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Nov 21, 2013

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Giving to Charity? Watch Out for These Tax Traps by Corli...

To give is divine. To err while giving is human. For many donors eager to nail down tax deductions, contributing to charity can be as simple as writing a check. But tax laws often can be surprisingly tricky. While there are many tax-smart ways to donate, it can also be easy to make costly mistakes. The mistakes run the gamut. Many thorny problems, for instance, stem from uncertainty over how to value gifts. Other donors stumble because they don't pay attention to the fine print on such long-cherished techniques as giving stock to charity. And still others trip over paperwork issues, such as getting proper acknowledgment for gifts on a timely basis. Many generous donors "have learned their lessons the hard and expensive way," says Victoria Bjorklund, a charitable-giving consultant and a retired partner at the law firm Simpson Thacher & Bartlett LLP. How can donors avoid these traps? It may help to keep in mind the following (seemingly) simple ideas—as well as a few common errors to avoid: Give Away Your Winners This is an especially good year to consider giving securities that are worth far more than you paid for them. Stock prices this year have surged, and 2013 brought higher taxes for many investors. This "could be a great strategy," says Justin T. Miller, national wealth strategist at BNY Mellon Wealth Management's office in San Francisco. In a typical case, you give a qualified charity shares of publicly traded stock that have risen sharply in value and that you have owned for more than one year. You deduct the fair market value of the stock—and you don't owe a capital-gains tax. If you donate appreciated stock you've held for a year or less (considered "short term" gains), you generally can deduct only your cost "basis"— that is, your cost for tax purposes—not market value. Don't make the mistake of donating securities that are worth less than your tax cost. Instead, sell those losers, donate the proceeds to your favorite charity and use your capital losses to trim your taxes. Capital losses can offset capital gains on a dollar-for-dollar basis. If losses exceed gains, deduct net capital losses of as much as $3,000 a year—$1,500 if married and filing separately from your spouse—from wages and other ordinary income. Carry over additional losses into future years. Get It In Writing One common error is making a gift of $250 or more and neglecting to get an acknowledgment from the charity saying whether or not you received something in return, such as free tickets. Even if you didn't get anything, make sure the charity says so—and gives you a description of any property you gave. If you did get something in return, the acknowledgment typically must include a good-faith estimate of the value. Rules can vary depending on several factors, such as the size and type of your gift. See IRS Publication 526. Don't wait to get the receipt until you're audited years later. You need "contemporane ous" receipts, Ms. Bjorklund says. Be sure to get a proper receipt by the date you file your return for the year you make the contribution—or the due date, including extensions, for filing the return—whichever is earlier. "The IRS pays a lot of attention to substantiation requirements, " says Eileen Donahue, director of planned giving and senior philanthropic adviser at Yale University. If you get something in return for a gift, you typically can deduct only the amount of your gift that exceeds the value of that benefit. Nail Down Value Problems can crop up with valuing donations of a wide variety of noncash items such as shares in a family business, real estate, conservation easements, paintings, antiques and many other items. "It is very easy to make major mistakes," says Carolyn M. Osteen, a consultant to the Ropes & Gray LLP law firm and co-author with Martin Hall, a Ropes & Gray partner, of a book on tax aspects of charitable giving.  (Dec 20, 2013 | post #1)

Formal Business Maintenance and Update Program by Corliss...

Should the business be passed on to a family member or key employee? How do I minimize the tax consequences and protect the proceeds of any sale? In business, as in life, nothing ever stays the same. Change represents renewal and growth, but also stress and danger. Operating conditions, personnel concerns, organizational considerations and management methodologies all shift with distressing frequency. Industry and market conditions, customers, competition and state-of-the-art continuously evolve! Legal and compliance issues, which represent a critical danger, need frequent monitoring and reporting. As with all of our planning, we offer you and your business a scheduled process to ensure the necessary updating and maintenance. Together, we will schedule a customized process for the immediate and long-term future. Corliss, A Law Corporation, offers a simple solution to these business concerns. The Family Business Maintenance and Update Program helps entrepreneurs and family business owners stay on top of change — instead of being steamrolled by it. We offer periodic, usually annual, updates to the family business consisting of: The Family Business Maintenance Program includes: Hosting periodic board meetings Hosting periodic ownership meetings Documenting minutes and reports of meetings held Documenting "Restatement of Information" reports as needed Business compliance reviews Employment agreements for key managers and employees Non-compete agreements for owners or key managers leaving the business Non-disclosure agreements between the business and its key vendors, suppliers, advisors and contractors Asset Protection Change is inevitable. It poses both dangers and opportunities. Make sure you avoid the former and take full advantage of the latter.  (Dec 12, 2013 | post #1)