Jeffrey B. Kahn, Esq. and Windus A. Fernandez Brinkkord Discusses GOP Bold Tax Plans, The Rift In OPEC, and Year-end Tax Planning Tips On ESPN Radio – November 13, 2015 Show
Topics Covered:
- Republican Candidates Push Bold Tax Plans.
- How investments in oil are being impacted by the rift within OPEC.
- More 2015 year-end tax planning tips.
- Questions from our listeners:
- If I’m earning dividend income and my asset value declines, should I be worried about my income?
- I get invited to charity balls and I have been noticing that each one will advertise the charitable value of the tickets that I purchased. What does that mean?
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Windus states: Yes sometimes we just have to take the money and run!
Good afternoon! Welcome to Inside Advantage – Your Financial And Tax Radio Show.
This is Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.
Jeff states:
And this is Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.
Windus states:
You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.
Jeff states:
When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!
Windus states:
And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.
Jeff states:
Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.
Jeff states:
For today’s show we have coming up:
Segment 2 material: How investments in oil are being impacted by the rift within OPEC.
Windus states:
Also coming up is:
Segment 3 material: More year-end tax planning tips.
And of course towards the end of our show, we will be answering some of your questions.
Windus starts chit chat with Jeff.
SEGMENT 1
Windus states:
Republican Candidates Push Bold Tax Plans
An article in the November 9, 2015 Wall Street Journal touts that proposed changes go well beyond the party’s previous platforms and ensure the issue will play a central role in the general election. http://on.wsj.com/1WNM7Q9
Jeff states: Given that the still rather large number of candidates is driven to stand out in a crowded field, the GOP contenders are defying economic reality going beyond the typical promises to lower rates and expand the tax base.
Windus states: Campaign platforms on taxes matter. Each of the past three presidents ran in part on a tax plan and each got much of it implemented by the end of his first term. And no matter who emerges from the primary season, the contrast between Republican proposals for tax cuts and Democratic ideas about tax increases on top earners will be starker than before.
Jeff states: The article goes on further to state that Democrats are primed to make the case that the bold Republican plans would provide the biggest benefits to the wealthiest households and balloon the federal deficit.
Windus states: And just how much tax cuts can juice the economy is in dispute? Democrats point to the economy’s growth after President Bill Clinton raised top rates in 1993 and President Barack Obama lifted rates in 2013, and to the recession that occurred after President George W. Bush cut taxes, as proof that rates for the top few percent of households aren’t the biggest drivers of economic expansion.
Jeff states: In previous shows we talked about Jeb Bush’s tax plan and Donald Trump’s tax plan. While other GOP candidates have not come out with tax plans as comprehensive as Bush and Trump, they do make some very creative and bold statements.
Windus states: Senator Ted Cruz of Texas wants to eliminate payroll and corporate income taxes in favor of a national tax on consumption, via a value-added tax that would be assessed on businesses and absorbed in wages and prices.
Jeff states: What Mr. Cruz is talking about is let’s have a tax system following the European countries and for that matter most of the world. The more people consume, the more in taxes will be paid. Since rich people do not consume as much as a percentage of their income, it should be apparent that the tax burden will largely fall on the middle class in this environment. It also does not encourage people to take risk and invest in business because they would not be able to write off their losses.
Windus states: I think that Florida senator, Marco Rubio, got your point Jeff and he has proposed eliminating taxes on capital gains and dividends for new investments, and raising tax credits for people with children so that he can appeal to the middle class.
Jeff states: But in Mr. Rubio’s case, he does not say how these tax cuts and raise in tax credits will be paid.
Windus states: Gov. Bobby Jindal of Louisiana wants to scrap the corporate income tax and create a 2% personal tax bracket that would add lower-income people to the income tax rolls, as a way of disabusing the public of the notion that “money grows on trees in Washington.” That would reverse a decades-long bipartisan trend of using the tax system to bolster take-home pay for the poorest households, which generally don’t pay income tax today.
Jeff states: Mr. Jindal has forgotten how mad a lot of people are hearing that multinational corporations are keeping their profits overseas to avoid U.S. taxes and now he is going to completely take away taxes from corporations? Mr. Jindal, the last time I checked, it is people who vote and not corporations.
