Wednesday, November 21, 2012

Tax Points

Succession planning loophole. Sell your business on an installment plan. This freezes the value at the current price. The seller reports capital gain on the installment basis, delaying taxes because gain is recognized only when and to the extent that installment payments are received. Interest must be added to the payments. The purchaser’s note will be included in the seller’s estate and the unpaid balance (the remaining portion of the capital gain), even though not yet received will be subject to income tax upon death.

Bonus depreciation. Under the law, businesses are entitled to claim 50% bonus depreciation for eligible new property placed in service in 2012. This means that half the cost of the property can be deducted in the first year, along with any additional depreciation on the other half of the property’s cost, as well as any first-year expensing.

Business use of personal cars. If you drive your personal car, truck or van for business, you can deduct the operating expenses related to business use. There are two ways to do this…Actual expense method. You can deduct your actual expenses related to business use of the vehicle – gasoline, oil, tires, repairs, insurance, etc. – plus an allowance for depreciation. Standard mileage rate. Deduct business driving in 2012 at the IRS rate of 55.5¢ per mile. This cents-per-mile allowance takes the place of actual expenses.

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