Posts Tagged ‘fire’

IRS and burning down your house

Sunday, September 27th, 2009

Here is a tax tale that has been happening for the last few years and been getting people hot under the collar.  In Upper Arlington, Ohio, there was a house that was run down and the fire department there burnt it to the ground.  The local SWAT teams barged through the front door in an exercise on dealing with domestic violence. Rescue crews scattered mannequins around the house and blew smoke through the halls to simulate a meth lab explosion. Firefighters set fires in one room after another and practiced putting them out. Then, in one last drill, they burnt down the whole place.  Interesting but effective training using an entire house.  Here we are though several years later (this happened five years ago) and there is still a dispute that still is burning over the homeowner’s attempt to claim a $287,000 charitable tax deduction for donating the house to the fire department, which has burned down at least 32 such homes in Upper Arlington since 1988.

The Internal Revenue Service is trying to stop homeowners from claiming such deductions.

Lured by the prospect of free demolition, homeowners around the country sometimes offer their houses to the local fire department for training purposes. The department burns down the house, clearing the way for the owner to build a bigger and better home. In court cases in Ohio and Wisconsin, the IRS is arguing that because such houses are already slated for demolition, donating them for fire training isn’t an act of charity.

The dispute adds a new element of controversy to the decades-old debate over whether the risks associated with “live burns” — more than a dozen firefighters have been killed in the past two decades — outweigh the training benefits. Fire chiefs say live burns supply invaluable training for volunteer departments, which make up the bulk of the nation’s firefighters. And some fear that the tax disputes will discourage donors from coming forward.  Hmm, there isn’t a shortage of homes that are getting run downdown and up for donation. Nobody tracks the number of live burns each year, but fire officials say they are increasingly rare because of mounting safety and environmental restrictions and because fewer homes are up for demolition in this slumping economy.  I wonder how people actually try to claim the donation of a home as a tax deduction.  Wonder if any business has tried that with their store.
Churches, corporations and cities with vacant properties also donate buildings for fire training. Sometimes it is a dilapidated old barn, other times a sprawling suburban house. (The Hendrix home, not including the land, was appraised at $287,400).

It’s impossible to know exactly how many people have tried to claim such deductions; the IRS would not comment.

Steven Willis, a professor at the University of Florida who studies income tax law, said a charitable deduction can be no greater than the value of whatever was donated, and a house given to a fire department has negative value, since the owner was going to have to pay somebody to get rid of it.

“The whole idea of a charitable deduction is that you give something to charity and you don’t get anything back, right?” said Paul Caron, a tax scholar at the University of Cincinnati. “When you give $100 to the Catholic Church, you don’t get anything for that $100.”

The IRS maintains in court papers in the Wisconsin case that the homeowners do not qualify for a deduction because they are donating only a “partial interest” in their home, rather than the entire property. The agency also says homeowners are letting firefighters only use the property, not donating it in full.

But a lot of work goes into preparing a house to be burned down, including a detailed inspection by environmental authorities, said Terry Grady, a lawyer representing Hendrix, who wants the IRS to refund him $100,590 in “erroneously collected” taxes. Hendrix built a new house on the property.

“They have to, in fact, pay their mortgage off. They have to make sure there’s no asbestos in the house,” Grady said. “And you know, conversely, the benefits to the fire department are just immense.”

Although the demolition is free, the homeowner is responsible for clearing away the debris.

ESPN commentator Kirk Herbstreit, who also lives in Upper Arlington, let firefighters burn his home in 2004. The former Ohio State football star’s claim of a $330,000 tax deduction was rejected a year later. Herbstreit declined to comment.  So there is a case of being a celebrity didn’t help matters either.

A case similar to the Hendrix dispute has also unfolded in Chenequa, Wis., where Theodore Rolfs filed for a $76,000 tax deduction on his lakefront home that was burned in 1998. The trial concluded in 2006. Rolfs is still waiting for a verdict.

Rolfs, who had been told it was common practice to receive the deduction, was taken aback when the IRS rejected his.

“Their arguments didn’t make any sense,” he said.

