you've got Gene Dickison, your host, your personal financial adviser, I'm very, very honored to be with you for the next half an hour and to act as, again, your personal financial adviser and serve you in any way that my 780 years will allow me to do exactly that.

If you're just joining us for the very first time, we welcome you.

We think you're going to find a couple of things will be of note about our show.

Number one, half an hour goes very, very quickly.

So don't get distracted.

Don't wander away, because you'll miss a great deal.

And, number two, if at any point in time you find yourself being even mildly entertained...

..I can assure you that was purely accidental.

We cover a broad range of topics, all of which are brought to us by you.

You send us your e-mails with questions, concerns, observations, and we bring those to the airwaves.

So if you have a question for us, send them directly to me, Gene@askmtm.com.

G-E-N-E@askmtm.com works very, very well.

We assure you that every single question is answered directly back to the questioner and some of those, sadly a small fraction is all that we have time for, will appear on future shows, and hopefully perhaps one of your questions will appear.

But wherever we draw those questions, from whomever we draw those questions, you get to benefit and you get to share those ideas with your friends, your family and everybody advances.

Everybody moves a little closer to their financial goals, which, after all, is the whole idea.

And, of course, as you're listening this evening, watching this evening, it may very well be inclement weather.

It's the season.

Winter brings that.

And sometimes we're forced kind of out of our schedule, perhaps even forced to stay at home, get locked in and maybe take a little bit of time.

Maybe take a little bit of downtime to reflect, maybe start to prepare.

Spring.

Spring always follows winter.

It has for all of recorded history.

Spring is coming and spring is that time of great renewal.

Great opportunity.

So take the time when the season demands it of you and get comfortable.

Get prepared mentally, spiritually, prayerfully.

Get prepared for the coming of the spring and the renewal once again.

It's going to be a great year and we want to be part of it.

Speaking of we want to be part of it, I want to take this opportunity to shift over and welcome back to More Than Money our financial correspondent Megan.

Megan, good evening.

- Good evening, Gene.

How are you today?

- Wonderful.

And you?

- I'm good.

I'm good.

- I know we have some Q&A back there, but anything that you want to start the show with?

- Well, I personally had a question for you.

I was chatting with some of my friends and they wanted me to ask this.

So, my friends and I are in our early twenties.

We graduated college right in the beginning of Covid.

So our plans of maybe what we thought post-college life would look like got a little delayed.

But now we're trying to kind of get our bearings and everything.

We're starting our first real adult jobs and living on our own for the first time and trying to save money, but also have a lot of new things to spend money on that we didn't before.

So I was kind of wondering if you had advice, how we know we're doing the right things financially, if we're moving forward in the right directions, if we're making progress.

How can we kind of track that just to feel a little bit more peace of mind when the world is kind of chaotic still?

- And you're right, the world is chaotic still and always will be.

The chaos will change, but there will always be chaos and it'll always feel that way to the world.

But as you get more and more confident, as anyone gets more and more attuned to their own personal rhythms, their own personal choices, then the chaos is in the background.

But it gets further and further in the background and your personal life gets more and more peaceful, more and more in line, more and more going with the flow, being in the flow, and, in many ways, being in the flow is a function of knowing that you're making good choices.

One of the things I would recommend for anybody, particularly starting out, is that they sit with a financial advisor for simply an hour, go through the basics, learn from someone, myself or others who are further down the road, the kinds of things that help - a good, sound budget, understanding that what you spend money on is are choices, and the choices that you make will determine how financially successful you are in the future, whether you're saving money, spending it wisely or maybe not so wisely.

There are lots of basics.

Lots?

A half a dozen.

It won't take very long.

Once you know the basics, then you can measure your financial decisions by... Are they getting me closer to being to achieving my goals?

Are they keeping me more in flow with the rhythm that I need?

Or are they taking me away?

And now you've got a real rule of thumb, a real litmus test for making financial decisions that are profitable, effective and beneficial to you, not just now, but for decades and decades, hopefully decades and decades and decades to come.

Lots of good tools out there.

There's lots of good technology, lots of good mobile apps that can be...put into effect to assist you.

But the reality is, some handful of basics.

Get some good guidance from somebody that's a little further down the road, perhaps a little further down the path.

And then don't hesitate to circle back as new questions arise and get continue to get good guidance, good coaching right along the way.

I hope that helped.

- Definitely.

Thank you very much.

- You're very welcome.

Let's start with our first question.

- Sure.

I actually have an article that I wanted your opinion on.

- Very good.

- The title of it is The IRS Is Coming For Crypto Investors Who Haven't Paid Their Taxes.

It's written by Laura Saunders from The Wall Street Journal.

