2. Tax-Deferred Savings. Non-deductible IRAs and Roth IRAsRoth 401(k)s/403(b)sChildrenPartnerships/LLC/Sole ProprietorshipsSubchapter S/C CorporationRoth Conversions2010Annual opportunitiesFunding IRAs at the first of the year . 3. Tax Deferred Savings. Non-Deductible IRAs. Assumptions: 9% return, 18% capital gains rate, 40.26% ordinary income tax rate.
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1. 1 Strategies for Maximizing After-Tax Wealth Creation
3. 3 Tax Deferred Savings
4. 4 Tax Deferred Savings Funding IRAs and 401(k)s at the first of the year
5. 5 Tax-Deferred Savings Funding 529 Future plans
State income tax deduction
Health Savings Accounts
Tax Relief and Health Care Act 2007
Life insurance to an annuity
Annuity to annuity and withdraw
6. 6 Capturing efficiencies in delivering tax planning advice – Knowledge Management Automate processes
Income tax letters
Charitable gift of appreciated securities
Paperless exchange of returns
Extract key data points to CRM
Income Tax Return Review
Income Tax Planning meeting
7. 7 February 1, 2007
Mr. and Mrs. John Client
1000 Devine Street
Irmo, SC 29063-9238
Dear John and Jane:
The purpose of this letter is to assist you with gathering information for the preparation of your 2006 income tax returns.
The purpose of this letter is to assist you with gathering information for the preparation of your 2006 income tax returns. According to our records, you will receive 1099s from Charles Schwab and Company, Inc with a projected mailing date of January 31st. If you do not have this information in hand shortly after this mailing date, please contact us. We will assist you in locating any missing forms.
You may receive a 1099-R related to the rollover of the 401(k) account. We are enclosing documentation to provide to your CPA reflecting the deposit of this rollover amount in your IRA Rollover account.
SURRENDER OF LIFE INSURANCE POLICY
Jane surrendered a life insurance policy with New York Life in 2006. The taxable gain on this policy should be on the 1099 from New York Life. If not, we can assist you in documenting this information.
INDIVIDUAL RETIREMENT ACCOUNT CONTRIBUTIONS
You each made a $4,000 non-deductible contribution to an IRA for the 2006 tax year. Please be aware that Form 8606 needs to be filed for these nondeductible contributions.
John made a $4,000 contribution to a Roth IRA for the 2006 tax year.
Jane made a $4,000 contribution to a Roth IRA for the 2006 tax year. As you are aware there are income limitations on the ability to fund a Roth IRA. If your adjusted gross income is too high, you will begin to lose the ability to fund this Roth IRA. If this occurs, let us know so we may take corrective action and reclassify this contribution.
CHARITABLE GIFT OF APPRECIATED SECURITIES
You made a gift of 150 shares of Pfizer for which we do not have the cost basis to Central Carolina Community Foundation. The value of the gift for income tax purposes will be on the statement provided by the charitable organization. Please provide this information to Kris when completing his tax organizer.
8. 8 MEDICAL EXPENSES
Please be aware that the amounts you pay for your long-term care insurance are deductible as a medical expense on your Schedule A within certain constraints. The premiums paid for the year should be provided to your CPA.
Because you are the beneficiary of a Generation Skipping/Credit Shelter/…. Trust, we have enclosed a distributions report for tax-year and a Portfolio Statement as of the end of the tax-year. If we have omitted any items that may be needed for preparation of this return, please have your CPA call me and we will be happy to provide the needed data.
We have enclosed a printout of your taxable sales for the year that provides cost basis and acquisition information.
You will note there are a number of investments with an acquisition date of January 1, 1985. We do have the cost basis for these purchases but not exact acquisition dates for all blocks. Thus, January 1, 1985, is just a placeholder and is accurate for income tax reporting purposes.
GIFT TAX RETURN
During the 2006 tax year you made annual exclusion gifts to family members. We have provided this information to David Sojourner so that he may determine whether to file a gift tax return.
SOUTH CAROLINA 529 PLAN
During the year, you contributed $5,000 to the South Carolina 529 Plan. This contribution will reduce your taxable income on the South Carolina return and therefore your South Carolina tax liability. You should have a statement from the Future Scholar program reflecting your contributions for 2006 which you will need to include in your tax preparation package for your CPA.
We are enclosing a report documenting the margin interest paid on your taxable accounts in 2006.
9. 9 MONEY MARKET INTEREST—PORTION ATTRIBUTABLE TO U.S. SECURITIES OR SOUTH CAROLINA MUNICIPAL BONDS
The money market managers will not be able to provide this information until late February. Once we have received the information, we will post it on the Abacus Planning Group website, www.abacusplanninggroup.com. If you will navigate to Strategic Partners and select Certified Public Accountants, you will be able to retrieve this information for all Charles Schwab and Company and Vanguard Group money markets and bond funds.
