April 2011 Newsletter - Financial Executives International

5
PARTNERS CORNER
(Continued from page 2)
3. Reduces risk and avoids penalties
a. Consistent assumptions: Arriving at a
consistent set of assumptions minimizes
the risk (both for the client and service
provider) of having certain assumptions
or conclusions for financial reporting
purposes that differ from (or have negative
implications for) positions that the
client has taken, or wishes to take, for
tax/TP purposes.
b. Avoiding penalties: This could help
avoid penalties, for example, where a
company might otherwise have taken a
position for financial reporting purposes
that conflicted with a prior position
taken for tax/TP purposes.
The Duff & Phelps Approach
PPAs provide a good starting point for a TP
analysis. The TP team can review the PPA
performed to determine if changes need to
be made to comply with TP requirements.
Ideally, the TP team will be involved early,
including during the fact-finding phase of the
PPA, to ensure that positions and assumptions
taken for the PPA are consistent with
the company’s current and anticipated TP
structure. Each company’s situation is
different and advisors need to tailor each
engagement upon extensive prior experience,
yet recognizing the unique value
drivers inherent in each transaction or situation.
Understanding the synergies between PPAs
and TP, and using an integrated team approach
to perform the analyses, will provide
taxpayers with a stronger basis for supporting
their audit positions as well as saving
time, money, and resources.
For additional information, please contact
Tim Reichert, Transfer Pricing Services
Leader, at 303.749.9002 or Myron
Marcinkowski, Tax Valuation Services
Leader, at 678.916.2525.
$100,000 IRA Gift to Charity—
Make Sense?
With the passage of The Tax Relief Unemployment
Insurance Act of 2010, allowing up to
$100,000 of IRA assets to be donated to charity,
many 501(c) institutions have mailed their potential
donors to encourage the use of this tax
benefit. But, is this the best way for donors to
give?
For donors who have long-term capital gains
assets, it is still more advantageous to donate
capital-gains assets directly rather than donating
one’s IRA. To illustrate:
Has $100,000 in IRA not needed for
retirement
and
Donor has $100,000 of appreciated, long -
term capital gains stock which was purchased
for $10,000
1. If $100,000 in IRA is donated to charity –
no taxes are paid. No deduction allowed.
When the long-term capital-gains asset is
eventually sold, $18,000 would be paid in
taxes (15% federal & 5% state) leaving
donor with $82,000 in cash.
2. If the long-term capital-gains asset is donated
to charity, the donor receives a
$100,000 tax deduction. If the IRA then
disburses $100,000 as a distribution, it is
taxable income. This taxable income will
be offset by the gift of the $100,000 longterm
capital-gains asset, leaving donor
with $100,000 cash, not the $82,000.
Conclusion: Gifts from IRAs are useful, but with
other assets from which to give, it may be more
advantageous from a tax perspective to gift the
assets and keep your retirement money.
For more information, please contact, Ed
Wallack, President of Sapers & Wallack, at
617.225.2600 or ewallack@sapers-wallack.com.
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