Timely points of particular interest
Roth IRA Limits - In 2010, a traditional IRA owner can convert to a Roth IRA, even if his or her AGI exceeds $100,000. But remember that limits on contributions to Roth IRAs will continue to apply. For 2009, contributions are not available to joint filers who have an AGI of $176,000 or more; $120,000 for single filers. If you qualify, you have until April 15, 2010, to make a maximum Roth IRA contribution of up to $5,000 for the 2009 tax year ($6,000 if you’re age 50 or older).
Say “Yes” to the Dress? - A businessperson can deduct the cost of special clothing used to perform the job or needed for safety. But deductions are not permitted if the clothing is suitable for everyday wear. In a new case, a concert pianist purchased gowns, dresses and accessories to wear at her concerts. Although she did not wear any of the items outside of the venues where she performed, others might. Therefore, the district court in New York disallowed deductions for the items.
401(k) Losses - Participants in a 401(k) plan had nine investment options, including company stock. When business dealings caused the stock value to plunge, the participants sued the company. But the district court ruled that the employer was not liable for the losses. Reason: The company provided adequate information about the 401(k) investment choices and the risks. Also, plan participants had other options.
Scenario Planning - After a flood occurs, many people buy flood insurance. Similarly, “scenario planning”--preparing responses to imagined changes in conditions--typically increases after a crisis. A 2002 survey showed an upswing in scenario planning to 70% among business executives following the attacks of September 11. It is expected that many firms will adopt this practice because of the 2009 recession.
Wash Sale Rule: Stay Dry -
If you sold securities at year-end, you might be soaked by the “wash
sale” rule. This rule prevents you from claiming a tax loss on the sale of
securities if you acquire “substantially identical” securities within 30
days of the sale. However, it is relatively easy to avoid the wash sale
rule. One obvious strategy is to wait at least 31 days before you buy back
the same securities. Alternatively, you can “double up” on your investment.
Of course, other economic factors besides taxes should enter into your
investment decisions. Just remember to watch out for the wash sale rule if
you sell securities at a loss.
Wherewithal
is provided by Somerset for our clients and other interested persons
upon request. Since technical information is presented in generalized
fashion, no final conclusion on these topics should be made without
further review. For additional information on the issues, please
contact
a member of the firm. Somerset provides total financial solutions,
including accounting, assurance, information solutions, litigation &
valuation, tax, wealth management and management consulting services to
entrepreneurs and their businesses. This document is not intended or
written to be used, and cannot be used, for the purpose of avoiding tax
penalties that may be imposed on the taxpayer.
Somerset CPAs,
P.C.
3925 River Crossing Parkway, Third Floor
Indianapolis, Indiana 46240
317.472.2200 • 800.469.7206 • FAX 317.208.1200
www.somersetcpas.com
info@somersetcpas.com
.jpg)