Tax Rates on 401K Lower Capital Gains - Excel by caf30022

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									                                                          4411153f-76c9-4317-899e-ccbc1b072b05.xls
                                               Pellini, Gold & Associates, Ltd.
JJP 1105/04                                     1040 Tax Data - Key Items
JBV 10/08/04                                                 2004

        11 Brackets
                         2004         Single                 MFJ                       MFS                      HH
                                   Tax        Inc.       Tax           Inc.         Tax           Inc.       Tax       Inc.
                   10.00%                0          0           0            0             0            0         0         0
                   15.00%             715       7,150       1,430       14,300          715         7,150     1,020    10,200
                   25.00%           4,000      29,050       8,000       58,100        4,000       29,050      5,325    38,900
                   28.00%          14,325      70,350     22,787      117,250        11,394       58,625     20,725   100,500
                   33.00%          35,717     146,750     39,979      178,650        19,990       89,325     38,141   162,700
                   35.00%          92,592     319,100     86,328      319,100        43,164      159,550     89,753   319,100
             Child under age 14 - unearned income same as parents on income over 750 (750 exemption +750 at 10%))
                               NOTE: MFJ -15% bracket will increase to equal 2x's single for tax years 2003 through 2010

      1405 AMT             Note that the AMT exemption will revert to 49,000 (mfj) and 35,750 (single) in 2006
            Exemption         40,250                   58,000                      29,000                  40,250
            Phased out - 25% of amount AMT AGI exceeds:
                    starts 112,500                   150,000                       75,000                 112,500
      1401           ends 273,500                    382,000                      191,000                 273,500
            Rates
                  26.00% 175,000                     175,000                       87,500                 175,000
                  28.00% over 175k               over 175k                    over 87.5k               over 175k

        126 Standard Deduction004 ->
                                2                 4,850                     9,700                  4,850                7150
elimination of the diff btwn
single & MFJ for 2003 - 2010
                Additional Standard Deduction for blind or age 65 or older
                                                  1,200                       950                    950                1200
                Children who are dependents
                                      800       or       250 plus earned income up to 4,850

       133 Exemptions          2004
                                 3,100
                             Reduced by 2% for each $2,500 of AGI over                                                          phase out of
                         2003 142,700                  214,050                           107,025           178,350              exemptions reduct-
                                                                                                                                ion begins in 2006


       137     Dependents
               2004--> 3,100
   137/143     Child           under age 19 at year end, or
                               under age 24 and still in full time student at year end
               Others - must have less than 3,100 of income

       139     children of divorced parents-- see special rules




      2648 SS Tax Base             2004        2005
                                  87,900      90,000


             Employee Benefits

       860     Medical Savings Account (MSA)
      1020      Used in conjunction with "high deductible" health insurance
                Used solely to pay unreimbursed health care expenses of taxpayer, spouse, and dependents

                                                   Individual                  Family
                                                  2004         2004          2004         2004
               Min deductible                    1,700        1,700         3,450        3,450
               Max deductible                    2,600        2,600         5,150        5,150
               Max Out of pocket                 3,450        3,450         6,300        6,300
               Contributions limitation        65% of deductible          75% of deductible



       861     Cafeteria Plans
               Offers employees choice of taking cash or receiving qualifiedPage 1
                                                                             benefits
               Cash is included in gross income as compensation
                                                         4411153f-76c9-4317-899e-ccbc1b072b05.xls
               Qualified benefits are excludable to extent allowed by law

      861      Flexible Spending Accounts
               Allow employees to make pre-tax contributions to a FSA account for reimbursement of health and/or dependent care expenses
               Unused contributions are forfeited at the end of each year

               Health Savings Account (HSA)
               Used in conjunction with "high deductible" health insurance

               Plan design requirements:                    Single       Family
                Min deductible                                 1,000        2,000
                Max Out of Pocket                              5,000       10,000

               Prior to age 65:
               An individual or spouse may make annual pre-tax contributions equal to the deductible up to a max of $2,600 single or $5,150 family
               Tax-free withdrawals may be made as the allowable medical expenses are incurred

               After age 65:
               Distributions will be tax-free provided they are used for eligible heath care expenses.
               Other distributions will be included in income and assessed a 10% penalty

               Eligible expenses include actual medical expenses, retiree heath ins premiums, COBRA premiums, LT care premiums
                 and premiums for a health contract while receiving unemployment compensation. Eligible expenses DO NOT include
                 regular medical insurance premiums and Medicare supplemental policies.

