May 31, 1999 Entertaining Your Accountant Can Be Taxing Or entertaining any other business related person, for that matter. Summer is a time for barbecues and backyard get togethers. If the person you invite over is business related, then the entire cost of entertaining that person (not their spouse or children or others) is deductible. The cost includes you, but not your spouse or children. The cost includes each and every papergood purchased and the value of every drink consumed from liquor or soft drinks including those not specifically purchased for the affair. The regulations are quiet on how you calculate the cost for the two of you, so just use a reasonable method. Oh yes, on the sheet of paper that you calculate the amount on, attach all relevant receipts and write the specific business purpose of the function and a short description of the specific business discussed. You are not entitled to a deduction for general goodwill and practice development. Have a great summer!! Bon Appetit! Taxation Created Russia Russia’s financial problems today stem in part from the failure of its tax collection process. This is not the first time the tax collection process was important to Russia. When Genghis Khan and his Golden Horde swept through Russia, they reduced its civilization to ashes. They farmed out tax collection to Moslem merchants from Baghdad. But the Russians rose up and slaughtered the Moslems. Then Khan found a man named Ivan in an obscure town called Moscow who proposed an unusual method of tax collection. Instead of punishing delinquents, he punished their princes. The taxes rolled in, and Ivan helped himself to a princely share. The Khan was so impressed that he made Ivan the tax collector for all of Russia. With his huge profits, Ivan began to acquire more land and hired the best warriors. Like Augustus in Rome, he gained control of Russia through its tax system. He built the Kremlin and gradually loosened the Mongols’ grip. His descendant, Ivan the Terrible, threw the Mongols out, then created a band of tax agents with unusual powers separate from the government. They were the forerunners of Stalin’s secret police. Peter the Great later put a tax on all males. It was higher on free peasants than on serfs, so the ranks of serfs increased. Landowners had to accept any peasant who applied, so they demanded more power over their serfs. Like Rome, Russia became a land of serfs and masters. Fidelity Restricts Frequent Phoners In an attempt to cut expenses, the largest mutual fund company has notified 30,000 investors that they will no longer be able to reach a human being over the telephone in order to obtain fund balances, stock quotes and other commonly sought information. Instead, Fidelity is telling these clients, singled out because of their frequent calling, to use its Website or automated telephone system to obtain information. Fidelity says a call to a phone representative costs them $13 while only $1 to an automated system. We remind you that we have our own brokerage operation in our investment management division and will continue to answer your questions as part of our commitment to old fashioned “service”. IRS Grants Automatic Filing Extensions For Employee Benefit Tax Returns The IRS has announced that, effective immediately, all applications for extension of time to file employee benefit plan returns on Forms 5500, 5500-C/R, and 5500-EZ will be automatically approved if the request (on Form 5558) is filed on or before the normal due date of the return or report. Because the extension to file the tax return 2 1/2 months later is automatically approved, the IRS will no longer return approved copies of Form 5558 to the filer to be filed with the tax return. Instead, filers must attach a copy of the completed and signed Form 5558 to the return or report. Taxpayers With Large Family and No Tax Preferences Are Subject to AMT The Tenth Circuit upheld a Tax Court decision holding that a couple filing jointly with ten children but no tax preference items was properly liable for the alternative minimum tax, a tax designed to tax wealthy taxpayers who invest in tax shelters. The taxpayers are members of a major church and are opposed to birth control and abortion. They claimed $29,400 in personal exemptions and dependency deductions. The Court rejected the taxpayers contention that they were not liable for the AMT because Congress never intended the AMT to apply to taxpayers with no tax preference items, but who had large families. The Court said that while the law may result in unintended consequences, the taxpayers should seek relief from Congress and the AMT did not violate their First Amendment right to free exercise of religion. This case has to be a great argument for tax simplification!! OJ Murders Do Not Result in Casualty Loss A District Court in California denied a casualty loss deduction to a couple who claimed the murders of Nicole Simpson and Ronald Goldman created permanent buyer resistance to their home. The couple claimed a casualty loss on their 1994 tax return on the basis that their Brentwood home fell in value after the double murder and the subsequent public focus on suspect OJ Simpson, whose house was near theirs. The Court pointed out that for an individual taxpayer to take a casualty loss the loss must arise from fire, storm, shipwreck, or other casualty or theft. The court only recognized losses arising from physical damage caused by environmental or other similar casualties. If you have any questions about these or any other tax or financial issues, please call me.