5 Million Dollar Strategies – Exclusions and Planning by George Mentz JD MBA CWM

With less than 3 weeks before the Estate and Gift Tax rates change, Americans are speedily transferring assets so as to benefit from the existing tax fairness rules.

There are 2 key objectives in wealth management. There are rules and then there is strategy. The purpose must be effectively intertwined with the laws on the books, and then mixed with the products and services available. And, it all must be documented effectively.

This all makes you think about the options available under the “so called” 5 million dollar exclusion. Here are examples:

1. Gift money to a trust and use a trust department while creating trust documents that have various provisions such as “spend thrift” or education, welfare, and living sustainability clauses.
2. Gift cash to multiple 529 plans to benefit several if not dozens of heirs for educational purposes.
3. Move stock or member interests in small to medium companies to heirs.
4. Create a dynasty trust with a wide array of beneficiaries who are descendants of children or relatives.
5. Buy homes or apartments for loved ones. Have the homes in trust where they are sustained & can’t be encumbered or legally attacked.
6. Set up UGMA or UTMA accounts for grandchildren, nieces, nephews and so forth.
7. Move income producing assets into your children’s name so as to capture a better tax rate.
8. Donate appreciated assets or stock to your children and have them move to a tax free state such as Texas and capture the low capital gains rate before year end.
9. Sell a business for stock, and immediately gift the stock to heirs or loved ones.
10. Borrow the money against your assets such as stock or real estate, and gift it to loved ones.
11. Release loans to family members as a gift.
12. Fund a major insurance trust immediately with a single premium policy.
13. If you demand that family behave and receive a lot of money later, create trust where beneficiaries only receive a portion of the money until they turn 35 or 45 years old.

*It is generally best to consult with a Chartered Wealth Manager and then use a licensed attorney who specializes in your county or state with trusts and wills. Moreover, it is advisable to consider using a lawyer or trust department to manage your estate, trusts and wills. Trust departments offer a lot of services to evaluate and can manage the assets of a trust while also paying bills, insurance, managing successions, and even running a business.

The TJSL Thomas Jefferson School of Law has an LLM program in international tax and finance.  To enroll or tell your staff about the program, view here: www.llmprogram.org

About the Author: Dr. George Mentz is a world recognized consultant and award winning professor who has authored several revolutionary books. Prof. Mentz, an international lawyer, has been a keynote speaker globally in Asia, Arabia, USA, Mexico, Switzerland, and in the West Indies. Mentz can be contacted for speaking engagements at www.gmentz.com or www.managementconsultant.us or www.selfhelpbook.org  Mentz is a licensed attorney and CWM Chartered Wealth Manager who resides in Colorado Springs Colorado USA
*No tax, insurance, investment or legal advice provided herein. Please consult with a licensed professional in your jurisdiction before making any important financial or legal decision.

The United States population is about 311 million people which represents about 4.5 percent of the worlds’ 7 billion viable consumers. For the United States to remain a world leader in business, it must remain competitive on a global level with regard to government effectiveness, economic development for entrepreneurial growth, and the costs of doing business.

Because of globalization, people and business no longer need to be based in the USA for success or even rely on the US for survival. Businesses and people in the USA can move out of the country and become successful in many regions of the world including: Latin America, Russia, Arabia, India, Asia, Africa, the West Indies, and specifically city states such as Dubai or Singapore. Many of the reasons people go offshore are for logistics, to sell to the global customer, and to take advantage of favorable business environments. Some countries even offer the ability for retained earnings enabling tax-deferred reinvestment and capital growth offshore. Allowing retained earnings lets companies to grow and reinvest rapidly and locally without ongoing tax regulation and filings, and seems to keep more money flowing in local regions. In countries like the USA, you must pay taxes and fees as you go either quarterly or at the end of each year, but there is no way to retain the revenues past fiscal year-end and invest it without involving complex tax regulations, filings, disclosures, or penalties.

