Michael Gray, CPA's Tax and Business Insight

May 8, 2015

© 2015 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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Kara draws a rainbow.
Kara Siemer creates a rainbow.

Happy Mother's Day!

This Sunday, May 10, is Mother's Day. Remember to express your appreciation to your mother and other mothers who have contributed to your life.

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Family celebrations.

My daughter, Holly Baker, and her husband, Dan are celebrating their 16th wedding anniversary this month. Time has certainly flown. Happy anniversary, Holly and Dan!

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Second quarter estimated tax deadline is June 15.

The second estimated tax due date for calendar-year taxpayers is June 15. Federal estimated tax payments (for estimated tax exceeding withholding) can be based on 110% of 2014 tax on your income tax return if your adjusted gross income exceeds $150,000. Alternatively, you can make payments based on your income and deductions for 2015.

The California payment is 40% of estimated tax for the year. Like federal estimated tax payments, California payments can be 110% of 2014 tax, unless your adjusted gross income is $1 million or more. In that case, your estimated tax payments should be based on your actual income and deductions for 2015.

If you want our help computing your second quarter estimated tax payments, call Dawn Siemer at 408-918-3162 on Mondays, Wednesdays or Fridays to make an appointment for a consultation.

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Foreign account reports will soon be due.

The due date for FinCEN 114, the report of foreign accounts for 2014, is June 30, 2015. It applies for foreign bank and brokerage accounts and certain other financial accounts exceeding $10,000 at any time during 2014 owned by the taxpayer or for which the taxpayer had signature authority. The form must be efiled. If you have any questions about this form, consult with your professional tax advisor.

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Dawn Siemer's work schedule changed.

Dawn Siemer, our office manager who also schedules our appointments, is now working Mondays, Wednesdays and Fridays from 9 a.m. to 5 p.m. Her direct telephone number is 408-918-3162.

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Michael Gray gives a LIVE seminar presentation for tax professionals.

Michael Gray will present Part 2 of a two-part series of lunchtime presentations of a "Survey of lifetime gift planning and Form 709" for the Estate & Trust Group, Silicon Valley San Jose chapter of CalCPA. The presentation will be from noon to 1:30 p.m. on Thursday, June 18 at Abbott Stringham & Lynch, 1550 Leigh Ave. in San Jose. Lunch is included. The investment with an advance reservation is $20 for CalCPA members and $30 for nonmembers. For reservations, call Stephanie Stewart at 408-983-1122 or register online at www.calcpa.org/events-and-programs/event-details?id=fcd554ea-507b-46c7-b23d-fd4d841851b6

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Our books are now available for purchase online!

We recently launched a new website for Michael Gray's publishing company, the Silicon Valley Publishing Company. You can buy our books on the website here: www.siliconvalleypublishingcompany.com.

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Correction of deferred compensation agreement was too late to avoid current taxation of a bonus.

An executive entered into a retention agreement with his employer on October 1, Year 1. Under the agreement, the executive would receive a retention bonus provided he was continuously employed until three years after the agreement was signed. The corporation had the right to accelerate payment of the retention bonus to one year after the agreement was signed.

The corporation later determined the right to accelerate payment violated Internal Revenue Code Section 409A. The corporation tried to correct the error by amending the agreement on June 6 of Year 3. The bonus was paid on October 1, Year 4 and Year 5.

The IRS Chief Counsel ruled that the amendment was too late to defer taxation of the bonus. It was taxable when it could have been paid one year after the agreement was signed.

(CCA 201518013.)

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National Football League drops tax-exempt status.

In light of negative publicity for football players for domestic abuse allegations, members of Congress have proposed discontinuing the tax-exempt status of the National Football League. The League is voluntarily dropping tax-exempt status to stop the bad publicity. The exemption only applied to dues paid by the teams to the league. The teams already pay income taxes on the bulk of the revenue received for ticket sales, advertising and broadcast rights.

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A medical doctor couldn't deduct his flying lessons.

A medical doctor took flying lessons. He said the purpose of taking the lessons was to join a charitable movement to provide medical services to remote areas.

The Tax Court ruled that the flying lessons weren't tax deductible because they didn't improve or maintain his skills as a doctor.

(Holden, TC Memo. 2015-83.)

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International flight attendant couldn't exclude all of her income from U.S. taxation.

A flight attendant stationed in Hong Kong, whose duties were performed in and out of the United States, claimed the foreign earned income exclusion for all of her earned income. The Court of Appeals for the District of Columbia upheld the IRS in disallowing the exclusion for that portion of the wages attributable to services performed in the United States.

(Rogers, 2015-1 USTC 50,273.)

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Taxpayer allowed to deduct fees paid to terminate a management agreement.

The IRS ruled that a corporate taxpayer could currently deduct fees that it paid to terminate a management agreement for services received from another corporation. The IRS said the fees were paid for services and not for intangible rights.

(Letter Ruling 201518012.)

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IRS won't allow withholding when withheld taxes for foreign taxpayers aren't deposited.

The IRS has announced it intends to issue regulations disallowing refunds to foreign taxpayers when withholding claimed relating to the U.S. income isn't deposited by the withholding agent (usually the payer of the income.)

(Notice 2015-10.)

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Does your group need a speaker?

We are seeking opportunities to speak before groups. Topics include recent tax developments, tax issues relating to real estate, how estate planning has changed recently, tax issues relating to alternative investments using retirement accounts, and marketing topics such as "How I created a public access television show broadcast on eleven Bay Area stations." To make arrangements, call Michael Gray at 408-918-3161.

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Please share your good experiences with Michael Gray, CPA.

As you know, more and more people are going to the internet to find information about service providers. We hope you will share some good words about experiences that you have had with our firm<. Some of the sites where you can share your experiences include yelp.com, siliconvalley.citysearch.com, and Google+.

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Financial Insider Weekly broadcast schedule for May and June.

Financial Insider Weekly is broadcast in San Jose and Campbell on Fridays at 9:30 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 May and June:

May 8 and 15, 2015, William J. Mitchell, CPA, "I'm being audited by the IRS! What should I do?"
May 22, 2015, William J. Mitchell, CPA, "What to do when you disagree with an IRS audit report"
May 29, 2015, Tom W. Anderson, President, Retirement Industry Trust Association, "Investing in real estate using a Roth or IRA account"
June 5, 2015, Tom W. Anderson, President, Retirement Industry Trust Association, "Making alternative investments besides real estate using a Roth or IRA account"
June 12 and 19, 2015, Don Pollard, CLU, ChFC, Advanced Professionals, "Health care plans for small businesses update"
June 26, 2015, Michael Desmarais, attorney at law, "Your rights as a beneficiary"

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, 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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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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Visit our new article!

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Follow me on Social Media!

Want to see new episodes of Financial Insider Weekly as soon as they're posted on Youtube? Want to see Michael Gray's blog posts as soon as they're live? We post them (and more) on social media!

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, LinkedIn, and Google+.

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

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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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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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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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