Newsletter

Highlights of the New Health Reform Law

Medicare surtax of 3.8% on unearned income of high income individuals. .9% surtax on earned income over $200,000 for singles and $250,000 for couples. Self-employed's won't be able to deduct any of the surtax as half of their SECA tax. Penalty on individuals who remain uninsured starting in 2014. Lower income earners will get a refundable credit to help them afford health insurance. Small firms that provide health insurance to workers will receive a credit. New 10% excise tax on tanning services provided by tanning salons. The 7.5% medical deduction threshold is increased to 10%. .

The Kiplinger Tax Letter

Vol. 85, No's. 7 & 8

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Those who dream by day are cognizant of many things which escape those who dream only by night.

Edgar Allan Poe

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The Installment Sale Method can be Useful in Tax Planning

The Installment Sale Method of reporting gains on the sale of certain assets (excluding inventory type assets and stock and securities traded on an established market) spreads the taxable gain over two or more years. Caveat: any depreciation recapture is taxable in the initial year of the sale. However, with proper tax planning installment sales can defer and sometimes reduce the amount of taxes paid on certain asset sales.

CCH

Practical Tax Bulletin

Issue 1

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The principal mark of genius is not perfection but originality, the opening of new frontiers

Arthur Koestler

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IRS will begin sending out random payroll tax notices in February

The Service expects to audit 6,000 businesses over the next three years. Agents will be looking for violations of rules for worker classification, executive pay and fringe benefits.

The Kiplinger Tax Letter

Special Issue

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If you can't make it better, you can laugh at it.

Erma Bombeck

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Random Audits of S Corporations

Surprise! Audits of S Corporations have uncovered broad noncompliance in certain areas such as travel expenses, meals and entertainment, car and truck expenses, expensing tools and supplies and taking profits as dividends instead of as salary to avoid paying payroll taxes.

The Kiplinger Tax Letter

Special Issue

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There are two types of preparation-physical and mental. You can't get by with just one or the other.

Ken Stabler

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Medical Expenses

Meals and lodging provided with long-term care services can be deducted as medical expenses if the person is in the facility for medical reasons.

The Kiplinger Tax Letter

Special Issue

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Competition is a way of life. If you don't have a really tough competitor, you ought to invent one.

Bill Smithburg

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Electric Golf Carts

Street-legal electric golf carts qualify for a federal income tax credit of $2,500 and up. In many cases the credit is more than half the cost of the vehicle's cost. Buyers can rely on the manufacturers' credit certification.

The Kiplinger Tax Letter

Special Issue

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Don't learn the tricks of the trade-learn the trade.

James Charlton

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Roth IRA Conversions

As of January 1, 2010, every taxpayer can convert their regular IRA to a Roth IRA. Income caps on Roth contributions still exist, but the limits don't apply to conversions. Taxpayers who convert in 2010 have the option to report half of the income on their 2011 and 2012 returns. But top bracket taxpayers may want to report the income on their 2010 return since there is a high probability of a tax rate increase. Early 2010 conversions will help reduce the amount of the tax owed on the conversion if your IRA account grows in value. If the account declines in value you can unconvert without having to pay any income taxes.

The Kiplinger Tax Letter

Special Issue

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Invest in the human soul. Who knows-it might be a diamond in the rough

Mary Mcleod Bethune

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Builders and Developers will receive Special Audit Attention

The IRS believes that many taxpayers using the completed-contract method of accounting are inappropriately deferring income. Therefore the IRS will increase their audits of Builders and Developers using the completed-contract method of accounting for income tax purposes.

The Kiplinger Tax Letter

Special Issue

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Getting something done is an accomplishment; getting something done right is an achievement.

Author Unknown

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Real Estate Agents Tax Break on Rental Losses

Real Estate agents can fully deduct their real estate rental losses without regard to passive activity loss disallowance rules if they spend over one half of their work time and at least 750 hours per year materially involved in the real estate rental activity.

Agarwal, TC Summ. Op. 2009-29

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It really doesn't cost anything to be nice, and the rewards can be unimaginable.

Bear Bryant

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Section 179 Expensing on Heavy Vehicles

Vehicle mileage must still be substantiated to verify the vehicle's business usage via a logbook, diary or similar documentary evidence to expense the business portion of the cost of the vehicle.

TC Summ. Op. 2009-126

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Bureaucracy is the art of making the possible impossible.

Javier Pascual Salcedo

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2010 Standard Mileage Rates

For 2010 the standard mileage rate is 50 cents per mile for business use, 16.5 cents per mile for medical and moving purposes and 14 cents per mile for vehicles used for charitable purposes.

Rev. Proc. 2009-54, 2009-51 IRB_;IRS News Release IR-2009-111

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All successful men have an education. Some got it without going to school, and some got it after going to school.

Author Unknown

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Payroll Taxes

Companies can correct most employment tax underreporting errors interest free.

Rev. Rul. 2009-39

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Being happy doesn't mean that everything is perfect. It means that you've decided to look beyond the imperfections.

Author Unknown

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Brokers 2009 Tax Statements

Congress changed the January 31st deadline to February 16, 2010 for the 2009 Forms 1099-B's, 1099-S's and certain 1099-MISC's. Also, the later due date applies to annual composite statements that include 1099-DIV and 1099-INT forms.

The Kiplinger Tax Letter

Vol. 84, No. 26

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While it is true that without a vision the people perish, it is doubly true that without action the people and their vision perish as well.

