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Difference Between Full Coverage and Liability

All cars, big or small; expensive or inexpensive need insurance since law requires it even if you are the best driver. However people purchasing cars for the first time are often confused by the type of cover to choose. Read this simple guide to understand what you need.

Car insurance can be broadly classified under two heads:

  1. Liability
    • It is the most basic type of coverage. All states require you to have this although the minimum amount required depends on the individual state’s regulation. It is thus prudent to carry papers of insurance as proof.
    • It covers the cost of that damage which is caused to the other driver or vehicles as a result of your fault.
    • It is comparatively cheaper than full coverage since you or your asset is not covered but only your responsibility in damaging the other party’s asset is covered.
    • This type of policy can be subdivided into Personal Injury Liability and Property Damage Liability. The former requires reimbursement of the cost incurred in the treatment of any bodily injuries incurred by the driver or passenger in the other car because of your faulty driving and the latter type makes mandatory payment of damage to property (including fences, building and the vehicle) in an accident brought about by your car. Personal Injury Liability will also include all costs related to legal defense and any settlement of lawsuits.
  2. Full Coverage has a higher premium rate and includes collision and comprehensive coverage. The latter makes good to you the losses in the event your vehicle gets into an accident; this means that even if you hit your car into a tree or any barrier etc. you can apply for claim. Comprehensive coverage will also compensate your losses in case of vehicle damage but not due to accident but various other reasons like theft, vandalizing, or an object like a tree falling on top of your car etc.

Now that you know how the above two policies can help you in compensating losses you might want to consider your current situation:

  • If you have a new expensive car then option No.2 is wise since you do not want to make another significant amount of investment just a few days or months after a new car.
  • If the car is new and not so expensive and you are the most confident and skilled driver around then go for option 1.
  • Suppose you have bought an old car then also option 1 would not be a bad idea since at least the cost of paying the other vehicle owner would be covered and because the cost of investment is less you can go in for another car.
  • If you are considering taking a loan to buy a car then you will definitely have to take option 2.

Remember, decide on that insurance which gives you the highest coverage for your cost.

How to Get an Income Tax Deduction for Contributions of Property to Charities

You can get a deduction in computing income tax in the USA for contributions to charities. Deductions are allowed for cash or property. Special rules apply, though, for contributions of property. The rules differ for contributions of differing types of property. This article summarizes the rules.

To be deductible, the contribution must be to an organization that qualifies as a charity under IRS rules. A charity can tell you if it qualifies. It MUST have an employer identification number to qualify, and it MUST have applied to the IRS for qualification. The charity should tell you this information. If they don’t have it, they may not be a qualified charity.

The amount of deductible is generally the fair market value of the property. However, the deduction for contributions of certain types of property is limited, as discussed below.

Valuation of Property

Deductions for contributions of property are based on the fair market value of the property at the date of the contribution. For property for which a regular market exists and for which prices are readily determinable, the value is based on such market. Thus, stocks, bonds, mutual funds, traded commodities, traded futures contracts, and foreign currency values are those quoted on such markets. For other property, the valuation is often contested by the IRS, even where there is an appraisal. Appraisals by a qualified appraiser are required for contributions of property valued above $5,000.

Vehicles present special problems, since the exact condition of the vehicle is often hard to document. The “blue book” value may bear little resemblance to the actual value. Example: Bill donates his 2002 Toyota to Cars for Kangaroos when the full retail price for an excellent condition one is $4,500. However, Bills car has body damage, the engine doesn’t run, and the transmission’s broken. The car is clearly not worth $4,500, in spite of what the tow truck driver tells Bill. Bill must get a believable receipt from the charity to prove his deduction.

More information is available in Income Tax in the USA, 2013 edition.

Personal Property Contributions

The income tax deduction for contributions of personal property is generally limited to the taxpayer’s basis in such property plus the amount of capital gain (but not ordinary income) the taxpayer would recognize if the property were sold. Thus, the deduction for contributions of business items (inventory, equipment, etc.) may be limited to basis. Significant exceptions are discussed below.

The deduction for contribution of publicly quoted stock by other than a dealer in securities is generally the fair market value of such stock or securities. No deduction is allowed for stock or securities issued by the taxpayer. Example: Phil founded Phillow, a software company, contributing $50,000 for his shares. After going public and numerous stock splits, Phil owns 100 million shares, worth $100 each. Phil contributes 10,000 shares of Phillow stock to a 501(c)(3) organization that is not a private foundation. Phil gets a deduction of $1 million for the contribution.

