Estate Planning

Here is a brief answer to a question someone had about the current status of the Estate Tax:

On 1/1/2010 a funny thing happened that we all knew about but thought it would get changed before actually coming to fruition.  As of 1/1/10, the estate tax is repealed (that means 0% estate tax for anyone who dies now), the gift tax went down to 35% and the generation skipping tax was also repealed.  One caveat, upon a person's death, the inheritor receives the assets at the original cost so when the inheritor sells, she will have to pay capital gains on the sale.  There is an exemption amount but I'm not going to get into that here as it isn't really that important.

All of the above is only in effect for 2010.  On 1/1/2011, we revert back to a 55% estate tax/gift tax, a 1 million dollar exemption and the  generation skipping tax returns at 55%.

Congress has been working on a bill to make permanent the estate law changes enacted in the 2001 Tax Act, however they have been unable to do so as of this writing.  The worry is, if they do come up with permanent estate tax relief, will they make the changes retroactive, thereby nullifying any action people took during this time?  No one knows--it is a huge mess.

What many people with wealth are considering is GIFTING of assets and paying the tax at the 35% rate.  If permanent changes occur and made retroactive, I am sure there will be masses of people who will challenge the constitutionality of such a decision.  But in the worst case scenario, the person who gifted would end up paying the new gift tax rate (what ever that may be).

Finally--Year End Return Numbers

Well, 2009 ended on a good note for most areas of the market.  I'm still in disbelief that in one year we went from Armageddon to "everything is back to normal"--as least as far as the market is concerned.  From an economic perspective, we still have a long way to go.  But the market always leads.  Here are the year's numbers:


The Monthly Index Report for December 2009

Index	Dec-09	QTD	YTD	Description
S&P 500 Index*	1.8%	5.5%	23.5%	Large-cap stocks
DJIA*	0.8%	7.4%	18.8%	Large-cap stocks
Nasdaq Comp.*	5.8%	6.9%	43.9%	Large-cap tech stocks
Russell 1000 Growth	3.1%	7.9%	37.2%	Large-cap growth stocks
Russell 1000 Value	1.8%	4.2%	19.7%	Large-cap value stocks
Russell 2000 Growth	8.6%	4.1%	34.5%	Small-cap growth stocks
Russell 2000 Value	7.6%	3.6%	20.6%	Small-cap value stocks
EAFE	1.5%	2.2%	32.5%	Europe, Australasia & Far East Index
Lehman Aggregate	-1.6%	0.2%	5.9%	U.S. Government Bonds
Lehman High Yield	3.3%	6.2%	58.2%	High Yield Corporate Bonds
Calyon Financial Barclay Index**	-3.0%	-1.8%	-4.4%	Managed Futures
3-mo. Treasury Bill***	0.0%	0.0%	0.3%
All returns are estimates as of December 31, 2009. *Return numbers do not include dividends. ** Returns are estimates as of December 30, 2009.

Helpful Tip from the IRA on filing status

Eight Facts About Filing Status 

Everyone who files a federal tax return must determine which filing status applies to them. It’s important you choose your correct filing status as it determines your standard deduction, the amount of tax you owe and ultimately, any refund owed to you.

Here are eight facts about the five filing status options the IRS wants you to know in order to choose the correct filing status for your situation.

1. Your marital status on the last day of the year determines your marital status for the entire year.
2. If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
3. Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.
4. A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.
5. If your spouse died during the year and you did not remarry during 2009, you may still file a joint return with that spouse for the year of death, provided the joint return election is not revoked by a personal representative for the deceased spouse.
6. A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.
7. Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.
8. You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2007 or 2008, you have a dependent child and you meet certain other conditions.

There’s much more information about determining your filing status in Publication 501, Exemptions, Standard Deduction, and Filing Information. Publication 501 is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Link:

• Publication 501, Exemptions, Standard Deduction, and Filing Information (PDF 196K)

Good Bye 2009

Markets Alert
from The Wall Street Journal
----------------------------
Sponsored by NASDAQ OMX
----------------------------


The Dow industrials fell 120.46 points, or 1.1%, to 10428.05 on Friday, capping what was otherwise a banner year that saw the average notch its biggest annual percentage gain in six years. For 2009, the blue-chip measure ended with an 18.8% gain. Still, it is down 26.4% from its all-time high set in October 2007.

The Nasdaq Composite Index wrapped up 2009 with a 43.9% gain, while the Russell 2000 index gained 25.2% and the Standard & Poor's 500-stock index added 23.5%.

Enjoy The Spirit Of Christmas

A reprint from www.newseum.org....enjoy

Eight-year-old Virginia O'Hanlon wrote a letter to the editor of New York's Sun, and the quick response was printed as an unsigned editorial Sept. 21, 1897. The work of veteran newsman Francis Pharcellus Church has since become history's most reprinted newspaper editorial, appearing in part or whole in dozens of languages in books, movies, and other editorials, and on posters and stamps.

