PricewaterhouseCoopers Guide to Tax and Financial Planning, 2007: How the 2006 Tax Law Changes Affect You Book

Introduction.

About PricewaterhouseCoopers.

How to Use This Book.

Let’s Get Started.

Tax Law Changes and Financial Planning.

Chapter 1: What Tax Changes Apply in 2006.

The American Jobs Creation Act of 2004.

Limits on Donations of Used Motor Vehicles, Boats, and Airplanes.

Enhanced Donor Reporting for Noncash Charitable Contributions.

Restrictions on Depreciation of Sports Utility Vehicles.

Expansion of Eligible Shareholders in S Corporations.

Restrictions on Nonqualified Deferred Compensation.

Changes to Taxation of Personal Use of Company Aircraft and Other Entertainment Expenses.

Penalties for Failing to Disclose Certain Reportable Transactions.

Tougher Rules for Tax-Avoidance Expatriation.

Changes to Foreign Tax Credit Carryovers/Carrybacks and Alternative Minimum Tax Limitations.

Increased Penalties for Failure to Disclose Foreign Financial Accounts.

Tax Rates, Tax Credits, and Deductions.

Ten Percent Income Tax Bracket.

Upper-Income Individuals Will Not Lose Deductions.

Personal Exemptions Will Not Be Lost.

Alternative Minimum Tax.

Investment Income.

Long-Term Capital Gains.

Reduced Dividend Rates.

Estate Taxes.

Exemption Increases.

Rate Reduction.

Loss of Full Basis Step-Up.

Highlights of Other Recently Enacted Legislation.

I. Hurricane Katrina Emergency Tax Relief.

II. Gulf Opportunity Zone Act.

III. Energy Tax Incentives Act.

IV. Tax Increase Prevention and Reconciliation Act.

V. Heroes Earned Retirement Opportunities Act.

VI. Pension ProtectionAct of 2006.

What’s Next?

Chapter 2: Investments and Stock Options.

Capital Gains.

Favorable Rates.

Exceptions to the 15 Percent Rate.

Collectibles, Qualified Small Business Stock, and Depreciated Real Estate.

No More Advantage for Five-Year Gains.

Effect of Past Election to Get the 18 Percent Rate.

Netting Rules.

Capital Losses.

Wash Sale Rule.

Protecting and Postponing Stock Gains.

Qualified Small Business Stock.

Passive Activity Losses.

Careful Record Keeping: Identification of Securities.

Dividends.

Mutual Funds and Real Estate Investment Trusts.

Preferred Stock.

Short Sales.

Margin Accounts.

Foreign Tax Credit.

Impact of Reduced Tax Rates on Investment Allocation.

Tax-Exempt and Taxable Bonds.

Taxable Tax-Exempt Bonds.

Bond Premium or Discount.

Florida Intangibles Trust.

Nonqualified Stock Options.

Incentive Stock Options.

Idea Checklist.

Chapter 3: Retirement Planning.

Employer Plans.

Qualified Retirement Plans.

Nonqualified Deferred Compensation Plans.

Your Resources.

Keogh Plans.

Simplified Employee Pension Plans.

Traditional and Roth Individual Retirement Accounts.

Tax Credit for Retirement Saving.

Charitable Remainder Trusts.

Tax-Deferred Annuities.

Split-Dollar Life Insurance.

Universal Variable Life Insurance.

Professional Retirement Services.

Social Security.

Required Retirement Plan Distributions.

Idea Checklist.

Chapter 4: Tax Advantages of Home Ownership.

Tax Benefits of Owning a Home.

Mortgage Interest.

Home-Equity Loans.

Vacation Homes.

Rental Properties.

Home Office Deduction.

Personal Residence Trust.

Home Sales.

Principal Residence Gains Exclusion.

Home Purchases.

Real Estate Taxes.

Mortgage Points.

Idea Checklist.

Chapter 5: How to Maximize Savings for Education.

Qualified Section 529 Tuition Programs.

What Expenses Qualify?

Gift and Estate Tax Breaks.

Coverdell Education Savings Accounts.

Roth IRAs.

Traditional IRAs.

Helping Outstanding Pupils Educationally (HOPE) Scholarships and Lifetime Learning Credits.

U.S. Savings Bonds.

Home-Equity Loans.

Student Loans.

Tuition Deduction.

Relatives.

Income Shifting and Capital Gains.

Employer Education Assistance.

