​Daniel Cullinane CPA                                   p 848-250-9587                                                                                                                                     

Facebook Inc is vying to bring virtual reality to your phone. The social network is working on a stand alone video app that would support 360 degree or spherical videos. people familiar with the matter said.  The format, typically compiled from multiple cameras, allows user to change their viewing perspective by tilting their phones


As conceived, the app would work on many platforms including Apple Inc's devices and those using Google Inc's Android operating system. Development of the app is in early stages and it is unclear when or if the app will launch. Facebook Chief Executive Mark Zucherberg has repeatedly called virtual reality  the next computing platform after mobile devices. Hype around virtual reality has waxes and waned over the past three decades, but Facebook's 2 billion acquistion of Oculus VR last year sparked renewed interest and investment in the sector.


In March, Mr Zuckerman said Facebook would support spherical video in its news feed, saying users would be able to move around inside the video and view it from different angles

​FACEBOOK/VIRTUAL REALITY 

The tax consequences surrounding environmental clean up costs is that there is no current year write off the costs must be capitalized. The IRS differentiated a situation involving mold removal in a private letter ruling in 2006.


Your business can deduct all the ordinary and necessary expenses it incurs and pays during the year. This includes expenses for regular repairs  that do not prolong the property's useful life or cause it to significantly appreciate in value. You cannot deduct expenses for permanent improvements. 


The IRS determined mold remediation expenses are ordinary and necessary expenses for four reasons

  • The building use stayed the same
  • No structural alterations were made
  • The mod problems did not appear until after the owner acquired the building
  • The work did not prolong the life of the building or cause it to appreciate in value.

MOLD REMOVAL

Just because you are not eligible to claim a dependency exemption for a parent or other relative does not mean that you lose out on deducting medical expenses. Example suppose Jane cannot claim her father as a dependent in 2015, even though she provides more than half of his total support. Reason: Her father's gross income tops $4,000. In this case, Jane can still include payments for medical expenses on his behalf among her own medical expenses

​DEDUCT MEDICAL EXPENSES WITHOUT EXEMPTION

Law school expenses are not deductible , even for foreign trained attorney. A US citizen in Germany took courses and got a license to practice law there. Later, he returned to the US and obtained a degree from an American law school. He attended school full time and was not employed. The Tax Court nixed his write-off for the cost of his legal education  because he entered into a new trade or business when he became qualified to practice law in the US


A break for accrual method firms that prepay contracts for routine services. As a general  rule, businesses can deduct these payments as the services are performed, not when they are paid for. There are two exceptions: One for certain recurring items and the other for wevices to be provided with in 3.5 months after payment IRS now lets firms deduct costs ratably over the contracts term. This easing is only for contracts of one year or less that provide for similar services to be performed at regular intervals, with each occurrence of the service having independent value 

BUSINESS TAXES

The Service has a new guide for auditing equity based compensation, stock transfers, options, restricted stock, phantom stock plans and the like. Agents will look at a company's filings with the Securities and Exchange Comm plus its internal documents, such as board minutes and employment contracts.


Among the issues to be examined: Whether the stock is vested or unvested. Existence of Section 83b elections by employees who choose to be taxed on the value of the shares on the date of the grant instead of the vesting date. Proper characterization of options, incentive or nonstatutory stock options. Loans to executives for them to exercise options or buy  restricted stock. The tax treatment of dividends on restricted stock as wages or dividends

​BENEFIT PLANS

IRS gets reprimanded for being inflexible about collecting a tax debt. A lawyer whose income fluctuated widely year to year because of the nature of his business requested to settle his tax debt for less money or pay it in installments. The collections officer rejected his offer, but the Tax Court said she acted arbitrarily and capriciously, making up her mind without having a meeting with the taxpayer and failing to take into account his seesawing income. As a result, the Court ordered the Revenue Service to grant the lawyer a new hearing

TAX DISPUTES

Following the lead of other jurisdictions that have signed intergovernmental pacts with the United States under FATCA ( Foreign Account Compliance Act) the Holy See of the Catholic Church recently agreed to report banking information about account holders in the Vatican Bank. The bank itself has been plagued by charges of corruption in recent years and Pope Francis has cited its clean up as one of his top priorities. To improve compliance with the federal tax law, FATCA requires foreign institutions to provide information about US  taxpayers directly to the IRS

​VATICAN

IRS will get a jump start on businesses that miss payroll tax deposits. Using a new payroll tax initiative, the Service will notify a business by mail when its records show that the firm's payroll tax deposits have declined. The employer will be asked for an explanation of the decrease  If the business has missed deposits, the IRS will pursue collection of the unpaid amounts. More complicated cases, such as businesses with preexisting delinquencies, will  be handled by field officers.


