Wednesday, April 05, 2006

Tax Attorney v Accountant: The Tax Free Extreme Makeover: Home Edition

As the April 15th IRS deadline approaches for filing returns, I recently learned what the differences and roles are between tax attorneys and accountants. As a University of Delaware senior, I am currently taking a class that has a variety of guest speakers from the Delaware legal community. Recently, I had the opportunity to listen to a former tax attorney talk about the roles of a tax attorney and the issues they face.

One of the issues addressed was the "attorney-client privilege" and how Certified Public Accountants can be forced by the IRS to testify against you in a criminal trial. However, tax attorneys are legally protected and cannot testify against you. More importantly the role of a tax attorney is to provide both people and/or businesses with tax advice so that they may make full use of the ever-changing complexity of the IRC code. Interestingly enough, in the attorney's speech he talked about the primetime ABC hit show "Extreme Makeover: Home Edition" and how the families on that show do not have to pay any taxes based on the renovations that are done to their homes. After some research, I found out that ABC can get away with this because of Sec. §280A (g) of the IRC Code. The provision basically says that if you rent your house out for a period of less than 15 days, then any rental income you receive is tax free.

On television, the family is given an all expense paid trip to Walt Disney World or some other vacation resort so that the family can lease the house out to ABC. ABC, Sears and other sponsors are given a period of 10 days to complete the house construction. When the family returns, any improvements that are made to the house are in fact considered "rental income" and therefore the family does not have to pay any taxes on the improvements made to the house. However, I am unsure when the families have to pay the adjusted property and school taxes. Regardless, I thought it was a really intuitive and creative use of a tax code that Congress is always changing from year to year.

POSTED BY: Craig J. Springer

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