|
|
|
 |
The Rodman
Report
December 2007 | |
|
|
With tax season just around the corner, we are
going to focus much of this edition of The Rodman
Report on tax issues that we believe our clients
will find helpful in planning for the best possible
tax outcome for 2007. The article
"Charitable Donations of Appreciated
Stock" will give you a different
perspective on how you can donate to a college, charity,
etc. and at the same time, increase your tax
benefits. "Year-end Tax Strategies for
Stock Market Investors" goes into detail about
how you can make the best tax use of the gains
and losses from your stock market
investments. Will Hackler of Hackler
Associates will give you some timely advice
that will help you to avoid the harsh
penalties the government lays down on
retirement plans who fail to follow the complex and
dynamic regulations placed upon them.
Lastly, don't forget about our free seminar
coming up this Thursday. Only
a few spots remain. If you are thinking about
selling your business in the next few
years, you'll want to hear what an expert has
to say about best preparing your business to maximize
the price you get! Get the details below.
Please enjoy your December edition of The
Rodman Report! |
|
***Just in - Auto Mileage
rates for 2008*** |
| The
Internal Revenue Service recently issued the
2008 optional standard mileage rates
used to calculate the deductible costs of operating an
automobile for business, charitable, medical or moving
purposes.
Beginning Jan. 1, 2008, the standard mileage rates
for the use of a car (including vans, pickups or panel
trucks) will be:
- 50.5 cents per mile for business
miles driven;
- 19 cents per mile driven for
medical or moving purposes; and
- 14 cents per mile driven in
service of charitable
organizations.
| |
 |
|
|
|
Charitable Donations of Appreciated
Stock |
At Rodman
& Rodman we are often approached by our clients
about the most tax-advantaged ways they can make
charitable donations. If you are planning to make a
relatively substantial contribution to a charity,
college, etc., you should consider donating
appreciated stock from your investment portfolio instead
of cash. Tax benefits from the
donation can be increased and the organization will be
just as happy to receive the stock.
This tax planning tool is
derived from the general rule that the deduction
for a donation of property to charity is equal to the
fair market value of the donated
property. Where the donated property is
"gain" property, the donor does not have to recognize
the gain on the donated property. These rules
allow for the "doubling up," so to speak, of tax
benefits: a charitable deduction, plus avoiding
tax on the appreciation in value of the donated
property.
Example:
Tim and Tina are twins, each of whom attended Yale
University. Each plans to donate $10,000 to the
school. Each also owns $10,000 worth of stock in
ABC, Inc. which he or she bought for just $2,000 several
years ago.
Tim sells his stock and donates the $10,000
cash. He gets a $10,000 charitable deduction, but
must report his $8,000 capital gain on the stock.
Tina donates the stock directly to the
school. She gets the same $10,000 charitable
deduction and avoids any tax on the capital gain.
The school is just happy to receive the stock, which it
can immediately sell for its $10,000 value with no taxes
since they are a tax exempt organization in any
case.
Caution: While this plan works for
Tina in the above example, it will not work if
the stock has not been held for more than a
year. It would be treated as "ordinary
income property" for these purposes and the charitable
deduction would be limited to the stock's $2,000
cost.
If the property is other ordinary income property,
e.g., inventory, similar limitations apply.
Limitations may also apply to donations of long-term
capital gain property that is tangible (not stock), and
personal (not realty).
Finally, depending on the amounts involved and the
rest of your tax picture for the year, taking
advantage of these tax benefits may trigger alternative
minimum tax concerns.
If you'd like to discuss this method of charitable
giving more fully, including the limitations and
potential problem areas, please give the team at Rodman
& Rodman a call.
|
|
Year-end Tax
Strategies for Stock Market
Investor |
 The volatile securities markets
make year-end planning for investors especially
challenging this year. As year-end approaches, you
should consider the following moves to make the best tax
use of paper losses and actual losses from your stock
market investments.