Johnetta B. Cole

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Rental Property

Casualty losses on rental property aren't passive losses and therefore don't count toward the $25,000 limit on deductible passive losses.

Agosto

TC Summ. Op. 2009-191

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Success is for those who know what they want and go after it, no matter how difficult the path.

Jacques A. Nasser

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Family Limited Partnerships

FLP's can be used to reduce estate taxes as long as they are set up for reasons other than tax savings.

Estate of Black

133 TC No. 15

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Those who travel unworn paths find the rarest flowers.

Hindu Proverb

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Estate Tax

Congressional inaction has the estate tax disappearing in 2010, then reappearing in 2011 with a lower $1 million exemption.

The Kiplinger Tax Letter

Vol. 84, No. 26

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Let your speech be always with grace, seasoned with salt, that ye may know how ye ought to answer every man.

The Bible

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When businesses should file Form 8300 for cash transactions

Generally, any person in a trade or business who receives more than $10,000 in cash in a single transaction or in related transactions must file Form 8300.

IRS.gov

e-News for Small Businesses

Issue Number 2009-18

September 2, 2009

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The earnestness of your desire will indicate the distance you are likely to travel.

Clark C. Stockford

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A Win for LLC Members and LLP Partners

Losses are not presumed to be passive according to the Tax Court. If the owners can satisfy one of the seven tests to show that they materially participated in the business they can treat any losses as non-passive. The significance of this ruling is that it makes it easier for such owners to deduct their losses against other income.

The Kiplinger Letter

 August 2009

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Give the world the best that you have, and the best will come back to you.

Madeline Bridges

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Employee vs. Independent Contractor - Ten Tips for Business Owners

1. Three characteristics are used by the IRS to determine the relationship between businesses and workers: Behavioral Control, Financial Control, and the type of Relationship.

2. Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done though instructions, training or other means.

3. Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker's job.

4. The Type of Relationship factor relates to how the workers and the business owner perceive their relationship.

5. If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees.

6. If you can direct or control only the result of the work done - and not the means and methods of accomplishing the result -- then your workers are probably independent contractors.

7. Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms.

8. Workers can avoid higher tax bills and lost benefits if they know their proper status.

9. Both employers and workers can ask the IRS to make a determination on whether a specific individual is an employee by filing a Form SS-8 -- Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding -- with the IRS.

10. You can learn more about the critical determination of worker's status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link. Additional resources include IRS Publication 15-A, Employer's Supplemental Tax Guide, Publication 1779, Independent Contractor or Employee, and Publication 1976, Do You Qualify for Relief under Section 530? These publications and Form SS-8 are available on the IRS Web site or by calling the IRS at 800-829-3676 (800-TAX-FORM).

IRS.gov

August 21, 2009

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It is no exaggeration to say that a strong, positive self-image is the best possible preparation for success in life.

Joyce Brothers

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Buying a Business - 10 Things It Takes

1. Understanding that you will be more of the chief cook and bottle washer than the Chief Executive Officer.

2. Realizing that you are buying someone else's "baby" . The seller has much of his or her life tied up in the business and needs to be comfortable turning the business over to the you the buyer.

3. Money. Buyer's should not begin the process until they have the necessary funds or know exactly where they will come from.

4. Accepting reality. In good times businesses sell for higher prices just like in bad times they sell for lower prices.

5. Understanding that there are no sure things and that buying a business is risky.

6. Accepting responsibility. Owning a business is a huge responsibility.

7. Patience. Buying the right business takes time.

8. A viable reason for buying a business. Also, all involved parties should be informed and supportive of the purchase.

9. Courage to take the leap of faith to pull the trigger. Once a buyer finds the right business at the right price they need to make the purchase.

10. Professional help. Buyers shouldn't make the largest financial decision in their life without good professional advice.

Summarized from the Business Brokerage Press

the business broker

August 18, 2009

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Next time you find yourself looking at a dream and thinking, "That's not possible," turn that on its head and force yourself to take the contrary view. Tell yourself: "Success is inevitable. Now prove it."

Curt Rosengren

Motivational Speaker

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IRS Offers Tips on Rental Real Estate Income

Rental income is any payment the taxpayer receives for the use or occupation of property. Advance rent is included in income in the tax period it is received. Security deposits that are refundable are not included in income unless the deposit is later retained by the lessor. Non-refundable deposits are included in income when received. Tenant payments to cancel a lease are considered to be rental income. The fair market value of services or property received in lieu of rent is also included in rental income.

Ordinary and necessary expenses incurred in respect to rental property are deductible. Examples include mortgage interest, property tax, operating expenses, depreciation, and repairs. Repairs are deductible only if they keep the property in good condition without materially adding to the property's value. The cost of improvements cannot be deducted immediately but rather they should be capitalized and expensed by depreciation. Examples include adding a deck, fence or roof to the property.

The lessor should keep good records to substantiate all rental expense, which will aid in preparing the financial statements, identify the source of receipts, keep track of deductible expenses, and prepare tax returns. All travel expenses incurred for rental property repairs, etc. should be recorded.

IRS Headliner Volume 271, July 8, 2009

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If you are not generous with a meager income, you will never be generous with abundance.

