Tax planning basics brought to you by Isdaner & Co. -rising rates -tax breaks -business tax -payroll tax -individual tax -medicare tax -estate tax -gift tax -transfer tax exemption & rates -section 179 -depreciation -state & local sales tax deduction -IRA charitable distribution -AMT triggers and how to avoid AMT -mortgage insurance premiums as interest -child/dependent care credit rules

1. In these uncertain
times, tax planning
is more important
than ever
Presented by:
<<Company Name>>
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2. [Insert your logo here]2
“The More
Things Change,
The More They
Remain The
Same.”

3. Rising rates and
expiring breaks
complicate tax
planning
TAX PLANNING BASICS

4. Business: Expired as of 12/31/2011
 100% bonus first-year depreciation allowance for qualified property
 Section 179 expensing
Increased $500,000 expensing election under Code Sec. 179, with
$2 million investment ceiling
Expired for leasehold-improvement, restaurant and retail-
improvement property
 Shortened recovery period of 15 years for specialized realty assets,
including qualified leasehold improvement property, qualified restaurant
property, and qualified retail improvement property
 Lower shareholder basis adjustments for charitable contributions by S
corporations
 Reduced S corporations recognition period for built-in gains tax
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5. Business: Expired as of 12/31/2011
 Research credit under Code Sec. 41(h)(1)(B)
 Various other credits including:
o Work opportunity tax credit (WOTC) for non-veterans under Code
Sec.51(c)(4),
o Credit for construction of new energy efficient homes under Code
Sec.45L
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6. Business: Expiring as of 12/31/2012
 Bonus Depreciation
o The 50% bonus first-year depreciation for assets placed in service
from January 1, 2012, through December 31, 2012
o Qualified assets include any new tangible property with a recovery
period of 20 years or less, computer software or qualified
leasehold improvements
 No bonus depreciation after December 31, 2012
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7. 7
Section 179 expensing election
 Allows you to deduct rather than depreciate
asset purchases
o Deduct up to $139,000 of purchases
o Deduction phases out dollar-for-dollar when 2012 asset
purchases exceed $560,000
o Only Section 179 expensing can be applied to used assets
o If asset purchases exceed phaseout threshold (or your
income), consider 50% bonus depreciation
TIP: The expensing limit and phaseout threshold have dropped from
their 2011 levels of $500,000 and $2 million, respectively. For 2013,
these amounts are scheduled to drop again, to $25,000 and $200,000.
If possible, purchase assets before year end.

8. Vehicle-related tax breaks
 Deduct out-of-pocket expenses (fuel, insurance,
depreciation, etc.) or mileage
o 55.5 cents per mile for 2012
 Purchases of new or used vehicles may be eligible for
Sec. 179 expensing
 New vehicles may be eligible for bonus depreciation
 Depreciation limit is $3,160 for autos placed
in service in 2012
o Increased by $8,000 for autos eligible
for bonus depreciation
 Additional rules and limits apply
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9. Business: Expiring as of 12/31/2012
 The temporary payroll tax cut will no longer apply. The two percentage
point cut in employee OASDI tax under FICA (from 6.2% to 4.2%)
9

10. Individuals: Expired as of 12/31/2011
 State and local sales tax deduction
 IRA charitable distribution
 AMT patch
 Personal credits allowed against regular tax & AMT tax
 $250 Educator expense
 Mortgage insurance premiums as interest
 $4000 Above the line deduction for qualified tuition and related expenses
 100% Exclusion of gain from sale of certain small business stock
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11. Individuals: Expiring as of 12/31/2012
 Temporary payroll tax cut
 Increase of 15% rate bracket for MFJ
 Reduced capital gains rate
 Reduced income tax rates
 Qualified dividend rate
 10% Income tax rate
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12. Individuals: Expiring as of 12/31/2012
 Liberalized child and dependent care credit rules
 American opportunity tax credit
 Refundable credit for prior year AMT
 Increased standard deduction for MFJ
 Repeal of limit on itemized deductions
 Repeal of personal exemption phase outs
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13. New Taxes 2013 and Beyond
 3.8% Medicare tax on unearned income
 .9% Additional Medicare tax
 Higher threshold for itemized medical expense deductions
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14. AMT Triggers
 State and local income tax deductions
 Real estate and personal property tax deductions
 Miscellaneous itemized deductions subject to 2% of AGI floor
 Long-term capital gains and dividend income
 Accelerated depreciation adjustments and related gain or loss
differences when assets are sold
 Tax-exempt interest on certain private-activity municipal bonds
 Incentive stock option exercises
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15. Avoiding AMT or reducing its impact
 Planning for AMT will be a challenge
until Congress passes long-term relief
 AMT system isn’t regularly adjusted
for inflation
 Congress legislates adjustments,
typically as a “patch”
15