               Upon death, HSA may be passed on to spouse tax-free or to another beneficiary on a taxable basis.



Deductions

             Employee Business
     941B     Statutory Employee - Not subject to 2% floor

      947      Mileage ---     37.50 cents - 2004        37.50 Cents - 2004

      910      Meals           50% exclusion
      915                      100% deduction for on site lunches for convenience of employer and party/picnic

      910      Meals -- interstate truck drivers while away from home - deductible amount                     (Employees subject to DOT regulation)
                                 2004/05      2006/07       2008/--                                           Air trans, railroad ees, truck & bus drivers
                                   70.00%        75.00%       80.00%

      918      Business Gifts
               Limited to $25 per recipient per year.

     954A      Travel          On or after November 1, 2003
                                             Meals &    Max Per
                                Lodging     Incidental    Diem
               Hi cost               161            46        207
               Low Cost                90           36        126

      961      Home office
               exclusive space, used regularly as a principal place of business or to see clients/customers
                need as a base to get auto mileage from home to various jobs

941C/1084      Qualified Classroom Expenses -"above-the line" deduction available to teachers, instructors, counselors, teachers, and aides.
                For unreimbursed expenses incurred in connection with books, supplies, computer equipment, and supplementary materials
                used in the classroom.
                Must have worked at least 900 hours during school year at a school that provides elementary or secondary education.

                 2004 -- up to $250 per year / need documentation.




             Non Business/Itemized Deductions

               Itemized - in General
     1014                                                                 Page
                   3% above following amounts is subtracted from total itemized 2
                               Single                 MFJ                     MFS
                                                 4411153f-76c9-4317-899e-ccbc1b072b05.xls                  HH

                          142,700                  142,700                      71,350                142,700
                       note : medical /investment int / casualty and theft are not subject to 3% calc
                       elimination of phase out commences in 2006
1016   Medical
       In excess of 7.5% of AGI
                       Mileage 14 cents/mi.
                       Special Schooling
                       Nursing home -- 100% of meals
                       Capital improvements in excess of increase in value to home
1018                   Paid w/in 1 year of decedents death may go on last 1040 if incurred prior to death
1020                   MSA's - rare //// HAS's new for 2004 may work …
1028   Taxes           Real Estate, State and Local --- NOT deductible for AMT
                       May deduct state sales taxes in lieu of state & local income taxes for tax years 2004 & 2005

1043   Interest -- Must be traced to the original use of proceeds
                        must be on taxpayer's debt

1045                   Personal = non deductible

1044                   Investment interest
                          Limited to investment income (int,div's, other passive inc.)
1094                       Capital gains are NOT inv income unless an election is made to tax such ordinary rates

1047                   Qualified Residence interest
                         Primary residence and
                         ONE Other
                        Limit
                            1,000,000 primary plus 100,000 GRAND TOTAL DEBT

                       Interest on second Mortgage (or home equity loan) is limited to interest on the first $100k of HE debt

                       See portion of Mtg interest from a rental property that is used over 10% of rented days or 14 days

1048                   Home Equity Indebtedness
                        deductible to the extent of that it does not exceed the principal amount of acquisition debt
                        immediately before refinancing, proceeds can be used for personal expenditures

1082                   Education Loans
                       elimination of 60 mo time period, can be deducted on voluntary payments
                        Dependents can't claim
                        Must be obligor
                        Loan must have been SOLELY for education costs (NO MIXED LOAN)
                                   w/in 60days and can use CCard first then loan
                                   Loan can't be from related party
                         Limits
                                      2003->
                                       2,500     Not changed

                             Phase outs begin at:   and reduce $166.66 for each $1,000 of inc.
                                    Single           MFJ        MFS           HH
                             start     50,000        100,000           0      50,000
                              end      65,000        115,000           0      65,000


1085                   Interest paid on loans to purchase/carry obligations that pay tax exempt income/interest is NOT deductible

1058   Contributions

1059                   Priority    Limits                                Types
                            1      50% of AGI                            501C3 charities
                            2      30% of AGI                            Non operating foundations (war vets), fraternal orgs., cemeteries
1062                        3      30% of AGI - Certain cap gain         (appreciated securities)
                            4      20% of AGI - Appreciated stock to a non-operating foundation



1060                   Carryforward 5 year

                       LIFO (current yr. before prior yr.)