Within the jurisdictions of the USA, the same holds true, people and business go to where there is the least friction and lower: red tape, regulation, litigation, fees, waste, corruption, and other economic costs. And guess what, if a business is relocating in one of the 50 US states or territories, there is competition between the jurisdictions. Any relocating company can freely ask the state officials the question, “what can you do for us”, and the state economic development folks will begin dancing, singing, and offering tax and other incentives for the company and its’ employees to move into their jurisdiction.

The point is that the United States will need to engage the same economic development both internally and externally to make our federal environment more fair and friendly to insiders and outsiders who want to invest in America. The dirty secret is that people from inside the USA and outside in developed countries want a token of good faith, a fair system, investor protection, and a good legal system. Moreover, they want to have confidence in America, it’s leaders and the system of business law. However, if the structure smells like a costly bureaucratic shakedown, then international investors will not invest in the USA.

To compare tax rates, in the USA, you pay federal income tax, state income tax, sales taxes, and also corporate taxes. Keep in mind, these taxes are paid before the individual can invest the money in their local or regional community where it would also be taxed.

The federal tax rate in the United States for corporations is 35% plus potential state taxes which is higher than most countries around the world. Higher than Indian’s 33% base rate, and China and Brazil’s initial corporate income tax of 25% and higher than Russian corporate tax which is 20%. See KPMG Tax Table. Whereas, there are countries with extremely competitive rates, safe jurisdictions, and available talent in the region. Various examples would be: Singapore, Czech Republic, Lithuania, Bermuda, Bahrain, Montenegro, Macau, Qatar, Paraguay and others.

In contrast, Dubai which is a major city state government and emirate within the United Arab Emirates allows for a corporate styled LLC Limited Liability Company which has no corporate taxes, no income tax and no retained earnings taxes. Much of Dubai’s government revenues come from annual fees for services and the expatriates & foreign companies that locate there.

The focus of this analysis is not just corporate tax rates, but the TBDB Total Burden of Doing Business versus total benefits for member loyalty. As with any credit card , if you do not like their fees and rewards, you can dump them for a better card with better rewards such as Visa, MasterCard American Express and Discover. VISA (NYSE: V[FREE Stock Trend Analysis]) MasterCard (NYSE: MA) American Express (NYSE: AXP) and Discover (NYSE: DFS). The same value proposition will draw the creators, producers, and contributors to the best service provider.

Going forward, it is my view that the most successful economies in the world will have strategies to provide benefits to those who locate in their country to do business. In the end, the citizens of these forward-thinking countries or jurisdictions will reap the benefits of such international respect and good will. During this political season, we hear reporters asking generic tax reform questions such as “Show Me the Math; yet, there is an incredibly simple answer that was provided to me by a old farmer with a 4th grade education. The answer is that, “50% of nothing is still nothing”, and the countries that promote good will and economic incentives will be rewarded with 10 or even up to 20 percent of the revenues from top companies including much of world investment and trade.

With all of this being said, volume businesses such as WalMart (NYSE: WMT) or Amazon (NASDAQ: AMZN) create vast revenues based in incentives, pricing, customer satisfaction and value. As such, the centers which promote economic fairness, freedom and security will become super-hubs of free markets, prosperity, and success for the long-term. This is just one more reason why management consulting firms such as Booz Allen Hamilton (NYSE: BAH) and international law and accounting firms such as Accenture (NYSE: ACN) will continue to flourish while international online education such as law schools for tax and finance such will also expand enrollment. See TJSL Online Graduate Tax Program

In the end, strategic government policy is the key to developing GCA or “Global Competitive Advantage” and also the secret to bringing new business into your country where relocated or new companies hire more local people, create local and national economic activity, and ultimately the key to revenue generation.

