2015 Year End Tax Planning (And other things I want to talk about) By Jack Fishburne Purcell, Flanagan, Hay & Greene, P.A.

Surface Transportation and Veterans Health Care Choice Improvement Act of 7/31/15 Applicable to all estates required to file an estate tax return (Form 706)(Gross estates in excess of $5,430,000), the Personal Representative has 30 days after the return is filed to inform the recipients of the property (and the IRS) of the basis reported on the Form 706. Intended to promote consistency across the income/estate tax returns.

Surface Transportation and Veterans Health Care Choice Improvement Act of 7/31/15 Currently no exception for beneficiaries that receive a cash distribution. Currently no exception for tangible personal property. IRS, in Notice , has deferred requirement until February 29, 2016, presumably to issue forms and regulations for the new requirement.

Surface Transportation and Veterans Health Care Choice Improvement Act of 7/31/15 Due Date Changes for Tax Returns Partnership returns now due 2 ½ months after year end (Typically March 15 th ) Previously due 3 ½ months after year end. Corporate Returns now due 3 ½ months after year end. Previously due 2 ½ months after year end. Applies to tax years beginning after 12/31/15

Medicare Access and CHIP Reauthorization Act of 4/15  Commencing in 2018, Medicare enrollees with MAGI over $133,500 ($267,000 for joint filers) will pay $273, plus inflation adjustment, per month. If MAGI over $160,000 ($320,000 for joint filers) will pay $336, plus inflation adjustment, per month. Enrollees under these thresholds are currently paying about $105/month.  BONUS QUESTION - What is CHIP?

Medicare Access and CHIP Reauthorization Act Why Care About this now? Because the new 2018 premiums will be based on the income you report on your 2016 Income Tax Return. If retirement is within the next year or so, consider shifting taxable income to 2015 to lower your 2016 taxable income. However, watch out that tax exempt income is included in MAGI for this calculation.

Obama Care Penalties for Uninsured Jump in 2016 An uninsured taxpayer in 2015 faces a penalty of the greater of $325 or 2 percent of income. An uninsured taxpayer in 2016 faces a penalty of the greater of $695 or 2.5 percent of income. NOTE the average subsidized taxpayer pays $100/month for coverage.

Obama Care Penalties for Uninsured Jump in 2016 For 2014: 7.5 million households paid penalties totaling $1.5 billion. 12 million households claimed exemption from the mandate. Enrollment for 2016 started on November 1 st.

Tax Extenders Legislation???? Expired as of 12/31/2014 $100,000 IRA Charitable Deduction Sales Tax Deduction Mortgage Insurance Premiums Deduction Tuition and Fees Deduction (max $4,000) $250 Educator Expense Deduction Residential Energy Credits (max $500)

Cost of Living Adjustments Don’t expect much. Social Security is stagnant for No COLA! 401(k) Elective Deferral remains $18,000 Over 50 catch up remains $6,000 IRA Deductible remains $5,500 Over 50 catch up remains $1,000 Health Savings Account Individual $3,350 Family $6, Estate Tax Exemption $5,450,000 No Change on Annual Exclusion $14,000

Year End Tax Opportunities Defer Income Until Next Year Check to see if any of your mutual funds will push out any capital gains before year end. Generate Tax Losses $3,000 capital loss allowed in excess of capital gain. Wash Sale Rule – disallows losses generated within 30 days before or after sales if stock repurchased.

Year End Tax Opportunities Watch out for the Alternative Minimum Tax Income is recalculated, deductions are reduced or disallowed and if the taxpayer’s remaining income exceeds the exempt amount, that excess is taxed at a 26% or 28%. If AMT exceeds regular income tax the Taxpayer pays the AMT.

Year End Tax Opportunities Increase Charitable Deductions Checks written & mailed or items donated before year-end count now. Credit card donations made this year even if the card is not paid until next year, count for the current year. Gift Stock If gain, give the stock, recognize gift at FMV If loss, sell stock, retain loss and gift cash

Year End Tax Opportunities Prepay expenses that are due in early January to obtain deduction this year Group expenses, if your itemized deductions are not sufficient to elect to itemize on your tax return every year, then bunch your expenses, such as charitable gifts and property taxes so that you can itemize every other year.

Year End Tax Opportunities Maximize your contributions to your IRA’s and 401(k)’s. Dispose of your passive activities, such as rental property, to free up trapped losses. Contribute to 529 college plans for your kids and grandkids. Make annual exclusion gifts to your family members and favorite lawyer!

Charitable Lead Unitrust Trust Type: Term Transfer Date: 11/2015 §7520 Rate: 2.00% FMV of Trust: $1,000,000 Growth of Trust: 6.00% Percentage Payout: 7.000% Payment Period: Quarterly Term: 20 years Remainder Interest: $238, Charitable Deduction for Income Interest: $761, Donor's Deduction as % of Amount Transferred: % Beginning 6.00% Year Principal Growth Payment Remainder 1$1,000,000 $58,425 $70,000 $988,425 20$ 801,550 $46,831 $56,109 $792,272

Charitable Lead Annuity Trust Trust Type: Term Transfer Date: 11/2015 §7520 Rate: 2.00% FMV of Trust: $1,000,000 Growth of Trust: 6.00% Percentage Payout: 5.000% Payment Period: Quarterly Term: 20 years Annual Payout: $50,000 Remainder Interest: $176, Charitable Deduction for Income Interest: $823, Donor's Deduction as % of Amount Transferred: % Beginning 6.00% Year Principal Growth Payment Remainder 1$1,000,000 $58,875 $50,000 $1,008,875 20$1,299,620 $76,852 $50,000 $1,326,472

2015 Year End Tax Planning (And other things I want to talk about) THANK YOU