Harold Nye

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Agents Given Greater Latitude for Leniency with Delinquents

Internal Revenue Service field agents are being offered new flexibility to go easier on delinquent taxpayers caught up in the current economic squeeze. Exactly how much additional discretion financially struggling taxpayers and their CPAs can expect from IRS enforcement personnel remains to be seen, but Commissioner Doug Shulman made it clear that he wants to "empower" the service's field agents to soften the tax pinch on economically distressed Americans.

Accounting Today

Vol. 23, No. 11

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Never hesitate to ask for help. No one succeeds alone.

Micheline Bouchard

Business executive

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Ten Forces Driving Business Futures

1. The Emergence of China as the World's Largest Economic Power

2. Global Demographic and Migration Shifts

3. Energy and Water Shortages

4. Managing Waste, Reusing Products

5. Falling Education Standards, Less-Skilled Thought Leaders

6. Brand Relationships Intensify

7. Instant Gratification Shopping

8. On-Demand Media

9. Customization, Personalization, and Community Experiences

10. Youth Rules

Michael Richarme

The Futurist, July-August 2009

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Real happiness is cheap enough, yet how dearly we pay for its counterfeit.

Hosea Ballou

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Do You Have the Right Stuff (to be an entrepreneur)?

1. Do you believe you have what it takes?

2. Are you able to let other people down?

3. How do you handle setbacks?

4. Are you really an inventor (or technician), rather than an entrepreneur?

5. Can you accept that your company may outgrow you?

6. When you look in the mirror, does an entrepreneur look back?

Summarized from Inc. Magazine

July/August 2009

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Friends and good manners will carry you where money won't go.

Margaret Walker

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Employers Reminded They Cannot Decide During Plan Year to Forgo Contributions to SIMPLE IRA

Employers with SIMPLE IRA plans cannot unilaterally stop, in mid-year, nonelective contributions they had previously promised to employees, the IRS recently cautioned.

IRS Employee Plan News

Summer 2009

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Say not you know a man entirely till you have divided an inheritance with him.

Johann Kaspar Lavater

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Hiring Your Children

Don't deprive your child of succeeding on his/her own. Allow them to gain experience outside the family business. Current employees will respect them more if they have outside experience.

Summarized from Inc. Magazine

July/August 2009

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People who think money can do anything may very well be suspected of doing anything for money.

Mary Pettibone Poole

A Glass Eye at a Keyhole

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Members of LLPs and LLCs Not Presumed to be Subject to the PAL Limitations

The Tax Court has held that members of limited liability companies and limited liability partnerships are not automatically presumed to lack material participation in the entities" activities for purposes of the passive activity loss rules.

Garnett v. Commissioner, Dec. 57,875, 132 TC

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More people should learn to tell their dollars where to go instead of asking them where they went.

Roger W. Babson

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Great Marketing Moves

1. Honor competitor's coupons.

2. Give new customers that buy a service/product additional services/products for   free.

3. Use tournaments, performances, board games etc. to increase awareness among   prospects.

4. Highlight your businesses' local roots.

5. Use tapes, CD's, DVD's, etc. to advertise your business.

6. Market to your prospects' influencers.

7. Advertise through payroll company's by putting coupons in employee pay checks.

8. Use You Tube, My Space, Face book, Twitter, etc. to get your message out.

Summarized from Inc. Magazine

July/August 2009

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People with love in their hearts go through life untouched by poverty regardless of the amount of monetary wealth they may acquire.

Douglas Meador

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Bankrupt QIs Cause Recognition of Gain on Like-Kind Exchanges

Taxpayers are required to recognize gain when their qualified intermediary holding proceeds from the sale of relinquished property in a deferred Code Sec. 1031 exchange filed for bankruptcy, preventing the QI from transferring monies to acquire a replacement property and complete the like-kind exchange.

The IRS noted that there is legislation pending before Congress that would amend the Code and allows a suspension of the 180-day period in the case of bankrupt QIs.

INFO-2009-0063, INFO-2009-0066, and INFO-2009-0106

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The successful man or woman has a guiding vision, a dream, a sense of focus. He or she has a clear idea of what he or she wants to have, do, or accomplish. It is the achiever's divine right to dream.

Dennis Kimbro

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Get Your People to Work Harder...

...without pushing them so hard that they quit.

  • Work harder yourself.

  • Create a sense of urgency.

  • Dole out cheap carrots.

  • Be fair.

Summarized from Money Magazine

July 2009

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We can change ourselves for the better and cause ourselves to subconsciously pursue our most precious desires with almost total success, if we crystallize the images clearly enough in our minds because the subconscious mind cannot tell the difference between real and vividly imagined situations.

Charles A. Coonradt

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Ready, Set, Innovate

Holding a company wide competition can inspire all staff members to think like innovators. Follow these rules to maximize results and minimize costs.

-Make participation mandatory

-Pick a slow time of year

-Assemble small, diverse teams

-Keep it loose

-Give specific feedback

-Reward the best ideas

Summarized from Inc. Magazine

June 2009

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For no matter how triumphant we are, no matter how high we may climb, the course of a normal life will lead us to losses.

Judith Viorst

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The Economy

We'll never know if the stimulus really worked. There are no do-over's, so we won't be able to tell what would have happened if a different path were taken. Because recessions run their course, eventual improvements is inevitable, helped by low interest rates as well as low prices for gasoline and other commodities. But a lack of confidence among consumers and companies and the halt in spending and hiring threaten to keep the economy from recuperating fully for several years. Throwing billions at the problems means soaring deficits and inflation later. But policymakers see those as the least of the evils they face.

