ETI Repeal Opens Big Opportunities with Domestic Production Deduction |
One of the centerpiece elements for businesses under the huge American Jobs tax legislation is the new domestic production or manufacturing activity deduction. What on the surface sounds like a tax break for U.S. manufacturers is actually a planning opportunity for a wide range of businesses that fit under the broad definition provided by Congress in the bill. Included in the industries affected are: agriculture, mining, movie production, the sale of electricity and even the provision of engineering and architectural services. The value of the deduction grows to nine percent by 2010, but the rules are very complex. At the heart of the provisions is the replacement of the Extra Territorial Income deduction found illegal by the World Trade Organization. But businesses of all kinds have a significant opportunity here, and the time to start making certain decisions is now if you want to take full advantage of this deduction, according to author Robert J. Misey Jr., J.D., LL.M, M.B.A., of Reinhart Boerner Van Deuren s.c. in the just-published ETI Repeal under the American Jobs Creation Act of 2004—Analysis of the Law’s Impact on U.S. Business.
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Seeking to encourage the return of money invested internationally and create more jobs in the U.S., Congress opened a narrow window to allow dividends paid out of out money permanently invested abroad to receive advantaged tax treatment. The Homeland Investment Act portion of the American Jobs Creation Act of 2004 offers tremendous tax savings potential for businesses with significant foreign investment — but there is a significant downside to doing it wrong with a 35 percent potential tax hit. Making it all the more critical is the fact that this opportunity ends with the 2005 tax year, so the decisions to take advantage of it will have to be made fast. Three experts from PricewaterhouseCoopers — Michael F. Urse, Tadd A. Fowler, and Martin J. Collins — take a close look at the repatriation of foreign earnings rules and the potential minefields in a recent issue of the Journal of Taxation of Global Transactions. |
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The beauty of partnerships, LLCs and S corporations is the well-known concept of pass-through income that avoids taxation at the entity level. The passing of tax liability to owners, partners or members seems simple on the surface but there are often complexities and subtleties in the structure of these entities that requires a thorough understanding of the rules of what does and doesn’t go into the taxable income calculation for a partnership or LLC. Accurately determining an individual’s tax liability could require going back to the numbers that were used to prepare Schedule K-1 and not just going by the numbers on that document alone. In CCH’s Partnerships and LLCs: Tax Practice and Analysis by Thomas G. Manolakas, Robert Ricketts and Larry Tunnell, the authors walk you through the process of determining taxable income while considering potential mistakes and pitfalls that could cause trouble later on. |
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Individual Retirement Accounts are everywhere and most everyone knows about having them as part of their retirement plans. But this awareness often doesn’t extend to a wide range of pitfalls and nuances that can leave IRA owners and their heirs with completely unintended results. Mark LaVangie and Beverly DeVeny are senior retirement plan specialists at the Private Bank at Bank of America and they outline a baker’s dozen of IRA missteps to avoid in a recent issue of the Journal of Retirement Planning. Among these are failure to properly file an IRA beneficiary designation; naming an estate as a beneficiary; selecting the right beneficiary; avoiding accelerated distributions; avoiding IRS penalties; choosing the right investment allocation; and not integrating the IRA into the overall estate plan. Look to this list to sharpen your IRA planning focus and make sure your clients get the results they want from their retirement plans. |
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Cautious savers have long looked to U.S. Savings Bonds as a great way to save money relatively risk free. Savings Bonds are simple, exempt from state taxes and offer some investors the security they seek. They also create a wealth of tax planning questions that change over time and circumstance. Questions about co-ownership, estate taxes and when to redeem the bonds in retirement are just a few of the sometimes vexing questions tax lawyer Douglas H. Frazer looks at in considering the lowly savings bond in a recent article in the Journal of Taxation of Financial Products. Knowing the ins and outs of how taxes affect savings bonds could save clients money and headaches, Frazer notes. With that knowledge, a planner can effectively use and manage savings bonds as part of an individual retirement investment portfolio. |
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