Sell at a loss to offset
gains. If you have realized gains earlier
in the year from sales of stock held for more than one
year (long-term capital gains) or from sales of stock
held for one year or less (short-term capital gains),
take a close look at your portfolio with a view to
selling some of the losers - those shares that now show
a paper loss. The best tax strategy is to sell
enough of the losers to generate losses to offset your
earlier gains plus an additional $3,000 loss. Selling to
produce this amount of loss is a good idea from the tax
viewpoint because a $3,000 capital loss (but no more)
can offset a like amount of ordinary income each
year.
For example, let's suppose you have $10,000 of
capital gain from the sale of stocks earlier this
year. You also have several losing positions,
including shares of ABC Corp. The ABC shares
currently show a loss of $15,000. Strictly from
the tax viewpoint, you should consider selling enough of
your ABC shares to recognize a $13,000 loss. Your
capital gains will be offset entirely, and you will have
a $3,000 loss to offset against a like amount of
ordinary income.
Suppose that you believe that the shares showing a
paper loss (in our example, the ABC shares) still have
the potential to turn around and eventually generate a
profit. You can sell and then repurchase the
shares without forfeiting the loss deduction
only if you avoid the wash-sale
rules. This means that you must buy the new shares
outside of the period that begins 30 days before and
ends 30 days after the sale of the loss
stock. However, note that if you expect
the price of the shares showing a paper loss to rise
quickly, your tax savings from taking the loss may not
be worth the potential investments gain you may lose by
waiting more than 30 days to repurchase the
shares.
Use earlier-in-the-year losses to offset
gains you would benefit from taking. If
you have capital losses on sales earlier in the year,
consider whether you should take capital gains on some
stocks that you still hold. For example, if you
have appreciated stocks that you would like to sell, but
don't want to sell if it will cause you to have taxable
gain this year, consider selling just enough shares to
offset your earlier-in-the-year capital losses (except
for $3,000 of those which can he used to offset ordinary
income). You should consider selling appreciated
stocks now if you believe those stocks have reached (or
are close to) the peak price and you also believe that
you can invest the proceeds from the sale in other
property that will give you a better rate of return in
the future.
For example, suppose you have $20,000 of long-term
capital losses from 2007 stock transactions, and $4,000
of short-term capital gains. If you don't have
other transactions involving securities or other
capital assets for 2007, you'll wind up the year with a
$16,000 long-term capital loss, of which only $3,000 can
be used to shelter ordinary income. The $13,000
balance of the loss could be used to offset gain on
appreciated stock that you wish to sell but which you
would not sell now if you had to pay tax on the gain
recognized on the sale.
If this strategy applies to you, and your holdings
showing a paper gain consist of stocks you haven't held
for more than one year, as well as stocks you have held
for more than one year, you should consider selling
those stocks on which you will have short-term gain
first, and then stocks that would yield long-term
gain. This way, you'll be in a better position to
wind up with gain taxed at favorable rates when you sell
other stocks with paper gains. To the extent
possible, you should also try to use long-term capital
losses to offset short-term capital gains. This
can be done, however, only if the total of your
long-term capital losses is more than your long-term
capital gains. Deferring long-term capital gains
until next year is one way of achieving this goal.
Since individual taxpayers may carry over
capital losses indefinitely, there is no reason to sell
appreciated stocks just to have offsetting gains.
If you don't have a better investment for the proceeds
of a sale of these stocks, don't sell
them. You can carry over your capital
losses to next year when you may have a better
opportunity to make use of those losses. You can
even offset another $3,000 of the carried over losses
against ordinary income next year (and in succeeding
years if the full amount of the capital loss carryover
is not used next year).
When gain on sale of stock this year should
be taken even if you don't have offsetting
losses. A 2007 sale of
paper-gain stocks you have held for more than
one year may make sense (even if you haven't recognized
losses) if you will be in the 10% or 15% bracket
in 2007, for example, due to business net
operating losses that will offset most of your ordinary
income, but expect to be in a 25% or higher bracket in
2008. By selling in 2007 rather than 2008, part or
all of the gain will be taxed at a maximum rate of only
5% (instead of 15%). However, if you expect to be
in the 10% or 15% bracket in 2008 and a higher bracket
in 2007, you would be wise to wait until 2008 to
recognize those gains, not only for the deferral of tax,
but because capital gains taxes in 2008 for
those in the 10% or 15% brackets is 0%.
