INDIVIDUAL TAX PLANNING

							Dear Clients and Friends:

          In these difficult times, tax planning is more complicated than ever. This is especially
 true as the end of 2011 approaches.

        First, the “Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of
 2010,” signed late last year, creates a slew of new tax incentives for individual and business
 taxpayers. It also extends several tax breaks and provides estate- and gift-tax planning
 opportunities. However, certain provisions in this new law will expire in the near future.

         Second, other recent laws—including the health care law formally known as the “Patient
 Protection and Affordable Care Act of 2010”—may have an impact on your situation. Year-end
 tax planning may also be affected by new directives and guidelines issued by the IRS.

         Third, the specter of possible tax reform creates an uncertain environment. If Congress
 enacts tax legislation at the end of 2011, it could require some last-minute scrambling.

        Keeping these key points in mind, we have prepared the following 2011 Year-End
 Tax-Planning Letter. Throughout this letter, take note of various tax actions that may be
 available. For your convenience, the letter has been divided into the following three sections:

                                Individual Tax Planning

                                Business Tax Planning

                                Financial Tax Planning

         Be aware that the year-end planning ideas discussed within this letter are general in
 nature and are intended only to provide an overview. We suggest that you review your situation
 with an experienced tax professional before you take any action. Contact Al DeLeon
 (allen@deleonandstang.com), Rich Stang (rich@deleonandstang.com) or a member of our Tax
 Department at 301-948-9825 if you have any questions or to schedule an appointment to discuss
 your tax planning needs.

                                Very truly yours,


                                DeLeon & Stang, CPAs and Advisors
INDIVIDUAL TAX PLANNING


Charitable Donations
          Normally, you can deduct the full amount of your cash contributions to charity, as long
as you obtain the proper substantiation. Furthermore, you may be able to deduct the fair-market
value of donated property that has appreciated in value if you have owned the property longer
than one year.

           Year-end action: Complete donations before January 1, 2012, to increase your deduction
for 2011. If you make a charitable gift by credit card and the charge is posted by December 31, 2011,
it is currently deductible, even if you actually pay off the charge in 2012.

          Tip: Deductions for donations of used clothing and other household items are generally
available only if those items are in “good condition.”


Alternative Minimum Tax
          The alternative minimum tax (AMT) is triggered if a special calculation involving certain
“tax preference items,” technical adjustments and a special exemption amount exceeds your regular
income tax liability. The AMT rate is 26% on AMT income up to $175,000; 28% above $175,000.
The exemption amounts for 2011, increased slightly from 2010, are as follows:

                  Joint filers                                         $74,450
                 Single filers                                         $48,450
           Marrieds filing separately                                  $37,225

         Year-end action: Have an estimate made of your AMT liability for 2011. If warranted, you
might shift tax preference items to 2012 to avoid or reduce expected AMT liability for this year.

         Tip: The exemption amounts are reduced for high-income taxpayers. The reduction is equal
to 25 cents for each dollar of AMT income above $150,000 for joint filers; $112,500 for single filers;
and $75,000 for marrieds filing separately. These thresholds are not adjusted annually.


Residential Energy Credit
           The tax law provides a 10% tax credit, up to a maximum of $500, for certain energy-saving
installations in the home. The list of qualified expenses ranges from insulation to energy-efficient
central air conditioning units and furnaces. Previously, a maximum credit of $1,500 was allowed for
2009 and 2010.

         Year-end action: Make energy-saving improvements before January 1, 2012. Unless this
tax break is extended again by Congress, it will expire on December 31, 2011.



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          Tip: The maximum $500 credit must be reduced by any credits claimed under the prior
rules in 2009 and 2010.


Estimated Tax Payments
          If you do not pay enough income tax through quarterly installments or income tax
withholding, you may be assessed an “estimated tax penalty.” But no penalty applies if payments
equal at least 90% of your current liability or 100% of the prior year’s tax liability. The 100%
threshold is increased to 110% if your adjusted gross income (AGI) for last year exceeded $150,000.

          Year-end action: Qualify under either one of these safe harbor rules. Typically, it is easier
to meet the requirement based on the prior year’s tax liability.

        Tip: If you are employed and increase withholding after clearing the Social Security
wage base ($106,800 for 2011), there will be little or no reduction in your take-home pay.


Miscellaneous Tax Benefits
         *The tax law allows you to deduct annual unreimbursed medical expenses only in excess of
7.5% of your AGI for 2011 (scheduled to increase to 10% in 2013). If you are close to the 7.5%
mark or already over it, schedule non-emergency medical and dental visits before the end of the year.

           *If state law permits, you might consolidate outstanding personal debts into a home equity
debt. Interest on personal debts is not tax-deductible, but you may deduct mortgage interest paid on
the first $100,000 of home equity debt, no matter how the proceeds are used. Caution: The debt
must be secured by your home, so use this technique carefully.

           *For 2011, you can generally claim a dependency exemption of $3,700 for a child younger
than age 19 or a full-time student younger than age 24 if you provide more than 50% of the child’s
support. To secure an exemption in 2011 for a child, make sure your support clears the 50% mark
this year.