It says the year 2021 has represented a turning point in the evolution of cryptocurrency from being a niche interest for hardcore enthusiasts to becoming a widely traded asset in many investors' portfolios.

At the beginning of the year, the total market cap of all cryptocurrencies had yet to cross $1 trillion.

Today, it stands at over 2.5 trillion.

But with the increased interest in crypto as an investment asset comes more attention from the IRS, which has ramped up its efforts to enforce tax compliance on crypto traders.

At the heart of the issue is that, unlike traditional brokerage firms, crypto exchanges are not required to report their customers' transactions to the IRS, leaving it up to the investors themselves to report their own transactions and any resulting income from capital gains.

This loophole could make cryptocurrency a potential avenue for fraud, tax evasion and money laundering, so the IRS has increased pressure on crypto exchanges to turn over information about their customers.

Earlier this year, the IRS issued court-ordered summons to several major crypto exchanges, requiring them to hand over customer records and in a criminal investigation annual report published in November, the agency announced that it seized $3.5 billion worth of cryptocurrencies connected to a range of criminal activities during its 2021 fiscal year, and that it intends to continue that trend in the year ahead.

For crypto investors, then, it will become more difficult to trade going forward while escaping the IRS's notice, which means that understanding and complying with the tax rules surrounding crypto, which generally but not always mirror those for capital assets like stocks and bonds, can save investors from facing tax bills, penalties and even criminal prosecution in the future.

What are your thoughts, Gene?

- Well, goodness.

First of all, a great report and the young lady that wrote that - very, very detailed and highlights a number of really serious issues that many people who are active in the cryptocurrency world either don't wish to discuss, are very aware of but don't intend to follow the rules anyway, or have never heard before and maybe misunderstood along the way.

Cryptocurrencies were started with the intent... By the way, when we say cryptocurrency, it is the global label for Bitcoin.

You've heard of that, most of you Ethereum, many of you have heard of that.

Dogecoin.

I call it doggy coin.

Many of you have not heard of that or any of the other dozen or so cryptocurrencies, encrypted currencies, that are available in the cloud.

They're not printed, they're not tangible, so to speak, in 99.99% of the cases.

So you're looking at a cryptocurrency world that was initiated with the intent of, We want nothing to do with governments.

We want nothing to do with dollars or pesos or yen or wans or euros.

We want to be extra outside the government, not only government...not only government endorsement, but government authority.

And for many of the early investors in crypto, that was the whole idea.

Take their money and disappear from the economy so that the IRS and government seizures, et cetera, et cetera, could not occur.

Yeah, that may have been their wish, but that certainly has not been the result.

The IRS has been on top of this from day one.

They expect, since the IRS system, our tax reporting system, is a voluntary reporting system...

I know it doesn't feel that way sometimes, but it truly is.

They expect that you will report all of your transactions, even though they are not being reported by the exchanges.

Unlike banks that will issue a 1099 saying, Hey, we paid you $131 and 14 cents in interest.

You'd better report it.

Unlike stock brokerages that will tell the IRS, Hey, we sent you dividends and interest in capital gains totaling $611 and 15 cents.

The IRS already knows.

We're reporting it to them.

The cryptocurrency exchanges at the moment are not required to do that.

However, because there is so much criminal activity being transacted through cryptocurrencies, in addition to legitimate activity as well, but a lot of criminal activity, the IRS says this is a target for us to pursue aggressively.

Three and a half billion.

That ain't chump change.

Way significantly more money than a lot of folks are suspecting has already been seized.

Lots more to come.

Lots more to be attached by the federal government.

Now, just so that you are as clear as you can be, either for yourself or somebody that you care about.

If they're engaging in cryptocurrency transactions, at any level, at any level, very modest, very large, the IRS requires that they report that, And on the current 1040 tax return, there is a checkbox that says, Do you or don't you participate in cryptocurrencies?

And if you answer, as far as you know, no, when you really do, it's called tax fraud.

That's what sent Al Capone to Alcatraz.

They never caught him on his criminal activities.

They caught him on tax evasion.

It's a federal crime.

It's a felony.

They're going to get an awful lot of folks, bad actors, off the streets on tax fraud.

And so be very careful.

Keep detailed records.

Make sure you're reporting everything that you are obligated to report and you should be just fine, Now, secondary question.

Should you be investing in cryptocurrency at all?

That's another question for another time.

Megan, another e-mail.

- Yes.

This e-mail says, I have lived in my home for almost 50 years.

My original purchase price was $53,000 and its current value is probably around 850,000.

I have made several improvements to the home.

I do not currently have plans to sell the home, but realize that at some point in the future the cost basis of the home will have to be determined.

I'm 81 years old and my wife is 68.

I have made the same capital improvements to the home more than once.

For instance, reroofing twice, a new furnace and a new AC twice.

