Question about my son using the Augusta rule

[Stormy Kromer]

I don't think so. There are several posters here who IMO are well versed in taxes. I'm guessing that cathy is a CPA and a tax practitioner. I'm a retired CPA but not a tax practitioner... my career was in corporate financial

On second thought Stormy, you don't have a vote. I guess that we'll go with Gemini's advice.

Heard you the first time.

 

[Stormy Kromer]

Well actually, the scheme that the article in OP posed is a legitimate tactic and would be viable if the proprietor/owner was a C corp or S corp or partnership but not in the case that the OP wrote of a sole proprietorship.

Not sure if you are aware, but paid professionals sometimes provide wrong advice too (that's why they buy E&O insurance).

My thought was the OP's question deserved the direct advice from an experienced tax preparer. CPA or not. I would say that their question was way beyond a free question on the internet answered by a stranger.

My advice to them would have been "talk to your tax professional" Not "Yes".

I was an insurance professional who used to underwrite Professional Insurance Policies (E&O). We never looked for clients who relied on their E&O insurance to back up questions they din't know to answer..

 

[SecondCor521]

I apologize for what appears to be a smart comment. It is not meant to be. I only wanted to warn the OP to be careful when dealing with IRS rules.

No apology necessary to me as the OP, and I'll accept and consider warnings from anyone.

Please leave it to your paid Professionals. You have a legitimate question that I would certainly pursue.

I understand your point of view and I understand the point you're making. I tend to DIY a lot more than most folks. Regarding taxes, I am not a CPA but I have an aptitude as well as many years of knowledge, experience, training, and education in taxation. So I almost entirely DIY taxes as well.

When I mentioned that it didn't pass the smell test I was referring to the OP saying "I heard it from a reasonably reliable source" That's what got my caution flag up. I have heard a lot of wrong advice from reasonably reliable sources. I was just looking out for the OP.

I said reasonably reliable source because I didn't note where I read the suggestion but I did recall that it was a source that I consider usually reliable. It also got my caution flag up because it sounded too good to be true which conflicted with my typical assessment of the data source.

I've also seen a lot of wrong advice, including here on this forum. My approach is to educate and train myself and research tax issues, then do my best, then apologize and pay up if I err. Like pb4uski, I've seen a number of tax professionals make errors regularly as well. Another reason I DIY.

Again, I appreciate folks here looking out for me, including you.

 

[SecondCor521]

My thought was the OP's question deserved the direct advice from an experienced tax preparer. CPA or not. I would say that their question was way beyond a free question on the internet answered by a stranger.

My advice to them would have been "talk to your tax professional" Not "Yes".

OP is a non-CPA experienced tax preparer who is his own tax professional. ;-)

 

[pb4uski]

My thought was the OP's question deserved the direct advice from an experienced tax preparer. CPA or not. I would say that their question was way beyond a free question on the internet answered by a stranger.

My advice to them would have been "talk to your tax professional" Not "Yes".

I was an insurance professional who used to underwrite Professional Insurance Policies (E&O). We never looked for clients who relied on their E&O insurance to back up questions they din't know to answer..

Well, as you have now found out, the OP is an experienced tax preparer as is cathy and me. Anybody can respond "talk to your tax professional" but it isn't particularly helpful advice. And experienced tax preparer's are not always correct since there are often many nuances to tax questions.

On the last part, I have to wonder how an "insurance professional" would differentiate between a prospective client/tax preparer who relies on their E&O insurance to back up questions they didn't know the answer to from tax preparer who doesn't.

 

[Stormy Kromer]

Well, as you have now found out, the OP is an experienced tax preparer as is cathy and me. Anybody can respond "talk to your tax professional" but it isn't particularly helpful advice. And experienced tax preparer's are not always correct since there are often many nuances to tax questions.

On the last part, I have to wonder how an "insurance professional" would differentiate between a prospective client/tax preparer who relies on their E&O insurance to back up questions they didn't know the answer to from tax preparer who doesn't.

Easy. We would deny them after their first easy mitake.

