Author: Hitt & Co. ©AICPA

2011 Q1 | More Flexibility in Retirement Planning

Some provisions of the Small Business Jobs Act of 2010 are not restricted to small companies or to job creation. Instead, they provide more choices for retirees and preretirees. An annuity alternative The new law gives individuals the option of annuitizing a portion of an annuity, an endowment, or a life insurance policy. That is, you can partially convert one of these financial instruments to a stream of income while the remainder is left alone. The annuity period must last for 10 years or more, or for the lives of one or more individuals. Example 1: Carol Thomas, age 70, has invested $100,000 in a deferred annuity. This is a type of investment contract that permits investment income to grow

2011 Q1 | Choices for Holding Investment Property

Now that prices are off sharply from their peak levels of a few years ago, you may want to invest in real estate. If so, you are looking for a promising property at the right price. Assuming you find such an opportunity, you’ll have to make still another crucial decision: how to hold your property. Outright ownership The simplest option is to hold the property in your own name. You’ll have absolute control and flexibility. You can make the decisions on capital improvements, tenant selection, and so on; you can sell the property or refinance it. You’ll face some disadvantages with this form of ownership, however. Depending on the amount of capital you’re willing to invest, you might be limited

2011 Q1 | You and Your Company Can Avoid the Disguised Dividend Tax Trap

If you are the owner or part owner of a C corporation, you might think that your compensation plan is relatively straightforward. You pay yourself a salary to cover your living expenses during the year. At year end, if your company has made money, you pay yourself a bonus. Your company deducts the salary and bonus so it winds up with little or no net income and pays little or no corporate income tax. In such a scenario, you might be in for a shock. The IRS could say that your compensation is unreasonable. Part of your compensation may be recast as a dividend, subject to both corporate and personal income taxes. Example: Grace Moran owns 100% of ABC, a

2010 Q4 | Planning During Uncertain Times

Some of the tax laws that were passed in the early years of this century will expire after 2010. Next year, prior law could take effect. Alternatively, Congress may pass new tax laws effective in 2011-or even some laws that are retroactive to the beginning of2010. Therefore, tax planning for year-end 2010 is unusually challenging. The articles in this issue of the CPA Client Tax Letter are based on current law, as of this writing. However, Congress may act by year-end, changing current law substantially. Therefore, our office will keep you posted to let you know what changes, if any, have been signed into law and how they might affect your personal tax planning. Income tax In 2010, six federal

2010 Q4 | Year-End Tax Planning for Investors

For the past two years, investors have experienced extraordinarily tumultuous times. From late 2008 through early 2009, stock markets in the United States and around the world have fallen sharply. The S&P 500 Index, a leading benchmark for the U.S. stock market, lost about half of its value, for example. As the winter of 2009 came to a close, stocks rebounded. For the remainder of last year and into early 2010, stocks enjoyed one of the strongest recoveries since the 1930s. Investors who held on recouped some of their losses, and those who rimed the market successfully had sharp gains. During the second quarter of 10, however, stocks dived again. Debt woes in Europe and sluggish employment growth in the