Having limited financial authority will no help co-owners beat a payroll tax bill a federal court rules.  Two shareholders, who owned equal stakes in a corporation agreed that the president would handle the firm's finances while the vice president would take care of field operations. The VP still had authority to sign checks and did sign checks to creditors, even though her was aware the firm owed payroll taxes, that made him liable for the payroll tax deficiency.

​PAYROLL TAXES 

Giving lifetime gifts to family members is a tried and true method for reducing your taxable estate. The problem is you give up control of your assets. Set up a Crummey Trust, this estate planning technique can produce favorable tax results. As long as you meet certain requirements you essentially keep control of the assets while removing them from your estate. Under the annual gift tax exclusion, you can give assets valued up to a specified limit to each family member each year without triggering any gift tax. the exclusion, which is indexed in $1,000 increments, is $14,000 for 2015. thus you can give three children a maximum of $42,000 this year with no gift tax., However, with this method, you run the risk that the money or property may be squandered especially if the child is young and irresponsible.  Alternatively, you can transfer assets to a trust and name the child as a beneficiary. In that case, the trustee you appoint will supervise until the child reaches an age designated in the trust. 


To qualify for the annual exclusion, the gift must be one of a present value. When a gift is placed in a trust and is not distributed to the beneficiary for some time, it is generally considered a gift of future interest. This type of gift is subject to gift tax. This is where a Crummey trust can come to the rescue. Typically, the trust documents entitle the child to withdraw funds from the trust during a small window of opportunity, ( 30 days ) Because the beneficiary has the present right o withdrawal, even though it is rarely used, the transfer of assets to the trust qualifies for the annual gift tax exclusion.


Note that the trust principle does not have to be paid out when the beneficiary reaches a certain age. In this way, the trust can potentially continue for a long period of time


​CRUMMEY TRUST

Provide long term care insurance as a company fringe benefit for employees including your self. This offers some protection to employees who may be forced into extended nursing home stay. As long as you meet the tax law rules, your company can deduct the long term care policy premiums and the coverage is tax free to the employees. It is effect an extension of your health insurance plan.


To qualify for tax-free treatment. the LTC policy must provide coverage only for qualified expenses such as the cost of diagnostic. preventative, therapeutic, rehabilitative and other health care services. However, the benefits may be provided in the form of straight per diems or periodic payments unrelated to expenses. The list of qualified expenses also includes personal care services for chronically ill people under a physician prescribed plan. For this purpose, a chronically ill person is someone certified during the past 12 months as meeting one of these requirements.

  • Physically unable to perform by himself or herself at least two activities of daily living ie eating, bathing, dressing, transferring continence for at least 900 day
  • Having a similar level of disability as defined by the IRS and Department of Human Services
  • Requiring substantial supervision as a result of mental impairment


Note: that you cannot offer long term care insurance to employees through a cafeteria plan or a flexible spending plan


A few tweaks to a fully loaded long-term care insurance policy can save thousands of dollars in premiums and still protect a portion of your retirement savings. Consider choosing an inflation adjustment of less than the standard 5%. Nursing home and home care costs have risen 4% annually over the past 5 years and assisted living and home care costs have risen 2% a year or less. Shortening the benefit period saves money but probably would not provide enough coverage for a degeneration condition, such as Alzeimer's. To hedge their bets couples can buy a shared benefit policy. Instead of a three year benefit period, they would have a pool of six years to use between them Extending the waiting period can also lower the premium although you will have to pay the full cost of care before your insurance covers everything

​LONG TERM CARE

Expect stock market turmoil to delay the Federal reserve' interest rate hike. Absent that a quarter point nudge seemed all but certain next month as a signal of confidence in the US economy and a way to get monetary policy back on a more normal course. The official lending rate has been near 0 for six years. The best betg for a jump now shifts to Dec giving the markets time to settle. The hike could also come at the Fed's Oct meeting, but the policy makers prefer to distance themselves from any perception that they react to market developments  Starting to gradually raise rates this year will restore the Fed's ability to move them up or down in response to economic conditions vital before the next down turn