                       Types                                        Page 3
                                    Cash/check (must have receipt if over $250. and for all cash)
                                                  4411153f-76c9-4317-899e-ccbc1b072b05.xls
                                    Mileage - 14 cents/mi.
                                    Out of Pocket
                                    Value of services NO NO NO
                                    Value of rental vacation house NO NO NO -- only out of pocket cost
                                    Item purchased - cost in excess of value received
1064                                Appreciated property
1062                                   Ordinary income property - Basis
                                       Long term Capital Gain
                                          FMV if subject to 30% limitation
                                          otherwise basis
                                          NEVER SELL APPRECIATED ASSETS AND GIVE CASH
                                          NEVER GIFT DEPRECIATED ASSETS - SELL THEM AND GIVE THE CASH

                                    See JJP/DGG re: charitable remainder trust for elder individuals with a large block of
                                    appreciated securities

1064                                Unrelated student (elementary or high school) in home sponsored by a charitable org.
                                         Limited to $50/mo.

1061                    Over $500 - form 8283 part A
                        Over $5,000 - 8283 part B AND an APPRAISAL

1073 Moving Expenses           Old home to New home distance >Old work - old home miles + 50
   not 2%          Transport of household goods                   Must keep job 39 weeks (78 self employed)
                   Travel (lodging but not meals)
                       14 cents per mile or actual
1080 Union Dues

1081    Job Hunt
                        Even if not successful
                        MUST be SAME trade or bus




1082    Education
                        even if leads to a degree
                        maintains or improves skills or
                        meet express requirements of employer

                        NON Deductible if leads to a new trade or
                        meets minimum requirements to qualify for present employment
                        Continuing education is deductible

        $ 4,000 AGI deduction allowed for 2004 ($4,000 for 2004 & 2005)
                       IF AGI is less than $65,000 single / $130,000 Married

1086    Investment Expenses (advisory fees)
          subject to 2%

1093    Legal fees for production of income e.g. to negotiate employment contract
          subject to 2%              Divorce legal fees Non Ded (except part related to tax and/or financial planning)

1748    Casualty/theft/involuntary conversion
        to the extent exceeds 10% of AGI (in excess to $100 floor per loss)

1173 NOL's
        back 2 years forward 20
     *** For 2001/2002, carryback period is increased to 5 years unless an election is made otherwise.
     *** Election can be made to forego carryback period or to revert back to 2 year carryback. May elect back to 5 yr if done before 10/31/02




1195 Hobby Loss
       Expenses only to the extent of revenue
       Income on page 1 of 1040
       Expenses on sch A AND subject to 2% limit

        Hobby = if no profits 3 of 5 years I.e. need 3 profit yrs out of 5 to not be a hobby
                                                                       Page 4
2062 Rental real estate                         Be careful about Hobby loss
                                                4411153f-76c9-4317-899e-ccbc1b072b05.xls
     Losses allowed up to $25,000 IF active participant
     Phased out between $100k to $150 k


1214 Auto depreciation
                             2004         2003          2002           2001        2000         1999       1998        1997         1996
                       1 10610*          10710**         7660***           3060       3060       3,060       3,160       3,160        3,060
                       2        4800          4900         4900            4900       4900       5,000       5,000       5,000        4,900
                       3        2850          2950         2950            2950       2950       2,950       2,950       3,050        2,950
                       4        1675          1775         1775            1775       1775       1,775       1,775       1,775        1,775
                       5        1675          1775         1775            1775       1775       1,775       1,775       1,775        1,775
       * The 10, 610 limit applies only to vehicles that qualify for additional 50% depreciation (new), otherwise the limit is 2,960
       ** The 10, 710 limit applies only to vehicles that qualify for additional 50% depreciation (new), otherwise the limit is 3,060
       *** The 7,660 limit applies only to vehicles that qualify for additional 30% depreciation (new), otherwise the limit is 3,060




1300 TAX Credits

1301     Child and dependent care

                            Under age 13 or older if handicapped

                            Payments may be made to a relative if not claimed as a dependent and a child not under 19

                            Overnight camp does not count

                            Qualified expenses limited to wages of lower earnings spouse unless full time student or disabled

                            20% to 35% of expenses depending on AGI
                              35% to 20% begins to phase at $15,000.
                               1% for each $2,000
                                at $43,000 = 20%
                             Children      credit
                                 1            3,000
                            2 or more         6,000