Windus states: But Jeff people complain how complex the tax code is. Carly Fiorina, former chief executive of Hewlett-Packard Co., says on her website she wants the tax code to be three pages long, which is “about all an individual can understand without having to hire an accountant, a lawyer, a lobbyist.”
Jeff states: I would not call Ms. Fiorina’s statement a plan but instead just a tactic to draw attention to her campaign. Everyone should know that you can’t condense a tac code that covers individuals, corporations and all other types of entities in just 3 pages. As the CEO of HP I wonder if she ever started a movement to make their contacts a lot more understandable and shorter.
Windus states: We have already critiqued former Florida governor Jeb Bush and Donald Trump’s tax plans which the article brought out that Mr. Bush wants to allow companies to write off capital purchases immediately and Mr. Trump has proposed a tax cut that would put federal collections at their lowest level since 1942.
Jeff states: And then there is Ben Carson who looks to the bible for tax guidance. He promotes a flat-tax plan based on the concept of Biblical tithing. His reading of the bible has fostered the idea of having a tax rate of 15%, eliminating all the deductions and all the loopholes and included a tax holiday for U.S. companies to bring back foreign profits stockpiled abroad.
Windus states: It sounds more like a fantasy to me. One thing should be clear is that each presidential candidate’s tax plan fails on how these tax cuts are to be funded. And as President the he or she would have to follow the same standard as prior Presidents and Congress must follow whereby any tax reductions are offset by new tax revenues so that the legislation is “revenue neutral”. No politician is against tax cuts but there is a lack of consensus on how to fund them.
Well it’s time for a break but stay tuned because we are going to tell you how investments in oil are being impacted by the rift within OPEC.
You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.
BREAK
Windus states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.
OPEC Rift Exposed as Oman Oil Minister Calls Group ‘Irresponsible’
Another article from the Wall Street Journal stating that the comments from Mohammed Bin Hamad Al Rumhy come as OPEC’s Persian Gulf producers unleashed a broad defense of their strategy. http://on.wsj.com/1WLRAHd
But before we talk about this I call your attention to my offer … Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.
Jeff states: Windus you brought this article to my attention to take the opportunity to discuss oil as a commodity which people invest in.
Windus states: Mohammed Bin Hamad Al Rumhy of Oman whose country produces oil but isn’t a member of OPEC stated “This is a commodity that if you have one million barrels a day extra in the market, you just destroy the market. We are hurting, we are feeling the pain and we’re taking it like a God-driven crisis. Sorry I don’t buy this, I think we’ve created it ourselves.”
Jeff states: The article stated that Mr. Rumhy’s comments came at a conference in Abu Dhabi as he shared a stage with Suhail al Mazrouei, the United Arab Emirate’s top oil official, who is a top advocate of the producer group’s strategy. The remarks also reflect the pressure on OPEC from less wealthy members like Venezuela and Algeria to intervene with production cuts to raise prices, as crude oil trades for less than $50 a barrel—down from more than $100 a barrel in 2014.
Windus states: But on the same day, OPEC’s Persian Gulf producers unleashed a broad defense of their decision to pump full throttle to keep their share of the market, less than a month before the group’s next meeting to decide whether to maintain or cut production. Mr. Mazrouei defended OPEC’s stance, arguing that production cuts would simply subsidize higher-cost producers in the U.S. and elsewhere. Oil in the U.A.E., Saudi Arabia and other Middle Eastern producers is fairly cheap to produce.
Jeff states: The article goes on to state that: The oil-producing group of 12 nations is pumping 31.57 million barrels a day, with Saudi Arabia producing at a record level for much of the year at more than 10 million barrels a day. That level of production, along with record output in Russia as well, has helped fuel a glut of oil supplies that outpaces demand by about 1 million barrels a day, according to OPEC. The production frenzy has occurred even as American output begins to decline. U.S. producers used hydraulic fracturing technology to foster a boom in crude supplies that helped lower prices, but those operations were generally much more expensive than projects in the Middle East.
Windus states: And for people who are invested in oil, they are uncertain where the market is going. Once a commodity we feared we’d run out of is not a commodity that we need to leave in the ground a little bit more then we currently are. You have U.S. production exceeding expectations and OPEC isn’t backing off. So the pressure is being felt in many emerging markets economies like Brazil and Venezuela.
