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The speculation is finally over. Former GOP presidential candidate and retired neurosurgeon Ben Carson will soon make his final announcement accepting the role of HUD secretary, sources close to the situation confirm. The build up from the week brought much speculation as rumors swirled and Carson hinted at an upcoming announcement.
Year-end 2016 is expected to bring a rush of tax-related legislation in Congress. Lawmakers will be up against a December 31 deadline to renew some expiring tax incentives and possibly pass new tax breaks for individuals and businesses. The year may end with what is often called a “Christmas Tree bill,” a bill that includes a variety of tax and other provisions.
Note: At the time this article was posted, the results of the November 8 presidential election was not yet known. That outcome will shape tax legislation in 2017 and beyond.
Tax breaks for individuals
In December 2015, many popular but temporary tax incentives for individuals were scheduled to expire at year-end. Congress renewed or made permanent most of these tax breaks in the Protecting Americans from Tax Hikes Act (PATH Act). However, some incentives were not included in the PATH Act and these are up for renewal, or possibly being made permanent, this December. They include the Code Sec. 25C residential energy credit (for energy-efficient improvements to homes) and the popular above-the-line deduction for higher education tuition and fees.
Tax breaks for businesses
The PATH Act also extended, and in some cases made permanent, many tax incentives for businesses. Some incentives, however, were not included in the PATH Act and are expected to come up for renewal this December. They include targeted incentives for film and television productions, Native American employment, the mining industry, railroads, and motorsports complexes. Along with these, some special tax breaks for alternative fuels are scheduled to expire at year-end.
Along with the incentives already described, some stand-alone tax bills are expected to come to votes in Congress before year-end. The bills, if passed, impact individuals, small businesses, farmers, and tax administration. They include:
Any or all of these bills, and others, could be part of a year-end tax package. Our office will keep you posted of developments.
J. Michael Grinnan, CPA.CITP
Certified Public Accountant
9900 Corporate Campus Drive, Suite 3000
Louisville, KY 40223
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Unanimous decision for 0.25% raise
(Source: Federal Reserve)
The Federal Open Market Committee announced in its December meeting that it is officially raising the federal funds rate for the first time since June 2006.
In a statement released Wednesday by the Federal Reserve, the FOMC said that it will gradually raise the federal funds rate to a range of 0.25% to 0.50%
“Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the committee decided to raise the target range for the federal funds rate to 0.25% to 0.50%. The stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2% inflation,” the FOMC said in a statement.
Moving forward, the FOMC said, “In determining the timing and size of future adjustments to the target range for the federal funds rate, the committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2% inflation.”
All FOMC members voted unanimously.
According to the economic projections of Federal Reserve Board members and Federal Reserve Bank presidents under their individual assessments of projected appropriate monetary policy, the federal funds rate is projected to grow from 0.4% in 2015 to 3.4% in 2018.
During the October meeting, the Federal Reserve said that it would not raise the federal funds rate at that time, citing the fact that the country’s economy still had not met the targets laid out by the FOMC.
However, since that meeting, Fed Chair Janet Yellen has said in a Congressional committee hearing on the U.S. economy that the current outlook and the flow of data since the central bank’s last meeting in October are “consistent” with the rate hike criteria spelled out by U.S. policymakers.
And in November, in a speech before the House Financial Services Committee, Yellen formalized the possibility of a rate hike in December, telling the Committee that a rate increase in December was a “live possibility.”
Recent housing news also supported a rate hike, with the November jobs report showing that job creation increased by 211,000 for the month. Consumer spending echoed that, recording solid growth in November.
What are your thoughts and comments?
In between preparing for the year-end holidays, school vacations, travel, work, and so on, tax planning should not be on the back burner. Although 2015 is quickly coming to a close, there is still time, with careful planning, to execute some last minute tax strategies. In many cases, these strategies can help minimize the tax burden. Of course, every individual’s situation is different, so please contact our office for specific details about a year-end tax planning strategy customized to you.