1302     Child tax credit
                            Less than 17
                              2003-10       $1,000

                Phase outs begin at: and reduce $50 for each $1,000 of inc.over
                            Single       MFJ         MFS          HH

                               75,000      110,000       55,000       75,000

1303     Hope
                            1,500/student!!           100% of first $1,000 plus 50% of next $1,000
                            Each of first two years of post secondary edu.
                            Must take at least 50% load at accredited edu.
                            ONLY if Lifetime is not claimed
                            AND if no Edu IRA funds are used !
                            Student cannot have been convicted of Drug offense
                            Any amount used from EE exclusion reduces amounts applicable to the credit




1303     Lifetime           After 6/30/98           LIMITED to $2,000 per 1040!!      (College, Graduate, Vocational)
                            ONLY if Hope is not claimed
                            AND if no Edu IRA funds are used !
                            Any amount used from EE exclusion reduces amounts applicable to the credit
                            CAN BE Used if only ONE course (no 50% requirement)
                            NO TIME LIMIT

                    1998 20% of first $5,000 up to $1,000                    only on expenses after 6/30/98
                    2003 20% of first $10,000 up to $2,000              Page 5
                                             4411153f-76c9-4317-899e-ccbc1b072b05.xls
            Phase outs begin at: and reduce $xx for each $??? of inc.
           Single       MFJ         MFS           HH

              42,000       85,000       NA             42,000 starts                                                                 starts
              52,000 105,000            NA             52,000 ends                                                                   ends
       CAN'T be claimed if dependent
                      If paid by third party, student is deemed to have paid
                      If student is dependent, parent is deemed to have paid


1082   "Above-the-line" deduction for education expenses
       Max deduction in 2004-05                      4,000
            Phase outs begin at: and reduce $xx for each $??? of inc.
                         Single        MFJ         MFS         HH
       2004-2005          65,000       130,000      65,000     65,000




1304   Credit for the Elderly
       See calc - rarely used

       Age 65 or
       permanently disabled

1306   Adoption Credit
       10,390/ child
       10,160/ child w/ special needs ------      Beginning in 2003        credit can be claimed regardless of actual expenses paid or
       under 18                                    incurred in the year adoption becomes final.
       allowed in year finalized - see 1036

               Phase out occurs ratably between below amounts
                           Single       MFJ         MFS            HH

                          155,860       155,860      155,860      152,390 starts
                          195,860       195,860      195,860      195,860 ends

1311   Foreign Tax
        can take as a credit or deduction (sch a)
       Credit is usually better

1379   Gasoline tax credit          see form 4136

1307   Credit for Retirement Savings Contributions
         For contributions to 401k, 457 plan, traditional or Roth IRAs, SEP, SIMPLE, Tax-exempt or public school annuities, or
             voluntary after-tax contributions to a qualified retirement plan.
          Must meet the following requirements:
       1. Must be at least 18 years old at end of tax year
       2. Must not be an eligible dependent of another
       3. Must not be a full-time student for 5 or more months of the calendar year.
       4. AGI cannot exceed the following amounts:
                          Single         MFJ          MFS            HH
                            25,000        50,000       25,000         37,500




1400 AMT

       see rates on page 1

1425   Items
1430
       Installment sales ENDED 1997 !!
       Itemized ded
          Taxes
           Medical OK but must exceed 10% AMT AGI
           Misc. 2% itemized
           Tax exempt private activity bonds                         Page 6
1435   Incentive stock options                    4411153f-76c9-4317-899e-ccbc1b072b05.xls
          FMV at date freely transferable - price paid


1700 Capital Gains
       1 year or more
1736      Sales prior to 5/06/03:
                  20% if 25% bracket or more
                  10% if 15% bracket or lower
          Sales after 5/05/03
                  15% if 25% bracket or more
                   5% if 15% bracket or lower

 733   Qualifying dividends received after 12/31/02 are now taxed at the reduced capital gains rates (5 and 15%)
       The following types of dividend income are specifically excluded from qualified dividend income:
           Dividends paid from a corporation exempt from tax under Code Secs. 501 and 521.
           Amounts that would be deductible under Code Sec. 591.
           Any dividend described in Code Sec. 404(k).
           Dividends paid under Code Sec. 246(c ) that fail to meet the revised holding period.
           The extent that the taxpayer is under a payment obligation under Code Sec. 246(c ).
       Special rules apply to Sec 306 stock


1701   Small business stock - 50% of gain excluded
        issued after 8/10/93
        held > 5 years

       may be rolled over tax FREE if
         if other SB stock is purchased w/in 60 days
         Only C corp stock -- I think ?

