The Primary Residence Exclusion

One of the greatest tax gifts is the principle residence rules for capital gains on the sale of your home. So great is the principle residence tax exclusion that even married couples filing jointly are benefited to the same, if not greater, extent as single taxpayers. Now, some people may argue that there have been, are and will be greater gifts, but not much beats the simplicity of this rule. The basics of it are immensely easy to grasp: you own a house, you live in it for at least two years, you sell it and you dont pay any taxes on the gain. Gone are the days when the young homeowner (not wishing to sell and upgrade) had to save every receipt for every upgrade, every repair, every minor item bought at the hardware store. If you have lived in your own home for two years, you probably dont have to worry.

Of course, there are some technicalities associated with the general rule. They are pretty simple so first I will bullet-point the main ones:

If you are single your capital gains exclusion is limited to $250,000.00
If you are married your capital gains exclusion is limited to $500,000.00
You have to own the home and it has to be your primary residence for two of the previous five years

What is your primary residence? Basically, it is a home that you personally live in the majority of the year. If you have a house in Palm Beach and one in Lake Tahoe and you spend 8 months of the year at the Tahoe home than that is your primary residence. But, keep in mind the 2 out of 5 part of the rule. Lets say that the next year you spend 7 months at the Palm Beach house. Then the Palm Beach home is your primary that year. See where I am going with this? You can primary more than one home at once over a five year period so long as each is your main home for at least two years during that five year period. Temporary absences are also counted as periods of use even if you rent the property during those absences (but talk to your accountant about recapturing any rental depreciation).

Now dont let the five year requirement confuse you it only takes two years to achieve the tax exclusion. The five year part is a bonus, allowing you some freedom. You dont have to personally use the home as your primary residence for two consecutive years or for the two years immediately before you sell, you just have to use it is your primary residence for two of the previous five years. But, it is also a limitation, you cannot live in a house for two years and then rent it for four years and then get the exclusion. You could live in it for two years and then rent it for three years and then sell it (so long as it is sold within the five year mark from when you first lived in it as your primary residence).

Also, bear in mind that married couples do not have to live together. So long as one spouse lives in the primary residence for the two years than the couple can take advantage of the $500,000.00 exclusion. But, they cannot primary two homes at once and get the $500,000.00 exclusion on both. If they live apart during the two year period and each sell their primary then they are each limited to the single taxpayer exclusion of $250,000.00 for each house.

If you have a home office or rental as part of your primary residence or run a business out of a portion of your property, your ability to maximize your capital gains exclusion largely depends upon whether the home office, business or rental was part of your home (in the same dwelling unit) or a separate part of your property (a separate building or apartment). If the business use of your home was contained within your dwelling unit then upon sale you will need to recapture any depreciation taken for that part of the home. But you will not lose any of the allowable capital gains exclusion ($250,000.00 for single taxpayers and $500,000.00 for married filing jointly). If the business use of your home was not a part of your dwelling unit then you need to bifurcate the sale by allocating the basis of the property and the amount realized upon its sale between the business or rental part and the part used as a home.

Remember, only one home can be sold in any two year period unless you and your spouse live apart, and even then you can each only take the single payer exclusion of up to $250,000.00. But what if you need to sell a home that you have not lived in for the full two years? The IRS tells us that in special circumstances you can sell a home before you reach the two year mark and get a pro-rated exclusion. An example of a pro-rated exclusion is, for example, if you are a single taxpayer and have to sell your primary residence for a qualified reason after living in it only one year than you could exclude up to $125,000.00. In other words, you lived in the home 50% of the requisite time so you can take 50% of the allowable exclusion. The special circumstances that qualify you for this safe harbor and allow you to take the pro-rated exclusion have to do with health (yours and certain qualified individuals such as close relatives), change of employment or what the IRS calls unforeseen circumstances (examples include death, natural or man-made disasters, multiple births form the same pregnancy, divorce) These circumstances also have to cause you to sell your home. Factors used by the IRS to determine causation include:

Your sale and the circumstances causing it were close in time,
The circumstances causing your sale occurred during the time you owned and used the property as your main home,
The circumstances causing your sale were not reasonably foreseeable when you began using the property as your main home,
Your financial ability to maintain your home materially changed, and
The suitability of your property as a home materially changed.

