Taxable Income for 101 year old

[Terry D EA]

This is interesting. My grandmother is 101 years old, in a nursing home and we have cashed in CD's, stocks etc to pay for the nursing home expenses. Yes, I know this was the wrong way to do things but I can say much for the planning the family has done. Here is the situation. On her 1040 pg 2, line 43, taxable income is 18,909. Line 44 is blank!

I have been trying to find any information regarding why line 44 is zero. Are folks releived from paying any federal taxes past 100 years old? She is in Ohio and Ohio is taxing the income so I assume I will need to complete Sch A which will reduce everything to zero. If anyone has a citation to support this, I would like to see it. I have always understood that age has nothing to do with paying taxes. I certianly know the filing requirement is there regardless but no tax???

[jainen]

>>cashed in CD's, stocks etc.... Line 44 is blank<<

That line on the form is titled "Tax (see instructions)." According to the instructions you would see, "If you have to file Schedule D... use the Schedule D Tax Worksheet." Remember that for long term capital gains in her tax bracket the rate is zero.

[rfassett]

Agree with Jainen - most likely zero tax due to the long term capital gain.

[Terry D EA]

I have now realized you both are correct and I should have realized this before I began to think there was a problem. I guess my wife is correct that I am stressing too much which is clouding my ability to think clearly.

[Kea]

I had that happen last year (but with younger client). It looked so strange to have $0 tax on substantial taxable income. It took me a few minutes to trace it to the Sch D.

It's just not something we see very often -- usually LTCG tax breaks have less significant impacts on the total tax. Very few of my clients have the bulk of their income from capital gains.

It looks odd. It's perfectly understandable to question it this time of year!

[JohnH]

I have several clients who will tell you that you don't have to pay income tax if you're over 75. I know they will say that because that's what they tell me every year.

[rfassett]

Happened on one of my returns a couple years back - also not a 101 year old. The guy had an AGI of over $120,000 and zero tax. This particular return is pretty big - 3 schedule C's, a couple of E's, a few K-1's, an F and more. I reviewed that return six times before I was comfortable releasing it Just one of those quirks

[jklcpa]

I have several elderly couples whose returns have been like this too. One has over $55K in dividends that are almost all qualified, small pension, taxable portion of soc sec ~ $12K. They used the standard deduction and had taxable income of about $50K and ZERO tax.

Terry D, bunny hop to the worksheet for line 44 of the 1040 will show you the calcs.

[Terry D EA]

Thanks for all the help. I did see the worksheets which answered my question at the same time Jainen and others had posted. I am glad to see that I am not the only one who got stumped on this for a while. I could have sworn there was a software problem here, deleted the return, re-proforma the return (I am using TRX) and even re-created it manually before I got the answer. I posted this on the TRX discussion, has anyone attached a pdf to the e-file to submit a broker statement that has 21 pages of transactions? If so, was it successful? I am getting a signed 8453 just in case.

[ljwalters]

I am amending a return for this same basic reason. The Qualified dividens was in put loosing the decimal (Turbo Tax). caused a $6000+ error on the return using CG calculation. Now she owes big time.

[RitaB]

I have several clients who will tell you that you don't have to pay income tax if you're over 75. I know they will say that because that's what they tell me every year.

Mine say it's 72. Get with the program.

[Jack from Ohio]

Enjoy the 0 tax rate on capital gains for the 10% filers. I will bet a steak dinner that Congress changes it before Dec. 31, 2012. Any takers?

[jainen]

>>I will bet a steak dinner that Congress changes it before Dec. 31, 2012<<

Right--nothing like an election year! Those politicians will be fighting in the halls to take credit for raising tax rates on low income. Terry's 101-year-old grandmother can be the poster child.

[Jack from Ohio]

>>I will bet a steak dinner that Congress changes it before Dec. 31, 2012<<

Right--nothing like an election year! Those politicians will be fighting in the halls to take credit for raising tax rates on low income. Terry's 101-year-old grandmother can be the poster child.

"She paid a lower tax rate then Warren Buffet's secretary!" There is your campaing slogan!! Find a couple that has only SS and a small retirement income from their 401K's and then sells stocks with gains of $50-100K and pays ZERO tax??

They can be the poster child.

[taxxcpa]

Soak the rich. Punish them for their success. From each according to his ability; to each according to his need.

[Randall]

We've had something of a reprieve on tax changes. Still in effect for 2012 (except those extenders expired at the end of 2011). So except for the extenders, our tax season next year will be for 2012 tax laws. But who knows what to expect for 2013.

[Terry O]

I have had this same situation for a 90+ yr old - - very difficult explaining it to her - - until the part about NO TAX DUE!!!

THAT - -she understood!!!!

[Terry D EA]

Well the only person I had to convince was me. I am down to three returns to complete, one of which is mine, and one crut and one invididual with many trades. This has been a very different tax season for me and I am so glad to see if come to an end. Two weeks off and back to all those wonderful extensions and after that time to go see that 101 year old grandmother who is well on her way to 102. If I could call it, I bet she lives to 105. Heck who knows, maybe longer.

[Jack from Ohio]

Well the only person I had to convince was me. I am down to three returns to complete, one of which is mine, and one crut and one invididual with many trades. This has been a very different tax season for me and I am so glad to see if come to an end. Two weeks off and back to all those wonderful extensions and after that time to go see that 101 year old grandmother who is well on her way to 102. If I could call it, I bet she lives to 105. Heck who knows, maybe longer.

Here's hoping you inherited the long life gene!!