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					                                                    TARANTO & ASSOCIATES, CPA'S
                                                                       PO BOX 5332
                                                                    CLINTON, NJ 08809
                                                                        908-730-7211




CLIENT                                                                    JANUARY/FEBRUARY/MARCH                      2O1O




     IN THIS ISSUE               How to Tell lf Munis Are Right for You
                                 Some investors  will receive higher after-      no tax to North Carolina because Tieasury
    flow to Tell if Munis
                                 tax yields from tax-exempt municipal            bond interest is exempt from state and
    Are Right for You 1-2
                                 (muni) bonds than from taxable bonds.           local income tax. Thus, Ashley will earn
                                 To find out what's best for you, you must       more, after tax, from this muni bond fund
   Gifts to Trusts Must Be
                                 crunch some numbers.                            than from this Treasury bond fund.
   Handled With Gare 2
                                                                                    Example 3.' Ashley's son Eric is in a
                                 Try an online calculator                        15olo federal tax bracket. If Eric invests in
  Past Mutual Fund Losses
                                 One option is to use one of several online      the Treasury bond fund yielding 5olo and
Gan Shelter Future   Gains 2-3   calculators     to help you   determine your    pays 15olo to the IRS, he will net 4.25o/o
                                 personalized tax-exempt yield.                  after tax. Therefore, Eric will earn more
   For Gollege Gosts, Pick          Example 1.' Ashley Burns enters her          after tax from the Treasury bond fund
    YourTax Breaks 4-5           federal tax rate of 33o/o into an online        than from the muni bond fund.
                                 calculator. She also enters her North              Example 4.' Ashley also is considering
  Refinance Your Mortgage,       Carolina state tax rate of 7.75o/o. Ashley      a bond fund that holds high           quality
 Retain the Tax Benefits   5-{   enters 4olo as the current tax-exempt yield     intermediate term corporate bonds. It
                                 from a hypothetical muni bond fund.             yields 60lo. However, Ashley would owe
 Maximize Tax Advantages         The calculator shows her "tax-equivalent"       income tax to North Carolina as well
for Gharitable Gontributions 6   yield to be 6.490/o. That is, if Ashley earns   as   to the IRS on that    60/o interest. She
                                 6.490/o on a taxable bond and pays federal      can deduct the tax she'll pay to North
                                 as well as state income tax on her interest     Carolina on her federal tax return, which
                                 income, she'll net the same 4olo interest       will reduce the effective federal tax she'll
                                 she can get from the muni bond fund she         pay. Ultimately, Ashley will owe about
                                 is considering.                                 38o/o in tax on that 60lo yield, so she'll net
                                                                                 about 3.7o/o after tax. Her after-tax yield
                                 Realworld math                                  would be lower than the muni fund's 4olo.
                                 A second option is to compare the after-        (The math would be different if Ashley
                                 tax yield you'd receive on a taxable bond       were subiect to the alternative minimum
                                 with the yield of a tax-exempt bond using       tax and, consequently, could not deduct
                                 real world numbers.                             state tax payments on her federal tax
                                    Example 2; Suppose Ashley can earn           return.)
                                 5olo interest  from a hypothetical mutual          Typically, the higher your tax bracket,
                                 fund that invests in Tieasury bonds or          the greater the advantage of muni bonds
                                 4olo interest from a hypothetical fund that     and muni funds. Many observers expect
                                 invests in high quality tax-exempt muni         tax rates to increase in the next few years,
                                 bonds. Because both funds hold interme-         especially for high-bracket taxpayers. Our
                                 diate term bonds, their exposure to inter-      office can help you determine whether
                                 est rate risk is similar.                       you will earn higher yields, after tax, from
         CPA                        If Ashley receives 5olo interest from this   taxable or tax-exempt investments.
                                 Treasury bond fund and pays 33olo of it to
  America Counts on CPAs
                                 the IRS, she will net 3.350/o. She will owe                             contimted on next page
                                                J   ANU ARY / FE B RUARY /MA RC H 2O 1O

    cotltinued   f   om page   1-How to Tell If Munis Are Right for You
                                                                     2009 Tax   Brackets
                         Tax Rate                    Single filers taxable income             Maried filing iointly taxable income
                           10%                          Not over $8,375                            Not over    $1   6,750
                           15o/o                        $8,376-$34,000                             $1 6,7s1   -$68,0900
                           25%                          $34,001-$82,400                            $68,001 -$1 37,300
                           28o/o                        $82,401 -$1 71,850                         $1   37,301-$209,250
                           33%                          $1 71,851   -$373,650                      $209,251 -$373,650
                           35%                          $373,651 or more                           $373,651 or more
            Sourcer IRS




