Carolinas - Virginia Business Brokers Association Thursday May 23, Presented By: Monty W. Walker CPA, CGMA, CBI Walker Business Advisory Services

2 Regular Capital Gain Rate Increase For individuals with AGI above $400,000 and joint filers with AGI above $450,000, the capital gain rate is increased from: 15% to 20% Effective January 1, 2013

3 Dividend Tax Rate Increase For individuals with AGI above $400,000 and joint filers with AGI above $450,000, the dividend tax rate is increased from: 15% to 20% Effective January 1, 2013

4 Ordinary Tax Rate Increase For individuals with AGI above $400,000 and joint filers with AGI above $450,000, the top ordinary tax rate is increased from: 35% to 39.6% Effective January 1, 2013

Individual Income Tax Rates, Tax Brackets

6 Medicare Tax On Earned Income Patient Protection Act: Additional Medicare Tax on earned income in excess of $200,000 for individuals and $250,000 for joint filers:.9% Effective January 1, 2013

7 Medicare Tax On Unearned Income Patient Protection Act: Additional Medicare Tax on unearned income (Dividends, Interest, Capital Gains, Pass-Thru income from S-Corps, LLCs, etc…) for individuals with AGI above $200,000 and joint filers with AGI above $250, % Effective January 1, 2013

8 Medicare Tax On Unearned Income Patient Protection Act: Per the Joint Committee on Taxation Report, the 3.8% Medicare tax on unearned income, as the law is currently written, does not apply to non-passive trade or business activities conducted by a: Sole Proprietor S-Corporation Partnership LLC

9 Section 179 Limit IRC Section 179

10  cannot exceed $500,000; and  the maximum deductible expense must be reduced (i.e., phased out) for each dollar of property cost which exceeds $2,000,000 For tax years beginning in 2012 and 2013, the deductible Code Section 179 expense:

11  a $25,000 limitation on the expense deduction applies, and  a $200,000 beginning-of-phaseout amount applies. Unless the provisions of the American Taxpayer Relief Act of 2012 are extended, the current projected Section 179 limits for Year 2014 and beyond are:

12 For tax years beginning in 2012 and 2013, up to $250,000 of qualified real property costs may be included as a part of the section 179 deduction limit. Qualified real property includes: I. Qualified leasehold improvement property costs as defined by IRC Sec. 168(e)(6), II. Qualified restaurant property costs as defined by IRC Sec. 168(e)(7), and III. Qualified retail improvement costs as defined by IRC Sec. 168(e)(8).

13 For tax years beginning in 2012 and 2013, a 15 year recovery period as opposed to a 39 year recovery period will apply to qualified real property improvements. Qualified real property improvements includes: I. Qualified leasehold improvement property as defined by IRC Section 168(e)(3)(E)(iv), II. Qualified restaurant property as defined by IRC Section 168(e)(3)(E)(v), and III. Qualified retail improvement property as defined by IRC Section 168(e)(3)(E)(ix)

14 Qualified Small Business Stock IRC Section 1202

15 The stock must meet ALL the following tests:  It must be stock in a C corporation;  It must be originally issued after August 10, 1993;  As of the date the stock is issued, the corporation must be a qualified small business by having gross assets not exceeding $50 million;  The taxpayer must acquire the stock at its original issue in exchange for money, other property (not including stock), or as compensation for services provided to the corporation; and  The corporation must meet the active business test.

16 The American Taxpayer Relief Act of 2012 allows: noncorporate taxpayers to exclude 100% of gain on the sale or exchange QSBS if the stock is acquired after January 1, 2012 and before December 31, 2013; and is then held for more than 5 years.

17 S-Corporation Built-In Gain IRC Section 1374

18 S-Corporation Built-In Gain Built-in Gain Tax S corporation conversion Built-in Gain (BIG) tax moratorium for Year 2012 and Year Applicable to S corporations with conversions at least 5 years prior to Year 2012 or Year 2013 Rate increases in Year 2014 from: 0% to 35%

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20 Works with Business Sellers, Business Buyers and their various advisors, such as Business Intermediaries, Accountants and Attorneys, to manage the unique financial, tax, planning and procedural matters associated with Buying and Selling a business. He does not serve as a Business Intermediary. He only provides Advisory Services. Has a comprehensive business background in the private closely-held sector spanning over 27 years which includes experience in both startups and established entities Professionally manages and administers retirement plans including plans which enable entrepreneurs to use their accumulated retirement money as a business capitalization source while preserving tax deferrals and without incurring penalties. His advisory services in the qualified money arena include solutions using of Self-Directed IRAs and Small Business Investment 401(k) Plans. Developed and assists Entrepreneurs throughout the country with a unique proprietary comprehensive transaction planning review resulting in a deliverable entitled --- Transaction Structuring Report. Works with clients throughout the country rendering advisory support for Business Transactions, Business Exit Strategies, Business Tax Planning and Business Transition Planning. Subject Matter Expert for the International Business Brokers Association in the area of Business Transaction Taxation, Structuring and Planning. He is also an approved instructor for the International Business Brokers Association, the Texas Real Estate Commission and the Texas Department of Insurance. Authored various business transfer taxation and structuring courses and various other business transfer related workshop topics which he instructs for these organizations. Due to his background in the area of business planning and business transfers he is often referred to by his clients and colleagues as a --- “Business Transaction CPA” Is a member of the American Institute of Certified Public Accountants, the International Business Brokers Association, the Texas Association of Certified Public Accountants, the Texas Association of Business Brokers, the Institute of Certified Business Counselors and the Society of Financial Service Professionals Certified Public Accountant, Certified Governmental Management Accountant, Certified Business Intermediary Monty W. Walker CPA, CGMA, CBI (940) About The Presenter