The Kiplinger Letter

 February 2009

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Share your success and help others succeed. Give everyone a chance to have a piece of the pie. If the pie's not big enough, make a bigger pie.

Dave Thomas

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Business Incentives

The American Recovery and Reinvestment Act of 2009 extends the 50 percent bonus depreciation, the higher cap for new vehicles, and the Code Section 179 expensing limit of $250,000. Also, the new law provides a five year NOL carryback period for small businesses.

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If something goes wrong, it is more important to talk about who is going to fix it than who is to blame.

Francis J. Gable

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Qualified Small Business Stock

The American Recovery and Reinvestment Act of 2009 increases the exclusion from income 75% gain from the sale of certain small business stock acquired and held for more than five years.

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When your outgo exceeds your income, the up-shot may be your downfall.

Paul Harvey

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S Corp Built-In Gain Period

The American Recovery and Reinvestment Act of 2009 temporarily shortens, from ten to seven years, the holding period for assets subject to the built-in gains tax imposed after a C corp elects to become an S corp. The reduction applies to C corps that convert to S corps in tax years beginning in 2009 and 2010.

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Rationalization may be defined as self-deception by reasoning.

Karen Horney

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Estimated Taxes

The American Recovery and Reinvestment Act of 2009 decreases required estimated tax payments for individuals whose incomes primarily come from a small business in 2009. Rather than basing the payments on 100% of their 2008 income tax, the estimates can be based on 90%.

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It has been my philosophy of life that difficulties vanish when faced boldly.

Isaac Asimov

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First-Time Home buyer Tax Credit

The American Recovery and Reinvestment Act of 2009 increased the first-time home buyer tax credit to $8,000 and extends it through November 30, 2009. It also eliminates any required repayment to the IRS after 36 months in the home. A first-time home buyer is defined as someone who has not owned a home for the past three years. The credit is 10% of the cost of the house up to $8,000 in credit and the house must be used as the primary residence of the taxpayer/purchaser.

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Never be too proud to change.

Bobby Bowden

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Education Credit

The American Recovery and Reinvestment Act of 2009 enhances the existing HOPE education credit for 2009 and 2010. The enhancements include the credit maximum amount increasing to $2,500, the covered time period increasing to four years and qualifying expenses now including course materials.

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The willingness to trust others even when you know you may be taken advantage of is the cornerstone of becoming civilized.

O. A. Battista

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New Car Deduction

An above-the-line deduction for sales taxes paid on the purchase of a new vehicle is included the American Recovery and Reinvestment Act of 2009. The deduction is limited to the amount of tax on the first $49,500 of the purchase price and will be phased out for taxpayer's with adjusted gross incomes exceeding $125,000 ($250,000 for joint returns).

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It is not enough to have power. Power must be used to protect freedom and give all people hope for the opportunity to see the fruit of their own labor.

Jesse Helms

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Non competition Payment Could Not Be Recharacterized as Goodwill

A payment made under a non competition agreement was compensation taxable as ordinary income, not proceeds from the sale of the recipient's personal goodwill taxable as long-term capital gain.

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The common sense is that which judges the things given to it by other senses.

Leonardo Da Vinci

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Outlook 2009

China will become the world's largest economy within the next three decades.

Tourism's future is bright.

Book publishers may need to hire movie directors.

Retirees in the United States will increasingly return back to work.

Wealth trends favor the already-favored.

Consumers will gain CEO-like powers in the business world.

Socioeconomic disparities will become more pronounced in aging societies.

Social safety nets will get cut.

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Making the most of other people's strengths and the least of their weaknesses is a surefire formula for managerial success.

Author Unknown

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Incentivizing Thrift

"Economists who study the impact and implications of various forms of taxation have generally found strong support for the idea that ... consumption taxes increase social welfare". Integrating financial literacy into the public high-school curriculum may increase savings more than the current tax incentives for retirement contributions. Studies provide evidence that financial education does persuade people to save more.

The Futurist, November-December 2008

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What They Study, What They'll Earn

Visual & Performing Arts $35,073

English                              $35,453

Liberal Arts                       $36,715

Business Administration   $46,171

Economics                         $51,062

Computer Science             $58,677

Chemical Engineering       $63,773

Money, December 2008

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"Gradually we will regain confidence in the market. This is a financial panic, not an economic one."

David Wyss, chief economist at Standard & Poor's

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Where to Find Safe High Yields

Tax-Exempt Money-Market Funds

USAA Tax-Exempt Money Market Fund 4.42% min. $3,000 800-531-8181

Tamarack Tax-Free Money Market Fund 4.35% min. 1,000 800-934-6674

Taxable Short-Term Bond Funds

Metro West Low Duration Bond M 6.91% min. $5,000 800-241-4671

USAA Short-Term Bond Fund 5.55% Min. $3,000 800-531-8181

Tax-Exempt Short-Term Bond Funds

Alpine Ultra Short Tax Optimized Income Fund 4.99% min. $2,500 800-222-8222

USAA Tax Exempt Short-Term Fund 4.61% min. $3,000 800-531-8181

Money, December 2008

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The measure of success is not whether you have a tough problem to deal with, but whether it is the same problem you had last year.

John Foster Dulles (1888-1959)

Statesman

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Take Your Pick of Retirement Plans

SEP-IRA: Best for Sole proprietors looking to save in profitable years.

Simple IRA: Best for small employers looking to keep staffers happy.