About the Author: Dr. George Mentz JD, MBA, CWM – Mentz is a world recognized Certified Chartered Wealth Manager and award winning professor who has authored several revolutionary books. Prof. Mentz, an international attorney, has been a keynote speaker globally in Asia, Arabia, USA, Mexico, Switzerland, and in the West Indies. Mentz can be contacted for speaking engagements at www.gmentz.com or www.managementconsultant.us or www.selfhelpbook.org  Mentz is a licensed attorney and CWM Chartered Wealth Manager

Mentz is part of the National Underwriter Panel of Experts for Advisor FX and FYI http://www.advisorfyi.com/expert/

*No tax investment or legal advice provided herein. Please consult with a licensed professional in your jurisdiction before making any important financial or legal decision.
References:
TJSL Thomas Jefferson School of Law Graduate Tax and Finance http://llmprogram.tjsl.edu
Global Tax Table from KPMG http://www.kpmg.com/global/en/whatwedo/tax/tax-tools-and-resources/pages…
IRS http://www.irs.gov/Businesses/Corporations
AAFM American Academy of Financial Management

The other day, a reporter asked a politician how to collect more money with lower taxes. Of course, there is a very simple answer to this childish riddle. With 95% of the worlds population outside of the United States, there must be economic development in the USA to bring companies, jobs, and capital into your jurisdiction. Whether you are President Obama, Paul Ryan, Joe Biden, or Mitt Romney, there are eternal truths about tax policy that can make or break a government budget, businesses, and families. Just like states compete for new business, so should the United States. With the USA corporate tax rates being the highest in the world, this reduces the number of businesses and people doing business within the US jurisdiction.

As the old sage says, “60% of nothing is still nothing”. So, if you raise taxes, less people participate. Even with higher rates, you get less. But with competitive rates, you always get more. Examples are Walmart, Target, Amazon or other. Water always flows to where there is the least friction, and the same holds true for businesses.

In todays global marketplace, there are businesses from around the world running to special jurisdictions to establish headquarters or offices within these economic hubs of freedom. Thus, money and tax dollars flow freely where the fees are fair, reasonable and are for mutual benefit of the business and society.

Financial literacy and education is becoming central to investors and the general public alike. The CFPB Consumer Financial Protection Bureau and other global organizations are looking for answers about how to raise the bar with financial education. Responding to the call for consultation or proposals from the CFPB, the AAFM American Academy of Financial Management ® and their General Counsel George Mentz, JD, MBA have sent a letter regaring the highest standards of accredited program exams and government recognized business schools in the United States and worldwide as a direct path to meeting assessment and education requirements for certification.

George Mentz, international counsel and chairman of the certification standards of AAFM has stated that, ” “A board certification earned by successfully completing accredited program exams and courses provides assurance that the advisor has mastered college degree level business skills and knowledge.” Double accredited business schools and accredited law schools represent approximately the top 10 percent in quality of degree and graduate programs worldwide.

The AAFM American Academy of Financial Management ® and Counselor Mentz sent a letter and comments to the CFPB showing the importance of accredited financial and legal education that leads to board certifications. In it, AAFM and Mentz clarify that the bulk of credentialing programs meet no third-party standard, do not require an accredited degree recognized by the government, and have zero regulatory or accreditation oversight. This is why the AAFM® and Professor Mentz started a crusade over a decade ago to promote certification requirements of: US Government recognized Accredited Business School and Law School Programs and Exams.

Mentz, is a teaching professor at the TJSL accredited law school graduate program. After a student completes the qualifying law school courses and exams at the accredited institution, the candidate can then petition for certification if they have met the professional requirements of degree, ethics, assessment, experience, and continuing education. As an example, the AAFM began to promote the CWM Chartered Certified Wealth Manager ® Program in the 1990s, and this designation may be achieved by successfully completing the CWM education and assessment program online from an accredited law program. See: www.llmprogram.org

In sum, the accredited education leaders at over 1000 institutions worldwide would see absolutely no reason to outsource exams or education when government recognized or accredited programs have met the test of time and quality for over 100 years.

Question for Comments: https://www.federalregister.gov/articles/2012/08/02/2012-18830/request-for-information-on-effective-financial-education
See: http://llmprogram.tjsl.edu *www.LLMProgram.org
See: http://www.AAFM.us * http://www.FinancialAnalyst.org
See: http://www.ACBSP.org

• See: FINRA Chartered Wealth Manager
  See: FINRA Monitored Designations http://s.wsj.net/public/resources/documents/st_CREDIT1015_20101015.html
• See CWM Chartered Wealth Manager http://www.aafm.us/

You can buy Stocks in Companies that you Patronize by: G Mentz, Esq.

