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Tax Strategy for the Week (December 13th, 2013)

Fun Asia Show Recording-December 12, 2013
Turning Charitable Contributions into Advertising Expenses
Tax Issue

Charitable contributions made by businesses do not receive the same tax treatment as advertising expenses. Contributions are subject to various limitations and restrictions at both the entity and personal tax level. Carryovers are generally limited to five years and unused deductions are forfeited. Partners, S corporation shareholders, and sole proprietors deduct charitable donations on Schedule A.  Any tax benefit depends on the taxpayer’s marginal tax bracket, potentially resulting in unequal tax treatment among shareholders or partners. The charitable contribution loses its vale as a tax deduction for individuals […]

Tax Strategy for the Week (December 6th, 2013)

Fun Asia Show Recording-December 5, 2013
Standard Mileage Rate – How It Can Avoid Auto Expense Limits
 

Tax Issue

For owners of passenger automobiles, section 280F imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. However, the limitations of section 280F do not apply to depreciation expense calculated using the standard mileage rate method.

 

Applicable Tax Law

Passenger autos. For purposes of the section 280F limitations, a passenger auto is any four-wheeled vehicle that is made primarily for use on public streets, roads, and highways. Its unloaded gross vehicle weight […]

Tax Strategy for the Week (Novemeber 15th, 2013)

Fun Asia Show Recording-November 14, 2013
Business Expenses Paid With Personal Funds – How to Avoid Tax Problems
 

Tax Issue

In an ideal situation, a business entity pays for all of its business expenses from its own funds, and business expenses are kept separate from personal expenses. However, sometimes employees, corporate shareholders, LLC members, partners, and sole proprietors pay for business expenses with personal funds as a matter of necessity or of convenience. Business expenses paid with personal funds might include vehicle expenses, overnight travel, business meals, and any expense that is an ordinary and necessary expense of a business entity, and, […]

Tax Strategy for the Week (November 8th, 2013)

Fun Asia Program Recording from Rauf Bajaria
Deducting an Improvement as a Repair
Tax Issue

Is it a repair or is it an improvement? Costs paid or incurred to repair property are currently deductible while costs to improve property are depreciated over the life of the property. With increased Section 179 deduction limits and bonus depreciation, businesses may not pay as much attention to what constitutes a repair versus an improvement. However, the increased depreciation expensing provisions were intended to be temporary.  As the provisions expire, determining what constitutes a repair, in order to maximize current business deductions, takes on added significance.

Applicable […]

Tax Strategy for the Week (October 18th, 2013)

Does it Make Sense to Refinance a Mortgage?
 
Tax Issue

The chance to refinance a mortgage and get a lower interest rate is sure to get a homeowners’s attention. Most people assume that refinancing will put them ahead economically, but that’s not always the case. Any number of situations can arise which will make the decision to refinance unwise. Refinancing a mortgage should be done with just as much care as was put into the decision to obtain the original mortgage. Sometimes a mortgage refinance makes sense. Other times, it is better to stay with the current arrangement.

Applicable Tax Law

Home mortgage […]

Tax Strategy for the Week (October 11th, 2013)

Employee Business Expenses – Avoiding Tax Problems
 
Tax Issue

Employees may be able to deduct their unreimbursed work-related expenses as itemized deductions subject to the 2% AGI limitation. Deductible expenses are those that are ordinary and necessary expenses and which are not reimbursed. Various substantiation rules apply depending on the type of deduction that is claimed. Without properly planning ahead of time so that the taxpayer retains the necessary documentation required, the IRS could disallow deductions for unreimbursed employee business expenses.

Applicable Tax Law

Ordinary and necessary expenses which are not reimbursed by an employer are deductible.

1.) Ordinary expense: An expense that is […]

Tax Strategy for the Week (October 4th,2013)

Married Filing Separately Tax Planning

 

Tax Issue

In general, married taxpayers living in the same household usually file joint returns. Tax preparers tend to assume the Married Filing Jointly filing status is best for married taxpayers living together and that the few returns that may save a little bit of tax by Married Filing Separately (MFS) are not worth the extra tax preparation fees that would apply for filing two separate returns.

Applicable Tax Law

Any taxpayer that was married at the end of the tax year can file MFS. A spouse does not need permission from the other spouse to choose to […]

Tax Strategy for the Week (September 20th,2013)

Split Funding an Annuity
 
Tax Issue

Taxpayers often use interest income to supplement earned income or retirement income. Interest income generated by bank savings accounts or certificated of deposit (CD) is subject to ordinary income tax at the taxpayer’s marginal rate.

When interest rates are low, taxpayers look for ways to generate the same amount of income as when interest was higher.

Applicable Tax Law

Earnings on nonqualified annuities are taxed at ordinary income tax rates when withdrawn.
Earnings on nonqualified annuities are tax deferred until withdrawn.
Interest earned from bank savings account and CDs are taxed at the taxpayer’s marginal rate in the year earned.
Taxpayers […]

Tax Strategy for the Week (September 13th,2013)

Nonqualified Annuities – Tax Benefits
 
Tax Issue

Nonqualified annuities offer tax-deffered earnings. However, upon distribution, nonqualified annuity earnings are taxed as ordinary income. Nonqualified annuity withdrawals are treated an income-first, meaning that the earnings are withdrawn before removing the principal. In addition, if the taxpayer is younger than 59 ½, withdrawals of earnings are generally subject to an additional 10% tax.

 

Other investment income, such as stock or mutual fund dividends, is often taxed as qualified dividends at a lower rate than ordinary income. In addition, equity investments help for greater than one year are generally taxed at a lower capital gains […]

Tax Strategy for the Week (August 2nd, 2013)

Equipment Leasing Programs
 
Tax Issue

Taxpayers often have the desire to have investments earn high current income while paying little or no income tax on that income. This is especially true for taxpayers with higher income. These investors are also looking to diversify assets to reduce risk.

 

Applicable Tax Law

Equipment leasing programs are usually set up as limited partnerships. Investors have limited liability and the general partner manages the investment.
As a limited partnership, income and losses flow through to the individual investor. Because the investor does not materially participate in the partnership, the deductions of losses of the partnership are limited to […]