Posts made in June 2019

The IRS provides an exclusion, if you’re a homeowner who qualifies, to exclude all or part of any gain from their income, as a result of the sale of your main home. The ownership and use tests require that during the five-year period ending on the date of the sale, you must have owned and lived in the home for at least two years.
• If there is a gain from the sale of the main home, you may be able to exclude up to $250,000 of the gain from income or $500,000 on a joint return, in most cases. If you can exclude all of the gain, you do not need to report the sale on your tax return.

• A main home that sells for lower than purchased is not deductible.

• There are exceptions for those with a disability, some military, and others.
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[9]

[9] www.irs.gov/newsroom/tips-to-keep-in-mind-on-income-taxes-and-selling-a-home

The Week on Wall Street
The S&P 500 hit an all-time peak of 2,964.03, in intraday trading Friday, while improving 2.20% across five market days. The Dow Jones Industrial Average and Nasdaq Composite posted respective, 5-day advances of 2.41% and 3.01%. In addition, the MSCI EAFE benchmark of overseas stocks rose 2.58%.[1][2][3]
A White House tweet and the latest monetary policy outlook from the Federal Reserve sent the bulls running. These were the top two financial news items in an eventful week – a week in which the value of West Texas Intermediate crude rose 9.4%, the price of gold went above $1,400 for the first time in six years, and the 10-year Treasury yield fell below 2%. (Treasury yields fall when their prices rise, and vice versa.)[4]

The Fed’s June Policy Statement
The central bank stood pat on interest rates this month, but the expectations of some of its policymakers changed. About half of the 17 Fed officials who have a say in monetary policy now project either one or two quarter-point rate cuts by the end of the year. As recently as March, no Fed official saw grounds for a 2019 cut.[5]

Markets interpreted this shift as a sign that the Fed might soon ease. While a rate cut is by no means a given, traders now believe that the Fed will make either a quarter-point or half-point cut at its July meeting.[6]

Last Tuesday’s Market-Moving Tweet
A day earlier, stocks rose after President Trump stated that he and Chinese President Xi Jinping “will be having an extended meeting” at this week’s G-20 summit in Japan.[7]
Investors were encouraged by this note, sensing a chance for progress in U.S.-China trade talks.
Final Thought
With tensions persisting between Iran and the U.S., investors are keeping a close eye on both commodity prices and stock indices. Economic or geopolitical developments could heavily influence the short-term movement of the markets.
[1] www.cnbc.com/2019/06/21/it-was-a-monumental-week-for-markets-with-major-milestones-in-stocks-bonds-gold-and-oil.html
[2] www.wsj.com/market-data
[3] quotes.wsj.com/index/XX/990300/historical-prices

[4] www.cnbc.com/2019/06/21/it-was-a-monumental-week-for-markets-with-major-milestones-in-stocks-bonds-gold-and-oil.html

[5] www.latimes.com/politics/la-na-pol-trump-fed-interest-rate-policy-20190619-story.html

[6] www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

[7] www.cnbc.com/2019/06/18/trump-says-he-and-chinas-xi-spoke-will-have-extended-meeting-next-week-at-g-20.html

If you receive a letter from the IRS, don’t panic. Millions of letters are sent to taxpayers every year for a myriad of reasons. If you receive a letter from the IRS, here’s some advice:
Don’t panic. Read the letter carefully. There will usually be an action that is requested of you and a corresponding phone number for you to call. Follow the directions carefully.
Be aware of dates and timeframes. The notice you receive will probably have a dated deadline by which to respond with the appropriate action. Be sure to take note of the dates and not miss any deadlines that may be stipulated by the IRS.
Know when to respond. Sometimes the IRS sends a notice or other communication that may not require a response. Again, read carefully, and if needed, respond according to the instructions on the letter. If a payment is required, reply with a payment or visit www.IRS.gov for information about payment options.