1705   Residence

       500,000 exclusion         250,000 for single
       owned and occupied 2 of 5 years
       can do every 2 years
       Hardship (change in employment, health, other)
         may prorate $500k based on time (18 mos = $375k)

       Past depreciation (i.e. home office is taxed ... i.e. business % no longer excluded from exclusion if not used as HO for
       2 years before sale)


1721   Like Kind Exchanges
          List for exchange -- not sale
          Identify new property w/in 45 days of sale
          Settle w/in 180 days

1736   Depreciation on real estate recaptured at 25% tax rate

1752   Net capital loss limit
                 3,000
            Carry forward - unlimited




1779   Recaptures and 1231

       Depreciation recapture on 1250 capital gain taxed at 25%

       Installment sale of 1245 or accelerated 1250
       100% taxed at time of sale --- NOT over time
                 1245 personal property AND SINGLE PURPOSE HORTICULTURAL FACILITIES -
                        I.E. Mushroom Houses
                 1250 real estate

       1245 recapture 100% ordinary

       1250 ordinary = all accelerated if ACRS
                                                                  Page 7
                             = accelerated in excess of SL if MACRS
                                                     4411153f-76c9-4317-899e-ccbc1b072b05.xls


1967     Bond Discounts and Premiums
1956     MUST be amortized as an adjustment to the basis is required




       IRA's

2168     Regular
         $3000 for 2002 - 2004
             Must be under age 70 1/2
              Spouse w/ No Compensation may use other spouse's comp.
              Spouse who is not an active participant in a plan is now NOT ACTIVE if other spouse is
                        AS LONG as AGI under $150,000 (phase out $150 to $160)

       New catch-up provision in law for individuals over 50 years of age…$500 -2005, $1000 - 2006 & thereafter

2171             Phase outs (IF Active participant) begin at:
                             Single        MFJ           MFS           HH

                               45,000       65,000             0       45,000 starts
                               55,000       75,000        10,000       55,000 ends

2173     Non Deductible Contributions

2177     Distribution Requirements (Regular and Non Ded)
              Age 70
              Age 70 1/2, distribution must commence April 1, calendar year after person turns 70 1/2
              Remember if wait to 70 1/2 must take two that yr (4.1 and 12.31)

2178           NA Anymore -    Be careful with estate plan affects of choosing annual recalc method vs. initial calc

2180     Roth
             2002-2004--> 3,000 (2005-2007-->4,000, 2008+ --> 5,000)
             Age 50+ can make catch-up contributions…see above
              Not deductible
              Grows tax free
              Taken out tax free
              Can leave in and make contributions to beyond 701/2

                 Phase outs begin at: (EVEN IF A PARTICIPANT IN A PENSION AT WORK)
                             Single      MFJ        MFS         HH

                               95,000      150,000             0       95,000 starts
                              110,000      160,000        10,000      110,000 ends

         Roth Rollover

                 Phase outs begin at:
                             Single        MFJ          MFS            HH

                              100,000      100,000              0     100,000

898      Education
         $2,000 - 2003
              Not deductible, total contribution to all Educational IRA's cannot exceed $2,000
              Grows tax free
              Taken out tax free
              Can leave in beyond 701/2
              Contributions can be made up to 4/15 of following year
              Can be used for Elementary, Secondary, or College education

                 Phase outs begin at:
                             Single        MFJ          MFS            HH

                               95,000      190,000       95,000        95,000
                              110,000      220,000      110,000       110,000
                                                                        Page 8
                                                    4411153f-76c9-4317-899e-ccbc1b072b05.xls
 697     Qualified Tuition Programs
             Contributions on behalf of beneficiary are N/D and are subject to transfer tax rules.
             Can apply a special gift tax rule allowing you to claim a gift ratably over a five year period.
             --- enables you to contribute up to $55,000 for 2002 without paying any transfer taxes.
             Distributions are tax free as long as used for qualified expenses after:
             ----2002 for state plans
             ----2004 for private institutions
             Donor can redirect back to self or another child or cousin at any time