​THE ECONOMY

Now that Donald trump is pledging not to run as an independent, watch for many of his GOP challengers to sharpen their rhetoric against him.  Until he accepted the pledge and vowed to support the GOP nominee, some held back, concerned that he would flee the Republican Party and campaign as an independent. In that scenario, Trump could not won, the task of qualifying for the ballot in all 50 states is gargantuan, but his presence would have helped the Democrat because Trump's support would have come at the expense of the Republican nominee. With that threat muted by the loyalty pledge, the gloves are sure to come off


Former Fla Gov Jeb Bush will continue to be the most aggressive attacker out of necessity. Bush started in the 2016 campaign as the presumptive front runner but faded into single digits in many polls as Trump surged. He will not be aone. Wis Gov Scott Walker, NJ Gov Chris Christie and former tech boss Carly Fiorina among others in the crowed field will try to cut into Trump's growing support. Aligning himself with Trump protects Cruz from being the target of Trumps' barbs, and leaves him to benefit if Trump, as expected starts to sputter in coming months


Out of cycle races for governor often offer hints for bigger races ahead. But not this year. The GOP will keep the governorships of Miss, and La KY where Democratic Gov Steve Beshear can not fun again because of term limits, is harder to handicap.  Republican Matt Bevin is backed by the tea party wing of the party, but he alienated some Republicans last year in the Senate primary by running against Senate GOP leader Mitch McConnell. Afer losing he primary, Bevin refused to endorse McConnell. That snub could  costly for Bevin, leaving an opening for Democratic candidate jack Conway Ky's attorney  general  The race should not affect next year's presidential contest. Sen Rand Paul will capture his home stat e caucus Whoever takes the GOP nomination will win Ky next fall

​POLITICS

Aug's jobs report brings both goo and bad news for US labor markets. The job market overall is sound, with the headline jobless rate falling to 5.1% which the Federal Reserve sees as near full employment. Wage gains were decent. Still job growth slowed a tad and manufacturing employment saw declines. The Federal Reserve will probably hold off on hiking interest rated in Sept, but a rate increase by year end is a good bet, given the improving economy


Uncle Sam wants to help small firms pump up their overseas business. The Small Business Admin will offer grants to smalls in 39 states to help pay the cost of scouting out sales opportunities abroad, such as taking part in export trade shows or overseas marketing campaigns. Interested firms should contact their local off of international trade. Many smalls miss out on the benefits of exports. Only one third of the value of all US exports comes from small or midsize firms, with a handful of big corporations nabbing the rest. 

​US ECONOMY

If you sell to Uncle Sam, take note: Agencies have money to burn in sept, the final month of the feds physical year. Any cash that agencies have left over after Sept 30 could cost them funding allocations in the upcoming fiscal yearl during the final two weeks of Sept. spending will be five to 10 times its normal level. The Defense Depart figures to be a big buyer of everything from robotics gear for advanced research work to staples such as food and toiletries for military bases. Items on other agencies sept. shoppng lists: Air and water testing supplies for the Environmental Protection Agency. Computers for the Federal Aviation Admin. Lab gear for the National Institus of Health and National Science Foundation

​FEDERAL BUSINESS

A case pending before the Supreme Court could shake up state politics. Two Texas voters are challenging the the usual method of apportioning seats in state legislatures, which conts total population of legislative districts. Instead, they argue , each state should bel allowed to count only eligible voters, citizens who are at least 18,  that would ignore children and illegal immigrants. 


A ruling for the plaintiffs would be a coup for the GOP. The new method of assigning seats would weaken the legislative heft of areas with big populations of illegal immigrants, suchas large cities, which often skew Democratic. The states where the effect would be the largest Arix. Calif. Fla, Ill. Nev. N.M. N.Y. and Texas. All have large numbers of Hispanics, some of whom are not in the US legally.

