Michael Gray, CPA's Tax and Business Insight

October 3, 2011

© 2011 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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Panch Baker on his birthday
My grandson, Panch Baker, with one of his favorite birthday gifts. Now Panch can be dressed properly when helping Daddy Dan and Mom Holly at the family restaurant, Marché Aux Fleurs, in Ross, California.

Boo! Are you ready for Halloween and the Holiday Season?

October is here. It will soon be Halloween, followed closely by the Holiday Season. Did you know Christmas decorations go up right after Halloween overseas, because they don’t celebrate Thanksgiving when we do?

The year will soon be over, so schedule your year-end planning appointment now. We will have limited availability during December because of a family vacation and the holidays. Call Dawn Siemer at 408-918-3162 on a Monday, Wednesday or Friday to set your appointment.

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Company and family celebrations.

My wife, Janet Gray, is celebrating her 60th birthday this month. We have been together more than two-thirds of our lives. I’m glad she is my life partner.

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Extended income tax returns for individuals are due October 17.

The extended due date for 2010 individual income tax returns is October 17, 2011. (October 15 falls on a Saturday.) I won’t be available for consultations until after October 17. The deadline is a reason this newsletter will be short.

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October 17, 2011 last chance to “undo” a 2010 Roth conversion.

If you made a Roth conversion during 2010 and the value of the account has declined, see this blog post.

michaelgraycpa.com/2011/09/26/should-you-undo-a-2010-roth-conversion/

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Federal estate tax forms (finally!) released.

The IRS has posted the federal estate tax forms, Form 706, at the IRS web site, www.irs.gov.

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Automatic extension granted for 2010 estate tax returns.

The IRS has granted an automatic 6-month extension of time for filing the federal estate tax return, Form 706, and to pay the federal estate tax, provided the extension form, Form 4768, was filed by the due date for filing 2010 Form 706, which was September 19, 2011.

(Notice 2011-76, September 13, 2011.)

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Carryover basis form due date extended again.

The due date for filing Form 8939, Allocation of Increase in Basis for Property Acquired From A Decedent, has been changed from November 15, 2011 to January 17, 2012. This form applies to taxpayers who were deceased during 2010 and elected to be treated as the estate tax was repealed. The form hasn’t been issued by the IRS yet.

An allocation of generation skipping tax exemption will also be timely if it is made on Form 8939 filed by January 17, 2012.

(Notice 2011-76, September 13, 2011.)

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Registered domestic partners and same sex married couples get tax guidance.

The IRS has published FAQs (Frequently Asked Questions) for registered domestic partners and same sex married couples at the IRS web site, www.irs.gov.

Just search the IRS web site for “registered domestic partners”.

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Ban on tax strategy patents passed by Congress.

Congress recently passed the America Invents Act, H.R. 1249. The legislation includes a ban on patents for “any strategy for reducing, avoiding or deferring tax liability.” President Obama is expected to approve the Act.

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Employee use of employer-provided cell phone is non-taxable.

Effective for tax years after 2009, the IRS has announced the personal use of an employer-provided cell phone is a non-taxable working-condition fringe benefit. The telephone use will be treated like the use of an employer-provided telephone in an office. A cell phone provided for morale, good will, or additional compensation is not tax free. In other words, the cell phone must principally be provided for a business purpose.

(Notice 2011-72.)

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Goodwill for sale of dental practice was a corporate asset.

The Ninth Circuit Court of Appeals has ruled that goodwill from the sale of a dental practice belonged to a personal service corporation, not the corporation’s sole shareholder. The shareholder was subject to an employment contract and non-compete provision that made the patient relationships the assets of the corporation. These agreements are typical for professional corporations. The court disregarded language in the purchase agreement stating the goodwill represented a personal, non-corporate asset.

(Howard v. United States, CA-9, 2010-2 USTC)

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California might require property tax disclosure.

The Franchise Tax Board has issued a draft Schedule CA for 2011 California Individual Income Tax Returns requiring listing the address and parcel number for properties for which a property tax deduction is claimed. The instructions for the form would also explain which items on a property tax bill are deductible and which are not.

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Financial Insider Weekly broadcast schedule for October and November.

Financial Insider Weekly is broadcast in San Jose and Campbell on Fridays at 8:00 p.m., Pacific Time. You can watch it on Comcast channel 15 for San Jose and Campbell. The show is broadcast as streaming video at the same time at www.creatvsj.org.

Here are the scheduled interviews for October and November::

October 7, John Olagues, Truth In Options, “Employee Stock Option Basics”
October 14, John Olagues, Truth In Options, “Employee Stock Option Hedging Strategies”
October 21, Mark Erickson, attorney, “Divorce – California Style: Basics”
October 28, Mark Erickson, attorney, “Divorce – California Style: Spousal Support”
November 4, 2011, Mark Erickson, attorney, “Divorce – California Style: Child Custody”
November 11, 2011, Naomi Comfort, attorney, The Silicon Valley Elder Law Group, P.C., “Durable Financial Powers of Attorney”
November 18, 2011, John Hopkins, attorney, Hopkins & Carley, “How to promote community giving as a family value”
November 25, 2011, Jeffrey Hare, attorney at law, APC, “Solving legal disputes out of court (alternative dispute resolution)

Financial Insider Weekly is also broadcast as follows:

Past episodes of Financial Insider Weekly are posted on YouTube. One way to watch them is to go to our web site, http://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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Questions and Answers

Question

I live in the East Bay Area and noticed a testimomial by a Michael Gray, CPA in the book by Dan Kennedy, The Ultimate Marketing Plan. I have been intrigued by the writings of Dan Kennedy and wanted to ask if you are the same Michael Gray in the book, and if so, do you still recommend the books and marketing plans by Dan Kennedy?

Answer

You probably did see a testimonial from me in the book. Regular readers of this newsletter know I am a big fan of Dan Kennedy. One of his first recommendations to me was to write regular newsletters, so you can see I still follow and endorse his advice. If you visit the web site www.profitadvisors.com, you will find I have written book reviews on almost all of Dan Kennedy’s books.

Question

Do we have to pay taxes on a gift of $200,000 from my parents for our investment home? My parents live in a foreign country.

Answer

Gifts are not taxable income. Federal gift taxes are imposed on the donor, not the donee/recipient. Gifts of more than $100,000 from a foreign person must be reported on Form 3520, which you can find at www.irs.gov. The form is due at the same time as your federal income tax return. For 2011, that will be April 16, 2012. Your parents should see a tax consultant in their country to find out if they are subject to a transfer tax of some kind for this transaction.


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.

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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 michaelgraycpa.com. Check it out!

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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 www.taxtrimmers.com/directions.shtml.

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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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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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