Solo 401(k): Best for People who work for themselves and want to save more.

Traditional 401(k): Best for businesses of more than 10 employees

Defined Benefit Plan: Best for sole proprietors over 45 with stable high income

Money, October 2008

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Is It Ever Okay to Take Out a 401(k) Loan?

Don't take the loan unless you absolutely must. You're borrowing against your financial future.

Money, October 2008

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You don't need to be sick to get better.

                           

Author Unknown

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The New Economy

Printers are now able to print many 3-D items by stacking layers of raw material processed through the printer. As with all technologies, the price of these printers will come down as more people adopt the technology. Soon People will be able to make many of the products that they now buy. Customization will be easier than ever.

The Futurist, January-February 2009

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Don't dwell on your mistakes. Get it right the next time.

Kirk Speraw

College basketball coach

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When Mentors and Mentees Switch Roles

There is a strong case for ... providing veteran workers with new skills (from new and younger hires) and orienting new workers with the institutional history (from the more experienced workers). The benefits include increased productivity, innovation, and organizational stability. While your long-term workforce teaches your new hires about the "job" have the new hires teach the old timers technology skills.

Summarized from The Futurist, January-February 2009

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Practical Ways for Small Business Owners to Cut and Contain Their Costs...

Look over all your expenses with a fresh eye.

Consider buying supplies or merchandise in greater quantities.

Consider joining forces with another business to buy in quantity.

Ask all new customers where they heard about you, so you can minimize your advertising costs to only those that are effective.

Use jumbo postcards or 6 x 9 envelopes for direct marketing efforts.

Carefully plan trips and errands to minimize travel costs.

Consider charging fuel surcharges or past due interest charges.

Use an interest bearing business savings account to deposit checks from customers.

Tighten up your credit and collection policies.

Don't pay unnecessary interest or finance charges.

Use your accounting records to indicate the best time to incur certain expenses.

Evaluate what expenditures are better spent on outside services or contractors.

Never compromise on quality.

Revised from Alyssa Lebovic - Money Tips

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No man can climb out beyond the limitations of his own character.

John Morley (1838-1923)

Statesman

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Chuck's (Norris) Code of Ethics

  • I will develop myself to the maximum of my potential in all ways.
  • I will forget the mistakes of the past and press on to greater achievements.
  • I will always be in a positive frame of mind and convey this feeling to every person that I meet.
  • I will continually work at developing love, happiness, and loyalty in my family and acknowledge that no other success can compensate for failure in the home.
  • I will work for the good of all people and make them feel worthwhile.
  • If I have nothing good to say about a person, I will say nothing.
  • I will give so much time to the improvement of myself that I will have no time to criticize others.
  • I will always be as enthusiastic about the success of others as I am about my own.
  • I will maintain an attitude of open-mindedness toward another person's viewpoint while still holding fast to what I know to be true and honest.
  • I will maintain respect for those in authority and demonstrate this respect at all times.
  • I will always remain loyal to God, my country, my family, and my friends.
  • I will remain highly goal-oriented throughout my life because that positive attitude helps my family, my country, and myself.

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It is all too easy to speed through life with our eyes focused only on the road ahead. The challenge is scanning the horizon from time to time to determine where we are headed.

Christopher Gergen and Gregg Vanourek

Life Entrepreneurs

Jossey-Bass

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Five Ways to Save Money

1. Send Your Employees Home

2. Share Your Staff

3. Get Customers to Put Away their Credit Cards

4. Cut Back on Travel

5. Try Do-It-Yourself Marketing

Money Magazine, October 2008

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We should be taught not to wait for inspiration to start a thing. Action always generates inspiration. Inspiration seldom generates action.

Frank Tibolt (1897-1989)

Personal success trainer and author

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Inspirational Business Books:

How to Win Friends and Influence People, Dale Carnegie

The Time Trap, Alec Mackenzie

Man's Search for Meaning, Viktor Frankl

The Meditations of Marcus Aurelius

The Golden Sayings of Epictetus

A Whack on the Side of the Head: How You Can Be More Creative, Roger von Oech

The Alchemist, Paulo Coelho

The Bible

Undaunted Courage, Stephen E. Ambrose

The Strangest Secret, Earl Nightingale

Toward a Psychology of Being, Abraham Maslow

The Science of Getting Rich, Wallace D. Wattles

Phule's Company, Robert Asprin

The Measure of Our Success, Marian Wright Edleman

-Money Magazine, October 2008

Email us the title and author of your favorite inspirational book.

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There are three rules for success. The first: Go on. The second: Go on. The third: Go on.

Frank Crane

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New Lower Mileage Rates for 2009

Beginning on January 1, 2009, the standard mileage rates for the use of a car, van, pickup or panel truck will be 55 cents per mile for business miles driven, 24 cents per mile driven for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations.

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Your dream is not big enough if it doesn't scare you.

Matthias Schmelz

Entrepreneur and author

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Secrets of a $10 Million Man

Rules for entrepreneurs to live by:

1. Numbers run a business. If you don't know how to read them, you are flying blind.

2. A sale isn't a sale until you collect.

3. When your short-term liabilities exceed your short-term assets, you are bankrupt.

4. Forget about shortcuts. Run a business as if it's forever.

5. Cash is hard to get and easy to spend. Make it before you spend it.

6. You have no friends in business, only associates.

7. Don't focus on the top line. Gross margin is the most important number on

    the Income statement.