1031 Exchanges and the Primary Residence Rule

What happens if you do a like kind tax deferred exchange (also known as a 1031 exchange) of rental property or other property held for investment and then later decide to live in the property that was purchased? It is crucial to your 1031 exchange that both the property sold and the property purchased are held for investment. The property purchased must undergo a holding period before it is resold or converted into non-investment property. That holding period should be a year and a day to avoid audit. After you have complied with the held for investment requirement by, for example, renting the property if it is rental property, then what? Well, you could sell the property and pay your taxes on that sale and all previous sales that were perhaps in a series of exchanges or exchange and defer the tax once again, OR you could live in the house as your primary residence. If you have a had a series of gains that you have deferred this is a way to extinguish your tax debt forever - all you have to do is move into your investment property once the holding period for it qualifying as an investment is over.

Gaining the primary residence exclusion for property that was 1031 property isnt as easy as the simpler primary residence rules talked about above, but it does allow you to take advantage of two loopholes at once! The main difference when primary residencing a 1031 exchanged property is that you actually have to hold the property for 5 years. The five year part here is a substantive rule, you cannot sell after only 2 years of ownership as you can if you were simply primary residencing a home that was not exchanged into. But that first year that you had to hold onto the home for investment goes towards the five year calculation. So, you rent it for two years and live in it for three, or vice-versa, so long as you kick the whole thing off with a one year rental period and live in it two of the remaining four years.

In this way, you can exclude up to a total of $500,000.00 worth of gain (if you are married filing jointly or $250,000.00 worth of gain if you are a single taxpayer) from the combined gains of the sale of the home you ended up living in as your primary residence, and any of the gains that you had previously 1031 exchanged. For example, say you purchased a duplex in May of 2000 for $150,000.00 and then in June of 2001 you 1031 exchanged the duplex (now worth $200,000.00) into a commercial building worth $200,000.00 (thus deferring $50,000.00 worth of gain). A few years later the commercial building is worth $300,000.00 and you do another exchange, this time into a nice single family home worth $350,000.00 (you have to put in an additional $50,000.00 to complete the purchase). You have now deferred a total of $150,000.00 worth of gain. Lets say you then choose to rent the home for the first two years that you own it and then you later decide to move into the home. You then live in the house for three years at which point it is now worth $700,000.00 and you sell it for this amount. You and your spouse have now effectively wiped out not only the $350,000.00 gain from the sale of your primary residence, but the previous $150,000.00 worth of gain as well.

Diet For Healthy Prostate - Why Soy Is Not Just For Women

Researchers from Canada have found that having a diet of red meat, organ meats, soft drink and bottled water increased the risk of getting prostate cancer. They compared the diets of 80 men with prostate cancer, and 334 healthy men, and the diet just described more than doubled the risk of developing prostate cancer.

So what prostate diet can reduce the risk of prostate cancer? Swedish researchers examined the diet of 1499 men with prostate cancer and 1130 men who were healthy, and they published their findings in the Cancer Causes and Control journal. They found that eating foods rich in phytoestrogens decreased the risk of prostate cancer.

Phytoestrogens are plant molecules that have a weak estrogenic effect. They are made converted in the intestines from plant precursors by bacteria as they digest food. They are taken up by the same parts of the body that process the hormone estrogen.

Interestingly, one of the treatments for prostate cancer by doctors involves using estrogens to reduce the level of testosterone in men with advanced prostate cancer. It does this indirectly, through its effect on the hypothalamus, as less luteinizing hormone releasing hormone is produced by the hypothalamus. This means not as much luteinizing hormone is released by the body, which suppresses the production of testosterone.

High doses of estrogens for men can lead to cardiovascular complications. But phytoestrogens obtained from diet, in less quantities than a drug, and with a milder effect to start with, should not pose a problem. And researchers don't yet know what exactly causes phytoestrogens to have such a protective effect, whether it is similar to that of the estrogen treatment for advanced prostate cancers. And they don't know which phytoestrogens are the most active.

So what phytoestrogen foods could you include in a diet for a healthy prostate? Soy beans and nuts are a good source. Soy and nuts contain a type of phytoestrogen called isoflavones, whilst berries and seeds contain lignans. Foods could include peanuts, sunflower seeds, peanuts, and berries.