SUPREME COURT

Every investor dreams of hitting a grand slam, investing in the next Apple, Netflix or Amason.com, while the company is still small and its stock relatively undiscovered Many prospects fail to realize their promise. This is where a well diversified exchange-traded fund can be a big help Consider iShares Russel 2000 Growth ETF, which tracks an index that comprises the faster growing companies in the small cap Russell 2000 index Though Growth holds nearly 1,200 stocks, 51% are in health care and technology​

​INVESTING

Pay of charter school employees is subject to payroll tax, IRS privately says.  After a state's attorney general issued an opinion that charter schools are instrumentalities of that state, one school sought a refund of employment taxes, claiming that it qualified for an FICA exception for waged paid to employees of states and municipalities. The IRS said no, because, though the school is state-regulated, it is not controlled by the state. The school's board is made up of private individuals, and the state does not excerise any supervision over the school's day to day activities.

​PAYROLL TAXES

The White House is keeping a wary eye on the political instability in Turkey. Recent elections saw President Recep Tayyip Erdogan's party lose its majority in parliament, setting the stage for fresh elections soon or a parliamentary coalition in which Erdogan could ally with an anti-Western party. The Obama administration has grown impatient with Ankara's refusal to do more to combat ISIS in the region. The uncertain makeup of the future Turkish government only complicates those efforts. A shaky government also makes doing business in  Turkey harder. Ted tape, counterfeit goods and software piracy already chronic problems, figure to get worse.

​THE WORLD

Despite the tragedy in Charleston, soaring gun sales will not slow down any time soon.  Gun and ammunition sales revenues have risen by 3.8% per year since 2009, largely driven by buyers' fears that President Obama would impose tougher gun regs. Guns sales are up by about half since Obama took office, with pistols leading the way. The fact is, the current political climate is perfect for fostering gun demand. The 2016 elections create uncertainty about the direction of federal gun regulations after Obama, even as some states enact tougher laws Increasing crime in certain cities is boosting interest in guns for self defense. Some police forces are stocking up. Strong sales bodies well for most manufacturers, Freedom Group, Ruger, Smith & Wesson etc. Even Colt Defense should eventually exit bankruptcy and thrive.


One reg. aiming at stricter gun control is a line to get dialed back. A rule proposed in early June by the State Depart. would crack down on the online publication of data about fun design and manufacture. The feds say that posting such specs could run afoul of the law against unauthorized exports of military grade weaponry Gun rights groups say the wording is vague enough to apply to small arms too

​FIREARMS

The shortage of truck drivers is only going to get more severe.  The industry expects to soon be 50,000 shy of what it needs to keepup with freight in a growing economy. Older drives are retiring faster  than  young one take the wheel. Long hours plus better opportunities in other industries make recruiting truckers hard. Trucking firms have no choice but to hike wages. Rates will rise 3% to 5%

TRUCKING 

An improving US economy spells a slimmer federal deficit this fiscal year. Tax receipts are coming in higher than expected, putting the deficit on track to shrink to 2.3% of GDP when the feds close the books on fiscal year 2015 in Sept versus 2.8% in 2014.  The next several years should see similarly modest shortfalls, which would take the pressure off Congress to curb spending or find new tax revenue. Uncle Sam's budget gap threatens to widen again in 2019. More outlays for health and retirement benefits for an aging populace mean annual deficits of 3% to 5% pg GDP in the 2020s, too high for future lawmakers and presidents to ignore.

​THE DEFICIT

The headwinds US manufacturers face keep building. The stronger dollar, rising competition from imported goods and slowing demand from China will all weigh on factory activity for the rest of the year. Expect manufacturing output to eke out a 2.5% gain in 2015, a notable downshift from 2014's 3.5% growth rate.


Industries  that figure to struggle most : Makers of pipe and other equipment used by the oil and gas industry, as weak energy prices discourage drilling activity. Mining and agricultural equipment produces, also facing a commodities price slump. Printers, publishers, and paper makers also. But a better outlook for manufacturers connected t othe housing industry,lumber,drywall, cement, paint ect

​THE ECONOMY

​SEPTEMBER NEWSLETER PAGE 3

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TURN ALLOWANCE INTO DEDUCTIBLE WAGES

​​Many parents pay their kids an allowance without any real strings attached. Instead they could take a deduction by paying them to do some business related work, such as cleaning, filing, photocopying or making trips to the post office. For instance, suppose Ed self employed and pays his 15 year old son $50 a week as compensation for doing odd jobs. The compensation is fully deductible. Depending on Ed's tax bracket, that could save about $700 per year


Is there a trap? Not as long as the work preformed and the compensation are reasonable. But it is important to keep records  to prove the children worked for the business and were not overpaid