Norm Brodsky

Inc. Magazine

October 2008

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Recognize a failure early and go on to the next idea.

Bill Heinecke

Entrepreneur

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How Much Should You Pay Your Employees?

To determine an appropriate salary, call local employment associations or industry groups or go to Glassdoor.com and PayScale.com

Money Magazine

September 2008

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Jumping at the first opportunity seldom leads to a happy landing.

Author Unknown

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Pay Tuition, Save Taxes

If more than half of your kid's school and living costs are paid from assets held in his name-and you're too rich for an education credit-you might bypass an exemption for him on your taxes. The exemption, $3,500 in 2008, begins to phase out once a couple earns $239,950 anyway. Junior can then claim a credit to offset his tax bill if its hefty. (He'll owe you one.)

Money Magazine

September 2008

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When in conflict, climb to the high road of understanding and compassion. Your view is better at the top.

Jerry Stoffer

Maitland Florida

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Check out the Safety of Your Bank

Bankrate.com will clue you in to how healthy your bank is.

Visit fdic.gov for an interactive worksheet to determine if any of your deposits are uninsured.

Money Magazine

September 2008

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IRS Auditor's Greyhound Breeding Wasn't an Activity for Profit

An IRS auditor who bred greyhounds was denied a loss deduction because he did not engage in the greyhound breeding activity for profit. Whitecavage v. Commissioner, T.C. Memo. 2008-203 (8/27/08).

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IRS Guidance on Requirements For Cash and Non-Cash Contributions

CASH. The proposed regulations implement the requirement that no deduction is allowed for any contribution by cash, check, or other monetary gift unless the donor maintains a bank record or written communication from the donee. The bank record or written communication must show the name of the donee, the date of the contribution, and the amount of the contribution. There is no de minimis exception.

 NONCASH. For contributions of less than $250 donors are required to obtain a receipt from the donee or keep reliable records. For contributions of $250 to $500 the donor needs a contemporaneous written acknowledgement. For total contributions of more than $500 but less than $5,000 the donor must also file Form 8283 with the return claiming the deduction. For contributions of more than $5,000 the donor must also have a qualified appraisal. The proposed regulations disallow any contributions of clothing or household items unless they are in good used or better condition.

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Health Insurance Doesn't Have to Be in the Name of the Business

Previously, there was some confusion as to whether a health insurance policy purchased by a sole proprietor was required to be issued in the name of the sole proprietor's business. The Chief Counsel's Office clarified that the policy may be in the individual's name.

Kleinrock's Federal Tax Bulletin, Volume 8, Issue 14

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The best way to escape from a problem is to solve it.

Author Unknown

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Good leaders not only need strong backbones, they need strong funny bones.

Bob Dole

Politician

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Former QB Bernie Kosar Pays $228,806 Tax Lien

Cleveland (Aug. 11, 2008)
By WebCPA staff

The Internal Revenue Service placed a $228,806 tax lien on former Cleveland Browns quarterback Bernie Kosar, which he said he has now paid.

The IRS filed the lien in June for Kosar's 2006 taxes. Kosar told the Cleveland Plain-Dealer that he paid the back taxes a few weeks ago, and the reason why he hadn't paid them was that he was going through a messy divorce at the time.

"Divorce is difficult enough as it is, especially for someone who wasn't really looking to do that," he told the paper. "So who owes what and all of that becomes hard, but whatever I owe, obviously I would pay."

Kosar retired as a player in 1996 and is now one of the owners of both the Florida Panthers hockey team and the Cleveland Gladiators arena football team.

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Many of us are afraid to follow our passions, to pursue what we want most because it means taking risks and even facing failure. But to pursue your passion with all your heart and soul is success in itself. The greatest failure is to have never really tried.

 

Robyn Allan

Dance show producer and performer

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IRS Warns of New E-mail Scams

The Internal Revenue Service issued an alert about a new wave of e-mail scams that use the IRS name to commit to identity theft.

In May and June, taxpayers reported nearly 700 phishing incidents to the lure the recipients into divulging their personal financial information. So far this year, taxpayers have reported about 1,600 phishing incidents to the IRS. The most common scams involve economic stimulus payments and tax refunds.

In one scam, the e-mail claims the recipient is eligible for a tax refund and instructs the victim to click on a link to access a refund claim form. The claim form requests personal information the scammer can then use to access the victim's bank account or credit card.

Another scam e-mail purports to be a message from the IRS asking fro the victim's bank account information so an economic stimulus payment can be directly deposited there. Yet another scam e-mail offers a link to an IRS report on the company where the recipient works. When the recipient clicks on the link, the Web site may put software on the victim's computer that might allow a hacker to take over and probe for personal information. In a similar scam, an e-mail contains a link to a supposed petition from the Tax Court about a case involving the IRS and the recipient.

Scammers are also using faxes to coax information from taxpayers. One fax claiming to be from the IRS asks the recipient to update their information for the IRS files and promises a special tax refund. The fax asks for not only financial information, but also a copy of the recipient's passport and driver's license, and his or her mother's maiden name.

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If you want to succeed in the world you must make your own opportunities as you go on. The man who waits for some seventh wave to toss him on dry land will find that the seventh wave is a long time a-coming.

John B. Gough (1817-1886)

Temperance advocate and speaker

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Inadequate Evidence Greatly Reduced Theft Loss Deduction

A married couple's claimed theft loss deduction was drastically reduced when they failed to substantiate either their basis in the stolen items or the items' fair market value immediately before the theft.