Recently, I was reviewing some stock charts on top performing businesses that are publicly traded. I was delightfully surprised to see many of my favorite companies which I regularly patronize on the leading-stocks lists. The question that this exercise forces us to examine is: where have you been spending your dollars lately? If you have been to the typical strip-mall, used technology, priced transportation, or paid for health care, there are generally businesses earning revenues from your monthly home-budget or generalized business spending.

As Charles Schwab once implied, it is not difficult to sell a prudent investor a Utilities Mutual Fund because they inherently know that their energy bill has never gone down. What I mean is to follow the money and your budget before investing in the stock markets. It is sometimes the perfect gut check to determine if a stock represents products and services that you know and believe in.

Some of the stocks on the lists that I have noticed in the last year are:
1. Family Dollar (NYSE:FDO) – Quick and easy purchases of supplies and food for home, hygiene, kitchen and more. Both businesses and home budgets spend money here.
2. Monster Beverage (NASDAQ:MNST) – The Big Energy Business – Between Red Bull and the rest, the non-alcoholic drinks that are enhanced with: Amino Acids, Proteins, B- vitamins, and more are hot stocks where big companies might want to buy them out.
3. GNC Holdings (NYSE:GNC) – While the economy is really bad, people are still taking care of themselves, watching their weight, and using holistic treatments rather than expensive alternatives.
4. Michael KORS (NYSE:KORS) I have not personally bought their products, but this company typifies the spending that is occurring in this bad economy. While folks may not have enough for a new car or home, the hardest working are buying “big brand” watches and jewelry for personal satisfaction.
5. VISA or AMEX – The credit card and merchant companies are making more and more money charging fees, interest and more while reaping revenues from both buyers and sellers. Loyalty rewards and points continue to be drivers of the use of cards.
6. TripAdvisor (NASDAQ:TRIP) and other travel related companies such as CTRIP in China and Priceline keep on growing
7. Various Pharma or HealthCare Stocks – Do your research. Some companies are well positioned to benefit from Obamacare or revolutionary patents and cures.
8. Panera Bread (NASDAQ:PNRA) – Another mall based quality cafe that draws from the visibility and traffic of their approximately 1500 locations.
9. Chipolte Mexican Grill (NYSE:CMG) – About 1200 locations to eat in or take out where many locations are next to or convenient to other business or shopping areas.
10. Apple (NASDAQ:AAPL) – If you have one or if your lady has one, then you know.
11. Verizon (NYSE: VZ) – One of the many service providers. If you have a phone, you will need wireless service for phone, data and more.
12. WalMart (NYSE: WMT) – With the discount super-locations, you can fill your basket with food, supplies, clothes and more at low prices.
13. Mosaic – Feed and Fertilizer – Feeding the Animals and Plants that feed you. (NYSE:MOS)
14. Dollar Tree – Cost effective products from discount outlets. (NASDAQ:DLTR)

The other areas where we all spend money which may be very emblematic such as: Auto, Fuel, Insurance, Health Care, Medicine, Security, Internet Services and more. If you are having trouble remembering where all of your money goes, take a look at your checkbook statements or your credit card statements.
In the end, I would not encourage people to buy any stock that is overpriced or that has too much downside. However, the fact that many of these companies have done well in the worst economy in 80 years, the proof is in the performance. What is also amazing about many of these stocks is that they are companies that represent brick and mortar, they have physical locations in both urban and smaller cities, and many of these companies are even situated within the same mall locations

Dr. George Mentz is a world recognized wealth management analyst and professor who has authored several revolutionary books. Prof. Mentz, an international attorney, has been a keynote speaker globally in Asia, Arabia, USA, Mexico, Switzerland, and in the West Indies. Mentz can be contacted for speaking engagements at www.gmentz.com or www.AAFM.us

*No tax investment or legal advice provided herein. Please consult with a licensed professional in your jurisdiction before making any important financial or legal decision.

