You can elect to receive the annual distribution from one or more of your IRA accounts. This way, if one account is not performing well, or is invested in a low yielding bond or CD, you can choose to receive part or all of the annual Required Minimum Distribution (RMD)from that account.

If there are other custodians or trustees, you are required to certify to them that you did take the RMD.

Q: I heard there are some tax changes I should know about concerning my margin account. Can you explain them?

A: Most stock brokerage accounts, when opened, are “Margin Accounts.” An investor is permitted to borrow funds from the brokerage firm to purchase stocks or bonds. Interest is charged by the brokerage firm for the use of that money -- essentially, it's now considered a "loan."

Currently, the maximum tax rate for qualified dividends and long-term capital gains is 15% (vs. 35% for all other income). Depending on how the brokerage firm accounts for the "loan," some or all of the investor's dividends may not qualify for the reduced income tax rate.

If you do not intend to use the margin capability, you may want to consider changing the margin account to a “Cash Account,” thereby insuring that all dividends will be subject to tax at the lowest tax rate.

For this reason, I recommend to all my Clients that if they're using a margin account, they should consider closing it due to tax changes.