The only possible concerns with soy is that a study in mice found that male mice that had a type of heart disease that people also have, suffered heart failure when fed a soy based diet. Whether this extrapolates to the human population is yet to be established. But it may be wise for those me who have this particular genetic heart condition, dilated cardiomyopathy, to be cautious about soy products in their diet.

But for other men, soy products could be good news. A meta analysis, which is a study of related studies, published in the International Journal of Cancer, found that diets high in soy lowered men's risk of prostate cancer by 30%.

Another important mineral to consider for men is zinc. Zinc is used by men's bodies to make some of the male hormones, and for general prostate health. A deficiency in zinc can lead to problems with the testicles, the prostate, and the health of the sperm. Foods that are great sources of zinc include seeds like pumpkin, sesame, and sunflower; nuts like almonds, brazil, cashews and walnuts; and foods like lettuce, oats and onions. Raw onion is particularly suggested by Paul Bedson, a natural therapist. He also suggests vegetable juice made of equal parts of beetroot, carrot, and cucumber in cases where the prostate gland is enlarged. Cranberry juice, a cup drunk three times a day, is also recommended in this case.

References:

1. phoenix5.org/Infolink/advanced/estrogen.html
2. Australian Healthy Food, March 2006
3. Australian Healthy Food, November, 2005
4. Paul Bedson, The Complete Family Guide To Natural Healing
5. nutraingredients.com/news/ng.asp?n=65785&m=1NIE213&c=qgtqmovbyiaxdub

If you're interested in a health prostate supplement that promotes healthy prostate, bladder and kidney functions, click here. Rebecca Prescott runs this site which presents comprehensive reviews of vitamins and supplements.

Official - Becoming a US Citizen or Permanent Resident is Now More Expensive

Beginning July 30, 2007, immigrants seeking to become US citizens or permanent residents will have to pay more in immigration fees. In some cases, the fees have almost tripled, such as the adjustment of status fee that will change from $325 to $930.

Back in February the U.S. Citizenship and Immigration Services had announced their plan of increasing their fee structure to finance the modernization of the agency. According to a USCIS press release:

USCIS expects that the revenue from the new fee structure will lead to a 20 percent reduction in average application processing times by the end of fiscal year 2009, and will cut processing times by the end of fiscal year 2008 for four key application types: the I-90 (Renew / Replace Permanent Resident Card), I-140 (Immigration Petition for Alien Worker), the I-485, and the N-400 (Naturalization). These four application types represent one-third of all applications filed.

Although the above may sound like good news in terms of processing times, the new fees are a hard blow to thousands of immigrants who couldnt even afford paying the current fees.

With the new fees, a family of two adults and two children filing for a green card will pay more than $3,000 in fees aloneadd to that the cost of the required medical examinations, photos, and attorneys fees.

Some of the changes include:

* Form I-130 (Family-based Petition): From $190 to $355
* Form I-140 (Employment-based Petition): From $195 to $475
* Form I-485 (Adjustment of Status): From $325 to $930 (adults); from $225 to $600 (children under 14)

The complete list of fees is available at the USCIS Web site:

Diego Pineda is the author of Getting a Green Card for Less: How to file the I-485 without an immigration lawyer. To learn how to save up to $5,000 in attorneys fees go to greencardforless.com

Head Unit Features, And How They Effect YOU: A Guide

Build quality:

Some head units are flimsy and weak. Some are built to last. Usually the best way to determine this is by the weight of the unit. Also, check to see if anything doesn't "fit", or if there are parts that are cheap or flimsy. The truth is this: The bigger name units tend to be better. Also, the more expensive units tend to be better. This isn't always a big deal for everyone, but I believe that build quality is very important.