1. Experience – Make sure your advisor has a track record of success.
2. Accredited Education (Level 2) Preferred – Make sure your advisor has an education from a program that is accredited. Also, if the advisor has a degree or diploma from a Level 2 institution that has both regional accreditation and business accreditation, that is the best. You may want to ask your advisor if he or she has earned a business degree from an ACBSP or AACSB accredited program. See www.ACBSP.org
3. Licenses – Are they licensed with the SEC or FINRA and do they have a record of good standing.
4. Government Professional License – Are they a lawyer or CPA. If so, check with the state bar association or AICPA to make sure they have a solid record.
5. Regulatory and Product Knowledge – Make sure your advisor has the ability to recommend a broad array of solutions for your wealth preservation and growth.
6. Qualifications – See if your advisor is a member of a prestigious body such as the CWM ® Chartered Wealth Manager Institute. Ask if they are board certified as an: Accredited Financial Analyst ® or Chartered Wealth Manger ®. Also, if they have a law degree and license or CPA, then they may also be competent to provide advice on tax law and estate planning.
7. Value and Compensation – How will your advisor earn income from you? Make sure they get paid for their work, but it may be best to make sure they are not double dipping. Some advisors will charge a fee for advice and then also invest you in a product that also has fees. With the ease of use of ETF Exchange Traded Funds, make sure your advisor is providing added value.
8. Wealth Team – Does the wealth manager have a group or team to help you in the areas of: Investing, Wealth Preservation, Risk and Insurance, Trusts, Legal, Retirement and Tax. Ask if they have names of people they have worked with successfully.
9. Customer Regulations – Be sure to let your advisor know what your objectives are. Make sure they understand your 1) suitability, 2) risk tolerance, and 3) time horizon. Ask the wealth manager to explain each of these to you in detail.
10. Policy Statement – Make sure your wealth manager provides you with an IPS Investment Policy Statement that outlines what they will do for you and the limitations involved.

*No investment, legal or tax advice is intended to be given herein. Please see a licensed professional before making any important decision.
Source: www.AAFM.us and www.financialanalyst.org

Starting in 2013, federal and state taxes hikes are set to hit many of the nations hardest working families and retirees. If you have a company or appreciated asset that you are planning to sell, you may want to do it before the end of the year. Beginning in 2013, the cost and taxes on selling any tangible asset or your business may go up by a whopping 60 percent.

The established tax rates on long-term gains and qualified dividends will expire on December 31, 2012. Starting 2013, the federal tax rate on long-term gains will go up to 20% (or up to 10% if a taxpayer is in the fifteen percent tax bracket). In addition to this tax hike, the state income tax is added to the 20 percent. Thus, if you live in New York for instance, your federal and state combined tax to sell an asset for a profit would be about 28% if you add the 8 percent New York state income tax. But wait, there is more. Beginning in 2013, you will also be hit with another new tax on long-term capital gains and dividends where you get whacked with an additional 3.8% “Medicare contribution tax.

Also starting in 2013, the distinction between ordinary and qualified dividends will disappear, and all dividends will be subject to the ordinary tax rates. Thus, the maximum rate on dividends is scheduled to increase from 15 % to max out at 39.6% as the Bush Taxpayer Relief Act provisions expire. Thus, taxes on fixed income dividend assets will go over 100%. I would only assume that these new taxes may hurt the share price and demand for dividend yielding stocks.
To sum it up, if you have worked for 30 years in New York to build a company and you sell your small business for $500 thousand dollars, your federal taxes will go up on that retirement sale from about 15% to a whopping 23.8 percent in federal taxes plus state tax. And yes, you then would owe on top of that another 7 or 8 percent to the state of New York to bring you up to well over $150,000 dollars or 30% percent of your retirement being gobbled up by the state and federal governments.

To make a comparison, there may be some folks in a (state with no income tax) such as: Texas or Florida right now who have recently established residency. By the end of the 2012 year, they can sell their stock or company in a long-term capital gain transaction with the tax rate at a flat rate of 15% or only $75,000 dollars. This is 100% less than what the New Yorker or Californian might pay in 2013. “Viva el la Estado de Texas y la Florida” …..