These are just a few of the year-end strategies
that can make a big dollar difference to you and your
family. To discuss these and other strategies that
should be put in place before year end, please give us a
call at Rodman & Rodman.
|
|
Five Questions To Ask
About Your Retirement Plan
Avoid the harsh cost of non-compliance by being
proactive |
If your
business sponsors a retirement plan the IRS and
Department of Labor have countless rules and regulations
that need to be adhered to. The price for failing
to comply can be quite steep. We asked Will
Hackler of Hackler Associates to address the most common
and costly mistakes he encounters in his
pension consulting and administration firm. Often
businesses come to him when the damage has already been
done (the plan has been audited and the penalties
levied) and his job becomes one of mitigating the
damage. Here are the five questions Will suggests every
employer asks themselves and those responsible for
administering the retirement plans:
-
Do you
have to refund any money to employees?
When nondiscrimination tests fail, many companies
make a decision to refund money. I contend if this is
the case, you either have the wrong plan or your
administrator is not paying enough attention to your
plan. The IRS allows many options besides refunds.
When was the last time you looked at those
options?
-
Have you
timely filed Form 5500 and given the employees the
requires Summary Annual Report (SAR)? If
you have a qualified retirement plan, you are required
annually to file this information form. The
penalties for failing to file Form 5500 are $25 per
day plus interest.
-
Have you
updated your plan document in the last few years for
changes in the law? If so, did you pass out new
Summary Plan Descriptions to employees?
In recent years, many law changes
regarding pension plans have required those plans to
be amended in order to comply. If audited, a failure
to make the required amendments may cause your plan to
be disqualified potentially costing the business
deductions and the employees their tax sheltered
savings. Such an occurrence could be
catastrophic.
-
Were all
eligible employees given the opportunity to make a
deferral election? If you have a lot of
part-time employees make sure you are adhering to the
hours requirement in your plan document. If your
provider is not doing regular enrollment meetings, you
may be missing someone. A correction for missing
employees can be very costly with interest and
penalties.
-
Are you
giving investment advice to your
employees? Investment advice should only
be given by the licensed broker. Even telling your
employees what funds you are using could be deemed as
investment advice and subject you to
liability.
Will Hackler, QKA is
the Managing Partner at Hackler Associates, Inc., a
Leominster-based retirement plan administration and
consulting firm, serving New England since 1980. If you
have a question for Will you can reach him at
978-847-0140 or by email at will@hacklerinc.com. You
can visit Hackler Associates on the web at www.hacklerinc.com. |
| 16 Ways to
Improve the Value of a Business Prior to Selling
-Seminar set for December 13th - Last chance to
register! |
16 Ways to Improve the Value of a Business Prior to
Selling
Thursday, December 13, 2007
7:30 a.m. - 9:00 a.m.
Complimentary
breakfast
Most entrepreneurs do not contemplate
the sale of their business when they begin it. However,
the transfer of the entity at some point in the future
is inevitable. Many will be counting on the sale of the
business to provide a significant portion of their
retirement funding, or depend upon the sale to in some
way be an integral resource for the future plans of that
entrepreneur. It is therefore imperative that the
business value be maximized.
David Humphrey,
President of Beacon Capital Group will present "16
Ways to Improve the Value of a Business Prior to
Selling." David brings more than a decade of business
merger, acquisition and valuation experience to the
firm's clients. During his tenure he has successfully
managed the sale of a wide range of manufacturing,
distribution and services businesses across New England.
If you are thinking about selling your business, or just
want to know more about what it takes to make your
business more valuable, this is a program you should not
miss. There is no cost or obligation to attend. This
program is to help the clients and friends of Rodman
& Rodman, and is provided as a value added service.
Please contact Jen Reading at 617.965.5959 to
register. You may also reach Jen by email at jen@rodmancpa.com |
|
Thank you for looking at The Rodman Report for
December. We hope you found some useful information.
Look for the next Rodman Report in January. From the
entire team at Rodman & Rodman, we wish you Happy
Holidays and Happy New Year!!!
Best regards,
The Team at Rodman &
Rodman
| |
|
| |
|