August 1, 1992 Continuing Education I am writing this while travelling between Rapid City and Sioux Falls, South Dakota on Route 90. I am returning from Jackson, Wyoming after having taken 26 credits of continuing education, 14 credits of Recent Developments in Federal Taxation and 12 credits of Wealth Planning and Taxation for Individuals. During the past 2 1/2 weeks I have seen and heard a lot which has given me time to pause and reflect. First, let me say that we live in a beautiful country whose landscape changes every few miles. Yellowstone, for example, gives new meaning to the word incredible. Eastern Wyoming is simply awesome! We, in the East, take alot for granted, namely water, trees and population. We presume all areas of the country are crowded and can support life. Of course, we also have shopping malls and department stores close by and all creature comforts that can be bought without much ado. Seeing simpler lifestyles which make due without the foregoing makes one reflect inward. Economy Much as Clinton and the Democrats would like us to believe, the economy isn`t so bad in the country west of the Hudson and several other areas. We have driven West on Route 80 and East on Route 90 covering almost 5,700 miles in total. By browsing through local newspapers, visiting stores and talking with many people from all walks of life from around the country it is the absence of certain things which is most evident. The stores are not having the clearance sales and deep discount sale signs that we see up and down the East Coast in abundance. The people we have run into do not have the everpresent New York frown that we see on the streets. Additionally, merchants sales and event ticket sales for the Cheyenne Frontier Days "Daddy of them All" Rodeo were up as much as 18% over last year. Business is so good in Jackson that there is a housing shortage and with that, a resulting labor shortage. There probably are two economies out there, a producing sector (doing well) and a service, sector (not doing so well). Our travel took us right through the country`s producing sector and it is fine. Talked with CPAs from all over the country and it appears that the ones from both Coasts were despondent, while the ones from the heartland noted a typical slowdown but not much else. The ones from California also noted that small businessmen were suffering more in California due to the anti-business climate there more than anything else. Funding Unemployment Compensation Unemployment compensation was recently extended by Congress for another several months. Funding for the additional unemployment compensation benefits will come from three tax sources, two of which are cash flow accounting gimmicks: Corporate estimated taxes will now rise to 97% of the current year tax liability must be paid in in order to use the safe harbor provisions to avoid penalties; up from 90%. The change does not effect the availibility of the estimated tax payment safe harbor that is based on 100% of a corporations prior-year tax liability. A new 20% withholding requirement on certain pension and annuity distributions that are not directly rolled over into other plans. Under the Act a 20% withholding rate will be imposed on any distribution eligible to be rolled over but that is not directly transferred to an eligible transferree plan. Payees will not be allowed to elect to avoid withholding on such distributions. From now on you will not be able to use all the funds for the 60 day rollover period. Extension of the personal exemption phaseout which phases out the deduction for personal exemptions for high income taxpayers, was originally scheduled to expire after 1995 but has now been extended by one year through 1996. Wanna bet it will ever be restored? Look carefully, Congress is following New York`s lead in borrowing to pay current expenses. If this doesn`t scare you I don`t know what will. If Congress persists in this course a tax rate increase is inevitable because a drastic cut in program expenditures is highly unlikely. How to Get Business Travel Deductions Out of Personal Time Out of town business meetings may take place on both ends of a weekend, meetings on Thursday and Friday and another on Monday. Since there is a valid business reason to stay, Saturday and Sunday should be treated as deductible business days even if the traveler does nothing but sightsee or play golf over the weekend. Although the IRS has not specifically spoken to this question in the context of domestic travel, the foreign business travel regulations say that such weekend days as well as standby days between business meetings are counted as business days. A new ruling also holds that if the seminar was on Thursday and Friday and it is cheaper, after considering all costs to fly home on Sunday because a Saturday night was included in the trip, then the Service will allow the Saturday as a business day. 1992 Tax Law Soon! If you have any questions about these or other financial matters, please call me.