          *Miscellaneous expenses are deductible only to the extent that the annual total exceeds 2%
of your AGI. When it is warranted, pay qualified expenses (e.g., tax assistance fees) before the end
of the year to maximize your deduction for 2011.

          *Under the “kiddie tax,” investment income in excess of $1,900 received in 2011 by a
child younger than age 19 or a full-time student younger than age 24 is generally taxed at the top
tax rate of the parents. Try to minimize or avoid the kiddie tax through tax-deferred or tax-free
investments.

        *Depending on your situation, you might pay state and local taxes due on January 1, 2012,
in December to increase your deduction for 2011.




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          *If you are a parent of a child in college, you may claim a tuition deduction or one of two
higher education credits for qualified expenses paid in 2011. However, these tax benefits are phased
out for high-income taxpayers.



BUSINESS TAX PLANNING

Depreciable Property
          Under Section 179 of the tax code, a business may currently deduct the cost of qualified
assets placed in service, up to a maximum amount. The deduction begins to phase out above an
annual threshold. These Section 179 limits have been enhanced in recent years as follows:

             Tax year                  Deduction limit             Phase-out threshold
              2007                        $125,000                      $500,000
            2008–2009                     $250,000                      $800,000
            2010–2011                     $500,000                     $2 million

         Year-end action: Place assets in service before January 1, 2012, to maximize
deductions for 2011. Absent further legislation, the maximum deduction is scheduled to
decrease to $125,000 with a $500,000 phase-out threshold in 2012.

           Tip: The Section 179 deduction cannot exceed your taxable income from business
activities.

          Furthermore, a business may claim 100% business depreciation on qualified assets
placed in service in 2011. Previously, 50% bonus depreciation was allowed for qualified assets
placed in service in 2010. The deduction generally reverts to 50% bonus depreciation in 2012.

         Tip: The Section 179 deduction may be combined with 100% bonus depreciation in
2011 for an unprecedented write-off of qualified business assets.


Bad Debt Deductions
          In this uncertain economy, customers or clients may be slow to resolve past-due accounts.
At least your business may be able to salvage some tax relief.

        Year-end action: Step up your collection activities. If you still do not receive payment,
you may be able to write off an unpaid debt as a business bad debt that is “worthless.”

         Tip: Keep detailed records of your efforts—such as dunning letters, telephone calls,
e-mails and pursuits by collection agencies—in your files. This documentation can help
support deductions based on the worthlessness of the debt.



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LIFO Accounting
        There are two basic methods of accounting for inventory: “First-in, first-out” (FIFO) and
“last-in, first-out” (LIFO). With FIFO, the oldest goods in inventory are treated as the first goods to
be sold first. With LIFO, the last goods acquired or produced are treated as the first goods to be sold.

        Year-end action: A company using the FIFO method might benefit from a switch to the
LIFO method. Reason: When prices rise, the LIFO method results in a higher cost of goods sold. In
turn, this reduces the taxable profit for the year, so the company’s income tax liability is reduced.

         Tip: Proposals in Congress would eliminate or restrict the LIFO method. Keep a close
watch on the proceedings.


Corporate Donations
          Charitable gift-giving is not limited to individual taxpayers. In fact, a corporation may
benefit from enhanced deductions for certain donations to qualified charitable organizations. This
includes donations of computers, books and food items.

        Year-end action: Complete donations of these items before January 1, 2012. These
enhanced deductions are scheduled to expire after 2011.

         Tip: As a general rule, deductions for corporate gifts are limited to 10% of the taxable
income for the year. Any excess may be carried forward.


Miscellaneous Tax Benefits
         *Purchase routine business supplies before the end of the year. A company can generally
deduct the cost in 2011—even if the supplies will not be used until 2012.

         *Maximize the Section 199 deduction for domestic production activities. For 2011, this
deduction equals 9% of the lesser of taxable income from qualified activities or taxable income.

         *Losses claimed by S corporation shareholders are limited to the basis in the stock plus
outstanding debt. Thus, shareholders might make a capital contribution or lend money to the
corporation before year-end to increase the basis for loss deduction purposes.

         *A company can deduct 100% of business travel costs and 50% of entertainment and meal
expenses. To increase your current deduction, accelerate trips planned for 2012 into 2011. Note: A
company can deduct 100% of the cost of a holiday party if the entire workforce is invited.

           *Get a new business up and running before 2012. For 2011, you can claim a maximum
first-year deduction of $5,000 of qualified start-up costs, subject to a phase-out threshold of $50,000.




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         *If you buy an SUV or van for business driving, you may be able to claim a first-year
deduction of up to $25,000. The usual “luxury car limits” don’t apply to certain heavy-duty vehicles.

         *Under the 2010 health care law, a qualified “small business” may claim a tax credit of up
to 35% of the cost of health insurance for employees. But the credit begins to phase out for
employers with more than ten employees with average annual wages of more than $25,000.



FINANCIAL TAX PLANNING

Securities Sales
          Tax-smart investors can use capital losses from securities sales to offset capital gains and
vice versa. A capital loss in 2011 may offset capital gains plus up to $3,000 of ordinary income. Any
remainder is carried over to next year. Under current law, the maximum tax rate on long-term capital
gains (i.e., on assets owned for more than a year) is 15% and 0% for certain low-income taxpayers.