       Profit Sharing, Pension, 401K, SIMPLE, SEP
       Contribution limits

2101 Profit Sharing                                     2004         2005       2006          2007             2008     2009      2010
       % of comp                                          100%         100%        100%          100%           100%    100%      100%
       Max Comp                                         205,000      210,000 Adjusted for inflation
       Max Contribution                                  41,000       42,000 Adjusted for inflation
       Employee Max 401K Withhold                        13,000       14,000      15,000       15,000          15,000    15,000    15,000
       Catch-up Contributions                             3,000        4,000       5,000         5,000          5,000     5,000     5,000
     Pension Plan
       % of comp                                          100%          100%        100%          100%          100%    100%      100%
       Max Comp                                         205,000       210,000 Adjusted for inflation
       Max Contribution                                  41,000        42,000 Adjusted for inflation
       Employee Max 401K Withhold                        13,000        14,000      15,000       15,000         15,000    15,000    15,000
       Catch-up Contributions                             3,000         4,000       5,000         5,000         5,000     5,000     5,000
2184 SEP's
       % of comp                                           25%         25%          25%         25%              25%    25%       25%
       Max Comp                                         205,000    210,000 Adjusted for inflation
       Max Contribution                                  41,000     42,000 Adjusted for inflation
                                                    ** May also make 401k contributions too.
2185 SIMPLE
       % of comp                                            3%            3%           3%           3%         3%        3%        3%
       Max Comp                                         300,000       333,333      333,333      333,333    333,333      333,333   333,333
       Max Contribution                                   9,000        10,000       10,000       10,000     10,000       10,000    10,000
       Catch-up Contributions                             1,500         2,000        2,500        2,500      2,500        2,500     2,500




       Estate and Gift Taxes:

       Gift Tax:
2908     For gifts of present interest:
         May gift up to $11,000 per year per donee not subject to gift tax
         Spouses can gift up to $22,000 per year per donee not subject to gift tax, if both spouses elect to split their gifts.

2908     Special rules apply to gifts of present interest to a donor's spouse who is not a US citizen.
         An annual exclusion of $114,000 is allowed to a spouse that would otherwise qualify for the marital deduction had the spouse been a US citizen

         Note: The annual exclusion is not allowed for gifts of future interests in property.

  42     Unified Transfer Tax Rate Schedule (Applies to estates and gifts)

                          Taxable     Taxable       Tax on        Tax
                          Amount      Amount        Amount        Rate
                          Over        Not Over
                                                                         Page 9
       for 2003                0                       0       18%
                                       10,000 4411153f-76c9-4317-899e-ccbc1b072b05.xls
                          10,000       20,000      1,800       20%
                          20,000       40,000      3,800       22%
                          40,000       60,000      8,200       24%
                          60,000       80,000     13,000       26%
                          80,000      100,000     18,200       28%
                         100,000      150,000     23,800       30%
                         150,000      250,000     38,800       32%
                         250,000      500,000     70,800       34%
                         500,000      750,000    155,800       37%
                         750,000    1,000,000    248,300       39%
                       1,000,000    1,250,000    345,800       41%
                       1,250,000    1,500,000    448,300       43%
                       1,500,000    2,000,000    555,800       45%
                       2,000,000                 780,800       49%


       ** Note: For 2004 the 49% rate is reduced to 48%

2942   Generation-Skipping Transfer Tax

       Applies to transfers to persons two generations or more younger than the transferor.
       Taxed at a flat rate equal to the maximum applicable estate tax rate.
                              2004         2005        2006         2007        2008        2009
                               48%         47%          46%          45%         45%        45%


       Lifetime Exemption
                                    Gift Tax   Estate Tax GST Tax
                            2002    1,000,000 1,000,000 1,100,000
                            2003    1,000,000 1,000,000 1,120,000
                            2004    1,000,000 1,500,000 1,500,000
                            2005    1,000,000 1,500,000 1,500,000
                            2006    1,000,000 2,000,000 2,000,000
                            2007    1,000,000 2,000,000 2,000,000
                            2008    1,000,000 2,000,000 2,000,000
                            2009    1,000,000 3,500,000 3,500,000
                            2010    1,000,000 ***675,000 ***675,000

       *** Note: The estate and GST taxes are scheduled to be repealed in 2010 only, unless legislation is enacted otherwise.




                                                                  Page 10
                                                               PELLINI, GOLD & ASSOCIATES, LTD.
                                                                       CERTIFIED PUBLIC ACCOUNTANTS
                                                                          11 SOUTH CHURCH STREET
                                                                        WEST CHESTER, PA 19382-3220
               JAMES J. PELLINI, C.P.A., C.V.A.                                                                           DAVID PELLINI (1953-1992)
               DAVID G. GOLD, C.P.A.                                                                                              --------------
                    --------------                                                                                                  696-1177
               JAMES C. PELLINI, P.A.                                                                                            FAX 344-7144
               JUDITH B. VIRGILIO, C.P.A.                                                                                       AREA CODE 610
               KAREN L. SHOPE, C.P.A.                                                                                     WEB SITE: www.pellinigold.com