    Gifts to Trusts Must Be Handled With Care
    You can reduce your beneficiaries'                   If you give $13,000 to an irrevo-
    exposure to future estate tax by giv-              cable trust for your daughter, that
    ing away assets you don't need. Those              transfer may trigger gift tax. You might
    assets and any future appreciation will            have to file gift tax returns and, if you
    be removed from your taxable estate.               already have used up your $ 1 million
    Giving money to your daughter Kristi               gift tax exemption, you might have
    can be a simple process. But what if               to pay gift tax As of this writing, the
    Itisti is young and you feel she'll be             maximum gift tax rate is 35%o of the
    temp(ed to spend that money unwise-                amount transferred, in 2010.
    ly? Or what if Kristi is married to                   To make gifts in trust and avoid gift
    someone you fear will gamble away                  tax consequences, you can follow the
    your gifts? For any number of teasons,             "Crummey" procedure. This process is
    you might pref'er to put money into an             named after a precedent-setting court
    irrevocable trust for Kristi rather than           decision in which the taxpayer pre-
    make an outright gift to her.                      vailed over the IRS. Here is how the
                                                       Crummey procedure might work:
    Dealing with the gift tax                              Example: Ben Richards creates an         transferred to the trust. This gives
I   Unfortunately, transfers to an irrevoca-           irrevocable trust and names his two          them a present interest in the transfer
    ble trust may not qualify for the annu-            children as trust beneficiaries. Ben         and qualifies the gifts for the annual
    al gift tax exclusion, which is $13,000            names his sister Meg, a CPA, as the          exclusion. After 30 days, if no with-
    per recipient in 2010. To qualify, such            trustee. Ben transfers $26,000 into          drawals have been made, the $26,000
    gifts must offer a "present interest."             the trust. Meg sends notices to both         can stay in the trust or be used by the
    That is, the recipient must be able                trust beneficiaries that state they have     trustee, with no gift tax consequences.
    to get his or her hands on the asset.              30 days to withdraw up to $13,000            If Ben's wife Lara joins in the gift, the
    However, often the reason for making               aplece.                                      couple can move up to $52,000 worth
    gifts in trust is to keep the assets out of          Therefore, both beneficiaries have         of assets (twice $26,000) into the trust
    the trust beneficiary's easy reach.                the opportunity to access the assets         this year, tax free.



    Past Mutual Fund Losses Gan Shelter Future Gains
    During the bear market of late 2008                   Example 1: Shareholders of stock          million. In order to avoid owing         taxes
    and early 2OO9, vfttually all stock                fund ABC own a total of one million          itself, ABC makes a $10-per-share capi-
    mutual funds posted large losses.                  shares. During a given year, ABC buys        tal gains distribution to its shareholders.
    Those losses, although painful, may                and sells various stocks in hopes of             For those shareholders who hold
    provide mutual fund investors a cfl.r-             increasing returns and to generate cash      ABC in a taxable account, these distri-
    cial tax benefit in 2010 and perhaps in            for investors who redeem shares of the       butions are taxable events. If Heather
    later years. To take advantage of this             fund. As ABC reaches the end of its          Gray owns 100 shares of ABC, she
    tax break, you should understand how               taxyear, it finds that its trades for the    will report $1,000 of capital gains on
    mutual fund taxes work.                            year have resulted.in net gains of $10                               contirurcd on next page

