TOPICS COVERED IN THIS ISSUE:

Determining how much your car weighs could prove beneficial when tax time comes around. The manufacturer's "unloaded gross weight" determines whether a vehicle is classified as a passenger car or truck. Internal Revenue Service regulations state that a four-wheeled vehicle is NOT A PASSENGER CAR when it has a gross vehicle weight of more than 6,000 pounds. This includes any part, component, or other item physically attached to the automobile or usually included in the purchase price of an automobile. If it is not a passenger car and it is used in business, it is not a "listed asset" subject to the limited depreciation rules. You may also be able to use the Section 179 Expense Recovery rules, allowing as much as $17,500 of the cost of depreciable assets to be written off in the year of acquisition. If you bought a sport-utility vehicle, it may fall into this category.

If you inherit money or securities, the value you receive is not subject to income taxes. Any estate taxes due on the value should have been paid by the estate. Therefore, it is tax free to you. Any income it earns while you own it may be subject to income taxes. So if you receive an inheritance, spend it wisely (or call a professional about investing it).

The Massachusetts Peachtree User Group (MAPUG) is now being formed. If you use Peachtree Complete Accounting for DOS or Peachtree Accounting for Windows, you might be interested in our new user group.

We will offer friendly informal meetings, vendor presentations, instruction by actual users or group instruction and a Peachtree Authorized Support Center.

Like many newsletters or digests on the Internet, I have decided to implement a voluntary payment for TAX TIPS AND FACTS. The annual fee is $24.00 per year for 12 issues. If you feel that you are receiving value from this monthly newsletter, then by all means we will happily accept your payment.

There has to be a reason to subscribe. The basic monthly TAX TIPS AND FACTS is free. One of the benefits of a paid subscription will be my personal attention to your requests for information and immediate responses to your tax or business questions. Non-subscribers must wait until a future edition of TAX TIPS AND FACTS to obtain a response (if the subject is of wide-enough interest). Another benefit is the periodic mailing of special notices, flyers and literature currently sent only to select snail-mail and paid subscribers. These items do not appear in the on-line version of TAX TIPS AND FACTS. Occasionally, DMJJ Sales or I make special offers to subscribers for computer and business related products. If you are a paid subscriber, your email or snail-mail address will be added to the distribution list.

Your check for $24 (US funds only) should be made payable to Roger A. Kahan, CPA and mailed to: 11 Jeanne Road, Randolph, MA 02368-2911. Please send your check with your full name, snail-mail address (with ZIP-code) and your e-mail address. Give me a few weeks to upgrade the database and you will be all set. E-mail changes of address to kahan@rak-1.com or send it to the above snail-mail address.

Congress is talking about the Health Insurance Portability and Accountability Act of 1996 which provides for criminal penalties for acts involving Medicare or state health care programs. Under the law, an individual is guilty of a felony, punishable by a find of not more than $25,000 or imprisoned for not more than five years, if the individual "knowingly and willfully disposes of assets (including by any transfer in trust) in order for an individual o become eligible for medical assistance under a state plan under Title XIX, if disposing of the assets results in the imposition of a period of ineligibility for such assistance under Section 1917(c)."

Many families make gifts of assets to their children or other benefactors with the intent to protect those assets from needing to be used for long-term care. Before transfers are made, for almost any reason, the transfer should be reviewed to insure that the transfer does not create any liability under the new statute. One commentator has thought that Congress might be attempting to create a new type of long-term care - - Penitentiary care!

Thanks for Attorney Thomas R. Mullen of Quincy for this thought.

The tax rules relative to Individual Retirement Account (IRA) withdrawals require you to start your annual "minimum" withdrawals in the calendar year in which you reach 70½. However, those rules also specifically allow for a delay of the first withdrawal "until April 1 of the year following the year you turn 70½"

If you turned 70½ during 1996, this means you may take your initial "minimum" withdrawal in 1996 or by April 1, 1997. However, regardless of when you take the first withdrawal, you must make your regular 1997 annual withdrawal by December 31, 1997, and then each year thereafter. If you wait until April 1, 1997 to take the first withdrawal, you will have put two annual withdrawals into the 1997 tax year (I mention this as a tax planning item).

