Deduct Move to New Home if You Pass IRS Test
Q: I accepted a teaching job in Long Beach and was forced to sell my faculty housing condo in Irvine and buy another home in Los Angeles. I would like to claim my moving expenses as an income tax deduction but am unsure of what the Internal Revenue Service allows. Can you help? --J. V. G.
A: Of course, just pass the following test.
Is your new home your principal residence? It must be to qualify for the deduction. However, the definition of home is quite broad and includes apartment, condo, mobile home, trailer, houseboat and other dwellings. But the IRS is not so broad-minded as to include vacation or seasonal residences such as mountain cabins and beach cottages.
Did you move within a year and a day of beginning your new job? In general, moving expenses are deductible if they are incurred within a year of your first day at your new full-time job. This rule is somewhat flexible and can allow, for example, families to delay moving while their children complete school.
Is your new job a full-time one? If you are an employee of someone else, the law says you must work at least 39 weeks of the first 52 weeks after you arrive in your new location. If your work, such as teaching, is somewhat seasonal, the law allows an “off season” of six months or less if that is part of the normal work contract. For self-employed persons, the law requires that you work 39 of the first 52 weeks in your new location and a total of 78 weeks during the 104 weeks after you move.
How far did you move? To qualify for the moving expense deduction, your new job must be at least 35 miles farther from your former residence than your former job was. Example: Your former job in Irvine required a daily commute of five miles. In order to qualify for the moving expense deduction, your new job in Los Angeles must be at least 40 miles from your Irvine home. In other words, in order to satisfy the IRS, you must show that prior to your move, you would have been required to commute an additional 35 miles one way to your new job.
These four requirements are only the most important. For a fuller explanation, consult one of the many tax preparation guides available.
State Can Supply Consignment Form
Q: In a recent column you discussed the pitfalls of consigning merchandise without taking proper precautions. Where can I get one of those UCC-1 forms you discussed? --G. D. N.
A: The UCC-1 form should be available from the business to which you are consigning your merchandise. If not, you can buy one for about $1 at stationery stores that sell legal document forms. After completing the form, mail it to the Secretary of State’s Office, 1230 J St., Room 126, Sacramento, Calif. 95814. You must also include a $5 check made payable to the Secretary of State.
The Uniform Commercial Code, which governs the consigning of merchandise, says a consignor must file a UCC-1 statement proclaiming that consigned merchandise belongs to him, not to the broker. This procedure is intended to protect the owner of the merchandise because it puts the broker’s creditors on notice that they cannot attach that asset in the event of a financial or legal dispute with the broker. For the fullest possible protection, the form should be filed before the broker takes possession of the goods.
Risk Is Low if Bank Holds Treasury Bill
Q: I bought a Treasury bill through my bank. What happens if my bank goes into receivership as my bill is maturing? Are my assets safe? --J. K. H.
A: Theoretically, something could go wrong, but the likelihood is remote.
Treasury Department securities purchased through a bank are held in separate trust accounts at the bank and are not mingled with the rest of the bank’s assets. You are safe at this point.
You already know that Treasury securities are backed by the “full faith and credit” of the United States government. So you are still safe here. Your concern centers on the brief period of time--perhaps a day or less--following the maturation of the security and the government’s remitting of the proceeds to the bank. Your concern is that the bank could be seized during the nearly 24-hour period that the proceeds are held by the bank before being disbursed to their rightful owners. If this were to happen, you fear that your assets could be, at best, frozen and, at worst, lost because they are uninsured.
Our experts say there is absolutely nothing in the law nor the government security redemption process to prevent the above scenario. Mega-deals involving the transfer of millions of dollars usually include contractual language to guard against such events. But normal Treasury bill redemptions and other everyday deals contain no such safeguards. You are not even covered by the $100,000 worth of federal depository insurance at this point because your funds are not in a savings account.
By now, you’re probably more worried than when you started out. But while there may be theoretical cause for alarm, it is an unlikely series of events. It may make you feel better to know that this doomsday scenario has never occurred.
