Posts Tagged ‘Tax’

Thoughts on Haiti

Posted in Charity on January 21st, 2010 by admin – Comments Off

We are all moved by the heart wrenching devastation in Haiti – a country that has for too long ranked among the poorest in the world. Haiti now struggles with the aftermath of this remarkable tragedy – 140,000 deaths, and over 300,000 homeless. What little infrastructure there was in Port-au-Prince has all but been destroyed.
 
60 Minutes aired a very moving story:

Watch CBS News Videos Online

 For those who are moved to help, here are a few suggestions:

 Partners in Health (http://www.standwithhaiti.org/haiti) is a medical organization that has been working in Haiti for 20 years. They probably have the most capacity to bring immediate medical relief on the ground.

 Longer term solutions may be found in the collaboration of former Presidents Bush and Clinton. Their Clinton Bush Haiti Fund will work to provide immediate relief and long-term support to earthquake survivors. Information can be found here: http://clintonbushhaitifund.org/

 A Memphis organization with a deep commitment to Haiti is Haiti Medical Missions of Memphis (http://www.cbu.edu/~aross/biology/Haiti/#fundraising). While they may not be the best choice for immediate relief, they offer a great ongoing way to support the country as it rebuilds.

 The American Red Cross is raising funds using text messages. By simply texting “HAITI” to 90999, donors can make a $10 donation to support the American Red Cross Haitian relief efforts. Over $20m has been raised to date.

 Without trivializing this tragedy, I will point out that a bill is likely to be passed that will allow any cash charitable contributions for Haitian relief made before March 1, 2010 to be deducted on 2009 tax returns.

Legislative Update

Posted in Estate on December 28th, 2009 by admin – Comments Off

Congressional Follies and Estate Tax Repeal

When the clock strikes midnight on December 31st, 2009, something remarkable will happen. For the first time since 1916, the estate tax will be completely eliminated, or will it? Thanks to Congress, we enter 2010 with massive uncertainty regarding this very complex and costly issue.

President Bush’s Wishful Thinking

President Bush’s 2001 tax cuts gradually phased out the estate tax, resulting in a complete elimination in 2010. But, the poorly written legislation sunsets in 2011 and reinstates the estate tax at draconian pre-2001 levels. The expectation was that Republicans would make the repeal permanent, but that opportunity never came before they lost their majority in the House and Senate.

Current State of Affairs

We entered 2009 with Democrats in control of Congress and while they were not in favor of complete repeal, there was a universal consensus that something had to be done to address the estate tax timeline. There was also a growing consensus that a compromise could be reached that locked in the generous 2009 tax rates (45%) and exemptions ($7m per couple).

 In fact, by October of 2009, three major bills in Congress proposed such a compromise. Bipartisan support was strong, and the expectation was high that permanent reform would be passed before year end.

 To everyone’s surprise, the issue has been tabled. There will be no vote this year – just a promise by Senate Finance Committee Chairman Max Baucus to implement permanent reform retroactively some time in 2010. This pledge to re-implement the estate tax retroactively presents legislative and legal challenges and prolongs the uncertainly that families have had to plan around for years. The fact that Congress could not find a permanent solution with eight years notice is shameful.

Legislative Update

Posted in Planning on November 19th, 2009 by admin – Comments Off

The Worker, Homeownership, and Business Assistance Act of 2009

On November 6, 2009, President Obama signed into law the Worker, Homeownership, and Business Assistance Act of 2009 (the “Act”). The Act provides up to an additional 14 weeks in benefits to unemployed individuals. An extra 6 weeks of benefits is available to individuals in states with unemployment levels over 8.5 percent. The legislation also includes the following provisions:

First-time homebuyer credit

The Act extends and modifies the first-time homebuyer tax credit. Specifically, the Act:

  • Extends the first-time homebuyer credit to principal residences purchased before May 1, 2010. The credit is extended to principal residences purchased before July 1, 2010 if a written binding contract is entered into prior to May 1, 2010.
  • Increases the income limits that apply to the credit. For the purchase of a principal residence after November 6, 2009 the credit is reduced if modified adjusted gross income (MAGI) exceeds $125,000 ($225,000 if married filing a joint return) and is completely eliminated if MAGI reaches $145,000 ($245,000 if married filing a joint return).
  • Establishes a new limitation: effective for purchases made after November 6, 2009, the first-time homebuyer credit is not available if the purchase price of a principal residence exceeds $800,000.
  • Expands eligibility (purchases made after November 6, 2009) by allowing some existing homeowners to qualify for the credit when they purchase a new principal residence. Specifically, an individual (and, if married, the individual’s spouse) who has maintained the same principal residence for at least five consecutive years in the eight-year period ending on the date that a subsequent principal residence is purchased, will be considered a first-time homebuyer for purposes of the credit. In such a case, the maximum amount of the credit is $6,500 ($3,250 for a married individual filing separately).

For purposes of the credit, in the case of a purchase of a principal residence after December 31, 2008, a taxpayer may elect to treat the purchase as if it were made on December 31 of the calendar year preceding the purchase for purposes of claiming the credit on the prior year’s tax return. This means qualifying purchases in 2009 can be treated as if they were made on December 31, 2008, and qualifying purchases in 2010 can be treated as if they were made on December 31, 2009.

The Act also imposes additional new limitations on purchases made after November 6, 2009:

  • No credit is allowed unless the taxpayer is 18 years of age as of the date of purchase. A taxpayer who is married is treated as meeting the age requirement if the taxpayer or the taxpayer’s spouse meets the age requirement.
  • The definition of purchase excludes property acquired from a person related to the person acquiring such property or the spouse of the person acquiring the property, if married.
  • No credit is allowed to any taxpayer if the taxpayer is a dependent of another taxpayer.

For tax years ending after November 6, 2009, no credit is allowed unless the taxpayer attaches to the relevant tax return a properly executed copy of the settlement statement used to complete the purchase.

The Act also includes special provisions for members of the uniformed services and others who receive government orders for qualified official extended duty service. These provisions include extended time to claim the credit.

Five-year carryback of net operating losses

The American Recovery and Reinvestment Act of 2009 allowed eligible small businesses to elect to extend the general two-year net operating loss (NOL) carryback period for 2008 net operating losses to three, four, or five years. An eligible small business was defined as a taxpayer meeting a maximum $15,000,000 gross receipts test. The provision applied to an eligible taxpayer’s NOL for any taxable year ending in 2008, or if elected by the taxpayer, the NOL for any taxable year beginning in 2008. However, the election was allowed only with respect to one taxable year.

The Worker, Homeownership, and Business Assistance Act of 2009 provides for an election similar in nature to the NOL carryback provision in the American Recovery and Reinvestment Act:

  • Businesses may elect to extend the general two-year NOL carryback period to three, four, or five years. The election is not limited to businesses that meet a specified gross receipts test.
  • The election can be used for an NOL for a taxable year beginning or ending in either 2008 or 2009. The election can be used for only one year, however.
  • Under the terms of the election, NOLs carried back five years would be able to offset up to 50 percent of the taxable income from the fifth year, but could offset all of the income from the other carryback years.
  • Eligible small businesses that elected to carry back 2008 net operating losses under the provisions of the American Recovery and Reinvestment Act of 2009 can still elect to carry back a 2009 NOL under the provisions of this Act.

The Act specifically excludes certain taxpayers. For example, a business in which the Federal government acquired an equity interest pursuant to the Emergency Economic Stabilization Act of 2008 is not eligible for the election.