The value of a CPA

I may have saved a friend well over $50,000 in taxes this weekend.

I don’t want this to be a tax column and I haven’t researched this specific issue to speak with authority but I want to point out the value of professional advice, especially when you are going through life’s transitions (marriage, death, children, divorce, starting or closing a business, etc.) and dealing with non-routine transactions.

During a casual conversation, my friend mentioned that her elderly father wanted to leave his California home to her when he died. The house has over $500,000 of potential gain in it (Market price less tax basis). Dad had or was going to simply add her name to the title with right of survivorship.

While this would get the house to her upon death, my concern here is that dad has made an Inter vivos transfer as opposed to a testamentary transfer. This difference can have significant tax implications since the beneficiary of a testamentary transfer gets a step up in basis while the recipient of an Inter vivos transfer doesn’t.

My advice to her was to talk with an attorney and her CPA to make sure they were doing this transaction correctly from both a legal and tax perspective. While it will cost some money for the professional services, I think it is better to be safe then sorry when engaged in transactions with significant financial implications.

As a CPA, I really, really like it when my clients call me for advice BEFORE these situations arise since it provides us the best opportunity to accomplish their goals and to avoid nasty surprises.