I have also installed wall to wall carpeting and then years later tore it out and refinished the wood floors.

Are appliances considered an improvement?

Is there a difference between a plugged-in appliance and, for instance, a dishwasher which is installed?

To ease the burden to whoever may settle my estate, I have created a spreadsheet using old receipts to calculate the cost basis.

Some costs, however, seem to be iffy.

Can you provide guidance on calculating cost basis?

PS, do long term owners actually keep receipts, or do they estimate costs at sale time?

- Interesting.

I have to take some notes there.

There's a lot to that question.

OK, let's talk about what's at stake.

Gentleman bought the home for 50.

If he sells it today, it's 850.

800,000 of potential capital gains.

$160,000 of potential tax.

Oh, my goodness.

My head hurts just saying that out loud.

So clearly his concern is well founded.

This is not a minor issue that we need to address.

The differential in ages is a very important issue as well.

He is 81, she is 68, so the likelihood, the probabilities are, that she will be inheriting the home.

Now, interestingly enough, if the home is in joint names, joint ownership, that may solve some of this problem.

If the ownership is in his name alone, that may solve a great deal, if not all, of the problems.

That's an interesting point that we're going to circle back to.

His concern about keeping records is very legitimate.

He's absolutely right.

Many people, especially 50 years in, have lost their records.

They're going to try to go by memory.

They're going to try to rebuild these cost basis numbers as best they can, or maybe make up a few numbers, because over 50 years, keeping all that is...

The likelihood that all that's been kept in good order is not really very high.

The fact that he's setting up a spreadsheet is fantastic.

What a wonderful thing for him to do.

It will certainly assist someone in the future.

Let's talk about the capital improvements that are deductible from that 850,000 gross sale price.

Anything that is tangible and connected to the home permanently and improves the value of the home is considered to be a capital improvement.

If you replace the roof completely, does your home value go up?

The answer's yes.

Is it permanent?

Of course.

That's an easy one.

I spend $5,000 to replace the roof.

That's an easy one.

That gets deducted from your gross sale.

What if you've done it two or three times over 50 years?

Each one of those is deductible.

What if you've had four refrigerators?

Each one is deductible.

What if you've had four built-in dishwashers?

Each one is tax deductible.

What if you have plugged-in heaters?

No.

Things that are temporary, things that are added for convenience but not intended to be left with the house... You put an entire suite of bookcases into a room to make it a library.

If they're not permanently installed, they're not capital improvements.

So you get the idea.

The fact that he put in hardwood, carpet, hardwood, those are all deductible.

They were certainly permanent.

They were certainly attached to the home and they were certainly intended to improve the value of the home.

So if we add all those things up, let's just say for the sake of demonstration that he paid 50, he's put 150,000 in, his cost basis is now 200.

If he and his wife are joint owners of the home and they were to sell it today, the gross profit is 600,000.

The IRS gives them 500,000 as a freebie, so to speak.

It's called an exclusion, but it might as well be called a freebie, because that amount they do not pay tax on.

They would only pay tax on 100,000.

So that is all of a sudden... We've gone from a tax of maybe 160 to maybe a tax of 20.

Fantastic.

Now, if the title is in his name alone and he passes away and his wife inherits the home, she receives what's called a stepped up basis, which means her basis in that home is now the value of the home on the date that he passes away.

Assume 850.

Assume sadly, that we lose this gentleman in a month or two and she inherits the home directly from him.

She doesn't need any of that data at all.

Her new cost basis is 850,000.

If they are owning this together and they both pass away and they send that down to their beneficiaries, their heirs, they receive a stepped up basis.

So the only real concern is what happens should they decide to sell during his lifetime and then during her lifetime and, in all honesty, in all probability, they will do just fine.

Very detailed question.

We appreciate that very much.

Allows us to explore both the tax side and the practical side of homeownership.

And for those of us who are not nearly 50 years in our home, we thank you.

That's very, very good.

Megan, another question for our audience.

- This next question says, My mom and dad left their house in Virginia to my five siblings and I.

Four out of the six of us would like to sell it, but the other two disagree.

My oldest brother and sister are co-executives on the will.

Do both of them have to sign off to sell the house?

Please let me know.

Thank you.

- Well, the simple answer is yes.

And I suppose we could go to another question, but that wouldn't be fair.

This is a serious concern, not an unusual concern at all that folks who are beneficiaries of a estate are not seeing eye to eye.

The executors, in order to sell the property, would both have to sign off.

No question about that.

And just so that we're not misleading our audience, the fact that four out of six wish to sell the home absolutely means nothing.

And the fact perhaps that the older brother and sister don't want to sell the home also absolutely means nothing.