From a philosophical standpoint, the less federal tax on capital gains, the more money that goes into a local economy where the seller resides. In the end, high capital gains rates tend to freeze up assets, constrict the sale of property, and the middle class generally end up waiting till they die to sell a company so as to avoid the capital gains taxes. Overall, if a taxpaying citizen does not receive a reasonable majority of the proceeds from the sale of a business or property, they will not sell or spend or circulate the money in local communities. Further, if people don’t sell things, taxes are not generated.

This whole capital gains tax debate brings me back to a vivid but real experience. I remember as a teenager reading the list of the Forbes 400 richest people in the world. The list in the 70′s was primarily people who inherited money, businesses, assets, or trusts. This list made me believe that being rich may be just luck and inheriting a 2nd or 3rd generational business. However, after the tax rates were lowered in the 80′s, the list changed quickly over the next few years to be comprised mostly of hard working folks who were “self-made”. Thus, my personal belief in the possibility for all Americans to become prosperous changed. The moral of the story is that lower tax rates helps create new wealth and new abundance. In sum, the incentives for hard work are directly correlated to the potential rewards, and everyone benefits from creativity and inventions in the form of cures, technology, and even tax receipts. And of course, higher taxes reduces global investing into new American ventures that may grow the economy.

For instance, even if you read the self-help book, Super Rich, by the famous music mogul Russell Simmons, you will see that even Mr. Simmons claimed to have used the favorable capital-gains rates to sprinkle around the vast proceeds from the sale of one of his businesses and share some of his good fortune with his workers who loyally invested their energy into his company over the years. I personally commend Mr. Simmons for rewarding his people for their contributions.

In the end, we must continue to think of ways to incentivize the hardest working and provide reasonable benefits for those who contribute with great creativity and effort.
Some Ideas for our Readers to Avoid Undue Tax:
1. Subchapter S Corporations may be more useful going forward to mitigate self-employment taxes or other taxes. However, dividend rates are going up if nothing is done by the administration.
2. The Purchase of ETFs, Funds or Stocks that do not produce interest or dividends may be a better investment for long term growth. iShares S&P 500 Growth Index Fund (NYSE: IVW) and WisdomTree LargeCap Growth Fund (NYSE: ROI) Read more: http://www.benzinga.com/analyst-ratings/analyst-color/12/02/2320350/growth-etfs-for-all-seasons#ixzz20LhXdkeF
3. Use of Tax Deferred Variable or Fixed Annuities or Self Directed 401Ks or IRAs may also become even more popular.
4. Read my previous article on Estate Tax Adjustments in 2013 and learn to prepare for those tax hikes and changes.
5. Consider donating appreciated assets to charity rather than cash to avoid undue taxes.

Dr. George Mentz is a world recognized wealth management commentator and professor who has authored several revolutionary books. Prof. Mentz, an international attorney, has been a keynote speaker globally in Asia, Arabia, USA, Mexico, Switzerland, and in the West Indies. Mentz can be contacted for speaking engagements at www.gmentz.com  or www.managementconsultant.us  To become a Chartered Wealth Manager please contact the AAFM

*No tax investment or legal advice provided herein. Please consult with a licensed professional in your jurisdiction before making any important financial or legal decision.

http://www.irs.gov/taxtopics/tc409.html

http://www.benzinga.com/personal-finance/financial-advisors/12/06/2691411/new-tax-rates-and-adjustments-for-2012-income-and-

http://www.smartmoney.com/taxes/income/what-obamacare-may-mean-for-taxes-1335896160486/

http://www.thestreet.com/story/11598139/1/time-to-avoid-2013-capital-gains-hike-is-now.html

http://businesscertification.org

In 2012, Many Tax Benefits Increase Due to Inflation Adjustments

USA — For tax year 2012, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation, the Internal Revenue Service announced today.

By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013, include the following:

The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.

The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.

Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.

