Gift Tax Valuations

Gift tax valuations are prepared for many reasons. Gift tax includes market value of gifts to charity, market value of conservation easements and gifts in excess of annual limit. Well-reasoned planning of gifts can minimize gift taxes, income taxes, and estate taxes.

Gifts to charity are included in the gift tax laws. Gifts to charity can reduce taxable income and income tax. Donate appreciated assets and you do not have to pay capital gains tax. However, you receive a deduction for the current market value of the asset.

Gifts made prior to death are often made to transfer wealth and reduce estate taxes. There are no gift taxes if the gift per person is below a specific amount per recipient. Both husband and wife can each give the max amount to each other and not pay the gift taxes.

Advanced planning and proper structuring can maximize the transfer of wealth without relinquishing control. Consider XYZ Company, owned by Mr. and Mrs. Carnegie, which is worth $10 million. Clearly a taxable estate.

Split into 100 A shares which own 10% and have 100% of control and 100,000 B shares which own 90% and have no voting rights;
B shares are transferred to ABC Company which has stocks and other liquid assets worth $1,000,000.

Assume market value of all ABC assets are worth $5.5 million (1.0 million + 50% x 9.0 million). Mr. and Mrs. Smith own 90% of ABC and the remaining 10% is owned by employees of XYZ Company. ABC is not a public company and shares may not be sold without prior approval of Mr. and Mrs. Smith during their life (sole discretion). Assume a 40% discount for illiquidity and lack of control, 1% of ABC is worth $27,000 (4.5mm x .01 x .6).

Hence assets worth $10,000,000 ($9million + $1million) are reduced in value to $2.7 million. If they have four children and each give the maximum, they can give 4.74% per year and not pay gift taxes.

O’Connor & Associates is the largest independent appraisal firm in the southwestern US and has over 40 full-time staff members engaged full-time in valuation and market study assignments. Their expertise includes gift tax valuations, feasibility studies, valuing real estate, business personal property, business enterprise valuation, purchase price allocation for businesses, valuation for property tax assignments, partial interest valuation, estate tax valuation, expert witness testimony and valuation for condemnation.

To obtain a quote or further information for a gift tax valuation, contact either George Thomas or at 713-686-9955 or fill out our online form.

O’Connor & Associates is a national provider of investment real estate consulting services including commercial real estate appraisals, highest and best use analysis, insurance valuations, property tax, gift tax valuation, due diligence, insurance valuations Tax reduction is a combination of art and science. The art involves understanding the client’s circumstances and objectives. The science requires being able to marshal technical resources to cost effectively reduce taxes.

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Alternative Minimum Tax Planning Ideas – Depreciation

Surprisingly, one of every six individuals paying the Alternative Minimum Tax has depreciation as an AMT item. It may or may not individually be a large item to a particular taxpayer, but the good news is that it is easy to plan around, and this planning can be done any time up until the filing of the tax return. In other words, a taxpayer with this item still may have the opportunity to reduce his AMT for 2009.

There are numerous ways depreciation may show up in an individual taxpayer’s Form 1040. One is rental property the individual owns; another is business property if the business is being operated as a sole proprietorship. Other ways are if the business or rental property is in a “pass-through” entity. Examples of these include LLCs, partnerships, and S corporations, in which case the income and expenses, and any of the separate AMT items, are reported on the individual owners’ tax returns.

Here’s how depreciation works. Assume a business asset cost $10,000, and that the period over which it will be used (its “useful life”) is 5 years. Under the basic “straight-line” method of depreciation, the taxpayer would report an expense of $2,000 per year over this period.

But, in an effort to encourage investment, Congress allows a choice of other depreciation methods, all of which allow more of the expense to be deducted in the early years of the property’s life. For example, under something called the “double declining balance” method, here is how the cost would be recovered:

Year 1 – 40%, or $4,000
Year 2 – 24%, or $2,400
Year 3 – 14%, or $1,400
Year 4 – 11%, or $1,100
Year 5 – 11%, or $1,100

Total – $10,000

While the double declining balance method may be used for Regular Tax purposes, it is not allowed for purposes of the Alternative Minimum Tax. The most accelerated depreciation method that may be used for a taxpayer’s AMT calculation in this example, the so-called “150% declining balance” method, would result in depreciation deductions as follows:

Year 1 – 30%, or $3,000
Year 2 – 21%, or $2,100
Year 3 – 17%, or $1,700
Year 4 – 16%, or $1,600
Year 5 – 16%, or $1,600

Total – $10,000

Matching these two schedules, the AMT item in each of the 5 years is the difference between the two:

Year 1 – $1,000 AMT item (AMT income is higher than Regular Tax income)
Year 2 – $300 AMT item ”
Year 3 – ($300) AMT item (AMT income is lower than Regular Tax income)
Year 4 – ($500) AMT item ”
Year 5 – ($500) AMT item “

Total – $0

The planning opportunity here simply is to choose a depreciation method that does not result in an AMT item. For Regular Tax purposes, a taxpayer may choose to use the 150% declining balance method (the AMT method) or the straight-line method instead of the double declining balance method. By doing this, there will be no AMT item to report. Note that this election is available each year for property that is placed in service during that year. Note also, however, that the choice of method is made at the entity level, so if the property is in an LLC, partnership or S corporation, the election is made in the filing of that entity’s tax return.