At Rolfs’ house, firefighters wheeled a truck down to the shore and practiced pumping lake water onto the flames, a crucial training exercise in Chenequa, which has no fire hydrants, said Rolfs’ attorney, Michael Goller.

Environmental laws in some states ban live burns. In other states, most fire departments adhere to safety guidelines that say windows should be boarded up, floors inspected for sturdiness and shingles and carpets stripped away.

Three firefighters were trapped by flames and perished in a 100-year-old farmhouse in Milford Township, Mich., during a controlled burn in 1987. In February 2007, a fire recruit was killed in a training exercise in a Baltimore rowhouse.

The moral of the story is to please check with a good tax professional before attempting to donate your house to the fire department for blowing up.  You don’t want to get burned later on!

Sep 27 2009

Kim Isac Greenblatt

IRS and burning down your house

How Are Your Backups?

Thursday, October 16th, 2008

How are your hard drive backups?  Do you have a set of flash drives as well that have your important documents, contact information, etc somewhere safe?  I have been guilty in the past of taking multiple back-ups of important records and keeping them all one spot.  That wouldn’t have done me any good if the fires that are hitting the San Fernando Valley got to my house.

Can you get to your back-ups, your computer, important documents in case of an emergency and get them out of the house or apartment in five minutes or less?  If a fire is coming, or if you have had an earthquake or the waters are rising, you will not have much time to gather the information that puts your life from set back or on hold to back on track.

Keep back-ups of business data off-site.

Invest in a flash drive and back-up important documents, phone numbers, account information in either a text format or a simple Word format.   You want to be able to re-read the information on ANY system in the event you cannot get your system restored or back from a burnt or flooded house.

Make sure that all people who need to have access on an account are on the account.  If you or your spouse or partner cannot make it to an ATM or to get money and the other needs to get money they will be out of luck if they don’t have access to cash.

In the event of a disaster, cash may be king.  The information in your life might be the queen.   I have heard of emergency services issuing debit cards.  That works great if local merchants are online to accept electrical transfers.  If they can’t, default is cash, food or the honor system.  Ask the people who have been through hurricane or tornado damage lately.

Documents or software for services you provide will need to be reloaded to computer systems.  Other parts of the country or world may be up and running and they still may need your services-maybe now more than ever.

While I am on the subject, make sure that your vehicles are gassed up so if you have to leave you can drive and if need be, drive far away out of the zone of the disaster.  If you are driving and almost empty and the roads are jammed, get ready to abandon your car.

Test your backups periodically.  Try reloading them into another directory or if you can, another computer so you can get the feel for what it is like to get back into action if your business is halted or interrupted.

Recently my DSL line was clobbered.  I have a backup and that allowed me to transfer networks and I was back up in minutes.  The DSL provider was out within 72 hours but some businesses cannot afford to wait that long. 

Do what you need to do to stay connected.  If you have a website, is it mirrored or backed-up somewhere safe? 

Hopefully, after reading this article, when asked, “How are your backups?”  You can respond, “Fine, thanks for asking, how are yours?”

Kim Isaac Greenblatt 

 

You are reading the profitable blog by Kim Greenblatt as he asks, “How are your backups?”

Help Kim What is the Tax Relief For Disaster Victims?

Monday, October 13th, 2008

Emergency question from a reader:
“Help, Kim, my house is involved in the Sylmar fire. What is the tax relief for disaster victims?”

My answer: Good luck and above all be safe! The Federal government offers relief to those of us who are suffering from uninsured property damage. To see if you can qualify for the write-off, the damage must be caused by an unexpected, identifiable event, such as a flood, earthquake, hurricane, tornado, etc. This is an aside but make a note that accidents and deterioration of property don’t count.

In this case, the fire sounds that it definitely would count.

Your uninsured loss, minus $100, must then exceed 10% of your adjusted gross income to qualify.

You will need to run the numbers to see if you can claim the casualty loss deduction.

If you can claim the casualty loss deduction, be prepared to provide the IRS:

1. An estimate of your loss, which could involve getting appraisals for the value of your property before and after the damage.