                                                                                2
                                           JANUARY/ FEB RUARY/MA RC H                   2O 1O


                                                    CPACLIENT
                                                                              TE,R
continlnd ftom page 2       Past   Mutual Fund   Losses Can Shelter Future Gains
                        -
her tax return and owe income tax                account, however, you have to report          Others insist that an unrealized loss
on those gains. She will owe this tax            a gain or loss.                            has value, too. If you invest when XYZ
regardless of whether she pockets the               For example, if you buy XYZ at $72      has an unrealized loss of $12 million,
$1,000 distribution or chooses to rein-          a share in 2010 and sell for $18 a share   you probably will not   see taxable capi-
vest   it in more ABC shares.                I
                                                 in 2OI7, you'd have to report a gain           tal gains distributions for   several
                                             i   of $6 a share, even if XYZ still                      years. When XYZ makes a
Tax-free gains                               I   has loss carryforwards.                                    trade, going forward,
In the recent bear market, many mutu-                                                                         that trade is far more
al funds incurred more losses than               Realized or unrealized?                                        likely to result in   a
gains on their stock trades. Unlike              Mutual fund losses fall                                         taxable loss than    a
gains, funds can't pass through those            into two categories:                                            taxable gain.
losses to shareholders.                          1. Realized losses. If                                             As an investor,
  Example 2: Stock fund XYZ also                    tund XYZ lost $10                                            you might want to
has one million shares in the hands of              million in trades in                                        consider both real-
investors. As XYZ reached the end of                its 2009 tax year,                                        ized and unrealized
its 2009 tax year, it determined that its           those losses                                              losses but give greater
trades for the year had resulted in $10             are locked in.                                            weight to realized
million of net losses. Therefore, XYZ               Investors know                                            Iosses. In any caser
made   no capital gains distributions               that they'll     be                                       the magnitude of the
for the year. XYZ did not distribute its            able to offset $10 mil-                                             important
                                                                                                             Iosses is Iess
Iosses either. Instead, it carried a $10            Iion of future gains real-                             than the ratio of losses
million "capital loss carryforward" on              ized by XYZ and owe no                  to the fund's assets. lf XYZ has $10
its books.                                          income tax.                             million of realized losses and $20
  Such losses can carry forward to as            2. Umealized losses. Suppose XYZ           million of assets (50%), it probably
many as eight future years. Suppose                 holds stocks currently valued at        will offer a longer holiday from tax
that XYZ has $7 million in realized                 $20 million. XYZ bought those           than a fund with $10 million of real-
capital gains in 2010. The fund's $10               stocks for $32 million. Therefore,      ized losses and $100 million of assets
million loss carryforward would com-                XYZ has unrealized losses    of   $12   (10olo).
pletely offset the $7 million gain, so              million. Some observers will com-
shareholders would owe no tax for                   bine the two numbers and say that       Evaluate the dog, not the tail
that year. The other $3 million net loss            XYZ's potential capital losses total    Both realized and unrealized        losses
would carry forward for up to eight                 $22 million: $10 million realized       can be hard to discover from a mutual
years after the original loss, to offset            plus $12 million unrealized.            fund's financial statements. Our office
tax on up to $3 million of realized                 Is this viewpoint valid? There          can help you determine the capital
gains by XYZ.                                    are two schools of thought on this         loss position of a particular fund.
   The bottom line is that mutual                issue. Some people say that a real-        However, you should not forget the
fund losses from the 2OO8-2OO9 bear              ized, locked-in capital loss is the only   traditional advice: Don't let the tax tail
market might shelter future mutual               one to count. You know you have            wag the investment dog. When you're
fund gains for several years. However,           $10 million of tax shelter in the XYZ      deciding whether to buy or hold onto
this tax shelter applies only to inves-          example. On the other hand, depend-        a mutual fund, your key concerns may
tors who buy mutual funds and con-               ing on how the stock market does           include the fund's investment phi-
tinue to hold them. As long as you               today, that $12 million unrealized         Iosophy, the manager's performance
hold onto mutual fund shares, you                loss could be an $11 million unreal-       record, and its expenses. Nevertheless,
don't have to report any gains except            ized loss or a $13 million unrealized      capital loss carryforwards can be
those that the mutual fund distributes           loss tomorrow. There's no knowing          important, too, especially if you're
ftom its own transactions. When you              if those unrealized losses will ever be    choosing between funds that are oth-
sell mutual fund shares in a taxable             realized and offset future gains.          erwise equally appealing.


