Broker Check

December 19, 2001

My Guitar Gently Weeps

          George Harrison should not only be remembered as "the quiet Beatle" but, as the musician who, in 1972, created the benefit concert where musicians donated their talent and all proceeds from the concert went to the charity. Along with Bob Dylan, Leon Russell and others, George Harrison turned the world`s attention to Bangladesh.

          Bob Geldorf, upon receiving knighthood for producing Live Aid, stated it was George Harrison who gave him the idea and started it all.

          Today, there are numerous copycat benefits that send funds to worthwhile endeavors and try to reduce the amount collectible by "The Tax Man".

          But don`t try and deduct the tickets you bought to those concerts, only the amounts you donated. The ticket bought you a concert, so you received consideration (music) for your admission.

Year End Tax Planning

          Think about taxes when you consider your year end giving plans.


  • appreciated stock to teenagers so the gains will be taxed at their 10% rate and this year capital gains are eligible for a lower 8% top rate if the combined holding period of the donor and donee exceeds five years
  • appreciated stock to charity; you avoid the tax on the gain
  • to a Roth for a child with a job
  • to a Coverdell education savings account (formerly known as Education IRAs). This year the maximum payin is $500 per child. Next year, $2,000. All payments used for college tuition and costs of K-12 education are tax free.
  • to state college savings plans (529)
  • up to $10,000 each year free from tax to anyone you want. Gift exclusion rises to $11,000 in `02. 
  •  to school directly for tuition - the tax break is unlimited.

          It has been a terrible year for savers and investors so let`s make the tax man feel our pain-

  • Sell the dogs in your investment portfolio.
  • Exchange from one fund to a better performing fund for the future.
  • Trigger capital losses and note that losses must first be deducted against any capital gains; then, if there are any losses left over, up to $3,000 can be deducted against ordinary income. Excess losses can be carried over to the following year.
  • For a capital loss to stick, you must not buy back the original investment for 31 days.
  • Defer income to 2002, tax rates will be lower.
  • Ask your employer to pay year end bonuses in January instead of December.
  • Charitable deductions may be worth more this year or next, depending upon your income. Same for mortgage interest and state and local taxes.
  • Professionals can slow their billings in order to collect less in `01 
  • Buy short term treasuries or certificates of deposit to defer interest to `02.
  • Medical insurance for self-employeds- 60% is deductible for `01 without itemizing, next year 70%. Balance is an itemized medical cost.

IRS Capitulates on Joint Tenancies Created Before 1977

          In the usual scenario, the husband buys realty before 1977 with his money and titles the property in his and his spouse`s name as joint tenants. After he dies, his widow sells the property for a large gain. IRS argued she owed tax on one half of pre-death appreciation as a joint tenant. Courts disagreed and now the IRS decides its position was wrong.

          Surviving spouse will only owe tax on appreciation after first joint tenant dies.

          Outcome is different for spousal joint tenancies set up after 1976. They owe tax on half the pre death appreciation no matter what they paid in, unless they are in a community property state.

We Cannot Be in A Recession

          since no contractor, painter, electrician or carpenter will call me back!

          Even so, they say we have been in a recession since March `01. Since the average post war recession lasts 11 months, this one should be over in February, three months from now!

Happy Holidays
no matter which you celebrate
A Healthy and Happy New Year
from all of us, to all of you.

          If you have any questions on these or any other tax, financial or legal matters, please call us.