Charitable Planning for Retirement Benefits

There are numerous tax advantages of giving qualified retirement plan and individual retirement account (IRA) benefits to a charity. When funds are drawn out of retirement plans and IRAs by non-charitable beneficiaries, federal income tax of up to 39.6% will have to be paid. State income taxes also may be owed. Furthermore, retirement funds possessed at death may be subject to substantial federal estate tax and state death tax. Retirement benefits are to be contrasted with other assets that can be passed to non-charitable beneficiaries free of income tax. For example, an individual inheriting stock worth $300,000 from his parent (that was purchased by the parent for $100,000) won’t have to pay income tax on the $200,000 appreciation. That’s not the case for retirement benefits. They are subject to both income tax and estate tax. A special income tax deduction for the estate tax helps non-charitable beneficiaries but the combined […]


S Corporation as Choice of Entity

The biggest advantage of an S corporation over a partnership is that as S corporation shareholders you would not be personally liable for corporate debts. In order to receive this protection, it is important that the corporation be adequately financed, that various formalities required by our state be observed (e.g., filing articles of incorporation, adopting by-laws, electing a board of directors, and holding organizational meetings), and that the existence of the corporation as a separate entity be maintained. Because you expect that the business will incur losses in its early years, an S corporation is preferable to a C corporation from a tax standpoint. Shareholders in a C corporation generally get no tax benefit from such losses. In contrast, as S corporation shareholders, each of you can deduct your percentage share of these losses on your personal tax return to the extent of your basis in the stock and in […]


Maximizing Depreciation Deductions for Business Real Estate

When buying business real estate—for your own occupancy or for rental to others—you should take steps that maximize the income tax depreciation deductions that you can claim for the property. Here are a few suggestions. Separating improvements from land: Not all of the cost of acquiring real estate is depreciable. Specifically, the cost of improvements to land is depreciable, but the cost of the land itself is not. Clearly, then, it is desirable to identify and document, at the time that you acquire real estate, the part of your overall acquisition cost allocable to improvements. Thus, when you buy a property, you should either retain a qualified real estate appraiser to make an allocation between land and improvements based on a detailed written analysis, or, if you have enough valuation expertise and knowledge of the locality, write your own detailed analysis and allocation. In either case, I will be happy […]



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