Summary of key tax law changes: Please check out our website for ongoing tax updates as part of our tax newsletter.
Prepared by Bill Brady, 6/01/03 updated 11/04
                                   Prior
                                   Law       2001  2002        2003        2004        2005         2006        2007         2008        2009         2010        2011
Income Tax Rates
     Single          Married
 over 311,950    over 311,950     39.60% 39.10%    38.60%       35.00%      35.00%     35.00%        35.00%     35.00%       35.00%       35.00%       35.00%    39.60%
 143-311,950      174-311,950     36.00% 35.50%    35.00%       33.00%      33.00%     33.00%        33.00%     33.00%       33.00%       33.00%       33.00%    36.00%
  68-143,500      114-174,700     31.00% 30.50%    30.00%       28.00%      28.00%     28.00%        28.00%     28.00%       28.00%       28.00%       28.00%    31.00%
   28-68,800       56-114,650     28.00% 27.50%    27.00%       25.00%      25.00%     25.00%        25.00%     25.00%       25.00%       25.00%       25.00%    28.00%
    7-28,400        14-56,800     15.00% 15.00%    15.00%       15.00%      15.00%     15.00%        15.00%     15.00%       15.00%       15.00%       15.00%    15.00%
     0-7,000         0-14,000               10.00% 10.00%       10.00%      10.00%     10.00%        10.00%     10.00%       10.00%       10.00%       10.00%    15.00%

Expansion of 10% Bracket 1
Taxable income limit - MFJ         NA             12,000      12,000    14,000    14,000      14,000    14,000   14,000      14,000       14,000       14,000    NA
Taxable income limit - all
 others                            NA              6,000       6,000     7,000     7,000       7,000     7,000    7,000       7,000        7,000        7,000    NA

Capital Gains rates 2,3,4,5,6
Max CG rate                             20%         20%          20%       15%      15%          15%      15%      15%          15%          20%          20%         20%
CG rate for 10 & 15%
 brackets                               10%         10%          10%        5%       5%           5%       5%       5%           0%          10%          10%         10%

Dividends 7,8
Max dividends rate                 Ord Inc    Ord Inc      Ord Inc         15%      15%          15%      15%      15%          15% Ord Inc        Ord Inc       Ord Inc
Dividends rate for 10 & 15%
 brackets                          Ord Inc    Ord Inc      Ord Inc          5%       5%           5%       5%       5%           0% Ord Inc        Ord Inc       Ord Inc

AMT Exemption
Single                               33,750       35,750      35,750     40,250   40,250       40,250   33,750   33,750       33,750      33,750       33,750
Married                              45,000       49,000      49,000     58,000   58,000       58,000   45,000   45,000       45,000      45,000       45,000

IRA Contribution Limits (Regular and Roth IRAs combined per individual)
Regular Contributions            2,000     2,000    3,000       3,000              3,000       4,000     4,000    4,000       5,000    increased by inflation
Catch-up Contributions            NA       NA         500         500                500         500     1,000    1,000       1,000         1,000        1,000


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Pension Provisions
401K Contributions                                 10,000      11,000      12,000      13,000      14,000      15,000       15,000      15,000      15,000         15,000
Pension Maximums 9,10                              35,000      40,000      40,000      41,000      42,000      42,000       42,000      42,000      42,000         42,000
401k Catch-up Contributions                       NA            1,000       2,000       3,000       4,000       5,000        5,000       5,000       5,000          5,000
Simple Plans                                                    7,000       8,000       9,000      10,000      10,000       10,000      10,000      10,000         10,000
Simple Catch-up Contributions                     NA              500       1,000       1,500       2,000       2,500        2,500       2,500       2,500          2,500

Child Tax Credit
Per qualifying child                       500                    600         1,000        1,000       1,000     1,000       1,000        1,000        1,000      1,000
                                                                        (will result in a $400 check from US Treasury in 2003 if taxpayer had qualifying dependent(s) in 2002)
Marriage Penalty Relief
Standard Deduction as a
 % of Single amount                                                          200%        200%        200%         200%        200%        200%        200%          200%
15% bracket as a % of
 Single amount                                                               200%        200%        200%         200%        200%        200%        200%          200%