A contribution of a future interest in tangible personal property is considered made only when all intervening interests have expired.{26 CFR 1.170A-5} A contribution of less than a full interest in personal property is also subject to other limitations.{26 CFR 1.170A-7}

To be deductible for income tax purposes, contributed household items (clothing, furniture, etc.) must be in good or better condition and of more than minimal value. Household items, for this purpose, do not include food, artworks, jewelry, or collectables, or donated items worth more than $500 if a qualified appraisal is attached to the taxpayer’s return. Example: Sam purchased an antique chair for $10,000. The chair was not in good condition, but had been used by the town’s founder. Sam donated the chair to the local museum, and attached appropriate appraisals to his return. Sam gets a deduction for the appraised value of the chair.

Intellectual Property Contributions

Contributions of intellectual property are limited to the smaller of the taxpayer’s adjusted basis in the property or the property’s fair market value. In addition, however, the taxpayer may claim a charitable contribution deduction for a percentage of the income the charity receives from the property.{26 USC 170(m)} This percentage is 100% for the first year ending on or after the date of the contribution, and declines by 10 percentage points per year, ending with a 10% deduction for the 11th and 12th years. However, the additional income-based deductions cannot be claimed until the cumulative amounts exceed the original deduction. For this purpose, intellectual property includes patents, copyrights, trademarks, trade names, trade secrets, know-how, software not available to the general public for purchase, and similar property. Example: Jane develops a new invention and donates the patent to the university where she works. Jane can deduct the value of the patent as well as the university’s income from licensing the patent.

Real Property Contributions

Contributions of interests in real property to the types of organizations and uses above are generally deductible. However, due to the nature of real property and the variety of possible interests therein, several additional rules apply.

Types of Interests in Real Property

Interests in real property can consist of outright ownership (fee simple interest), interests in minerals in place in the ground that have no rights to the surface other than access (mineral interests), and partial interests. Partial interests may include a joint ownership, lifetime right to use, rights to access or specific use, residual interests following lapse of other interests, and other types of rights often called easements. Each of these interests is a bundle of specific rights to use of the property, is generally transferable, and generally has value on its own.

Example: Noel Bob owns 40 acres of farmland outright and has a 40-year farming easement an adjacent 40 acres. His house is on the corner of his 40 acres, including a half acre yard. The easement is transferable. Noel decides to retire. He sells the entire farming rights, in perpetuity, for his 40 acres, retaining a life interest in the house and yard. He also sells the farming easement. He transfers as a gift to his children the remainder interest in the house and yard. He transfers the remainder interest in the farm land to the state college farming program. These transfers must be analyzed separately for tax effects.

Contribution of Partial Interests in Real Property

A contribution of a remainder interest in a personal residence where the donor retains a life interest is generally deductible if the other requirements for deduction are met.{26 CFR 1.170A-7} Example: Ellen transfers to her church a remainder interest in her house, retaining a life interest (expiring on her death). Ellen can claim a deduction for the value of the remainder interest, which is generally determined based on the current fair market value of the house and mortality tables.

A transfer of an undivided interest in all of a property is also generally deductible, as are transfers of full interests in specific, severable aspects of the property (such as mineral rights).

A deduction is permitted for contribution of a remainder interest in the donor’s primary or secondary residence or form.{26 USC 170(f)(3)(B); 26 CFR 1.170A-7(b)} Transfers of other partial interests are deductible only if the transfer would be deductible if transferred in trust.

Contributions Made in Trust

A contribution may be made directly to a charity or in trust. However, to be deductible a contribution in trust must meet additional requirements.{26 USC 170(f)(2)} A contribution of a future interest in property other than a personal residence is deductible only if the trust meets certain requirements. The trust must be either a pooled income fund maintained by the charity, a charitable remainder trust that pays the noncharitable beneficiary a fixed annuity, or a charitable unitrust that pays a fixed percentage of annual asset value of the trust.