Basic Head Unit Features:

Power output:

Most head units have built-in amplifiers. These drive the speakers. Some head units do not have internal amps, and therefore, require the use of an external amp. Head units without amps are usually high-end models. Anyway, power is measured in WATTS. We'll talk more about watts later, but for now, just see more watts as more volume. Most head units (unfortunately) are deceptive about the power output. Usually, the power output spec on a unit will say "50Wx4 MAX output". This means that when the laws of physics are on your side, it's a clear day everywhere in the world, the planets are aligned, the bass hits really really low and hard, and for about a tenth of a second, yeah, your head unit will put out 50Wx4. However, most of the time, your head unit is probably putting out a quarter of that. It's not that the head unit manufacturer is lying, it's just that they are exaggerating the truth, AND MOST PEOPLE DON'T KNOW BETTER. So, anyway, many people put a lot of importance on a head unit's power output. I don't because head unit amps suck, and no serious car audio person uses the head unit's amp anyway. Most head unit brands have about the same power output anyway. 9 times out of 10, an aftermarket head unit will put out more power than your factory head unit, and as such, will sound better.

RCA Preouts:

These are used to connect external amps to your head unit. These are the same red and white cables that you use for your home system. Basic head units usually have one set of preouts (front left, front right). Some head units have two sets (front left, front right, rear left, rear right), but most decent head units have 3 sets (front left, front right, rear left, rear right, subwoofer left, subwoofer right). One quick note about subwoofer outputs: Sometimes they're called "non-fading" outputs because they are not effected by the head unit's fade control (front to back balance). If you're not planning on adding an external amp, you don't need to worry about RCA pre-outs. If you want to add an external amp (or amps), I would always recommend getting a unit with three pre-outs.

RCA Pre-out voltage:

Usually this spec is next to pre-out spec. It is measured in VOLTS (which we'll go over later). Basically, the higher the voltage, the LOUDER the music will be at your amp. Don't look at this as "free power" because it is not. In addition, the higher the voltage, the less noise that will be introduced to your system. Again, this spec doesn't matter if you don't plan on using an external amp. If you do plan on using an external amp, try to find the HIGHEST voltage you can. 2 volts is basic, 4 is standard for a good unit, sometimes you'll see units with 5 volts. I know Eclipse units have 8V(!) pre-outs. In short, more voltage=less noise and cleaner sound.

Digital time correction:

This is used to simulate a perfect stereo environment. If you're at home listening to music, you want to situate yourself in the middle of the two speakers to get the best sound. The same is true in the car, EXCEPT that it's a hell of a lot more difficult. Usually, the passenger side speaker will be farther from your ear than the driver side. Since sound travels fairly slow (comparfed to light), you'll have one ear receiving a portion of sound before the other ear. The digital time correction delays the music slightly so your ears will be perceiving the same music at the same time. This is a very important feature if you are planning an SQ system.

Crossover:

This feature is incorporated into many components in a car audio system. If your head unit doesn't have it, don't worry. Just be sure your amps have it. Basically, this makes sure the right speakers are playing the right sounds. I will go into more detail about crossovers later.

Equalizer aka EQ:

This feature allows you to tweak the sound. The most basic EQ is a two-band, and controls BASS and TREBLE. Some head units have 3-bands, BASS, MIDS, TREBLE. More advanced head units have 5-band EQs. If you are serious about tweaking your sound to perfection, you won't use your head unit's EQ; You will get an external unit, and some of these units have 30 bands! I will go into much more detail about EQs later.

Theft Deterents/Security Features:

There are a few options when it comes to head unit security:

Detachable Faceplate:

The most common method is a detachable faceplate. Basically, you remove the faceplate of the unit (where the screen and controls are), and the unit won't function. This will deter thieves, but please don't leave the faceplate in your car. Thieves know most people do this, and will still break into your car, find the faceplate and steal your head unit.

Password:

Some other units have a password function. When the unit is disconnected from power, then reconnected, the unit will require some sort of password. The unit will not function until the password is provided.

Key CD:

A few units use a key CD. Basically, the first time the unit is used, the unit will ask for a key CD. You insert any CD, and the unit will now designate that CD as the key CD. If the power is disconnected, the unit will ask for the key CD before it will function again.

Black out face:

When the unit is off, the head unit has a completely black face with no visible buttons or controls. Come on. Criminals aren't so stupid that they can't see that the head unit still has its face attached.

Hidden faceplate:

This is common for DVD players with screens, and one unit that I used to own, the Alpine CDA-7998. Basically, the face folds into the head unit, and looks exactly like a unit with the faceplate removed. Neat, but the unit is still vulnerable.