You may need to dispute. If you don’t agree with the IRS notice, write a letter explaining why you are disputing the matter and mail it to the address on the contact stub at the bottom of the notice.
*This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov[8]
[8] www.irs.gov/newsroom/dos-and-donts-for-taxpayers-who-get-a-letter-from-the-irs

The Week on Wall Street
Stocks advanced for a second straight week. The S&P 500 benchmark rose 0.47%; the Nasdaq Composite, 0.70%; the Dow Jones Industrial Average, 0.41%. Overseas shares, as tracked by the MSCI EAFE developed markets index, added 0.20%.[1][2]
The market seemed to put its recent preoccupation with trade issues aside, with attention shifting to this week’s Federal Reserve monetary policy meeting. Traders in futures markets now believe the Fed will make a rate cut in July, so its June policy statement will be of great interest.[3]

Oil Prices Rollercoaster
Attacks on vessels in the Strait of Hormuz, the busy oil shipping channel, helped to push the price of West Texas Intermediate crude 2.2% higher Thursday, just a day after a 4% fall. Even so, WTI crude lost 2.7% in five days, closing Friday at $52.51 on the New York Mercantile Exchange.[4]

Investors wondered at mid-week if tensions in the Persian Gulf region would soon impact oil output and transport. Looking beyond the short term, however, the International Energy Agency reduced its 2020 projection for global oil demand.[5]

Households Bought More in May
Retail sales rose 0.5% last month, according to the Department of Commerce. Across the year ending in May, they advanced 3.2%. The previously announced 0.2% April retreat was revised into a 0.3% gain.[6]

These numbers affirm strong household spending this spring. Consumer spending accounts for roughly two-thirds of the nation’s gross domestic product.
What’s Ahead
In terms of news, Wednesday offers what may prove to be the biggest economic event of the week: a Federal Reserve policy statement and press conference.
[1] www.wsj.com/market-data

[2] quotes.wsj.com/index/XX/990300/historical-prices

[3] www.cnbc.com/2019/06/14/stock-market-middle-east-tensions-weigh-china-data-in-focus.html

[4] www.marketwatch.com/story/oil-prices-steady-as-market-keeps-watch-on-strait-of-hormuz-after-tanker-attacks-2019-06-14

[5] www.marketwatch.com/story/oil-prices-steady-as-market-keeps-watch-on-strait-of-hormuz-after-tanker-attacks-2019-06-14

[6] www.cnbc.com/2019/06/14/retail-sales-may-2019.html

If you make a mistake on your income taxes, you may receive a penalty from the IRS. In some circumstances, the IRS can provide relief from certain penalties, such as:
• Failing to file a tax return
• Failing to pay on time
• Failing to deposit certain taxes as required
Types of penalty relief offered by the IRS:
Reasonable Cause
If you can show that you tried to meet your obligations, but didn’t succeed in doing so, you may be forgiven. Some circumstances would be a house fire, a natural disaster, or a death in the family.
Administrative Waiver and First-Time Penalty Abatement
Relief may be possible if you:
• Didn’t previously have to file a return or had no penalties for the three years prior to the IRS assessed penalty.
• Filed all currently required returns or filed an extension of time to file.
• Paid or arranged to pay any tax due.
Statutory Exception
It’s possible you’ve received incorrect written advice from the IRS, which may result in an exception.
*This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov[9]

[9] www.irs.gov/newsroom/heres-what-taxpayers-should-know-about-penalty-relief

The Week on Wall Street
Stocks rallied during a week in which Wall Street was buffeted by headlines. The S&P 500 rose 4.41%. The Nasdaq Composite and Dow Jones Industrial Average respectively added 3.88% and 4.71%. The MSCI EAFE index of overseas stocks improved 2.02% across five days.[1][2]
Following a mixed Monday, the market jumped Tuesday after dovish remarks from Federal Reserve Chairman Jerome Powell. Breaking out of a 6-week losing streak, the Dow had its best week since November.[3]

Jerome Powell’s Comments
Speaking at the Federal Reserve Bank of Chicago, the Fed chair stated that central bank officials “will act as appropriate to sustain the expansion” of the economy in the face of “recent developments involving trade negotiations and other matters.”[4]

The next 2-day Fed policy meeting ends on June 19, with a press conference to follow.[5]

