Tax Guide for Investors

Interpretation of Stock Vesting Rule

January 5, 2014

Compensation in stock and optionsThe Tax Court recently rejected an IRS attempt to treat stock as vested based on a provision in the regulations dealing with termination for cause. The court found that the employment agreement used the word “cause” with a different meaning than in the regulation.

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Share Identification Under Attack

January 3, 2014

Taxation of InvestorsOne of the oldest rules in the tax law allows investors to choose which shares are being sold when disposing of part of their holdings in a particular stock. Both President Obama and Dave Camp, Republican Chair of the House Ways and Means Committee, have proposed doing away with this important rule. Our new article in the Journal of Taxation of Investments (subscription required) explains why repeal of share identification would be a policy blunder, accomplishing nothing and creating unnecessary problems for investors. Why aren’t more people objecting to these proposals?

read more: In Defense of Share Identification

Clergy Housing Allowance Exemption Unconstitutional

December 30, 2013

Court rulingsSection 107 of the Internal Revenue Code provides a tax exemption for a housing allowance provided to a “minister of the gospel.” In a decision virtually certain to be overturned, a federal judge has found the exemption unconstitutional.

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IRS Announces Tax Season Start Date

December 22, 2013

Filing your taxesThe IRS has announced that it will begin accepting 2013 income tax returns on January 31, 2014. Here’s what’s strange about that particular date.

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Roth Guide Updated

December 22, 2013

Roth retirement accountsOur free online guide to Roth retirement accounts has been fully updated. This extensive guide offers much of the information covered in Go Roth!, our book on the subject.

details: Roth IRA and Other Roth Retirement Accounts

Standard Mileage Rates for 2014

December 6, 2013

The IRS is out with the standard mileage rates for 2014. Here are the main points, quoted from the IRS announcement:

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 56 cents per mile for business miles driven
  • 23.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

The business, medical, and moving expense rates decrease one-half cent from the 2013 rates.  The charitable rate is based on statute.

Estate Planning Smarts

November 19, 2013

Our favorite book on estate planning is now available in an updated and expanded third edition. Estate Planning Smarts by Deborah L. Jacobs is now firmly established as the leading book on the subject, both for individuals planning their own finances and for finance professionals who want a thorough, readable treatment of the subject. In our review of the first edition we called this book a category killer, because it would be so hard for anyone to improve on it. Jacobs showed we were wrong, as she improved on her own work.

The new edition covers the important changes made by the 2012 tax law as well as the implications of the Supreme Court’s Windsor decision on same-sex marriage and the IRS pronouncement on how it would implement that decision.

to learn more: Estate Planning Smarts website

Covered Call Strategy Was Not Trading

November 14, 2013
By Kaye A. Thomas

The tax law differentiates between investors and traders. The tax rules that apply to traders are generally more favorable, but only a tiny percentage of all the people who buy and sell stocks and other securities satisfy all the requirements for this treatment. A recent case raises the question whether a taxpayer pursuing a covered call strategy can qualify as a trader.
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New Editions of Options Books

November 13, 2013

We’re pleased to announce that 2014 editions are now available for both our books on stock options:

  • Consider Your Options is for people who receive stock options, and for advisors who deal with stock options only occasionally. This book is also one of the assigned readings for the Certified Equity Professional designation.
  • Equity Compensation Strategies is for professional advisors (financial advisors or tax professionals) who deal with stock options or other forms of equity compensation on a more regular basis.

These books contain important updates from previous editions, reflecting new tax rates, the new Medicare tax on net investment income, and guidance on how these and other developments affect strategies for handling stock options.

Waiting for Regs on Net Investment Income Tax

November 7, 2013

This is the first year of the Medicare tax on net investment income, and we’re still waiting for final regulations, which are promised by the end of the year. This tax will cause taxpayers with income above a threshold amount to pay an additional 3.8% tax, on top of regular income tax and/or alternative minimum tax (AMT), on net investment income, including dividends, interest and capital gains. Recent remarks by a Treasury official indicate that the final regs will fix a glitch in the taxation of traders that appeared in the proposed regs, but the official declined to specify how that fix would work. Meanwhile, the IRS has posted a draft of Form 8960, Net Investment Tax (PDF), but don’t expect to learn much by reviewing it. Nearly every line of the form includes the words, “see instructions,” but instructions are not included in the draft. Reason? IRS can’t issue instructions indicating what the regs say until the regs are issued.