                                                                      3
                                          JANUARY/FEBRUARY/MAR CH 2O7O

For College Gosts, Pick Your Tax Breaks
ln  2010, many parents of college             he qualifies minus his $1,200 in tax          Nevertheless, if you or someone you
students  will pay five-figure bills for      savings. Walme will receive a $900            know has lost a job and experienced
higher education. Fortunately, most           refund (4oo/o of $2,250) from the IRS.        a drop in income, the lifetime learn-
families can use tax benefits to pare            The American opportunity tax               ing credit can help defray the cost of
their after-tax costs. If you use some        credit is subject to a phaseout for tax-      going back to school to improve career
of the tax breaks for higher education,       payers with modified adjusted gross           prospects.
you can't use certain others. By know-        income (MAGD between $80,000 and
ing the rules, you can get an idea of         $90,000 ($160,000 and $180,000 for            Tuition and fees deduction
what your actual costs will be, now or        married couples filing iointly).                Both the American opportunity
in future   years.                                                                          and lifetime learning tax breaks are
                                              Lifetime learning credit                      tax credits. That is, you calculate your
American opportunity tax credit               You can claim the American oppor-             federal income tax obligation and
The Hope scholarship tax credit was           tunity tax credit only for     expenses       then subtract tax credits. A $1,000
created by the Thxpayer Relief Act of         incurred in the first four years of post-     credit, for example, trims your tax bill
1997. The American Recovery and               high school education. In contrast,           by $1,000. If you're paying college
Reinvestment Act of 2009 (Recovery            you may claim the lifetime learning           bills, you have yet another option-
Act) effectively replaced the Hope tax        credit for any year of higher educa-          a deduction for tuition and related
credit with the American opportu-             tion, including graduate or profes-           fees. Like any deduction, it cuts your
nity tax credit for 2OO9 and ZOIO             sional education.                             taxable income rather than your tax
(see CPA    Client Tax Letter, JulylAugust/      In order to qualify for the American       bill. For example, if you take a $1,000
September 2009). With the new credit,         opporrunity tax credit, the student           deduction and are in the 25o/o fed-
taxpayers who pay at least $2,000 for         must be enrolled at least half time. By       eral tax bracket, you will reduce your
tuition, fees, books, and materials for       comparison, you can take a lifetime           tax obligation by $250: 25o/o of your
higher education can get a dollar-            learning credit for any course of study       $1,000 deduction.
for-dollar tax credit, saving $2,000 in       that is designed to help you acquire or         Also, you take the tuition and fees
tax. Above $2,000, the tax credit is 25       improve iob skills as long as you pay         deduction "above the line," on page
cents on the dollar. When a taxpayer          the fees to an accredited school.             one ofyour tax return. Therefore, even
reaches $4,000 of expenses, he or she           The lifetime learning credit is 20          if you don't itemize deductions, such
will qualify for the maximum credit           cents on the dollar. Therefore, if you        as mortgage interest and charitable
of $2,500.                                    spend at least $10,000 for tuition and        donations, you can take this deduc-
     This tax credit is per student. Ifyou    related expenses this year, you can           tion. Moreover, an above-the-line de-
have a college freshman and senior            save the maximum-$2,000 in tax.               duction reduces your adjusted gross
this year, for example, and you spend         The lifetime learning credit is not           income (AGI), which can increase
more than $4,000 for each of them,            refundable.                                   your ability to take other deductions
you may be able to claim two $2,500               While the American opportunity            and tax credits.
American opportunity tax credits, for         tax credit is per student, the lifetime          The tuition and fees tax break is a
a total tax savings of $5,000. In addi-       learning credit is per taxpayer. Thus,        "cliff" rather than a phaseout deduc-
tion, the American opporfunity tax            no matter how many people in your             tion. A taxpayer paying college tuition
credit is refundable, up to 40olo of the      family take higher education courses,         can take a $4,000 deduction as long
amount for which you qualify.                 the most you can save with this credit        as his or her MAGI is no more than
   Example: Wayme Wallace spends              is $2,000 in tax on $10,000 or more in        $65,000 ($130,000 for married couples
$3,000 on his daughter's college tuition      expenses. You cannot use the American         filing jointly). If your MAGI is even
and other expenses in 2010. Therefore,        opporrunity credit and the lifetime           $1 above those numbers, you fall off
he qualifies for an American oppor-           learning credit for the same student          a metaphorical cliff to a $2,000 deduc-
tunity tax credit of $2,250: $2,000           in the same year, but you can use                                    if
                                                                                            tion. What's more, your MAGI is
plus $250 (25o/o of $1,000). However,         different credits for different students'     even $1 above $80,000 ($160,000 in
Wa).ne's federal income tax liability         educational expenses in the same year.        joint returns), you fall off another cliff
(the amount that he owes on his 2010              The phaseout for the lifetime             and get no tuition deduction.
tax return before taking this credit) is      learning credit is stricter than for             You can't claim this deduction in
only $1,200 this year. The American           the American opportunity tax credit:          the same year you claim the American
opporrunity tax credit completely off-        $50,0000-$60,000 of MAGI for sin-             opportunity or lifetime learning
sets his tax liability, with $1,050 left      gle taxpayers and $100,000-$120,000           tax credit for the same student. In
over: the $2,250 tax credit for which         for married    couples   filing    jointly.                       contimted on rcxt page