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Types of Online Courses in Tax Accounting

There are many different types of online courses in tax accounting available if you would like to learn how to manage the books. The different online courses in tax accounting you can choose from include business, personal, statistics, and much more.

Taking online courses to learn how to do taxes or manage finances is a great idea. Finances are something you will have to manage your entire life for personal or possibly for a business. The smarter you are with your finances, the more successful you will be with having good credit and not have to worry about problems in the future. Most people who have financial problems are those who have not taken courses in accounting and who don’t know how to manage their bills and accounts.

Online courses in tax accounting will teach you about liabilities and assets. You will learn about managing bills and income. You will learn how to set up a balance sheet, income tax statement, and learn about cost effective methods. If you find that you often bounce checks on your personal account or if your bills are often on a shut off notice before you are capable of paying them then it might be a good idea to look for some free online accounting courses you can take. You can learn a lot through free online accounting courses. When people take accounting classes they learn about cost effectiveness and less money is wasted. You will learn how to properly manage your income and live within your means.

You can also take income tax courses online. This is very beneficial for people who want to file their taxes on their own. If you have had problems with people filing your taxes for you in the past or you don’t want to pay the fees anymore, you can learn by taking income tax courses online. In a class based on taxes, you will learn the steps on how to file, credits, how to get the highest return back that you possibly can, and much more. You will also learn about business taxes and how to file them. Businesses must pay taxes differently than individuals. A business must pay taxes every time they cut a pay check to an employee, on property taxes, and more.

Online statistics courses are very beneficial for people who work with numbers and think analytically. Statistics are used more often than people think and this course is beneficial if you are working with projections, comparing local market business statistics, or if you need to ask a bank or a lender for a loan.

Online courses in tax accounting are beneficial in many ways. You will use and work with finances your entire life. Everyone has to worry about personal finances and taxes. Income, bills, and taxes are impossible to get away from. Learning how to successfully manage your money will help you have less stress and live within your income level comfortably without having to worry about utilities getting shut off or bouncing checks.

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Ways to Get Tax Breaks

Taxes are the bane of most citizens’ existence. Fortunately, there are many IRS income tax breaks available to citizens, allowing them to get back a little of the money they have spent. These kinds of IRS income tax breaks focus on certain areas of government such as education-related and job-related expenses.

One popular way to obtain a tax break is the benefits that can be found in education costs. Certain tuition fees and deductions can be considered tax breaks, if you are either paying for expenses of a higher education, and if you are paying this for yourself or for another eligible student such as children or family members tat can claim you as a dependent on their tax returns. This however, does not apply to non-residents, and if your modified adjustments gross income exceeds $80,000. With this, you can reduce your income tax to as much as $4,000.Deductible fees only include the tuition fees for secondary education, and not living and personal expenses. Students who avail of loans also are allowed certain IRS income tax breaks of up to $2,500 in yearly paid interest. Some education savings plans such as the 529 plans may also avail of these.

There are many opportunities to also avail work-related IRS income tax breaks. For people working full-time and needing to pay for someone to look after the children at times, then they can also get tax breaks from the amount that they used to pay for babysitters and nannies, with up to $3,000 on one dependent, and $6,000 for two or more. If you have had to spend money on travel expenses for a possible job interview, you can still write it off. If there is mandatory subscription for publications you have paid for that is needed or required by your work, it can also be deducted from your tax. Other IRS income tax breaks also include using the phone for long-distance interviews, or for other work-related matters, and fees paid out to professional association memberships needed for or in relation to your work.

Self-employed people can also opt for certain reductions. If they have contributed to at least a maximum of a Simplified Employee Pension (or an SEP), then they can deduct that same amount as part of their IRS tax income break.

Another important return to consider involves how much you send for a retirements savings plan. AGIs with $25,000 or less for individuals, and a maximum of $50,000 for married couples, you can take back 50% on as much as $2,000 in savings to retirement plans such as the 401 or IRA plans.

Some IRS income tax breaks were provided in order to encourage energy savings in the household. As an example, people who buy or make use of energy savings equipments such as solar-powered utilities can get back 30% of as much as $2,000, 10% for as much as $500 for insulation, and $200 for as much as other energy-efficient materials such as windows, all excepting labor costs.

People are always seeking active means by which they can reduce the taxes that they have to pay, or make full use of any IRS income tax breaks that can apply to them. With this in mind, it is important to be aware of all possible IRS income tax breaks made available to the public, so that more people can save up on their money. As many of these income tax breaks revolve around education and retirement savings plans, or help promote work and energy-saving in some way, it is also a good chance for people to better improve their lifestyle by placing more importance in these types of savings.

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