2. Background data about the disaster that caused your loss, such as newspaper clippings.

3. Proof you own the damaged property.

4. Receipts for repairs.

5. Make sure that you remove any costs that you have been reimbursed for by insurance companies.

Please remember that if your loss is in a federally declared disaster area (and that may be deemed as such by the government depending on how bad things get), you have the option of deducting the loss on your tax return for the year immediately before the disaster. If you choose that option, enter your adjusted gross income from the prior year instead.

For more on claiming the deduction, see IRS Publication 547, Casualties, Disasters and Thefts, and IRS Publication 584, Casualty, Disaster, and Theft Loss Workbook.

Good luck!

Kim Greenblatt

Kim Greenblatt’s profitable blog answers a plea for help on what tax relief is for disaster victims.

Planning for A Disaster with Free Contingency Advice

Thursday, July 31st, 2008

You’ve gotten your business going and all is going well.  What happens if you have an earthquake similar to the one that just hit California?  How about if you have flooding like Louisiana, or parts of Asia?  What about fires?  As unlikely as it sounds, what about a terrorist attack?

 

If you don’t have one, you need a solid contingency recovery or disaster plan.  A contingency recovery plan is how to recover, keep the continuation of business and avoid a loss of your income stream.  It can also be how you and your loved ones should react when you have a disaster.  Having been trained in contingency planning, I have seen and been part of the implementation of a lot of systems.  Talk about a lot of details!  The gist of it is, it is better to be prepared and not have a disaster then not to be ready and something goes wrong.  What could go wrong?

 

How about the 1992 Chicago Flood by the Chicago River?  How about the World Trade Center terrorist attacks?

 

Remember that disasters don’t have to be a catastrophe to be annoying.  Smaller ones could be utility company failures, bad weather, or equipment just breaking down or failing.  The reason that the Year 2000 programming bug (the fear that computer programs couldn’t handle dates after the year 2000 accurately)  was a non-event was that companies spent millions retrofitting, upgrading and reviewing their computer software and firmware to see if any date changes would cause any problems.  If they had not done that, it probably wouldn’t have been the end of the world however you can bet that a lot of companies would get a lot of complaints from their clients if their bank interest statements showed they owed interest calculated back to 1900 on their loans.  The firms would have felt a lot worse if you came in with a bank statement showing that you were entitled to receive savings interest calculated from 1902!

  

Your contingency plan should be tailor made for specific actions you need to take if certain things happen.  One a larger scale, certain levels of destruction have to occur before the Federal or state government support agencies are triggered into action.  That explains why sometimes Governors, Presidents and the military are slow to offer aid.

 

You should have a contingency plan for your family as well.   If you don’t have one there is some free information further down in the article.

 

How do you begin in forming a plan?

 

First, get all the stakeholders together and decide what should be kept running or restored into operation if the business (or your family) gets disrupted. 

 

What do you need in your disaster or contingency plan?

 

1.  Establish a training plan and practice that you and your staff are safe and they are away from harm’s way if something happens.  Think fire drills, flood drills, earthquake drills.

2.  Determine the extent of the damage and who to notify that there has been a disaster or problem (it could be as simple as the power going out in a thunderstorm and your backup generator has failed-don’t laugh, it has happened).

3.  Bring in the recovery team members to get the systems up and running.

 

If you are in a customer oriented sales business and have people in your store, make sure that you have an evacuation plan in place and test it periodically.

 

Do you have emergency lighting?  Make sure that you have some way to see where you are going if the power goes out.  Contrary to popular belief, it isn’t the disaster that hurts people but things like people walking barefoot in cut glass or tripping in the dark afterwards.

 

If you can, take steps get what insurance coverages you need now.  Once a minor event like a small flood happens, people start trying to get coverage and rates go up (if they haven’t already with all the flooding going on worldwide in the last few years).

 

There are a lot of other issues to take into consideration and if you want specific information, check with the link below or post your questions in the comments section. 

 

If nothing else, please take away information that you should have a contingency plan in place for you, your family and business if nothing else so that if all goes well, you will never ever have to use it.

 

For information about what to have for your own disaster planning, you might want to check out the free information at FEMA. They have some great stuff about planning there.

Kim Greenblatt

Questions or comments? Let me know about them! Thanks for taking the time to visit and for more information or to get back to the beginning of the blog, go here.