Jeff states: Just a few years ago it was thought that a barrel of oil would cost $200. The views of many large investment banks and oil companies are now predicting oil prices at around $60 a barrel in 2016—far lower than needed to balance the budget in some oil-producing countries, including Saudi Arabia.
Windus continues: We are almost in a game of chicken right now with OPEC. OPEC does not want to curb its own oil production as that could severely hurt those economies. But flooding the markets with oil is not the solution either. No one wants to cut, unless everyone cuts is what I am feeling when I read the articles out there. It is very much a game of mistrust and one that impacts economies deeply.
Jeff states: I can imagine that this price of oil impacts other areas that are dependent on oil.
Windus replies: Other assets that are essentially collateral damage for oil prices are investments in the MLP space. Many clients in dividend paying portfolios have felt the pain in the value of their portfolios as oil investments tend to be good dividend producing investments. Although dividends have mostly been unimpaired, the values of investments have declined. As is the case in many market cycles, most clients should simply weather the storm as long as the investment was made to their correct risk tolerance, time horizon, and goal.
Which is why … Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.
Windus states: Stay tuned because after the break we are going to tell you top year-end tax planning tips.
You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.
BREAK
Windus states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.
2015 Year-End Tax Planning for Individuals
Windus states: Well here we are in November and while many people are now thinking about the year-end holiday celebrations, you should also be thinking about year-end tax planning to perhaps save on taxes and use those tax savings instead on your holiday celebrations and gift giving.
Jeff states: So it really is important that you address your year-end tax planning now and that is where we can help. PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.
Jeff states: The end of year is also a good time to clean out your closets and garages. You could have some valuable tax deductions in there if the unwanted items are donated to a charitable organization.
Windus asks: Where do you report noncash contributions on your tax return?
Jeff replies: You must fill out Form 8283, Noncash Charitable Contributions, and attach it to your return, if your deduction for a noncash contribution is more than $500. If you claim a deduction for a contribution of noncash property worth $5,000 or less, you must fill out Form 8283, Section A. If you claim a deduction for a contribution of noncash property worth more than $5,000, you will need a qualified appraisal of the noncash property and must fill out Form 8283, Section B. If you claim a deduction for a contribution of noncash property worth more than $500,000, you also will need to attach the qualified appraisal to your return.
Windus asks: So how do you figure what Is Fair Market Value (FMV) of the item you are donating?
Jeff states: To figure how much you may deduct for property that you contribute, you must first determine its fair market value on the date of the contribution.
Fair market value. Fair market value (FMV) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.
Example: If you give used clothing to the Salvation Army, the FMV would be the price that typical buyers actually pay for clothing of this age, condition, style, and use. Usually, such items are worth far less than what you paid for them.
Windus asks: What other considerations are there in determining Fair Market Value?
Jeff replies: Well it depends on what you are donating.
[Windus to read item and Jeff to comment]
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Household Goods. The FMV of used household goods, such as furniture, appliances, and linens, is usually much lower than the price paid when new. Such used property may have little or no market value because of its worn condition. It may be out of style or no longer useful. You cannot take a deduction for household goods donated after August 17, 2006, unless they are in good used condition or better. A household good that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal.
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Used Clothing. Used clothing and other personal items are usually worth far less than the price you paid for them. Valuation of items of clothing does not lend itself to fixed formulas or methods. The price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops, is an indication of the value. You cannot take a deduction for clothing donated after August 17, 2006, unless it is in good used condition or better. An item of clothing that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal.
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Jewelry and Gems. Jewelry and gems are of such a specialized nature that it is almost always necessary to get an appraisal by a specialized jewelry appraiser. The appraisal should describe, among other things, the style of the jewelry, the cut and setting of the gem, and whether it is now in fashion. If not in fashion, the possibility of having the property redesigned, recut, or reset should be reported in the appraisal. The stone’s coloring, weight, cut, brilliance, and flaws should be reported and analyzed. Sentimental personal value has no effect on FMV. But if the jewelry was owned by a famous person, its value might increase.
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Paintings, Antiques, and Other Objects of Art. Your deduction for contributions of paintings, antiques, and other objects of art, should be supported by a written appraisal from a qualified and reputable source, unless the deduction is $5,000 or less.