Please keep in mind that you can take your annual "minimum" from any one, some or all IRA accounts you own, just as long as you take at least the required "minimum" amount in total. You may take your withdrawals in monthly, quarterly or annual payments, but the total for each calendar year must equal or exceed the annual "minimum" amount.

Benefits must be paid out over a period that does not exceed the life or life expectancy of the participant or the combined lives or life expectancies of the participant and his/her designated beneficiary. This mathematical calculation uses the total balances of all IRA's in your name and the ages of both you and your beneficiary (if you named a beneficiary). Life expectancies may be recalculated annually.

A mutual fund account with a fluctuating daily price per share can create some unusual and unexpected tax consequences. Each time you sell some share or write a check on a mutual fund account, you create a taxable event. This includes trades or transfers between funds (even within the same family, such as Fidelity, Pioneer or Phoenix). Each sale can produce either a gain or a loss based upon the difference between the share cost (or tax basis) and the share net selling price. If you purchased the shares over a long period of time, you have a difficult chore of finding the cost basis of each share sold. Unless you have kept accurate records of each purchase, reinvested dividend and previous shares sold, this could be a nightmare. You should record the date, amount of shares and the amount paid (or reinvested if the shares were obtained through reinvested dividend).

No, it's not one of those "too good to be true" stories, but you can make as much or as little as you want to. It all depends upon how much time you want to put into it.

A client called me to attend a presentation to see if HE should go into it. I attended the session, listened, asked a lot of questions, and then WE BOTH went into it.

Right now, the deal concerns long-distance telephone service. How would you like to save 30 to 50% over AT&T rates? Yes, you can save money on your own long-distance calling in addition to making money selling the savings to others. You earn commissions on long-distance service billings to your customers. Later, the company may provide other services like beepers, local telephone calling, cable TV service, internet access and other communications or utility products.

If you and/or your spouse are interested having some more money to spend, please call me. I will invite you to attend a "training" session to learn more about this money making venture. Training sessions are on Saturday mornings and several evenings. If you are local, I will accompany you to the session.

Small print: Income earned from this venture will be taxable as self-employment earnings, subject to income taxes and perhaps the self-employment tax.

One of your most important privileges as a United States citizen is the right to vote. Your vote is not only important, it is critical. If we are to positively affect the outcome of congressional state and local races, we must vote.

Your vote could very well be the deciding vote in a race. History has proved that many times.

Remember, the general election is on November 5, 1996. In Massachusetts, you must register at least 20 days before an election and you can select your party affiliation at the polls.

This reminder may be a little early, but it's important enough to let you plan ahead.

In a year of lowering income or increased costs, you must find ways to lower costs of operations. One way is to check the cost of insurance coverage. Yes, insurance costs are not necessarily fixed, they can be changed. Perhaps you can change companies and find a lower rate; perhaps you have too much insurance or not enough deductible and by cutting coverage or exposure can lower premiums; perhaps you have the wrong type of coverage and a change may produce better coverage and lower premiums. Send your insurance package out to bid. Call several agent/broker/companies to review your coverage and offer proposals of coverage and premiums. Don't forget to include your current insurance consultant in the bidder list. You may be happily surprised at the results.

The first tax reporting of your business is critical. Elections have to be made, and can only be made on a timely filed income tax return. If you are not sure what elections are available or what elections to make for your business, call us or your CPA and be assured of the best tax benefits.

A BOAT OR RECREATIONAL VEHICLE may qualify as your residence (either primary or secondary) if it contains sleeping space, a toilet, and cooking facilities. Deductions are allowed using the normal residence rules, including real estate or property taxes and mortgage interest (within limits); and other costs if it can be considered rental property.

If you like our work, recommend us to a friend. If you are not happy with our work, please call me and let's talk about it. We will both appreciate it.