Michael Gray, CPA's Tax and Business Insight

February 3, 2010

© 2010 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!

Route to _______   _______   _______   _______   _______

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Clive Baker in a puddle.
Clive Baker thinks rain puddles are cool.

Remember Valentine's Day is February 14!

My daughter and her husband, Holly and Dan Baker, tell me their restaurant, Marché aux Fleurs, is fully booked for Valentine's Day. Hope you've made your reservation for your favorite restaurant. Janet and I will be babysitting two of our favorite "Valentines," our grandsons Panch and Clive Baker, while their parents are working at their restaurant.

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Family and firm celebrations.

My grandson, Clive Baker, will celebrate his second birthday on February 23.

Thi Nguyen, our resident CPA, will celebrate her 31sh birthday on February 24.

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Tax season is here! Make your appointment now!

There are only about two and one-half months left before the tax return due date. Time to get started now!

If we prepared your income tax returns last year, you should have already received instructions in the mail. If you haven't, please call Dawn Siemer at 408-918-3162.

To have us prepare your income tax returns, start with the online Tax Notebook organizer. Call Dawn Siemer at 408-918-3162 for instructions to get started. We also have a paper organizer, if you prefer. We still need your documents (W-2s, 1099s, receipts for donations) to prepare your income tax returns.

We can prepare most income tax returns using information provided online and by mail. If you wish a personal meeting, please call Dawn Siemer at 408-918-3162 to schedule an appointment. Our calendar is filling up fast!

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Time to revisit your home loan?

Home loan interest rates are still low. The refinance loans that we offer are mostly on a no-points, no-fees basis. This gives the homeowner more flexibility for refinancing again in a short time. For example, one of our clients closed a mortgage with a 5.375% interest rate on September 26, 2009. Recently, the client locked a 4.875% interest rate for refinancing the same loan, for a half percent rate reduction with no points and no fees. It doesn't happen often, but it's possible.

For many homeowners, there is a refinancing opportunity now. We provide home loan brokerage services through our strategic partner, Wymac Capital, Inc. To explore whether we can help get financing for your new home, reduce the interest rate on your mortgage, or convert an adjustable rate mortgage to a fixed-rate mortgage, call Michael Gray at 408-918-3161.

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New partnership form will be easy to miss or make errors in reporting.

The IRS has issued new partnership form 1065, Schedule B-1, Information on Partners Owning 50% or More of the Partnership. This form hasn't been required in the past. Since ownership includes attribution from certain family members and trusts, several partners in a family partnership could show ownership interests up to 100%. (The attribution rules are complex and beyond the scope of this alert. Get professional advice.) It will look weird because the percentages might add up to more than 100%. Heads up!

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Tax election available to deduct some 2010 Haiti relief donations in 2009.

President Obama has approved Public Law 111-126, H.R. 4462, allowing taxpayers to choose to deduct certain donations made during 2010 for relief to Haiti relating to the earthquake on January 12, 2010 on their 2009 federal income tax returns.

California has not conformed to this law!

In order to qualify, the donation must be of cash to a U.S. charity specifically for Haiti relief. The American Red Cross web site where you can make a donation is www.redcross.org.

The donation must be made after January 11, 2010 and before March 1, 2010 in order to qualify for the election.

In addition to the usual way of documenting donations with a cancelled check and qualified receipt, individuals who make donations using their cell phones can document their donations using ther telephone bill. The bill must show the name of the charitable organization, the date of the contribution and the amount of the contribution.

Individuals and corporations are both eligible to make the election.

Remember that you have to itemize deductions in order to get a tax benefit from charitable contributions. If you claim the standard deduction, you won't receive a tax benefit.

Higher income taxpayers have part of their itemized deductions phased out for 2009, but not for 2010. They might receive a bigger tax benefit by not making the election and deducting the donation on their 2010 income tax return.

No double dipping! The donation may only be deducted on an income tax return for 2009 or 2010, not both!

Since the election is only available for donations up to February 28, 2010, there is less than a month left before this tax benefit expires.

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Some California businesses are required to file use tax returns.

California businesses that reported more than $100,000 in gross receipts from a business or rental property on their 2007 federal income tax returns and that don't file sales tax returns will be required to electronically file a California use tax return for 2009. The California State Board of Equalization is mailing notices in early March, 2010. The use tax returns and tax payments are due April 15, 2010. A use tax return must be filed even if there is no tax due.

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Financial Insider Weekly broadcast schedule for February and March.

Financial Insider Weekly is broadcast in San Jose and Campbell on Wednesdays at 4:30 p.m., Pacific Time. You can watch it on Comcast channel 15 for those cities. The show is broadcast as streaming video at the same time at www.creatvsj.org.

Here are the scheduled interviews for February and March:

February 10, Professor Patricia Cain, "Estate and gift tax problems of same sex couples"
February 17, David Beck, CFP, "Applying for financial aid for higher education"
February 24, David Beck, CFP "Using tax benefits and student loans to pay college costs"
March 3, attorney Ray Sheffield, "Estate planning for retirement benefits"
March 10, John Herzog of Valley Community Bank, "Small business financing"
March 17, Tom Anderson of Pensco, "Real estate investments in your IRA or Roth account"
March 24, Tom Anderson of Pensco, "Alternative investments in your IRA or Roth account"

Financial Insider Weekly is also broadcast Friday at 4 p.m. on cable channel 15 in Cupertino, Los Altos and Mountain View. Starting this week, it will also be broadcast Thursdays at 7 p.m. on cable channel 26 and AT&T U-verse channel 99 in Marin County.

Past episodes of Financial Insider Weekly are posted on YouTube. One way to watch them is to go to our web site, www.financialinsiderweekly.com, and click on "Past Episodes."

Let me know any ideas that you have for topics or guests. Guests will usually have to be located in or near the Silicon Valley in California.

Hope you can watch or record the show. Please tell your friends about it!

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New business books to read.

Marketing guru Dan Kennedy, who is a mentor of mine, has written two new books that are now available in book stores and online. They are No BS Sales Success in the New Economy and No BS Business Success in the New Economy. Dan writes excellent material and these books are a bargain to "catch" some of his business savvy for only $15.95 retail per book.

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Questions and Answers

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

For your questions about dependent exemptions, see IRS Publication 501 at www.irs.gov.

Question

Can you claim a tax deduction for monetary donations to a family member or friend? How much can you claim for items donated to the Goodwill? How do you determine the values?

Answer

Donations to a family member or friend are not tax deductible. Only donations to a qualified charity are deductible as charitable contributions.

Items donated to Goodwill and other charities are based on the fair market value of the items. There are no published guidelines that I'm aware of from the IRS. Here is one from Goodwill Industries of San Diego: http://www.sdgoodwill.org/donation_values.shtml.

If you give more than $500 of a given type of merchandise (used clothing), special disclosure is required on IRS Form 8283, which is required to be included with your income tax return.


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

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Visit our new article!

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Follow me on Twitter!

If you enjoy Twitter, please follow me at www.twitter.com/michaelgraycpa. I would especially appreciate retweets of our messages announcing episodes of Financial Insider Weekly.

I'm also on Facebook and LinkedIn.

you can also follow me on other social media sites, Facebook and LinkedIn.

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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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Check out my blog.

I have also started a blog at www.michaelgraycpa.com. Check it out!

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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.


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Michael Gray, CPA
2190 Stokes St. Ste. 102
San Jose, CA 95128
(408) 918-3162
FAX: (408) 998-2766
Hours: 8am - 5pm PDT Monday - Friday

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