Michael Gray, CPA's Tax and Business Insight

"Extra" Edition

October 13, 2008

© 2008 by Michael C. Gray

ISSN 1539-395X

A monthly report to help you prepare for your financial future, keep more of what you earn by minimizing your taxes, and build an extraordinary business!

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Table of Contents

Bailout legislation includes major AMT relief.

Tax legislation, including energy credits, alternative minimum tax (AMT) relief and extensions of expiring tax provisions were included with the Federal "Bailout" legislation enacted last Friday, October 3. The tax section I am discussing is called the "Tax Extenders and Alternative Minimum Tax Relief Act of 2008."

I'll discuss some of the details in my next newsletter, but the big news for many taxpayers is the AMT relief.

In a nutshell, the legislation cancels liabilities for unpaid AMT for certain ISO exercises and makes more minimum tax credits refundable!

Taxpayers with unpaid tax liabilities relating to ISO exercises before 2008 just received a major gift from the United States Congress - their unpaid liabilities for alternative minimum taxes (AMT), penalties and interest relating to the exercise of incentive stock options have been cancelled (abated) as of October 3, 2008. The minimum tax credits available for the refundable minimum tax credit and the regular minimum tax credit are reduced for the abated AMT. (No double dipping!)

For those who have already paid alternative minimum tax with respect to an ISO exercised before 2008, the legislation will accelerate the refundable AMT credit for tax years beginning after 2007 from 20% of the minimum tax credit that is more than three years old to 50%, and will add 50% of penalties plus interest paid before October 3, 2008 attributable to the AMT for an ISO exercised before 2008 to the minimum tax credit for each 2008 and 2009 (a total of 100% for the two years). The AGI phaseout that previously applied to reduce the refundable AMT credit has been eliminated.

The refundable minimum tax credit is still scheduled to expire after 2012. Hopefully, it will be extended along with the "AMT patch" for the inflation adjustment for the AMT exemptions each year in the future.

Taxpayers who dutifully paid their AMT for their ISO exercises may view this "gift" as a rip-off, but there are other taxpayers who are suffering major emotional and financial distress because they have AMT liabilities that they don't have the cash to pay - especially from the "dot.com crash" in 2000 and 2001.

Another group that didn't get relief is individuals who exercised non-qualified stock options before the market crash, some of whom made Section 83(b) elections and were stuck with big tax liabilities.

Two groups that worked tirelessly to get this legislation enacted are the Coalition For Tax Fairness and Reform AMT. Representatives from these groups say this was a group effort supported by many members of Congress. Thank you to all of you who participated for your efforts!

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AMT exemptions extended for 2008.

The "Tax Extenders" act also included an extension of the increased AMT exemption amounts for 2008. The amount for married persons filing a joint return was $66,250 for 2007 and is $69,950 for 2008, and the amount for single persons was $44,350 for 2007 and is $46,200 for 2008.

Telephone seminar on AMT Relief Legislation. There will be a 90-minute telephone seminar on the AMT Relief Legislation at 1 p.m. Pacific Time on Thursday, October 30, 2008.

Tim Carlson, President of the Coalition for Tax Fairness, and Angela Hartley with Reform AMT will talk about why relief was necessary and how it was passed.

Then Michael Gray will explain the relief measures.

Then we will open up the lines for questions and answers.

A flyer is included with this newsletter, or call Dawn Siemer weekday afternoons at 408-918-3162 for details and registration.

Live seminar on AMT Tax Relief. If you live or work in the San Jose, California area or will otherwise be in the area, Michael Gray will be leading a lunchtime seminar at Hobee's restaurant in Campbell, California from noon to 1:30 p.m. on Friday, November 7, 2008.

A flyer is included with this newsletter, or call Dawn Siemer weekday afternoons at 408-918-3162 for details and registration.

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Last chance! Telephone seminar on foreclosures & short sales October 16.

Michael Gray will be presenting a telephone seminar about foreclosures and short sales on Thursday, October 16 at 7 p.m. For information and registration, visit www.realestateinvestingtax.com/shortsale-teleseminar.shtml or call Dawn Siemer weekday afternoons at 408-918-3162.

If you’d like to attend, we need your registration by TOMORROW!

Michael Gray regrets he can no longer personally answer email questions. He will answer selected questions in this newsletter.

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If you have employee stock options, have you subscribed to Michael Gray, CPA's Option Alert at no charge or obligation?

To learn more, visit stockoptionadvisors.com/subscribe.shtml

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Real estate investors, have you subscribed to Michael Gray, CPA’s Real Estate Tax Letter at no charge or obligation?

For details, visit www.realestatetaxletter.com

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IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this communication was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

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P.S. My daughter and her husband, Holly and Dan Baker, have a Southern French Restaurant at 23 Ross Common, Ross, California, about 15 minutes north of the Golden Gate Bridge. The name of the restaurant is Marché Aux Fleurs and their website address is marcheauxfleursrestaurant.com. For the best meal of your life, call 415-925-9200 for a reservation and give them a try! For directions, visit our website at taxtrimmers.com/directions.shtml.

They also have a second restaurant, AVA, at 636 San Anselmo Ave., San Anselmo, California. AVA serves food and drinks produced in California. For reservations, call 415-453-3407. The web site is avamarin.com.

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Michael Gray, CPA
2482 Wooding Ct.
San Jose, CA 95128
(408) 918-3162
FAX: (408) 938-0610
Hours: 8am - 5pm PDT Monday - Friday

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