Insurance and Annuities

A taxpayer may contribute an insurance policy or annuity to a charity and claim a deduction for the value of the policy or annuity. An individual may also purchase an annuity from a charity for more than the value of the annuity and claim a deduction for the excess. However, the deduction is not allowed if the charity must pay part of the premiums, with exceptions.{26 USC 170(f)(10)}

Special Fully Deductible Items

Certain types of contributions are subject to the 50% limit and deductible at full fair market value regardless of other restrictions.{26 USC 170(e)} These include items described in the following paragraphs.

Real Property

A contribution of an interest in real property to a governmental entity or a private foundation (or a subsidiary thereof) is fully deductible at fair market value if the interest will be used for a broad range of recreation, historic, or scenic purposes.{26 USC 170(h)} The use need not be open to the public. The interest can be merely a deed restriction preventing certain types development, or may be outright ownership of the land or buildings. Special rules apply with respect to historic buildings. Example: King Jim owns a mansion and 500 acre estate in New Jersey which he plans to keep in the family and neither sell nor develop. The king’s appraiser says rights to develop apartments on the land would be worth $10 million. The king donates a no-development easement to the New Jersey Kings Land Conservancy, a private foundation, and he retains all other ownership and use of the land, which is not open to the public. The king gets a deduction for $10 million, limited to 50% of his AGI.

Personal Property

Contribution of shares of a corporation (by other than the issuing corporation) are fully deductible (subject to limits based on the donee) if market quotations are readily available for the shares and they are capital assets of the donor.{26 USC 170(e)(5)}

Contribution of certain inventory items is fully deductible subject to some limits. Such property includes:{26 USC 170(e)}

- Contributions by a corporation of items for use by the charity in care of the ill, needy, or infants, where the donor receives no consideration. However, the deduction is reduced by half the gain the taxpayer would have recognized, and is limited to twice the corporation’s basis.

- Contributions of food by any taxpayer, subject to these limitations on use and deduction.

- Contributions of books to public schools, subject to these limitations on deduction, but not use.

- Contributions of new inventory made by the taxpayer to a qualified research organization (including colleges and research labs)

- Contributions by a corporation of new or used computers, peripherals, and software for use by schools or libraries in the USA, where the donor receives no consideration. However, the deduction is reduced by half the gain the taxpayer would have recognized, and is limited to twice the corporation’s basis.

Recapture on Charity’s Disposition of Property

If a charity disposes of any of the above specially deductible items within 3 years of the donation, the donor must recapture the deduction. However, an exception applies where the charity makes certain certifications of use of the property.{26 USC 170(e)(7)}

Assumption of Liability by Charity

A charity may assume a liability of the taxpayer in connection with the contribution. The amount assumed reduces the fair market value of the contribution. If the liability exceeds the value of the property, the taxpayer must recognize gain. Any interest on the liability attributable to periods before the contribution is not deductible by the taxpayer.{26 CFR 1.170A-3}

Prove It!

It is up to the taxpayer to prove the deduction if the IRS comes calling. The following records are required:

- A receipt from the charity indicating what was contributed, the value, the name and address of the charity, and the charity’s employer ID number. This is required for contributions of cash or property. For contributions of property valued above $500, this information must be disclosed on Form 8283 filed with the taxpayer’s income tax return.

- A suitably detailed description of property contributed and its condition. For real property, this means something sufficiently specific to identify the property (such as “house at 123 Easy Street, Niceville, GA”), but need not be the full legal description. For personal property, the description need not identify a particular article (like a serial number or CUSIP number) but should be complete enough to understand what the property is (such as model number or number and class of shares). Note: a vehicle identification number is required for contributions of vehicles.

- An appraisal if the property is valued above $5,000. This must be attached to the taxpayers income tax return. The appraisal is not required for publicly traded securities (stocks and bonds). Both the charity and the appraiser MUST sign Form 8283, or the IRS will disallow the deduction.

- Records demonstrating the taxpayer’s basis in property if the deduction is limited based on basis. These include records of cost of goods produced or acquired.

- For significant contributions of tangible property, pictures help prove the condition of the property.

- For property (e.g., land, patents) with a non-negotiable title, a copy of the written contract transferring title.

Summary

Contribution of property can give you a significant income tax deduction. Where you contribute all rights to the property, the contribution is generally fully deductible, but your deductions may be limited based on your AGI. Deductions for contributions of inventory are generally limited to basis (cost). Where contributions are of less than all rights, additional limitations apply. Generally, all rights to personal property must pass to the charity to get a deduction, but deductions are allowed for portions of rights to real property. The taxpayer must prove the deduction, and must file Form 8283 for deductions in excess of $500. Appraisals are required for contributions of property valued above $5,000.