                                                                lol
                                          J   ANU      A RY / F E B RU A RY / M A R C   H   2 O 1O


                                                       CPACLIENT
                                                                               TE,R
continLnd ftom page 4       For College Costs, Pick Your Thx Break
                        -
addition, you can't claim the tuition         I   to   $2,500 per student per year, that        is available to families with    higher
and fees deduction for expenses paid          I   probably    will be your best choice.         incomes. Our office can help you sort
with earnings from a Section           529        However, if you are paying bills for stu-     through your choices as you prepare
plan or withdrawals from a Coverdell              dents who already have four years of          your 2OO9 tax return and make plans
Education Savings Account.                        higher education, you can only claim          for 2010. We also can let you know if
                                                  a lifetime learning credit or a tuition       it makes sense to forego claiming a stu-
How they   compare                            I   and fees deduction.                           dent as a dependent in order to let the
If you qualify for an Ameri.un oppor-         i
                                                       Although the credit might pro-           student take a higher education tax
tunity tax credit, with tax savings up        I   vide rrrore tax savings, the deduction        benefit on his or her own tax return.


Refinance Your Mortgage, Retain the Tax Breaks
Mortgage rates are at some of their                    Example    2:   Richard and   Sarah
Iowest levels since the 1950s. As of this         Tucker refinance a mortgage       with    a
writing, the average rate on a 30 year,           $250,000 balance. Their new loan is
fixed rate mortgage is below 5%o. Many            $300,000. After paying off their old
lenders offer lower rates. Therefore, if          loan, the Tuckers keep $50,000 in
you have a home loan with an inter                cash. They spend $20,000   to install
est rate of 60/o or higher, this may be a         a powder room in their home and
good time to refinance.                           use the other $30,000 to pay college
    To refinance your loan, you may               tuition for their son Adam.
have to clear several hurdles. You'll                 Under the tax code, the $250,000
have to show that your home's value               the Tuckers use to replace their old
is high enough to provide the lender              mortgage and the $20,000 they spend
with adequate security. Additionally,             on improvements is all considered
you'll probably have to demonstrate               "home acquisition debt." The interest
that you have enough income to make               on that $270,000 will be tax deduct-
the loan payments and a solid credit              ible as long as the Tuckers'home loans        tax (AMT) can deduct the interest on
history.                                          are no larger than $1 million.                home equity debt only if the money
                                                     However, the $3O,OOO used          for     is used for home improvements. (The
Tax tactics                                       Adam's schooling       is "home    equity     $100,000 cap still applies.) If you are
Assuming      you qualify to      refinance       debt." The Tuckers can deduct the             subject to the AMT be careful about
your home mortgage, you'll want to                interest on no more than $100,000 of          how you use the proceeds of cash-out
make sure you maximize the available              such debt. Therefore, in order for the        refinancing and how you report the
tax benefits. The simplest way to do              Tuckers to deduct the interest paid on        interest on your tax return.
this is to get a straight replacement             that $30,000, they can have no more
loan.                                             than $70,000 of other home equity             Paying points
    Example -1: Patrick Rogers has                debt, such as an existing balance on          Homeowners frequently pay "points"
a 6.50/o mortgage with a balance of               a home equity line of credit. A-lso,          when they refinance a mortgage.
$250,000. He refinances with a 5olo,              for the interest on the home equity              Example 3: Jerry and Kay Martin
$250,000 mortgage. Patrick's mort-                debt to be fully deductible, the total        refinance a $300,000 loan and pay
gage interest on the new loan (about              mortgage debt on the home cannot              two points (2o/o), or $6,000. Paymg
$12,500 per year) will be tax deduct-             exceed its value. The total mortgage          these points reduces the interest rate
ible as long as the total of all of his           debt includes all acquisition debt and        on their loan. The Martins can deduct
home loans is $1 million or less. The             all home equity debt.                         these points over the life of the loan.
situation is trickier, however, if you                 What's more, taxpayers who are           If they get a 30 year (360 month)
refinance with a larger loan.                     sublect  to the alternative minimum                              continued on next page