Estate Tax
Maximum Tax Rate                        55.00%    55.00%    50.00%    49.00%    48.00%    47.00%    46.00%    45.00%    45.00%                      45.00% Repealed
Exemption Amount                        675,000   675,000 1,000,000 1,000,000 1,500,000 1,500,000 2,000,000 2,000,000 2,000,000                   3,500,000 Repealed

Gift Tax
Maximum Tax Rate                        55.00%    55.00%    50.00%    49.00%    48.00%    47.00%    46.00%    45.00%    45.00%                      45.00%      35.00%
Exemption Amount                        675,000   675,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000                   1,000,000   1,000,000

Depreciation Provisions
 Sec 179 expense
   Deduction Amount                                24,000      24,000      100,000     102,000      102,000      102,000     102,000       25,000     25,000      25,000
   Investment limitation                           24,000     200,000      400,000     410,000      410,000      410,000     410,000     200,000     200,000     200,000
   SUV deduction                                  Limited to $25,000 for vehicles placed in service after Oct 22, 2004 with a GVWR in excess of 6,000 lbs but less
                                                   than 14,000 lbs
                                                  IRS went a step further to define exclusions to the rule for certain heavy trucks, cargo vans, and small buses

    Bonus Depreciation 11,12,13,14,15                             30% 30 or 50%           50% NA             NA          NA          NA          NA           NA

    Leasehold Improvements                        Qualified leasehold improvements to nonresidential real property placed in service after October 22, 2004 and
                                                   before January 1, 2004 may now be depreciated over a 15 year SL recovery period.

1
    The 10% tax bracket will be eliminated for tax years beginning after 2010 unless further legislative action is taken.

2
    The JGTRRA of 2003 temporarily lowers capital gains rates effective for sales and exchanges (and payments received) on or after May 6, 2003
        and through December 31, 2008.

3
    The deduction of capital losses against ordinary income will continue to be limited to $3,000.

4
    Long-term capital gain from certain assets (such as collectibles) will remain subject to a 28% maximum rate.


                                                                                                Page 12
5
     Unrecaptured Sec. 1250 gain will remain subject to a 25% maximum rate.

6
     The capital gain rates for property held for more the 5 years was lowered to 18% and 8% respectively by the EGTRRA of 2001, however this provision
        has been repealed until 2009 when the 20/10% CG rates are scheduled to return. Please note that the lower 5 year rates are set to expire after 2010.

7
     The new tax rates on dividends are effective for dividends received after December 31,2002 and before January 1, 2009.

8
     The following types of dividend income are specifically excluded from qualified dividend income:
       Dividends paid from a corporation exempt from tax under Code Secs. 501 and 521.
       Amounts that would be deductible under Code Sec. 591.
       Any dividend described in Code Sec. 404(k).
       Dividends paid under Code Sec. 246(c ) that fail to meet the revised holding period.
       The extent that the taxpayer is under a payment obligation under Code Sec. 246(c ).

9
     Contributions to a defined contribution plan are limited to the lesser of the stated amount or 100% of compensation.

10
     The maximum pension contribution will be indexed annually in $1,000 increments.

11
     The bonus depreciation is applicable only to new assets acquired after September 10, 2001 through December 31, 2004 and applies only to assets with
        a recovery period of 20 years or less, computer software depreciated over 3 years, or qualified leasehold improvement property.

12
     The 30% bonus applies for the period beginning after September 10, 2001 through May 5, 2003. The 50% bonus applies for the period beginning after
        May 5, 2003 through December 31, 2004.

13
     The following states conform to the bonus depreciation allowed by federal law: Alabama, Alaska, Colorado, Delaware, Kansas, Louisiana, New Mexico,
        North Dakota, Oregon, and Utah. Florida and West Virginia allow the 30% bonus, but not the 50% bonus.

14
     The following states do not allow the federal bonus depreciation: Arizona, Arkansas, California, Connecticut, D.C., Georgia, Hawaii, Idaho, Illinois, Indiana,
        Iowa, Kentucky, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont,
        Virginia, and Wisconsin.

15
     The following states have special rules regarding bonus depreciation: Maine, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New York, North Carolina,
        Ohio, Oklahoma, South Dakota, Texas, Washington, and Wyoming.


Prepared by Bill Brady, 6/01/03




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