The American Recorvery and Reinvestment Tax Act of 2009

Below is a excerpt from the RIA Newsstand: Wednesday 1/21/09 - Here at Bell and Company we try to keep everyone up to date on what is going on in the Tax world. Richard Bell thought the following information would be great information to pass along to the blogging community.

On Jan. 16, the House Ways and Means Committee released a summary of the economic recovery package, H.R. 598, “the American Recovery and Reinvestment Tax Act of 2009”—which also includes the Assistance for Unemployed Workers and Struggling Families Act; the Health Insurance Assistance for the Unemployed Act of 2009; and the Health Information Technology for Economic and Clinical Health Act. The package, which would include a number of tax breaks for businesses as well as individuals, is scheduled for markup Thursday, January 22.

Business tax breaks would include:

* an extension of first-year 50% bonus depreciation for 2009;

* an extension of enhanced Code Sec. 179 expensing for 2009 (i.e., $125,000 maximum
expensing/$500,000 phaseout ceiling, as adjusted for inflation);

* a 5-year carryback of net operating losses (NOLs), instead of 2-years for 2008 and 2009
(except for those receiving benefits under the Troubled Assets Relief Program (TARP)
legislation, Fannie Mae and Freddie Mac);

* a work opportunity tax credit expanded to include two new targeted groups: (1)
unemployed veterans; and (2) disconnected youth. An individual would qualify as an
unemployed veteran if they were discharged or released from active duty from the Armed
Forces during 2008, 2009 or 2010 and received unemployment compensation for more
than four weeks during the year before being hired. An individual would qualify as a
disconnected youth if they are between the ages of 16 and 25 and have not been regularly
employed or attended school in the past 6 months;

* a prospective repeal of Notice 2008-83, 2008-42 IRB, the controversial guidance which
provided that if a bank recognizes a loss from the disposition of a loan or takes a bad debt
deduction under the specific charge-off or reserve methods of accounting after a change in
ownership, that loss or deduction will not be treated as a built-in loss attributable to the
pre-acquisition period (see Federal Taxes Weekly Alert 10/09/2008 and 01/02/2009 for
details).

Tax breaks for individuals would include:

* a refundable tax credit of up to $500 for working individuals and $1,000 for working
families, calculated at a rate of 6.2% of earned income, and phased out at adjusted gross
income (AGI) in excess of $75,000 ($150,000 for married couples filing jointly). The credit
could be claimed as a reduction in the amount of income tax that is withheld from a
paycheck, or through a credit on a tax return;

* an expanded earned income tax credit (EITC) that would temporarily increase the EITC to
45% of the family's first $12,570 of earned income for families with three or more children
and would increase the beginning point of the phase-out range for all married couples filing a
joint return (regardless of the number of children) by $1,880;

* an increase in the eligibility for the refundable child tax credit in 2009 and 2010. While the
child tax credit is refundable for 2008 to the extent of 15% of the taxpayer's earned income
in excess of $8,500, the bill would eliminate this floor for 2009 and 2010;

* a new American Opportunity tax credit for 2009 and 2010 of up to $2,500 of the cost of
tuition and related expenses paid during the tax year. The credit would be based on 100% of
the first $2,000 of tuition and related expenses (including books) paid during the tax year
and 25% of the next $2,000 of tuition and related expenses paid during the tax year, subject
to a phase-out for AGI in excess of $80,000 ($160,000 for married couples filing jointly).
Forty percent of the credit would be refundable; and

* the removal of the repayment requirement for the first-time homebuyer credit under Code
Sec. 36 for homes bought after Dec. 31, 2008, and before July 1, 2009.

The bill would also include a bundle of energy tax incentives and bond incentives for distressed areas. Some of these energy provisions would include:

* an enhanced 20% research & development credit for tax years beginning in 2009 and 2010
for research expenditures incurred in the fields of fuel cells, battery technology, renewable
energy, energy conservation technology, efficient transmission and distribution of
electricity, and carbon capture and sequestration;

* an extension of the Code Sec. 25C tax credits for improvements to energy-efficient existing
homes through 2010. For 2009 and 2010, the amount of the tax credit would be increased
from 10% to 30% of the amount paid or incurred by the taxpayer for qualified energy
efficiency improvements during the tax year. The property-by-property dollar caps on the
tax credit would also be eliminated and an aggregate $1,500 cap would apply to all property
qualifying for the credit;

* an extension and modification of the renewable energy production tax credit, extending the
placed-in-service date for wind facilities for 3 years through Dec. 31, 2012, and for certain
other qualifying facilities for 3 years through Dec. 31, 2013.

* a temporary election to claim the investment tax credit in lieu of the production tax credit;

* a repeal of subsidized energy financing limitation on the investment tax credit;

* removal of the dollar limitations on certain energy credits, e.g., for qualified small wind
energy property ( $4,000 cap); for qualified solar water heating property ($2,000 cap); and
qualified geothermal heat pumps ($2,000).