 

[Stormy Kromer]

Well, as you have now found out, the OP is an experienced tax preparer as is cathy and me. Anybody can respond "talk to your tax professional" but it isn't particularly helpful advice. And experienced tax preparer's are not always correct since there are often many nuances to tax questions.

On the last part, I have to wonder how an "insurance professional" would differentiate between a prospective client/tax preparer who relies on their E&O insurance to back up questions they didn't know the answer to from tax preparer who doesn't.

If you and cathy and the OP are you are tax professionals...


Then why in heck are you even baititing us amateurs for advice

Give them your CPA approved, E&O insured and court approved court guaranteed advice and tell us to shut up.

 

[Stormy Kromer]

Well, as you have now found out, the OP is an experienced tax preparer as is cathy and me. Anybody can respond "talk to your tax professional" but it isn't particularly helpful advice. And experienced tax preparer's are not always correct since there are often many nuances to tax questions.

On the last part, I have to wonder how an "insurance professional" would differentiate between a prospective client/tax preparer who relies on their E&O insurance to back up questions they didn't know the answer to from tax preparer who doesn't.

Easy. I read the renewal applications for their E&O Insurance. Two people we denied are in jail today, 2/28/26. They lied to us.

 

[Stormy Kromer]

Well, as you have now found out, the OP is an experienced tax preparer as is cathy and me. Anybody can respond "talk to your tax professional" but it isn't particularly helpful advice. And experienced tax preparer's are not always correct since there are often many nuances to tax questions.

On the last part, I have to wonder how an "insurance professional" would differentiate between a prospective client/tax preparer who relies on their E&O insurance to back up questions they didn't know the answer to from tax preparer who doesn't.

It is a 12 page application with personal references. Under oath by the way........ You are a CPA? aren't you. Do you think insurance companies with hundreds of you would give it away.

 

[Stormy Kromer]

Well, as you have now found out, the OP is an experienced tax preparer as is cathy and me. Anybody can respond "talk to your tax professional" but it isn't particularly helpful advice. And experienced tax preparer's are not always correct since there are often many nuances to tax questions.

On the last part, I have to wonder how an "insurance professional" would differentiate between a prospective client/tax preparer who relies on their E&O insurance to back up questions they didn't know the answer to from tax preparer who doesn't.

Because they lie to us.

 

[Stormy Kromer]

I'm done here folks. I'm in this furum to have fun. I went too far......

Good bye

 

[pb4uski]

^^^. Wow, 6 responses to one single post, some of which are repetitive. I've never had that happen before. Methinks you have an attitude problem. Chill out man. Like you wrote, we do this for fun.

 

[Texas Proud]

Just to put some meat on the bone with the people who keep saying 'talk to a professional'...

There will be a lot of professional CPAs who do not know this rule... there are a lot of 'rules' and nobody knows them all...

The other thing is what is 'fair market rates'? My house might be a whopping $100 a day.. so max savings is $1400 in income... even at 24% rate that is $336...

Is it worth increasing your odds of an audit to save $336? That is why I had asked what is he trying to save...

Now, if you have a $10 million house that could be different, but then the pct savings is probably the same..

 

[SecondCor521]

The other thing is what is 'fair market rates'? My house might be a whopping $100 a day.. so max savings is $1400 in income... even at 24% rate that is $336...

Yup, another reason not to do it.

Also, the tracking and documentation hassle.

As noted earlier in the thread, I'm not even going to bring it up to him.

 

[Stormy Kromer]

^^^. Wow, 6 responses to one single post, some of which are repetitive. I've never had that happen before. Methinks you have an attitude problem. Chill out man. Like you wrote, we do this for fun.

To all. I apologize. Thanks for the correction. I deserved it.

 

[pb4uski]

Stormy, we've had our differences over time, but I'm glad that you came back. Apology accepted. Chalk it up to a bad day, but water over the dam at this point. Take care.

 

[Stormy Kromer]

Stormy, we've had our differences over time, but I'm glad that you came back. Apology accepted. Chalk it up to a bad day, but water over the dam at this point. Take care.

Thank you, I am not a jerk, even though I acted like one.