If there is a will - it sounds like there is, since they are executors - If there is a will, the only opinion that matters is that of the decedent, the individual that wrote the will.

And in that will it will give very clear instructions to the executors as to how to handle various pieces of the estate, =including the home.

The will either says sell it and divide.

Or it says hang on to it.

Either way, the executors have no discretion.

That's not their role.

Their role - very similar to following a recipe to the letter on Hell's Kitchen or Scooby-Doo's Cooking Competition...

I have no idea of the cooking shows.

You know what they are.

You follow the recipe to the exact letter.

You have no discretion.

So is it possible that your brother and sister are not playing fair?

Sure.

Does it happen a lot?

Sadly, sure.

Is it possible that four of you must band together, acquire a trusted estate attorney, a trusted estate attorney as your representative?

Yeah, it's very possible.

And by the way, sooner rather than better...rather than later.

Sooner is better because these kinds of things tend to have a life of their own, and left unattended to they get more difficult to unravel than they are to stop.

My apologies that you're going through that, but hopefully we helped a bit.

Megan, a question for us, please.

- This next question said, I would like to contribute to a 529 plan for my granddaughter.

I live in Pennsylvania and she lives in New York.

Her parents have a 529 already established for her.

I don't know whether to open my own 529 here in PA or to contribute to theirs in New York.

- Well, first of all, congratulations.

Fantastic.

Grandchildren are a blessing.

Just ask my friend, Carmen.

That's a fantastic situation to be in.

The fact that you're in two states really has very little bearing on the contributions to a 529.

And for those of you listening or saying, I'm not really clear that I understand what a 529 is, it is a program that allows...

It's under IRS regulations.

It allows anyone to set up a savings account, an investment account to assist any student, any student, in their studies and get some tax advantages to them.

That's an important part of this.

Often we think of college planning as something that starts with a 4-month-old little grandbaby, and Grandmother wants to set up an account.

Similar to this situation.

And it's going to be 18, 19, 20 years before the money is used.

That's one way to use a 529.

Another way, however, could be, Hey, my son is 45 years old.

His job was eliminated and he needs retraining.

Can we put money into a 529 plan and assist him?

The answer is absolutely yes.

It could mean that a person that is in a wonderful field, one that they love, knows that over many, many years they're going to be required to take continuing education credits, and they want to fund those on a tax advantage basis.

A 529 can help that as well.

Now, I would strongly suggest that you set up your own 529.

I would strongly suggest you not contribute to the one set up by your grandchild's parents.

There are advantages, particularly in the area of student financial assistance, when the 529 is owned not by the parents, not by the student, not by the parents.

So there are no regulations that limit the number of 529 plans that a student can benefit from.

Set one up here.

If you set it up in Pennsylvania, it does not have to be a Pennsylvania 529 plan.

You can choose any plan that you find to be beneficial, and, as a result, you'll set it up here, but it can still benefit your grandchild in New York, and you'll get a little bit by the way of a tax deduction on your Pennsylvania return.

So not a bad idea at all.

Megan, a short one.

- This is a good one.

This one says, My granddaughter is 14.

We stopped buying holiday birthday gifts and started investing in dividend stocks by purchases in stockpile.

My hope is that she will grow money for college and learn a little bit about stock market investing.

I now believe that this can have tax implications, as well as an effect on financial aid options.

Should we or can we do this in a 529 plan?

Should we cash out and move to a 529 plan?

What would you recommend?

Thank you.

I enjoy your show.

- Very kind words.

Can you?

Sure.

Should you?

Different question.

You can't answer... We can't answer that question without knowing what your tax situation is.

So my recommendation to you... By the way, you're doing a great job, helping train your daughter, getting her smart financial exposure, dividends and stocks.

This is fantastic.

So if it hasn't been tax-wise perfect - water under the bridge.

Still beneficial to your daughter.

But I would suggest strongly that you sit with a financial adviser you trust or a tax professional that you trust.

Look at your tax brackets, see what impact the liquidation might have on you and/or your daughter, and then make your decision about whether you want to liquidate and transfer that into a 529, or whether you want to keep that and also have a 529.

There's lots of different ways, as they say, to skin the cat, which hurts my feelings.

We've got four cats at home.

But you understand the point.

Don't make your decision without having all the facts.

And in this case, facts are tax facts.

Folks, we've covered a lot of ground.

Megan, thank you so very much.

If you have questions for us for future shows, all you have to do is send them along.

Gene@askmtm.com.

Gene@askmtm.com.

And we'll make sure we answer you directly back and perhaps one of your questions will appear on a future show.

Thanks for being part of tonight's show.

We hope that you found it educational.

We hope you found it beneficial, maybe even a little entertaining.

Hopefully you'll return next week right back here as we come back right on this show with More Than Money.