- Art valued at $20,000 or more. If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the signed appraisal to your return. For individual objects valued at $20,000 or more, a photograph of a size and quality fully showing the object, preferably an 8 x 10 inch color photograph or a color transparency no smaller than 4 x 5 inches, must be provided upon request.
- Art valued at $50,000 or more. If you donate an item of art that has been appraised at $50,000 or more, you can request a Statement of Value for that item from the IRS. You must request the statement before filing the tax return that reports the donation. Your request must include the following: (i) A copy of a qualified appraisal of the item; (ii) A $2,500 check or money order payable to the Internal Revenue Service for the user fee that applies to your request regarding one, two, or three items of art. Add $250 for each item in excess of three; (iii) A completed Form 8283, Section B; and (iv)The location of the IRS territory that has examination responsibility for your return.
- Collections. Since many kinds of hobby collections may be the subject of a charitable donation, it is not possible to discuss all of the possible collectibles in this publication. Most common are rare books, autographs, sports memorabilia, dolls, manuscripts, stamps, coins, guns, phonograph records, and natural history items.
- Stamp collections. Most libraries have catalogs or other books that report the publisher’s estimate of values. Generally, two price levels are shown for each stamp: the price postmarked and the price not postmarked. Stamp dealers generally know the value of their merchandise and are able to prepare satisfactory appraisals of valuable collections.
- Coin collections. Many catalogs and other reference materials show the writer’s or publisher’s opinion of the value of coins on or near the date of the publication. Like many other collectors’ items, the value of a coin depends on the demand for it, its age, and its rarity. Another important factor is the coin’s condition. For example, there is a great difference in the value of a coin that is in mint condition and a similar coin that is only in good condition. Catalogs usually establish a category for coins, based on their physical condition—mint or uncirculated, extremely fine, very fine, fine, very good, good, fair, or poor—with a different valuation for each category.
Jeff states: So it really is important that you address your year-end tax planning now and that is where we can help. PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.
Windus states: Stay tuned as we will be taking some of your questions. You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.
BREAK
Windus states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.
Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.
You should also know that the securities and advisory services are offered through National Planning Corporation (NPC) Member FINRA, SIPC, and a Registered Investment Advisor. Trilogy Financial Services and NPC are separate and unrelated Entities.
Jeff states: If you would like to post a question for us to answer, you can go to my website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.
OK Windus, what questions have you pulled for us to answer?
Terry from Los Angeles asks: If I’m earning dividend income and my asset value declines, should I be worried about my income?
Windus replies: This is a great question and the answer is both yes and no.
First, dividends are paid as per share that someone owns. A dividend is declared, for example, as 5 cents per share, therefore if you own 100 shares, you’d earn $5 on that position when the dividend paid.
Now, if a company is not as profitable and the company is under pressure, the dividend may be reduced. Most companies that pay consistent dividends do tend to maintain that through varying times in the markets but this is not guaranteed. Also, just because a stock price is down doesn’t mean the company is actually not profitable. Stock pricing is more complicated than this.
Needless to say, it has been my experiences that if the investment declines due to market fluctuation, most dividend income can remain stable but you would want to keep an eye on the companies to be sure they are stable and ok.
Kevin from Oceanside asks: I get invited to charity balls and I have been noticing that each one will advertise the charitable value of the tickets that I purchased. What does that mean?
Jeff replies: The tax code states that you can deduct as a charitable contribution only the amount that exceeds the fair market value of the benefit received if your contribution entitles you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance, or sporting event.
So for example, you buy a ticket for $100.00 to attend a charity ball and the ticket says that this has a value of $60.00. That would result in $40.00 being the excess of what you paid over the value of the ball and it is that $40.00 that you can take as a charitable contribution.
Now remember – for a contribution of cash, check or other monetary gift (regardless of amount), you must maintain as a record of the contribution a bank record or a written communication from the qualified organization containing the name of the organization, the amount and the date of the contribution.
Also for any contribution of $250 or more you must obtain and keep in your records a contemporaneous written acknowledgment from the qualified organization indicating the amount of the cash and a description of any property contributed. The acknowledgment must say whether the organization provided any goods or services in exchange for the gift and, if so, must provide a description and a good faith estimate of the value of those goods or services.
Jeff PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.
Windus states: Well we are reaching the end of our show.
Jeff states: Remember you can send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com. Have a great weekend everyone!
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