In short, all of these tactics are imperfect. Pick the one that makes the most sense to you, however most units only have a detachable faceplate feature.

CD Changer controls/Optional equipment interface:

This is a feature that allows you to connect other peripherals to your head unit. These peripherals are often CD changers, digital music players, satellite radio units, and video equipment. With this feature on your head unit, you'll be able to add additional capabilities to your stereo system in a convenient way. However, most of these interfaces are only compatible with the same brand. In other words, you'll need an Alpine head unit with the Ai-net interface connected to an Alpine CD changer with the Ai-net interface.

Remote Controls:

Some head units have remote control capability. This is a handy feature because you can control the headunit without taking your eyes off of the road.

OK, so these are some of the features of head units. Now, let's look at the specs of specific types of head units.

Tuner Features:

Most head units have AM/FM capability built in. Check out this information on getting the best AM/FM performance possible.

Presets: This feature allows you to save your favorite radio stations, and instantly recall them at the push of a button.

HD Radio: A new radio format that is close in sound quality to CDs. Basically, a radio station broadcasts their usual programming, but with an additional signal that can be received by units with "HD radio" capability. The availability of units with this feature is still small, and most radio stations haven't yet embraced the technology. I do expect this technology to take off, however because the sound quality is better, and not everyone wants to pay for satellite radio.

RDS: AKA "Radio Data System". A new feature for FM radios. This technology makes it possible for radio stations to transmit text to your receiver. This text can be used to show the station title or the artist name, and other information.

FM Sensitivity: The ability of your unit to tune into a weak signal

FM Selectivity: The ability of your unit to reject interference from other stations.

FM Stereo Seperation: The ability of a tuner to recreate the proper left/right channel sepearation.

CD Players:

CD-R/CD-RW Playback: This feature guarantees that your unit will play a CD-R or CD-RW that was made with a CD recording device.

CD-Text: This feature displays CD text information that is encoded on some CDs. This information includes artist names, song titles and album titles.

MP3/WMA/iTunes Playback: This spec assures you that certain digital file formats can be played back on certain units.

ID3 Tag Display: Displays text (such as song title and album name) encoded into MP3 files.

DAC: Digital to Analog converter. This device takes the digital signal from your CD, and turns it into an analog signal for your amp. The better your DAC, the more "real" your sound will be.

CD Frequency Response: The range of frequencies that the CD player can reproduce. It should at least cover the 20hz-20,000hz range.

Electronic Shock Protection: This feature prevents your CDs from skipping. If your head unit doesn't offer this, don't buy it. However, most players have it, and technology has gotten pretty good lately, so it's unlikely that you'll have any problems with skipping.

Signal to noise ratio (s/n): A measure of how well a CD player silences noise. The higher the rating, the less noise.

Zero Bit Detect mute: When the CD player detects a series of 0's on the CD (such as between songs), it will automatically mute the output. This feature isn't really important, but is often advertised.

Oversampling: The CD Audio format has a resolution of 16 bits, with a sampling rate of 44.1khz. What the hell does that mean? I really don't know, but think of a digital picture. Zoom in really close to this picture, and you see pixels. Think of each pixel as a sample. When you increase the pixels, you increase the sharpness and quality of the picture. When a CD player has oversampling, it takes the 44.1khz, and turns it into a bigger number. More samples=More realistic sound. Confused? I know. I am too, but a unit with oversampling will sound better than one without. Of course, the good news is that pretty much every unit these days has this feature.

Tape decks:

Auto Reverse: A feature that will automatically play the reverse side of a tape at the end of a side.

Dolby noise reduction: There are many Dolby technologies incorporated into tape decks. Most of these features exist to lower tape hiss, and raise the signal to noise ratio.

Frequency response: Again, the frequencies the tape deck respond to. Normal human hearning is from 20 to 20,000 hz.

Wow and flutter: This spec tells you how stable the tape deck playback speed is.

Now that you know some of the features of head units, you are ready to buy the right unit for YOU.

Alan Bayer is an entrepreneur and Car Audio enthusiast. He currently resides in some lame suburb in northern California.

He owns an eBay business http://stores.ebay.com/honest-aebs-autosound/, and the website http://www.honestaebs-caraudio.com/.

I also have a newsletter at my website. Check it out!