REQUEST FOR FEDERAL AND STATE RETURN
We hope this information is helpful. Please let us know if we can provide you or any additional information in preparing your income taxes. When your income taxes are completed, please make sure we receive a copy for our files.
Cheryl R. Holland
10. 10 Managing the Tax Drag on Portfolios Mutual fund selection issues
Exchange Traded Funds
Asset location decisions
Marginal Tax Bracket and Investment Decisions
Money Market Fund Selection
Tax Loss Harvesting
Calculating and reviewing the tax drag on a portfolio as a benchmark
11. 11 Managing the Tax Drag on Portfolios Mutual Fund Selection Issues
12. 12 Managing the Tax Drag on Portfolios Asset Allocation Decisions
13. 13 Managing the Tax Drag on Portfolios Asset Allocation Decisions
14. 14 Managing the Tax Drag on Portfolios
15. 15 Managing the Tax Drag on Portfolios Asset Location Decisions
16. 16 Managing the Tax Drag on Portfolios
17. 17 Managing the Tax Drag on Portfolios Money Market Fund Selection
18. 18 Money Market Rates 4/3/2007 4/10/2007
Schwab Value Advantage (SWVXX) 4.92% 4.92%
Schwab Advisor Cash Reserves (SWQXX) 4.71% 4.70%
Schwab Advisor Cash Reserves – Premier (SWZXX) 4.78% 4.77%
Schwab U.S. Treasury (SWUXX) 4.48% 4.49%
SC tax equivalent yield (assumes 7% SC income tax) 4.82% 4.83%
19. 19 Managing the Tax Drag on Portfolios Calculating and Reviewing tax drag as a benchmark
20. 20 Nickels and Dimes Income with Respect to the Decedent for IRAs and annuities
Capitalizing investment advisor fees
UBTI for IRAs and CRUTs
Deductibility of hedge fund fees
Investment Interest deduction
Charitable gift of appreciated assets or from IRA
Net Unrealized Appreciation
21. 21 Nickels and Dimes Capitalizing Investment Advisor Fees
22. 22 Concentrated Positions Goal
Diversifying a portfolio
Providing a temporary hedge against a price decline
Monetizing the position to provide liquidity for other needs
Separate Account Workout, e.g. Parametric
Charitable Remainder Unitrusts/Foundations
Equity Collars and Protective Puts
Gift to charity
23. 23 Concentrated Positions
24. 24 Prudent Investor Act (3) A trustee shall consider in investing and managing trust assets those circumstances of the following as are relevant to the trust or its beneficiaries:
(a) general economic conditions;
(b) the possible effect of inflation or deflation;
(c) the expected tax consequences of investment decisions or strategies;
(d) the role that each investment or course of action plays within the overall trust portfolio, including financial assets, interests in closely held enterprises, tangible and intangible personal property, and real property;
(e) the expected total return from income and the appreciation of capital;
(f) other resources of the beneficiaries;
(g) needs for liquidity, regularity of income, and preservation or appreciation of capital; and
(h) an asset's special relationship or special value to the purposes of the trust or to one or more of the beneficiaries.
25. 25 “Don’t let the tax tail wag the dog”
26. 26 Bibliography FPA Journal – Asset Location: A Generic Framework for Maximizing After-Tax Wealth. Daryanani, Gobind, Ph.D., and Chris Cordaro. www.fpanet.org.
Morningstar, Inc. Morningstar Principia – Advanced Analytics. www.morningstar.com
Schwab Institutional. Market Knowledge Tools - “Investment Strategies to Reduce the Risk of Concentrated Positions.”
www.savingforcollege.com. 529 website.
Investing with a Tax-Efficient Eye. Robert Gordon. CFA Institute Conference Proceedings. www.cfapubs.org.
Ed Slott’s IRA Advisor. 1-800-663-1340.
27. 27 Bibliography www.foundationsource.com
Gardner, Randy. “Recent Developments Help Avoid the
Double Tax on IRD Property.” Journal of Financial
Planning. February 2007. www.fpanet.org.
Reiner, Eric L. “A Sly Deduction.” Wealth Manager. March 2007. www.wealthmanagermag.com
Slott, Ed. “NUA No-No’s.” Financial Planning. July 2006.
Strobel, Caroline and Paul Steer. “Proper Planning can Minimize the Impact in Respect of a Decedent.” The Tax Advisor,Vol. 26,
No. 5, May 1995, pp.297-304
Swift, Marie. “A Round of Transitions.” Wealth Manager.
February 2007. www.wealthmanager.com