                                                                    lsl
                                             JANUARY/FEBRUARY/MARCH                               2O IO


contiruEdftompage 5            Refinance Your Mortgage, Retain the Thx Benefits
                        -
loan, they can deduct $16.67 ($6,000                  However, if you refinance with the                    Example       6:   Diane Jensen refi-
divided by 360) every month that this              same lender, you can't deduct the                    nances a loan secured by her princi-
Ioan is outstanding, or $200 each cal-             old points. Instead, the old and new                 pal residence, borrowing $200,000
                                                   points are combined and deducted                     and paying $4,000 in points. Of the
endar year ($16.67 times 12). What's
                                                                                                        $200,000, she uses $50,000 (25o/oi) for
more, when the loan is paid off, all               over the life of the new loan.
                                                                                                        home improvements. In this situa-
of the not-yet-deducted points can be                 Example 5: As mentioned, the                      tion, Diane can deduct $1,000 (25olo
deducted. This might occur if they refi-           Martins take out a 30 year loan and                  of $4,000) immediately because she
nance the loan again or sell the house.            pay $6,000 in points. Suppose theY                   used $50,00O (25o/o of her loan) for
   Example 4: The Martins refinance                had $2,000 worth of nondeducted                      home improvements. She can deduct
their mortgage in mid 2010 and                     points from their old mortgage and                   the other $3,000 worth of points over
deduct $100 worth of points that                   they refinance with the same lend-                   the life of her new loan.
year, for the six months since theY                er. Now the Martins have $8,000 in                      You can deduct home imProve-
got the new loan. ln2O1l,2Ol2, and                 points to deduct over their 30 Year                  ment points immediately onlY for
2013, they deduct $200 worth of
                                                                                                        work on your principal residence.
                                                   Ioan: about $22 a month.
points each year. ln 2014, theY sell                  In another situationr suPPose
                                                                                                        If Diane had spent the $50,000 on
                                                                                                         her vacation home, she would have
their home and pay off their loan. On              you refinance with a cash-out mort-                   to deduct all $4,000 worth of points
their 2014 tax return, the Martins can             gage and use some of the proceeds                     over the life of the loan. If you con-
take a $5,300 deduction: the $6,000                to improve your principal residence.                  tact our office when you refinance
of points they paid upfront minus                  Then some of the points you PaY can                   your mortgage, we can helP You take
the $700 they've already deducted.                 be deducted upfront, pro rata.                        all legitimate tax deductions.




Maximize Tax Breaks for Charitable Gontributions
Good times or bad, many Americans                   worth only $4,400: he would have                     She owns shares of XYZ CorP., which
contribute generously to charity.                   owed $600 in capital gains tax (15olo                she bought for $50 a share. Now those
Charitable donations are tax deduct-                of his $4,000 profit) on a sale.                         shares trade      at $20 apiece. Ellie
ible-but  some strategies work better               Therefore, this strategy gives                                    can sell 250 shares to raise
than others. Often, you will gain the               Doug a $5,000 tax ben-                                              $5,000 for the donation.
greatest tax advantage by donating                  efit for relinquishing a                                             Not only will she get a
appreciated securities.                             $4,400 asset.                                                          $5,000 tax deduction,
   Example .1: Doug Davis decides                                                                                           Ellie will have a $7,500
to donate $5,000 to his alma mater.                 Lack of appreciation                                                    capital loss: $30 per
He owns shares of ABC CorP., which                  Some taxpayers don't                                                  share on 250 shares. Her
he bought years ago for $10 a share.                have appreciated secu-                                                capital loss can offset the
Now those shares trade for $5O. Doug                rities to donate now.                                                tax on realizcd capital
decides to give 100 shares to his alma              In that situation, you                                                gains, now and in the
mater. Doug gets a $5,000 tax deduc-                shouldn't donate dePreci-                                             future. If she doesn't
tion for this donation. His alma mater              ated securities. Instead, You                                        have enough caPital
is a tax-exempt organization, so it                 should sell first and donate                                     gains to offset this caPital
can sell the shares and use the entire              the cash.                                                     Ioss, she can use the loss to
$5,000 of sale proceeds. To Doug,                       Example 2: EIlie Evans also wants                  offset ordinary income uP to $3,000
however, those shares were ultimately               to donate $5,000 to her alma             mater.      per year until the loss is used in full.



 In  accordance with IRS Circular 230, this newsletter is not to be considered a "covered opinion"                                    or other written
 tax advice and should not be relied upon for IRS audit, tax dispute, oI any other purpose.

  The cpA client Tax   lerer (lssN 1066-1g67) is prepared by AICPA staff for the clients of its members and other practitioners. The Tax Lettef cafiies no
  official authority, and its contents should not be acted upon without professional advice. Copyright O 2010 by the American Institute of Certified
  publicAccountants, Inc.,Newyork,Ny10036-8775.printedintheU.S.A SidneyKess,CPA,JD,Editor.ForAICPAcustomerservicecall(888)777-7077
   ot visit www.cPa2biz.com.




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