Idea Checklist.

Chapter 6: Account-Based Health Care Arrangements.

Health Savings Accounts.

Eligibility.

Contribution Limits.

Health Reimbursement Accounts.

Flexible Spending Arrangements.

Chapter 7: Estate Planning Ideas.

How Estate and Gift Taxes Work.

Amounts Exempt from Tax.

Gift and Estate Tax Rates.

Planning for Phasedown and Repeal of the Estate Tax.

Draft a Will.

Review How Your Property Is Owned.

Consider State Death Taxes.

Give Gifts.

Consider Valuation Discounts.

Consider Trusts.

Give a Roth IRA.

Pay Gift Taxes Now.

Idea Checklist.

Chapter 8: Charitable Giving.

Charitable Deductions.

Charitable Contributions.

Deductible Contributions—Quick Guide.

Nondeductible Contributions—Quick Guide.

Valuation Issues.

Retail Property.

Stocks and Bonds.

Closely Held Businesses.

Notes.

Life Insurance.

Real Estate.

Artwork: Paintings, Antiques, and Other Objects of Art.

Jewelry and Gems.

Used Cars, Boats, and Aircraft.

Used Clothing and Household Goods.

Hobby Collections.

Appraisals and Substantiation Requirements.

Penalties for Overvaluation.

Reduction of Contribution Amount.

Percentage Limitations.

Private Foundations.

Nonoperating Foundations.

Operating Foundations.

Pass-Through Private Foundations.

Tax Compliance and Operating Rules for Private Foundations.

Alternatives to Private Foundations.

The 50 Percent Limitation.

The 30 Percent Limitation.

The 20 Percent Limitation.

Other Alternatives.

Year-End Tax Saving Strategies

Chapter 9: Quick Planning Guide.

Tax Reduction.

Tax Deferral.

Income Shifting.

Year-End Capital Gains Checkup.

Year-End Alternative Minimum Tax Diagnosis.

Chapter 10: Accelerating Deductions.

State and Local Taxes.

Interest.

Home Mortgage Interest.

Business Interest.

Investment Interest.

Passive Activity Interest.

Student Loan Interest.

Personal Interest.

Medical Expenses.

Charitable Contributions.

Property Donations.

Substantiation Requirements.

Deferred Giving.

Passive Activity Losses.

Casualty Losses.

Miscellaneous Itemized Deductions.

Moving Expenses.

Idea Checklist.

Chapter 11: Deferring Income.

Year-End Bonuses.

Deferred Compensation.

Stock Options or Stock Appreciation Rights.

Treasury Bills and Bank Certificates.

Dividends.

Installment Sales.

U.S. Savings Bonds.

Annuities.

Individual Retirement Accounts.

401(k) Plans.

Shifting Income to Family Members.

Chapter 12: Alternative Minimum Tax.

Understanding the Alternative Minimum Tax.

Alternative Minimum Tax Computation.

The More, the Not-So-Merrier.

Top Ten Items That May Cause the AMT.

An Unpleasant Surprise for Many.

Alternative Minimum Tax-Planning Strategies.

Taxpayers in the Alternative Minimum Tax for 2006 Only.

Taxpayers in the Alternative Minimum Tax for 2006 and Beyond.

Chapter 13: Year-End Planning for Business Owners.

Increased Section 179 Expense Election.

Retirement Plans.

Bonuses and Deferred Compensation.

Income Deferral or Acceleration.

Alternative Minimum Tax Planning.

Accounting Method Changes.

Personal Holding Company Tax.

Succession Planning.

Buy-Sell Agreements.

Deferred Compensation.

Covenant Not to Compete.

Earn-Out (Contingent Sale Price).

The Importance of Early Planning.

Do Not Wait to Plan.

C Corporation versus S Corporation Comparison.

A Nuts-and-Bolts Review.

Chapter 14: Fundamental Tax Concepts.

Gross Income.

Adjusted Gross Income.

Modified Adjusted Gross Income.

Itemized or Standard Deductions.

Personal and Dependent Exemptions.

Marital Status.

A Tax Credit or a Deduction.

Taxable Income.

Marginal and Effective Tax Rates.

Social Security Taxes and Benefits.

Marriage Penalty.

Accountable Plan.

Tax Effects of Alimony.

Social Security Taxes for Domestic Employees.

Estimated Tax Payments.

January Tax Strategy Idea Checklist.

Conclusion.

About the Authors.

Index.