Credits, deductions, and related phase outs.

For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751

in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.

The foreign earned income deduction rises to $95,100, an increase of $2,200 from the maximum deduction for tax year 2011.

The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.

For 2012, annual deductible amounts for Medical Savings Accounts (MSAs) increased from the tax year 2011 amounts; please see the table below.

The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels.

Estate and Gift

For an estate of any decedent dying during calendar year 2012, the basic exclusion from estate tax amount is $5,120,000, up from $5,000,000 for calendar year 2011. Also, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011.

The annual exclusion for gifts remains at $13,000.

Other Items

The monthly limit on the value of qualified transportation benefits exclusion for qualified parking provided by an employer to its employees for 2012 rises to $240, up $10 from the limit in 2011. However, the temporary increase in the monthly limit on the value of the qualified transportation benefits exclusion for transportation in a commuter highway vehicle and transit pass provided by an employer to its employees expires and reverts to $125 for 2012.

Several tax benefits are unchanged in 2012. For example, the additional standard deduction for blind people and senior citizens remains $1,150 for married individuals and $1,450 for singles and heads of household.

However, the totality of taxes from: State, Federal, City, Utilities, Real Estate, Gasoline, Luxury Taxes and the rest of personal and business taxes are still putting many Americans in the 50% or higher tax rates.

Details on these inflation adjustments can be found in Revenue Procedure 2011-52, which will be published in Internal Revenue Bulletin 2011-45 on November 7, 2011. http://www.irs.gov/newsroom/article/0,,id=248485,00.html

Dr. George Mentz is a world recognized wealth management commentator and professor who has authored several revolutionary books. Prof. Mentz, an international attorney, has been a keynote speaker globally in Asia, Arabia, USA, Mexico, Switzerland, and in the West Indies. Mentz can be contacted for speaking engagements at www.gmentz.com or www.managementconsultant.us

The Economic Issues and Some Defensive Strategies and Ideas
According to the WESP World Economic Situation and Prospects Report from the United Nations, the US and global economy is in a rut and having extreme difficulty moving forward. The report recommends that governments must be innovative and think of new strategies to cooperate with business and the workers to stimulate the economy.

As per the United Nations Report, the US economy still remains weak and without direction. The report states that, “In the United States, despite recent improvements, the unemployment rate remains well above pre-crisis levels, at over 8 per cent. In the euro area, it increased to a historic high of 10.9 per cent in March 2012. It reached alarming heights in the debt-ridden euro area countries: in Spain it had jumped to 24.1 per cent in March 2012 (up 8.6 in 2007), 21.7 per cent in Greece (up from 8), 13.5 in Portugal (up from 8.5), and 14.5 per cent in Ireland (up from 5). In developing countries, in contrast, employment rebounded more strongly.”

USA Economic Woes – The Highlights
1. In a May 9th ABC news report, the number of highly educated professionals or PhDs on public aid or welfare has tripled in recent months.
2. In total, 44 million people were on food stamps in the US on a monthly basis in 2011, compared with 17 million in 2000, according to the U.S. Department of Agriculture. – Source ABC News
3. Moreover, Business Week reported on May 31st that The number of Americans on Social Security disability has jumped 23 percent since 2007.
4. Presently, The level of employment is about five million jobs lower than where it was in 2008, when the economy slipped into recession.
5. A record 5.4 million workers with their dependents have signed up to collect federal disability checks since President Obama took office.
6. CNN now reports this May that 12.7 million are unemployed in the United States not including the 4 million who have may have given up looking for work.
7. Economists forecasts and estimates reveal that about another 4 million workers have simply stopped looking for work, and so do not show up in the Dept. of Labor tally used for the unemployment rate
8. Japan’s stock markets fell again with the broader Topix index hitting a 28-year low.
9. To make things worse in 2012, Wall Street Stocks ended down a whopping 2 percent, extending May’s rout. The DJI Dow Jones industrial average also dipped into negative territory for the year which is the biggest insult to injury to a potential recovery and to workers’ 401K Plans.
The United Nations States that there are Four major weaknesses continue to conspire against economic recovery:
1. Deleveraging by banks, firms and households, which continues to restrain normal credit flows and consumer and investment demand;
2. Unemployment remains high, a condition that is both cause and effect in preventing economic recovery;
3. Fiscal austerity responses to rising public debts deter economic growth and make a return to debt sustainability all the more difficult; and
4. Bank exposures to sovereign debt perpetuate fragility in the financial sector, which in turn spurs continued deleveraging.