          Year-end action: When it makes sense, “harvest” losses from securities sales before 2012
to avoid tax if you are currently showing a net capital gain. Conversely, if you are showing a net
capital loss, capital gains realized before 2012 are effectively tax-free up to the amount of the loss.

          Tip: The 15% and 0% maximum tax rates for long-term capital gains are scheduled to
increase to 20% and 10%, respectively, in 2013. But this may be changed by future legislation.


Roth IRA Conversions
          There are two main types of Individual Retirement Accounts (IRAs): traditional IRAs and
Roth IRAs. In brief, contributions to traditional IRAs may be tax-deductible, but deductions are
phased out for “active participants” in employer-sponsored retirement plans. Future distributions are
taxed at ordinary income rates. Conversely, Roth IRA contributions are never tax-deductible, but
qualified distributions from a Roth in existence five years are 100% tax-free.

          Year-end action: Consider converting funds in a traditional IRA to a Roth. The transfer is
currently taxable, but can provide future tax-free benefits.

         On the downside, a one-time tax break for Roth conversions is no longer available. For
2010 only, taxable income from a conversion could be split evenly over the following two years.

          Tip: The contribution limit for both traditional and Roth IRAs in 2011 is $5,000 ($6,000
for those age 50 or older). This limit applies to any IRA combination (but Roth contributions are
restricted for high-income taxpayers).


Required Minimum Distributions



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          As a general rule, you must receive “required minimum distributions” (RMDs) from
qualified retirement plans and IRAs once you have reached age 70½. The amount of the
distribution is based on special life expectancy tables.

         Year-end action: Make sure you take the RMD before January 1, 2012. If you fail to do
so, you may be assessed a penalty equal to 50% of the required amount.

         Tip: If you are still working and not a 5%-or-more owner of the employer, you can
postpone RMDs from the employer’s qualified plan until retirement, but not for any IRAs.


Estate and Gift Taxes
          During the last decade, the top estate-tax rate gradually decreased from 55% to 45% while
the estate-tax exemption increased from $1 million to $3.5 million, before the estate tax was
generally repealed for 2010. Now a generous estate-tax exemption of $5 million, with a top estate-
tax rate of 35%, is available through 2012. The chart below summarizes the recent progression.

            Tax year            Top estate-tax rate               Estate-tax exemption
             2009                      45%                             $3.5 million
             2010                   Repealed                         Not applicable
             2011                      35%                              $5 million

         Year-end action: Review your estate plan with a professional adviser. Frequently, it will
make sense to reduce your taxable estate with lifetime gifts to family members. The annual gift-tax
exclusion allows you to give each recipient up to $13,000 in 2011 without paying any gift tax
($26,000 for joint gifts by a married couple).

           Tip: The gift-tax exclusion applies annually. Therefore, you can give the maximum tax-
free gift to someone in December 2011 and give the maximum to the same person in January 2012.


Miscellaneous Tax Benefits
         *When it makes sense, you may defer tax on investment income by acquiring certificates of
deposit (CDs) and Treasury securities that mature next year. Generally, the income from these
investments is not taxable until the year it is received.

          *Under the “wash sale rule,” you cannot deduct a loss on securities sales if you acquire
substantially identical securities within 30 days. The simplest way to avoid this result is to wait at
least 31 days before you repurchase the same or similar securities.

          *It is often beneficial tax-wise to sell mutual fund shares before the fund declares dividends
(the “ex-dividend date”) and to buy shares after the date the fund declares dividends.

       *Consider investments in dividend-paying stocks. As with long-term capital gains, the
maximum tax rate on qualified dividends received in 2011 is 15% (0% for low-income taxpayers).


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          *Maximize deductions for vacation home rentals. Generally, you may claim a loss only if
your personal use does not exceed the greater of 10% of the time the home is rented out or 14 days.
However, you may qualify for loss deductions if you are an “active participant” in the rental activity.
This tax break is phased out for high-income taxpayers.

          *Invest in “qualified small business stock” (QSBS) before 2012. If certain requirements are
met, 100% of the gain from the sale of QSBS held at least five years is excluded from tax. This tax
break is scheduled to expire after 2011.



CONCLUSION
         This year-end tax-planning letter is based on the prevailing federal tax laws, rules and
 regulations. Of course, it is subject to change, especially if major tax reform provisions are
 enacted before the end of the year.

        Finally, remember that the letter is intended only as a general guideline. Your personal
 circumstances will likely require greater examination. We will be glad to schedule a meeting
 with you to provide assistance with your tax-planning needs.




 This year-end planning letter is published for our clients, friends and professional associates. It is
 designed to provide accurate and authoritative information with respect to the subject matter covered.
 IRS Circular 230 requires us to inform you that the information contained in this letter is not intended or written to
 be used for the purpose of avoiding any penalties that may be imposed under federal tax law and cannot be used by
 you or any other taxpayer for the purpose of avoiding such penalties. Before any action is taken based on this
 information, it is essential that competent, individual, professional advice be obtained.




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