Don't miss estate planning opportunities in 2012
This year may be the last year to take advantage of some unique estate and gift tax planning opportunities. The current estate and gift tax law is set to expire Dec. 31, 2012. Absent congressional action, the $5.12 million estate tax exemption and current top tax rate of 35 percent, in place for 2012, will revert to a $1 million exemption with a top tax rate of 55 percent beginning Jan. 1, 2013. With the lifetime gift exemption also at $5.12 million for the rest of 2012, there exists what could be a once-in-a-lifetime opportunity to transfer significant assets to the younger generation without incurring any wealth transfer taxes.

Grouping? Investors may want to take a second look
Taxpayers involved with passive activities should make sure they understand the ins and outs of the rules - especially in view of recent developments. Under the 2010 healthcare act, a surtax on higher-income individuals' net investment income becomes effective in 2013. Taxpayers should be concerned with the proper grouping of activities and should review every opportunity to group a passive activity with a materially participating business. Passive business income and rental income will be subject to the Medicare surtax, but active business income will not.

2011 Overview: End-of-year tax legislation
In the closing days of 2011, Congress passed tax legislation that temporarily extended a payroll tax cut, but did not extend two important depreciation incentives – a lack of action that will be important as taxpayers plan their income and deductions for 2012.

Depreciation incentives reduced for 2012
To help a struggling economy, Congress has encouraged business investment in capital equipment using two incentives. Through 2011, new equipment - not used equipment recently purchased - qualified for a 100 percent bonus depreciation deduction. But for calendar year 2012, the first-year bonus percentage drops to 50 percent, and for 2013 there is no bonus percentage. The Internal Revenue Code Section 179 (first-year depreciation) deduction was $500,000 for tax years beginning in 2011. The tax year beginning in 2012 sees this deduction reduced to $139,000.

How IRS examiners will handle uncertain tax positions
The IRS Large Business and International Division has issued guidance to examination teams on the procedures and requirements they are to follow when reviewing and using Schedule UTP, Uncertain Tax Position Statement, in conjunction with their examinations.

IRS ruling allows bonus accrual deduction
An employer using an accrual method of accounting may take a deduction in the current year for a fixed amount of bonuses, according to a new IRS ruling.

Tax credit for hiring qualified veterans extended, expanded
A new act extends the work opportunity tax credit for one year but only for qualified veterans who begin work before Jan. 1, 2013. The act also makes a number of changes for hiring qualified veterans.

Small employers not claiming health care credit, IRS says
he volume of claims for the Small Business Health Care Tax Credit has been lower than expected, according to a Treasury Inspector General for Tax Administration audit released Nov. 7, 2011.

The technical information here is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. Please be advised that, based on current IRS rules and standards, the information contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty assessed by the IRS.

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