More information on getting deductions for contributions is available in Income Tax in the USA 2013, ASIN B00BCSNOGG, available at Amazon.com

10 Useful Tips About Wooden Summer Houses and Sheds for Gardens

Building regulations and planning permission

“My garden and my rules” is unfortunately not exactly the way it works with setting up a summer house or any other building in your garden. Whether you need to apply for a planning permit or not depends on the size and height of the building, ways of use, location in the garden and other details. There are two separate issues when considering a new garden building – Building Regulations and Planning Permission. In most cases, if the building has an internal floor space up to 15m² and its overall height is less than 2.5m, it is very unlikely that you’ll need any Building Regulations or Planning Permissions at all. Even if your garden building is within the limits, it is still wise to contact your local planning office and get all the answers to your questions. This will give you peace of mind to be sure that everything goes to plan with your new garden office or a hobby room. Should your desired summer house or a garden room exceed the limits, don’t worry and don’t give up your dream! In this case you should call or visit your local planning office and get a proper instruction of what you need to do in order to meet all the rules and get the required permissions. Our previous experience with clients getting planning permission for larger garden buildings, is that it takes no more than 4-6 weeks.

Peculiarities of wooden buildings. Proper care.

Wood is a natural material, growing and adapting depending on the temperature, humidity and other weather conditions especially during the first month after the assembly. It is common that you must adjust doors and windows a few times during the first month after the wooden cabin has been erected and then once or twice in a year to keep them functioning properly. Small cracks, knots and color tone differences are not errors but inherent qualities of wood. It is important to treat your garden house with wood preservative stain or other protective coatings straight after the assembly. Untreated wood becomes grayish, and can turn blue and become moldy or rot. We recommend that you treat floor boards with a wood impregnation agent before installation, especially the bottom sides of the boards, because after the assembly you have no more access to that side. Having been properly treated, your log cabin’s lifespan has been increased significantly. It is wise to inspect your summer house once in the year and retreat accordingly to the instructions set by the wood preservative manufacturer.

Size of your garden building

It is very important to think about the use of your garden building and buy the right size. Wooden summer houses are something we want you to enjoy for many years and not just a season. Therefore we would recommend you involve all the family members or users of the summer house, ask everybody’s opinion and make a collective decision.

What will I get, what is inside the package and how are the log cabins are delivered?

Your log cabin or garden building will be delivered in water proof packages, so that they will not be influenced or damaged by the weather during the shipping or if your packed summer house or garden office stays packaged for several weeks outside before the installation. Delivery of your order is curbside delivery and the driver is not able to assist with the unpacking of your garden building. The size of vehicle and method of delivery will depend on the size of the building you have ordered. It will be delivered on a vehicle equipped with one of the following facilities: tail lift, forklift truck or hiab crane able to unload and move heavy packages (700-2500 kilos). All wooden details and panels have been prefabricated, precut and ready to install (like a giant Lego set!). Standard log cabin kit consists of impregnated foundation beams, untreated wall logs / panels and other wooden details, roof and floor boards, windows and doors, roofing felt, screws, nails and other fixings, storm braces, user manual and assembly instructions. All details are numbered to make assembly as easy as possible. All you need to supply is the tools!

Foundations / Base for your Garden Building

Required foundation type depends on the size of your garden building and the firmness of the ground in your garden. The easiest and cheapest foundation type is concrete slabs set on sand and gravel. This foundation type is fairly simple to construct and can be done by a DIY novice without having to hire in a professional. This type of base is suitable for smaller cabins up to 10 m2. To achieve this base you will need to dig out 25-30 cm ground, fill it with gravel and then a good layer of sand to provide a level surface. Then, finally lay down the concrete slabs, blocks or similar. It is vital that your base is level as your cabin will only be as level as your base! The most popular, but more expensive and durable foundation type is a concrete base. A concrete base is a perfect fit for all types of garden buildings. For preparing that kind of base you will probably need to hire a local professional or small building company, because concrete foundations involve more know-how and you really have to know what you are doing. These two are the most popular foundation types for garden buildings, but there many other ways to do it. It is good to consult with local experts before you choose, taking in to account the firmness of the existing ground and size of your intended building. Whatever your choice, you have to know that a firm and level foundation is crucial! If you fail with the foundation you will fail with your entire garden building. Twisted walls and non functioning doors and windows as well as very short life span and voided warranty will mean you do not enjoy your garden building!