16. What to consider doing
 If subject to AMT this year
o Accelerate income and short-term capital gains into 2012
o Defer expenses you can’t deduct for AMT purposes until 2013
o Defer expenses you can deduct for AMT purposes to 2013
 If subject to AMT next year
o Defer income until 2013
o Prepay in 2012 expenses you can’t deduct for AMT purposes
o Sell private activity municipal bonds whose interest
could be subject to the AMT before year end
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17. Timing of income and expenses is key
 Smart timing can reduce your tax liability
 Poor timing can unnecessarily increase it
 Tax rates are scheduled to rise in 2013
17

18. Estate/Gift Taxes: 2012
 Estate and Generation Skipping Transfer Tax
Highest Rate 35%
Exemption $5,120,000
 Gift Tax
Highest Rate 35%
Exemption $5,120,000
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19. Estate/Gift Taxes: 2013
 Estate and Generation Skipping Transfer Tax
Highest Rate 55%*
Exemption $1,000,000
 Gift Tax
Highest Rate 55%*
Exemption $1,000,000
* A 5% surtax applies to estates of $10,000,000 until approximately
$17,000,000
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20. 20
Transfer tax exemptions and rates

21. 21
Gift tax
 Gifts to spouse are tax-free under marital deduction
 Gift tax follows estate tax exemption and
top rate for 2012
o Any gift tax exemption used during life reduces
estate tax exemption available at death
 Exclude certain gifts of up to $13,000 per recipient
o $26,000 per recipient if your spouse splits gift with you
or you’re giving community property
o Scheduled to increase to $14,000 in 2013

22. 22
 2012 may be the year to make large gifts
o Potentially lock in the record-high $5.12 million gift tax exemption
while it’s available
o “Clawback” could reduce the tax advantages, but many experts
believe this is unlikely
o Remove future appreciation from your taxable estate
TIP: Be sure to retain sufficient assets
to maintain your desired lifestyle.
Tax-smart giving

23. Tax-smart giving
 Consider estate and income tax effects of gifts
o To minimize your estate tax, gift property with
greatest future appreciation potential
o To minimize your beneficiary’s income tax, gift property
that hasn’t appreciated significantly since you’ve owned it
o To minimize your own income tax, sell property that has
declined in value to take the tax loss and then gift the sale proceeds
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24. Tax-smart giving
 Plan gifts to grandchildren carefully
o Annual exclusion gifts are generally exempt
from GST tax
o For gifts that don’t qualify for the exclusion
to be entirely tax-free, apply both your
GST tax exemption and gift
tax exemption
24

25.  Gift interests in your business
o Leverage gift tax exclusions and exemption by
gifting ownership interests
 May be eligible for valuation discounts
25
TIP: The IRS may challenge the value, so
a professional appraisal is strongly recommended.
Tax-smart giving

26. Administration’s 2013 Proposals
Individual Income Tax
 Possible limitations on itemized deductions
 Retain current rates for taxpayer with income below $250,000 (joint
returns)
 Allow rates to rise to pre-Bush era tax rates for those with income in
excess of $250,000.
o 39.6% highest rate (including dividends)
o 20% capital gain rate
 “Buffett rule” – taxpayers with over $1 million of income subject to 30%
effective tax rate.
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27. Administration’s 2013 Proposals
Estate & Gift Tax
ESTATE TAX
 Exemption of $3,500,000
 Top rate – 45%
GIFT TAX
 Exemption of $1,000,000
 Top rate – 45%
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28. Administration’s 2013 Proposals
Business Taxes
 Broaden base to cut corporation tax rate to 28%
 Simplify small business tax filings, allow up to $1 million expensing of
investments, and wider use of cash basis of accounting
 Provide manufacturing incentives, including R&D for domestic
manufacturers.
 Repeal the last-in, first-out (LIFO) accounting method for inventories
 Various changes to the international tax provisions
 Repeal of various oil and gas incentives
 Taxing carried interest as ordinary income
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29. 2012 Year End Planning
Business Taxes
 Consider acquiring automobiles, fixed assets, plant and equipment by
year end to take advantage of expiring accelerated deductions.
 Consider dividends from C corporations (or S corporations with earnings
and profits) to take advantage of lower dividend rate.
 Consider taking money out of the business by way of a stock
redemption. The buy-back may yield long-term capital gain or a dividend,
depending on a variety of factors.
 Increase your basis in a partnership or S corporation if doing so will
enable you to deduct a loss from it this year.
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30. 2012 Year End Planning
Gift Taxes
 Consider gifts to maximize the current $5,120,000 exemption.
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31. 2012 Year End Planning
Individual Taxes
 Consider “mining” capital gains to lock in tax at 15% bracket.
 Consider “electing out” of installment sales.
 Consider investment strategies to reduce impact of new 3.8% surtax in
2013 (for example, use of tax free bonds).
 Consider IRA conversion to ROTH IRA to take advantage of lower tax
rates.
 Consider timing of required minimum distribution from IRA/Pension
accounts to reduce impact of new 3.8% surtax if turning 70 ½ in 2012.
 If possible, accelerate home sales that are taxable into 2012 to take
advantage of lower capital gains rate and reduce impact of 3.8% surtax.
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32. Please contact us for assistance:
610.668.4200
www.isdanerllc.com
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Thank You!