For many taxpayers, one of the most significant questions looming over 2015 returns is will they be able to claim all the deductions, credits and incentives that were available in 2014? Many of these incentives are grouped in a package known as the tax extenders. If you have taken in 2014 (or in a prior year) the state and local sales tax deduction, higher education tuition deduction, teacher’s classroom expense deduction, IRA distribution to charity, among others, you enjoyed the benefit of a tax extender.
Under current law, these popular tax breaks expired after 2014. That means they are no longer available for 2015, unless they are renewed by Congress. At this time, it is highly likely that Congress will vote to extend the extenders at least for 2015. Congress could approve a two-year extension. A vote is expected before January 1, 2016. However, Congress could delay the vote until early January. Uncertainty is never far from the extenders, but the best approach is to develop a year-end planning strategy that reflects both an extension of the extension and develop another plan that does not.
For example, qualified taxpayers contemplating making a gift to a charitable organization should take into account renewal of the tax break for gifts to charity from an IRA. If all the requirements are met, this may be a valuable tax break. However, there are other avenues for gifts to charity that can help maximize tax savings if you do not qualify for the deduction or the deduction is not renewed. Also, keep in mind the rules for substantiating gifts to charity. You do not want to lose the tax benefit of a generous gift to charity because these substantiation rules were not followed. Our office can explore these strategies with you.
While taxpayers wait for action on the extenders, tax bills already passed in 2015 could be valuable. The Defending Public Safety Employees’ Retirement Act expands the exemption from the penalty for early retirement withdrawals to include certain federal law enforcement officers, federal firefighters, customs and border protection officers, and air traffic controllers. The Surface Transportation Act of 2015 provides that a veteran’s eligibility to contribute on a pre-tax basis to a health savings account (HSA) is not affected by receipt of medical care from the VA for a service-connected disability.
The roster of traditional year-end tax planning strategies is lengthy and often involves methods to shift income between 2015 and 2016. To postpone income to 2016, taxpayers can consider delaying plans to sell appreciated assets, redeem U.S. savings bonds, completing Roth IRA conversions, and so on. If possible, it may be worthwhile to postpone any bonuses until after 2015. In contrast, some taxpayers may want to accelerate income into 2015. This can be particularly valuable if a taxpayer expects to be in a higher tax bracket in 2016 compared to 2015.
When considering traditional year-end techniques, keep in mind the 3.8-percent net investment income (NNI) tax. The NII tax applies to the lesser of (1) an individual’s net investment income (NII) or (2) the excess of the individual’s modified adjusted gross income (MAGI) over the threshold amount. The thresholds are $250,000 for married taxpayers filing a joint return and surviving spouses; $125,000 for married taxpayers filing a separate return; and $200,000 for all other taxpayers.
Gift-making is an important year-end tax strategy that can be overlooked. The Tax Code allows taxpayers to give away up to an “annual exclusion amount” per recipient per year free of gift tax. For 2015, the annual exclusion amount is $14,000. If property is given instead of cash, the value of the gift is the fair market value of the property. If spouses consent to split all gifts that are made by either one of them during any year and each spouse is also a U.S. citizen or resident, then the gifts can be deemed as having been made one half by each spouse. As a result, spouses who consent to split their gifts can transfer twice the annual per-recipient exclusion amount each year, free of gift tax ($28,000 for 2015).
These are just some of the tax strategies to consider before year-end.
Please contact my office for more details.
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J. Michael Grinnan, CPA.CITP
National REIA Applauds US District Court Ruling Upholding Fourth Amendment that Protects Property Owners from Unnecessary Gov’t Harassment
Cincinnati, Ohio) The National Real Estate Investors Association (National REIA) issued a statement today applauding the U.S. District Court’s (Southern Ohio) recent decision stating that the city of Portsmouth’s (Ohio) occupational licensing requirements, which are imposed upon landlords violates the Fourth Amendment to the United State Constitution.