Adel v. Commissioner, T.C. Summary 2008-65 (6/10/08)

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Taxpayer's Social Security Benefits Aren't Exempt from Levy

An Individual's claim seeking removal and cancellation of various notices of federal tax lien was dismissed and the IRS could garnish the individual's social security benefits.

Acevedo v. United States, No. 4:08CV248 CDP (E.D. Mo. 5/16/08)

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IRS to Issue Guidance on Special 50-percent Depreciation Allowance

The IRS plans to issue guidance for businesses on how the special 50-percent deprecation allowance that was included in the Economic Stimulus Act of 2008 can be used to make capital investments in 2008. IR-2008-58

This special bonus depreciation allowance is available to all businesses and applies to most types of tangible personal property and computer software acquired and placed in service in 2008.

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A successful man is one who can lay a firm foundation with the bricks that others throw at him.

David Brinkley(1920-2003)

Broadcast journalist

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Decedent’s Transfers to LLC Are Not Includible in Estate

Code Section 2036 is one of the weapons in the IRS’s arsenal used to protect the integrity of the estate tax regime. It is designed to drag back into an estate assets that have been superficially transferred by a taxpayer but which the taxpayer still continues to enjoy during his or her lifetime. That’s what the IRS said occurred when Anna Mirowski transferred substantial assets to a limited liability company and then made gifts of interests in the company to trusts that she had established for her daughters. According to the IRS, the transferred assets really belonged in Anna’s estate, with the result being an additional estate tax of $14.2 million. But in Estate of Mirowski v. Commissioner, the Tax Court denied the IRS’s claim, saying that Anna’s transfers were valid and that she, and thus her estate, did not retain any ownership of the transferred assets.

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Avoid fight or flight, talk through differences.

Stephen R. Covey

Leadership consultant and author

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IRS Issues Its Annual Dirty Dozen Tax Scams

The IRS released its annual list of the twelve most egregious tax schemes and scams affecting American taxpayers.

According to the IRS, the twelve most egregious tax schemes and scams affecting American taxpayers include:

  • Phishing: This is a tactic used by Internet-based thieves to trick unsuspecting victims into revealing personal information; the thieves then use this information to access the victims’ financial accounts.
  • Economic Stimulus Payment Scams: Criminals posing as IRS representatives try to trick taxpayers into revealing their personal financial information by telling them they must provide information to get an economic stimulus payment.
  • Frivolous Arguments: Promoters of frivolous schemes encourage people to make unreasonable and unfounded claims to avoid paying taxes.
  • Fuel Tax Credit Scams: Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit; however, others are claiming the tax credit for non-taxable uses of fuel.
  • Hiding Income Offshore: Individuals continue to try to avoid paying U.S. taxes by hiding income in offshore bank and brokerage accounts or using offshore debit cards, credit cards, wire transfers, foreign trusts, employee leasing schemes, private annuities or life insurance plans.
  • Abusive Retirement Plans: The latest such scam involves using Roth IRAs to avoid the limitations on contributions. Taxpayers should be aware of advisers who encourage them to shift appreciated assets into Roth IRAs at less than fair market value.
  • Zero Wages: Filing a phony wage-or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Typically, a Form 4852 (Substitute Form W-2) or a corrected Form 1099 is used as a way to improperly reduce taxable income to zero.
  • False Claims for Refund and Requests for Abatement: This scam involves a request for abatement of previously assessed tax using Form 843, Claim for Refund and Request for Abatement.
  • Return Preparer Fraud: Dishonest return preparers make their money by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services.
  • Disguised Corporate Ownership: Some individuals are forming domestic shell corporations in certain states for the purpose of disguising the ownership of a business or financial activity.
  • Misuse of Trusts: For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. They promise reduction of income subject to tax, deductions for personal expenses, and reduced estate and gift taxes.
  • Abuse of Charitable Organizations and Deductions: This includes arrangements to improperly shield income or assets from taxation, attempts by donors to maintain control over donated assets or income from donated property and overvaluation of contributed property. In addition, the IRS is seeing more instances where taxpayers try to disguise private tuition payments as contributions to charitable or religious organizations.

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Payment Received by Company President Was a Bonus; Not a Gift

An individual who received $160,000 from her employer one month after she became president of the company was required to include the amount in taxable income as a bonus.

Larsen v. Commissioner.

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Taxpayer Recognizes Income On Discharge of Credit Card Debt

A taxpayer received cancellation of indebtedness income when he settled with a bank for less than the amount owed on his credit card.

Payne v. Commissioner.

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The best years of your life are the ones in which you decide your problems are your own. You do not blame them on your mother, the ecology, or the president. You realize that you control your own destiny.

Albert Ellis (1913-2007)

Psychologist

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IRS Revises Capitalizing Costs Relating to Tangible Property

The new safe harbor provides that an amount deducted for the tax year will be deemed not to distort income if that amount, added to the amounts deducted in the tax year as materials and supplies for units of property costing $100 or less, is less than or equal to the lesser of: (1) .1 percent of the taxpayer’s gross receipts for the tax year; or (2) 2 percent of the taxpayer’s total depreciation and amortization for the tax year.

Materials and Supplies

The proposed rules define materials and supplies as tangible property that: (1) is not a unit of property; (2) is a unit of property with an economic useful life of twelve months or less; or (3) is a unit of property that costs $100 or less.

