August 31, 2007 Tax Quote There is a difference between a tax collector and a taxidermist-the taxidermist leaves the hide Mortimer Caplan (former IRS Commissioner) Congress Extends Kiddie Tax The Democrat led Congress started to make good on its pledge to raise taxes on the "rich". "Rich" in this case means those who saved money to help pay for their children’s college education. Beginning in 2008, the kiddie tax will include children up to their 19th birthday and all dependent full time students up to age 24. The tax is a set of rules that apply a parent’s federal tax rate to a child’s investment income. It was designed to keep "rich" families (those with income greater than $35,000) from sheltering assets in a low tax bracket. For years, only children under 14 were subject, but the ceiling went to 18 in 2006. For 2007, the kiddie tax applies to investment income in a child’s name above an inflation adjusted threshold of $1,700. The $850 standard deduction allows the child to take the first $850 tax free. The second $850 is taxed at the child’s rate, which can be as low as 10% for interest, dividends and short term capital gains, 5% for long term capital gains. Income or gains above the $1,700 is taxed at the parent’s rate. People between 18 and 23 are exempt from the kiddie tax if more than half of their financial support comes from income they earn themselves. College savings strategies should get a second look and the so called 529 plans should become more attractive. All gains in a 529 account, if used for college tuition or room and board, are tax free. Among the potential victims of the revised kiddie tax will be UTMA and UGMA accounts. These accounts permit a parent to transfer property to a minor without establishing a trust. When the child comes of age, usually 18 or 21, depending on the state, the custodian may withdraw the money and the child would pay tax at his or her rate. Wall Street Journal, June 16, 2007 p. B2 If you have any questions about restructuring your college financing plan, do not hesitate to call us. Summer Reading During our long drive through the South we went through Louisiana on the Stephen Ambrose Memorial Highway. Coincidentally, my reading list for the trip was Jeremy Siegel’s, Stocks for the Long Run, as well as Eisenhower by Stephen Ambrose. Stephen Ambrose is well known today for writing Band of Brothers which HBO brought to the small screen. Prior to reading Eisenhower, I respected the man both for his WW II and Presidential years. After reading it, I find my opinion of him has been lessened. Additionally, in my personal opinion, I did not like the author’s style and find I much prefer Thomas Fleming’s books both for their insight, presentation of facts and as an easier read. In fact, rumor has it that a new Thomas Fleming book will be out, covering the period from the victory at Yorktown through the early years of our Republic. Maybe it might shed some new light on whether Iraq’s problems are that unique. Amnesia In the furor over the Democrats’ attempt to force an early withdrawal from Iraq, they forget that no war is ever fought perfectly or without casualties. Reading Stephen Ambrose’s biography of Eisenhower was refreshing in reading of what Eisenhower thought were the fortunes of World War II. The Democrats take advantage of the ignorance of my generation in that we have been brainwashed that World War II was fought by the U.S. from beginning to end without error. We have grown up on a revisionist history of WW II perpetrated by Hollywood and TV land and in our own laziness, have not read the authors who got it right. We should remember that the victorious conclusion also included: Corregidor North African landings Kasserine Pass Rest of the North African Campaign Tarawa Salerno landing Rest of the Italian Campaign Sardinia French Hedgerow country Operation Market Garden Battle of the Bulge Yalta Above all, we should remember the role of luck and error by the enemy. By the way, when you see a veteran of World War II or any of our other wars, say "Thank You" for protecting our freedom, our way of life and our families and friends. If you have questions about the foregoing or any other financial matters, please call us. We are always available to see if we can help your family or friends. Remember, We’re Here for You!!