Hiring Cools
Employers added just 75,000 net new jobs to their payrolls in May, according to the Department of Labor. Economists polled by Reuters thought that the gain would be 185,000. The main unemployment rate held at 3.6% last month; the U-6 rate, which includes the underemployed and those who have stopped looking for work, fell 0.2% to 7.1%.[6]

To some analysts, the weak May hiring number hinted at private-sector concern over tariffs. To others, it simply signified the possibility that the economy may be at or near full employment.[7]

Final Thought
While breaking news does often merit investor attention, refrain from letting the headlines of the moment prompt you into emotional decisions. Brace yourself for further headlines that may drive market volatility because new developments are arriving quickly in the financial markets.
[1] www.wsj.com/market-data

[2] quotes.wsj.com/index/XX/990300/historical-prices

[3] www.cnbc.com/2019/06/07/us-futures-edge-higher-as-wall-street-rally-set-to-continue-jobs-data-in-focus.html

[4] www.cnbc.com/2019/06/04/powell-says-the-fed-will-act-as-appropriate-to-sustain-the-expansion.html

[5] www.federalreserve.gov/newsevents/calendar.htm

[6] www.reuters.com/article/us-usa-economy-instant/us-may-payrolls-rose-less-than-expected-idUSKCN1T81GG

[7] www.reuters.com/article/us-usa-economy-instant/us-may-payrolls-rose-less-than-expected-idUSKCN1T81GG

You may make jewelry, sell baked goods, or do some carpentry. When you start selling these goods, the IRS may need for you to report this income. So, how do you know when it remains a hobby or becomes a business? When your hobby becomes profitable, it may be a business. The IRS offers some factors for you to consider, including:
• Do you carry on the activity in a businesslike manner and maintain books and records?

• Does the time and effort you put into the activity indicate you intend to make it profitable?

• Do you depend on income from the activity for your livelihood?

• Are your losses due to circumstances beyond your control (or are normal in the startup phase)?

• Have you changed your methods of operation in an attempt to improve profitability?

• Do you or your advisors have the knowledge needed to carry on the activity as a successful business?

• Were you successful in making a profit in similar activities in the past?

*This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[9]

[9] www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses

The Week on Wall Street
Stocks struggled during a 4-day market week as the U.S.-China trade standoff continued to weigh on the minds of market participants. From the Friday, May 24 close to the Friday, May 31 close, the S&P 500 retreated 2.62%; the Nasdaq Composite, 2.41%; the Dow Jones Industrial Average, 3.01%. The MSCI EAFE index of overseas stocks dipped just 1.47% in a week.[1][2]
Trade is dominating the conversation in the financial markets, with developments steadily unfolding. Wednesday, China’s state media suggested that the country could soon cut off exports of rare earths to the U.S. Late Thursday, the Trump administration announced 5% tariffs on all imports from Mexico, effective June 10; these taxes could rise in the coming months.[3][4]

Meanwhile, on Main Street…
The Conference Board’s consumer confidence index soared to 134.1 in May, its highest reading since November; the consumer view of present economic conditions was the best since the end of 2000. Additionally, the University of Michigan’s consumer sentiment index ended May at 100.00, near the 15-year peak of 102.4 seen earlier in the month.[5][6]

Spring also brought a solid advance in consumer spending. April’s gain was 0.3%, according to the Bureau of Economic Analysis.[7]

Final Thought
While Wall Street remains cautious and concerned about trade, consumers appear to be upbeat, sensing widespread economic prosperity. This underscores the fact that the state of the economy does not necessarily correspond to the state of the stock market (and vice versa).

[1] www.wsj.com/market-data

[2] quotes.wsj.com/index/XX/990300/historical-prices

[3] apnews.com/af8ed9e6b95f4d14b32e6e0135949159

[4] www.foxbusiness.com/markets/us-stocks-wall-street-may-31-2019

[5] www.bloomberg.com/news/articles/2019-05-28/u-s-consumer-confidence-tops-forecasts-rises-to-six-month-high

[6] www.investing.com/economic-calendar

[7] www.investing.com/economic-calendar