* an increase for 2009 and 2010 in the Code Sec. 30C 30% alternative refueling property
credit for businesses (capped at $30,000) to 50% (capped at $50,000); and

* authorization of addition funds for new clean renewable energy bonds and qualified energy
conservation bonds.

Social Security - Retirement Age Considerations

Below please find a link which is an informative social security bulletin on the merits of delaying your social security benefits from age 66 to age 70. The benefit will increase 8% if you were born after 1943, each year. With the loss in 2008 of an average 30 to 40% of balances in our respective retirement accounts, the strategy may be to work till age 70 and take advantage of the social security increase by waiting, and use the additional four years to build your retirement back.

http://www.socialsecurity.gov/mystatement/insert2.htm

Race for The Cure 2008

This is Team Bell Babes 2008. We enjoy participating in the Susan G. Komen Race for The Cure. Each year we are still moved by the number of people and the cause. Here at Bell and Company we have each been touched by the diesease, we have clients, family and friends that have had breast cancer, and we want to support the cure.

We're Rich - By Jeff Lovelady, CPA

I received a phone call from my father the other day informing me that he had sold the store that belonged to my grandparents in a little town called Guion, located on the White River in Arkansas. This store in it’s prime was one of two stores in the little town and they were right across the street from one another. I am sure if my grandfather was alive he could tell us some stories of the rivalry that may have existed. Me and a buddy went up there early Saturday morning to do some trout fishing. The river was up so high there was no way we could put enough weight on the line to keep the bait running close to the bottom. Being diehard fishermen, we went ahead and decided to wet a hook. We fished for a good 2 hours, floating down and motoring back up and back down and up again. We did not get a bite, at least that we could tell because if you have ever been float fishing for trout, you realize it is hard to distinguish between bumping along the bottom and a trout snapping at your corn for lunch. About 11 am we decided to head back to shore to go help my father and brother clean some old stuff out of the store before the final closing on the sale. Nothing seemed to have been touched since the auction that took place before my grandfather passed in early 1998. Dust had settled on everything and mice had eaten away and made nests out of paper and string and old magazines. It was dark and stuffy in the store with no electricity to light our way, only flashlights, a couple of seams in the boards that covered the windows and the front door that was propped open. My father and his sister and her husband had already gone through “all” the stuff behind the counter where my grandparents had kept a lot of old records. Well my curiosity got the best of me so I decided to just go and look myself. So I started digging and digging and digging and I found a lot of information pertaining to the operations of the store over the years that we bagged up and hopefully soon, I will be able to go and look through some of that stuff just to find out what was going on “back in the day”. I find that old stuff interesting. So I kept digging and digging and during this next search, I found a box that had been tucked back underneath the counter where it kind of looked like part of the counter. What was in this virtually intact cardboard box? Upon opening the box, I saw a few old calendars from the 1960’s and some old progressive farmer magazines from the 1970’s and then I came across an old comic book that had the cover removed. It was a Batman comic, nothing special but I thought it was interesting so I kept digging and then there it was, it was like a spotlight had illuminated the box, the “Holy Grail” of comic books, with the cover still intact. SUPERMAN No.1 by Action Comics, June 1938, 10 cents, and low and behold, another one right behind it in the same condition. I looked at my father and said do you realize what this is? He said, “A comic book”. After stuttering and sputtering and some shaking, I proceeded to explain to him the significance of this comic book, it could be worth hundreds of thousands of dollars and we have two of them! We delicately took the comics and placed them in the seat of the truck and proceeded to finish cleaning out the store. We were on cloud nine. I was trying to access the internet with my PDA and was able to get on a site that showed the value at $80,000 in poor condition. When I got home I did some more research and my dad was calling me and I was calling my brother and we were all researching the value of this comic book, $400,000 to $1,000,000 is what we were estimating. I found an auction web site for a company that auctions rare comic books. I emailed the VP of the comic book auction division explaining to him the find and describing the book to him. This was on a Saturday night. We were counting the money and spending it all at the same time. I did not expect to get a response from him for a few days and was searching for places we could go to get it appraised. Upon awaking Sunday morning, I saw where he had responded to my email, asking me to measure the dimensions of the comic book and I did, 10 inches by 13 inches. If you know anything about comic books, you already know the rest of the story, the comic book was an exact replica of the original that was produced around 1974. It is identical in all respects except the dimensions. The original that was produced in 1938 was 10 inches by 7 ½ inches. After deflating our Robin Leech balloon, we were discussing the impact of taxes on something of this nature and this brings about an interesting question that I will pose to everyone. Of course, being a CPA, I know the answer but I thought if would be fun to see what thoughts are out there in this regard. Kind of like buying a vase for $50 and finding that it had $10,000 in $100 bills stuffed inside, do you report the gain? The answer is yes you do. So, if the comic book had been worth $400,000, would my father have to pay taxes on the sale of the comic book, and if so, what would the basis be, considering he took one and my aunt took the other?