Self assembly or hiring a building company?

The assembly of most garden buildings, summer houses and log cabins is achievable by a competent DIY enthusiast. Especially small and mid-sized summer houses and sheds up to 8-12 m2. We would always recommend that two people undertake the assembly and that care is taken with lifting as some of the panels are heavy. Our statistics show that 85% of our clients do the assembly themselves or hire one local expert for assistance to make sure that everything goes well. For the assembly of your garden building you need at least 2 adults, tools (hammer, saw, pliers, drill, screwdriver, measuring tape, ladder, knife and spirit-level) and not forgetting 1-3 days of your precious time, depending on your skills and the size of your log cabin. If, at least, you or your companion is familiar with fixing some things at home or doing some small DIY projects in the garden, assembly with prefabricated details, proper installation instructions and user manual should be achievable for you. But, if you are not confident in your DIY ability or just don’t fancy the assembly then we would recommend you hire a local professional.

Wall thickness

Most popular wall thicknesses for garden buildings are 28 mm, 40 mm, 44 mm and 50 mm. You can find 19 mm walls on the market, but these are mostly very small tool sheds or very poor garden houses with a very short life span. We would not recommend you to go for less than 28 mm wall thickness. 28 mm walls are usually single tongue and groove logs and suitable for storage sheds and smaller garden houses up to 8-9 m2. If you are after a smaller garden building with a very affordable price, these garden rooms and storage sheds with 28mm wall thickness are a smart choice. 40-50 mm wall logs have double tongue & groove and with these walls you can easily go for 20 m2 garden buildings and even larger. Compared to the 28 mm walls they are not only sturdier but also provide better insulation and a really solid feel. As a conclusion, 28mm walls are more than enough for storage sheds and 4-9 m2 garden summer houses, but if you are looking for a larger building with better insulation make sure you choose walls 40mm or thicker.

Single or double glazed windows?

If you intend to use your wooden cabin mostly during the summer season then you do not need the expense of double glazed windows. Single glazed windows are usually 3mm glass and come without sealing. Single glazed windows are mostly used for smaller garden buildings with 28-40 mm wall thickness. In particular 28 mm walls have pretty poor insulation and using double glazing for these walls does not make any material difference. If you would like to use your garden building all year round, we would suggest you may like to consider insulating the roof and floor. In addition, we would recommend the use of double glazed windows. Double glazed windows are sealed by the factory and have good insulation properties. As a general rule, garden buildings with with less than 40 mm wall thickness have single glazed windows and all garden log cabins with 40 – 50 mm wall thickness and up come with double glazed windows.

Multi-functional log cabins

One garden building with several functions helps you to save money and space in your garden. Buying a summer house with terrace is a significantly lower cost than buying a garden room and a gazebo or a summer house with shed compared to the price you pay when buying them separately. So, before you buy, get your family together and think about all the needs and functions that could be useful and make your garden life brighter and more versatile with one smart multi-functional garden building.

Can I use my garden log cabin all year round?

Yes you can, but if you intend to use your garden building all year round (garden office, hobby room, table tennis or billiards room or others), we would recommend a building with 40mm and above wall thickness. Make sure that windows have double glazing and insulate the floor and roof. There are 4 areas to be insulated: floor, walls, roof and windows. Choice of materials that you can use for insulating your garden house is very wide, depending on your local weather conditions, your budget and ways of use. It is also very important to choose the right foundation type and insulate the floor first. Having a layer of insulation beneath the floor boards will contribute towards keeping the contents of the garden house toasty. Roof insulation is crucial, because of the fact that warm air rises and approximately 35-40% of warmth exits through the uninsulated roof. Then walls, windows and heating if necessary. Installing a log burner in your garden building is a great way to ensure you get year round use. You may get a burner that you can cook on too! It is obviously important that any combustion device is installed by a professional installer and that ventilation requirements are met and functioning carbon monoxide and smoke detectors are installed in your garden building.