Charles Tassell, Chief Operating Officer of National REIA said “Today’s ruling laid bare the excuses used by local governments to steal the freedoms of property owners.”
He further added that “The 4th Amendment is still alive and well, and citizens should NOT be forced to have their homes intrusively ‘inspected’ by warrantless searches. Every local government should take note that warrantless searches are STILL illegal and unconstitutional.”
Regarding the ruling itself, Tassell said “The ruling won by the 1851 Center For Constitutional Law was a victory for freedom against a tyranny with which the Founding Fathers were all too familiar. Citizens of the United States have an expectation to live without local, state or federal inspection of their home based on flimsy excuses disguised as law.”
Judge Susan Dlott, of the Western Division of the Southern District of Ohio, held as follows: “[T]he Court finds that the Portsmouth [Rental Dwelling Code] violates the Fourth Amendment insofar as it authorizes warrantless administrative inspections. It is undisputed that the [Rental Dwelling Code] affords no warrant procedure or other mechanism for precompliance review . . . the owners and/or tenants of rental properties in Portsmouth are thus faced with the choice of consenting to the warrantless inspection or facing criminal charges, a result the Supreme Court has expressly disavowed under the Fourth Amendment.”
For more information and to read a copy of the the Court’s ruling visit www.realestateinvestingtoday.
September 3, 2015 4:49PM
In total, Fannie Mae increased the maximum number of allowable days for a foreclosure sale for 33 states, effective for foreclosure sales on or after Aug. 1.
Fannie Mae made the announcement Thursday in an email to its servicers.
According to the announcement, Fannie Mae increased the maximum number of allowable days for the following jurisdictions: Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Nevada, New Mexico, New Hampshire, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Dakota, Tennessee, Texas, Vermont, Washington, West Virginia, Wisconsin, and Wyoming.
As part of its servicing guide, Fannie Mae establishes time frames under which it expects routine foreclosure proceedings to be completed.
According to Fannie Mae, the maximum number of allowable days takes represents the maximum allowable time lapse between the due date of the last paid installment and the completion of the foreclosure sale.
The allowable time frame also signifies the time typically required for what Fannie Mae calls a “routine, uncontested” foreclosure proceeding.
The allowable time frame reflects the legal requirements of the applicable jurisdiction, and takes into consideration delays that may occur outside of the control of the servicer, Fannie Mae said.
If the number of days to complete a foreclosure sale exceeds stated maximum number of allowable days and the servicer does not provide an adequate explanation to Fannie Mae as to the reasons for the delay, Fannie Mae requires the servicer to pay a “compensatory fee.”
According to Fannie Mae, the list of “reasonable explanations” includes:
Fannie Mae noted in its announcement that there is currently a compensatory fee moratorium for Washington D.C., Massachusetts, New York and New Jersey and stated that the moratorium will last, “at a minimum,” until Dec. 31.
Can an S corporation own an interest in another business entity?
An S corporation may own an interest in another business entity.
An S corporation can be a member of an affiliated group by owning 80 percent or more of the stock of a C corporation. The group then can elect to file on a consolidated basis, if other affiliated group rules are met. But the S corporation itself cannot join the consolidated group.
Although in general only individuals can be shareholders in an S corporation, an S corporation can own an S corporation if the subsidiary corporation would otherwise qualify as an S corporation if the parent’s shareholders held the subsidiary’s shares directly, and the taxpayer elects qualified S corporation status for the subsidiary.
Generally, for federal tax purposes a corporation that is a qualified S corporation subsidiary is not treated as a separate corporation, and all assets, liabilities, and items of income, deduction, and credit of a qualified S corporation subsidiary are treated as assets, liabilities, and items of income, deduction, and credit of the S corporation.
An S corporation can also be a partner in a partnership or a member of an LLC.
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