"DEAR EDITOR: I am 8 years old. "Some of my little friends say there is no Santa Claus. "Papa says, 'If you see it in THE SUN it's so.' "Please tell me the truth; is there a Santa Claus? "VIRGINIA O'HANLON. "115 WEST NINETY-FIFTH STREET." VIRGINIA, your little friends are wrong. They have been affected by the skepticism of a skeptical age. They do not believe except [what] they see. They think that nothing can be which is not comprehensible by their little minds. All minds, Virginia, whether they be men's or children's, are little. In this great universe of ours man is a mere insect, an ant, in his intellect, as compared with the boundless world about him, as measured by the intelligence capable of grasping the whole of truth and knowledge. Yes, VIRGINIA, there is a Santa Claus. He exists as certainly as love and generosity and devotion exist, and you know that they abound and give to your life its highest beauty and joy. Alas! how dreary would be the world if there were no Santa Claus. It would be as dreary as if there were no VIRGINIAS. There would be no childlike faith then, no poetry, no romance to make tolerable this existence. We should have no enjoyment, except in sense and sight. The eternal light with which childhood fills the world would be extinguished. Not believe in Santa Claus! You might as well not believe in fairies! You might get your papa to hire men to watch in all the chimneys on Christmas Eve to catch Santa Claus, but even if they did not see Santa Claus coming down, what would that prove? Nobody sees Santa Claus, but that is no sign that there is no Santa Claus. The most real things in the world are those that neither children nor men can see. Did you ever see fairies dancing on the lawn? Of course not, but that's no proof that they are not there. Nobody can conceive or imagine all the wonders there are unseen and unseeable in the world. You may tear apart the baby's rattle and see what makes the noise inside, but there is a veil covering the unseen world which not the strongest man, nor even the united strength of all the strongest men that ever lived, could tear apart. Only faith, fancy, poetry, love, romance, can push aside that curtain and view and picture the supernal beauty and glory beyond. Is it all real? Ah, VIRGINIA, in all this world there is nothing else real and abiding. No Santa Claus! Thank God! he lives, and he lives forever. A thousand years from now, Virginia, nay, ten times ten thousand years from now, he will continue to make glad the heart of childhood.

Reminder from the IRS!!

RS Reminds Car Shoppers about 2009 Tax Break  

WASHINGTON — The Internal Revenue Service today reminds individual taxpayers who are considering buying a new car that they have until Dec. 31 to take advantage of a tax break that may not be around in 2010.
Taxpayers who buy a qualifying new motor vehicle this year after Feb. 16 can deduct the state or local sales or excise taxes they paid on the first $49,500 of the purchase price. Qualifying motor vehicles include new passenger automobiles, light trucks, motorcycles, and motor homes.
Individuals who itemize and those who take the standard deduction can benefit from this tax break. In states without a sales tax, other taxes or fees can qualify if they are assessed on the purchase of the vehicle and are based on the vehicle’s sales price or as a per unit fee.
The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.
Taxpayers who take the standard deduction need to complete Schedule L and attach it to Form 1040 or Form 1040A to increase the standard deduction by the allowable amount of state or local sales or excise taxes paid on the purchase of the new vehicle. Also, check the box on line 40b on Form 1040 or line 24b on Form 1040A. Individuals who itemize should include the allowable amount of state or local sales or excise taxes from the purchase of the vehicle on Form 1040, Schedule A

November Returns

With only one month left to go, the year is looking like a pretty remarkable comeback after the dark days of 2008.  Today's Unemployment numbers and rate certainly showed that at least the trend for the economy has turned.  Payroll number was down only 11,000 with an unemployment rate of 10% vs. last month's 10.2%.
Here are the returns:

The Monthly Index Report for November 2009

Index	Nov-09	QTD	YTD	Description
S&P 500 Index*	5.7%	3.6%	21.3%	Large-cap stocks
DJIA*	6.5%	6.5%	17.9%	Large-cap stocks
Nasdaq Comp.*	4.9%	1.0%	36.0%	Large-cap tech stocks
Russell 1000 Growth	6.1%	4.7%	33.1%	Large-cap growth stocks
Russell 1000 Value	5.6%	2.4%	17.6%	Large-cap value stocks
Russell 2000 Growth	3.1%	-4.1%	23.9%	Small-cap growth stocks
Russell 2000 Value	3.2%	-3.7%	12.1%	Small-cap value stocks
EAFE	2.0%	0.8%	30.6%	Europe, Australasia & Far East Index
Lehman Aggregate	1.3%	1.8%	7.6%	U.S. Government Bonds
Lehman High Yield	1.0%	2.8%	53.2%	High Yield Corporate Bonds
Calyon Financial Barclay Index**	2.4%	1.3%	-1.4%	Managed Futures
3-mo. Treasury Bill***	0.0%	0.0%	0.3%
All returns are estimates as of November 30, 2009. *Return numbers do not include dividends. ** Returns are estimates as of November 27, 2009.