The UNs Ban Ki-Moon said, “Worldwide, more than 400 million new jobs will be needed over the next decade. That means that policy-makers must get serious, now, about generating decent employment,” said Secretary-General Ban Ki-moon at the high-level thematic debate on The State of the World Economy and Finance and its Impact on Development, held on 17 May. “It is time to recognize that human capital and natural capital are every bit as important as financial capital,”

In conclusion, there needs to be new, bold, and efficient ways to stimulate hiring, employment and consumer spending. Governments should begin to look at ways to treat the working professional and the employers as the customer and determine what types of simple benefits and tax reform could be imparted upon the hardest working and the most steadfast contributors.

There needs to be greater incentives to: compete, to create, to invest, and to participate. If the cash, food, and health benefits of “not working” outweigh the rewards of: hard work, risk and job stress, then the entire system is totally broken. In sum, because the markets and investment yields are not advancing in recent years, the pensions and government obligations grow larger while the available money gets smaller. In the end, the state, federal and city governments are not using sustainable business practices or budgeting, and if costs are not constrained, then debts will become unmanageable and insurmountable.

Defensive Market Tips: Some Stock Sectors that were resilient this week were: Verizon VZ, WalMart WMT, AT&T Symbol T, Sara Lee SLE, AmerisourceBergen ABC, Johnson and Johnson JNJ, Pfizer PFE, ristol-Myers Squibb, Wellpoint WLP, or you can find ETFs that are defensive in nature that own gold, silver, or other commodities Gold/DGP or Silver/SLV
Other Typical Defensive Stocks may include: Microsoft MFST, Mastercard MA, Monsanto MON, Walgreens WAG, Merck MRK, VISA symbol V, Chevron CVX, Exxon XOM, Lowes LOW

George Mentz is a world recognized wealth management commentator who has authored several revolutionary books. Dr. Mentz, an international attorney, has been a keynote speaker globally in Asia, Arabia, USA, Mexico, Switzerland, and in the West Indies. Mentz can be contacted at www.gmentz.com

References & Citations:

http://www.un.org/en/development/desa/newsletter/desanews/feature/2012/06/index.html#3974

http://abcnews.go.com/Business/growing-number-americans-phds-receiving-food-stamps-aid/story?id=16310858

http://www.businessweek.com/articles/2012-05-31/federal-disability-insurance-nears-collapse

http://finance.yahoo.com/news/job-growth-falters-may-123604088.html

http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/

http://news.investors.com/article/608418/201204200802/ssdi-disability-rolls-skyrocket-under-obama.htm?p=full

http://money.cnn.com/2012/06/01/news/economy/europe-unemployment-jobs/index.htm

http://online.wsj.com/article/SB10001424052702304065704577424492946765620.html

http://www.reuters.com/article/2012/06/04/markets-japan-stocks-idUSL3E8H42LZ20120604

*No tax or investment advice is implied herein. Before making any important investment, tax, or legal decision, please speak to a licensed professional in your jurisdiction.

The number of electronic filing and payment options increases every year, which helps reduce your burden and also improves the timeliness and accuracy of tax returns. When it comes to filing your tax return, however, the law provides that the IRS can assess a penalty if you fail to file, fail to pay or both.

Here are eight important points about the two different penalties you may face if you file or pay late.

If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty.The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return on time and pay as much as you can, then explore other payment options. The IRS will work with you.

The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.

If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

If you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.

If you request an extension of time to file by the tax deadline and you paid at least 90 percent of your actual tax liability by the original due date, you will not face a failure-to-pay penalty if the remaining balance is paid by the extended due date.

If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.