Capital Expenditures in General

The proposed regulations identify a number of specific examples of capital expenditures. These include amounts paid:

  • to acquire or produce real or personal tangible property;
  • to improve real or personal tangible property;
  • to acquire or create intangibles;
  • to facilitate an acquisition of a trade or business or a change in capital structure of a business entity;
  • to acquire or create interests in land, such as easements, life estates, mineral interests, timber rights, zoning variances, or other interests in land; and
  • under an agreement between bondholders or shareholders of a corporation to be used in a reorganization of the corporation.

Transaction Costs

The proposed regulations provide that the following transaction costs be capitalized:

  • shipping fees and moving costs,
  • appraisal fees,
  • professional tax advice on an acquisition,
  • application fees, bidding costs, or similar expenses,
  • preparing the bid, offer, sales contract, or purchase agreement regarding acquisitions,
  • conveying property between the parties, including sales and transfer taxes, and title registration costs,
  • finders’ fees or brokers’ commissions, including amounts paid that are contingent on the successful closing of the acquisition,
  • fees for architectural, geological, engineering, environmental, or inspection services pertaining to particular properties, and
  • fees for services provided by a qualified intermediary.

Routine Maintenance Safe Harbor

Routine maintenance activities that can be currently expensed include recurring activities that a taxpayer expects to perform more than once over the class life of the property as a result of the taxpayer’s use of property to keep the property in its ordinary efficient operating condition.

Betterments

The general rule focuses on betterments to the condition of the property, the costs of which should be capitalized as an improvement if the betterment is material, regardless of whether the betterment increases the fair market value.

An amount paid results in a betterment if it: (1) ameliorates a material condition or material defect that previously existed; (2) results in a material addition to the property (including a physical enlargement, expansion, or extension); or (3) results in a material increase in the capacity, productivity, efficiency, strength, or quality of the property or its output.

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An optimist is one who sees an opportunity in every difficulty.
A pessimist is one who sees a difficulty in every opportunity.

L.P. Jacks (1860-1955)

Educator and cleric

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In Atlanta the average salary for a

CEO is $224,000
CFO is $135,000
COO is $163,000
CTO is $147,000
CIO is $162,000

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True heroism is remarkably sober, very undramatic. It is not the urge to surpass all others at whatever cost, but the urge to serve others at whatever cost.

Arthur Ashe (1943-1993)

Tennis Champion

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Tax Court Determines Loss on Sale of Residence with Attached Workshop

A couple was entitled to deduct part of a loss on the sale of their residence because it included a workshop they had added for use in their woodworking business.

Mallin v Commissioner.

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Direct Marketing Activity Was Not Engaged in for Profit

RESULT: An individual did not engage in his direct marketing activity for profit and could only deduct expenses to the extent of his income from the activity. Eder v. Commissioner

STORY: Robert Eder was employed on a full time basis as an engineer at Abbott Laboratories, receiving an annual salary of $85,000. While employed at Abbott, Robert became an independent distributor for Reliv International, a network marketing company that sells health care products.

Until preparing for trial, Robert had never prepared a business plan for his Reliv activity, nor had he calculated a break-even point showing how much future profit he would need to recoup of his past losses. He maintained no organized record-keeping system. On his Schedules C for the tax years 1997 through 2005, Robert reported net losses from his Reliv activity ranging from $2,700 to $12,000. The IRS issued a notice of deficiency with respect to Robert’s 2002 tax year, determining that he was not engaged in the Reliv activity for profit that he was entitled to claim deductions for operating expenses only to the extent of his gross income from the activity.

The Tax Court held that Robert did not engage in the sale of Reliv products with a good faith expectation of profit and could only deduct his expenses to the extent of gross income from the activity. The court concluded that the manner in which Robert carried on his Reliv activity strongly suggested that he was not primarily concerned with realizing a profit.

The court noted that Robert only spent several hours each week on is Reliv activity while earning substantial income from his full-time employment. Further, he was a long-time user of Reliv products and the court felt that the ability to buy the products at a discount was a significant motivating factor for Robert’s business. From this record, the court concluded that Robert did not engage in his Reliv activity for profit.

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Our business in life is not to get ahead of others but to get ahead of ourselves--to break our own records, to outstrip our yesterdays by our own today.

Stewart B. Johnson

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Failure to File Deed Subjected Property to Prior Owner’s Tax Lien

WARNING: A corporation’s purchase of realty was subject to a federal tax lien because, although the corporation bought the property before the IRS perfected its tax lien, it did not record the deed until after the IRS perfected its lien.

Moco Investments, LLC v. IRS

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Knowledge will not always take the place of simple observation.

Arnold Lobel

Fables

HarperCollins

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Have There Been Changes in Your Business? Need Help Wading Through the IRS Updates?

DM Snyder, CPA, PC is uniquely qualified and experienced to help you with taxes, business planning, and business development. In addition to income tax and accounting we offer Strategic Business Planning, Income Tax Planning, Profit Maximization, Expense Reduction, and Business Acquisition and Divestiture Services. We conduct workshops focusing on the following small business topics: 1) Accounting Basics, 2) Buying and Selling Small Businesses, 3) Expense Reduction, 4) Financial Management, 5) Profit Maximization, 6) QuickBooks, and 7) Strategic Planning.

 

 

 

 

 

 

 

 

 

 

 

 

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