Thursday, December 29, 2016


This is a simple example to demonstrate the potential tax benefits of donating stock instead of cash.  Please consult your tax advisor to review your individual facts and circumstances.  The tax savings realized will depend on multiple factors including your marginal tax rate, a comparison of your itemized deductions to the standard deduction, AMT taxes, capital gain tax rates and more.

First, assume you are preparing to make a significant charitable donation of $50,000.  As stated above, there are multiple factors involved to determine the effective tax savings on charitable donations but for the sake of our example, if your marginal tax rate is 28%, then donating $50,000 in cash could reduce your income taxes by approximately $14,000.  What if you donated $50,000 of stock instead of cash?

Assume you have 100 shares of stock that you purchased 30 years ago, with a total market value of $50,000 and a cost basis of $5,000.  Normally, if you sold this stock then you would be subject to capital gains taxes.  For our example, let us assume the capital gains tax is 15% resulting in capital gain taxes of $7,500.  However, if you donate the stock directly to a qualifying charity then the capital gains tax is completely avoided and you are still eligible to claim the charitable donation deduction of $50,000.  In this case, you could avoid $7,500 of capital gains tax and also reduce your income tax by an additional $14,000 for total tax savings of $21,500.  This is an effective tax savings rate of approximately 43%.

You could then use the cash you had planned on using for the donation to instead replace the donated stock by purchasing shares on the open market on the same date as the donation.  This would put you back in the same financial position as if you had donated cash but allows you to realize the tax savings of donating stock.

Nick Wold, CPA

Friday, July 29, 2016


As Benjamin Franklin once said, “In this world nothing can be said to be certain, except death and taxes.”  I believe Mr. Franklin would find it quite interesting that under current tax law, the single greatest ability to avoid tax occurs upon death.

Commonly referred to as “the step up in basis” rule, section 1014 of the Internal Revenue Code allows taxpayers to legally avoid capital gains tax at death.  Here is a very quick and simple example of how the “step up” works.

Assume the taxpayer, at age 30, purchased stock in 1950 for a cost of $5,000.   The taxpayer never sells the stock and dies at age 96 when the stock is valued at $5,000,000.  In this simple scenario, how much do you think is due in tax to the federal government by either the decedent taxpayer or their beneficiary?

What if I told you there is a possible fact set where neither the decedent or their beneficiary would pay a single dime in federal income tax?

First, the decedent taxpayer never sold the stock while they were alive so the taxpayer is not required to report the gain on their personal income tax return.

Second, assuming the taxpayer had never made any taxable gifts in their lifetime, the decedent would not be subject to any federal estate tax because the stock value of $5,000,000 is beneath the current estate tax exemption amount of $5,450,000.  The decedent taxpayer’s estate value is still $5,000,000 but the exemption allows this amount to escape any federal estate tax liability.

Third, the beneficiary inherits the stock at the value included in the decedent’s estate, which is the $5,000,000 value at death.  This allows the beneficiary to sell the stock and report a cost basis of $5,000,000.  If the beneficiary sells the stock for $5,000,000 then the beneficiary will pay zero capital gains tax.

What if the decedent taxpayer had gifted the stock to a family member while still living?  In this scenario, the original cost basis of the taxpayer would pass to the family member.  If the family member sold the stock for $5,000,000 then a capital gain of $4,995,000 would be reported and subject to capital gains tax.  At 15%, the tax would be $749,250. 

While death and taxes are as certain now as they were in 1789, the certainty of taxes upon death is not nearly as certain.  Make sure you are utilizing existing tax law to protect your assets to the fullest extent authorized by law.

Nick S. Wold, CPA, MA

Wednesday, July 6, 2016


Under current regulations of the Fair Labor Standards Act (FLSA), several exemptions allow employers to exempt certain employees from overtime pay.  However, in order to qualify for an overtime exemption, an exempt employee must be paid at least $455 per week ($23,660 annually).  One of the most common overtime exemptions claimed by employers is FLSA section 13(a)(1).  This exemption applies to certain management and professional positions with an annual salary in excess of $23,660 per year.

As of December 1st of this year, the salary threshold to qualify for exempt status will increase to $913 per week ($47,476 annually).  Employers need to carefully review their payroll data to identify all existing exempt employees that earn a current salary near or below the new exemption amount of $47,476. 

The U.S. Department of Labor estimates the new exemption threshold may impact up to 5 million American workers.  If you are an employer facing a direct impact from the new regulations, then you have a few different options to remain compliant as of December 1st.  Please call our office if you would like our assistance to review your options.

Nick S. Wold, CPA, MA

Wednesday, May 18, 2016


The IRS recently warned taxpayers to remain vigilant against ongoing IRS telephone fraud scams.  Many areas of the country are experiencing an escalation in telephone scams involving people pretending to be the IRS.  These scammers make false claims to trick taxpayers into providing personal information over the phone.  Some of the false claims include immediate jail time for unpaid taxes or an unclaimed tax refund set to expire.  Please help spread the word to friends and family to remain vigilant. 

Remember, never disclose personal information to unsolicited phone calls, even if you believe the caller is legitimate.  For example, let us assume you forgot to pay your cell phone bill the past few months and you receive a phone call from your cell phone carrier.  The caller then offers you a 10% discount on unpaid bills if you pay immediately.  Don’t let this trick you.  Any reputable company would allow you to take the name and number of the person offering you the discount and then allow you to end the call and decide if you want to take them up on the offer.  At that point, you could research the correct number to contact your cell phone carrier and then initiate the call to your phone carrier.  This will allow you to validate the original caller.

Unfortunately, when it comes to unsolicited phone calls asking for personal information, people need to assume the caller is guilty until proven innocent.  Scammers are looking for personal information related to your finances so they then have the information to call you with what appears to be a legitimate phone call.  Whether the caller says they are from the IRS, Social Security, T-Mobile or local police department, if you are not 100% sure of the caller’s identity then simply ask to take their name and number and end the call.  Then, independently verify the correct phone number for the company/organization and then call the company/organization to verify if the original caller was legitimate.  The criminals will eventually move on from the IRS scam and begin to falsely represent other organizations.

Nick S. Wold, CPA, MA

Thursday, January 7, 2016


Tacoma voters approved two new laws that will both become effective as of February 1st, 2016.  The first new law is based on Initiative Measure No. 1B and calls for a $12 city minimum wage phased in over two years.  The second law is the Paid Leave Ordinance that will require employers to provide up to 24 hours of paid leave annually to employees working within the Tacoma City Limits.

Like any new law, there are many areas of complication when attempting to implement the law for the first time.  To help the process, the City of Tacoma has published information dedicated to both employers and employees.  If you are not up to speed on the new laws, then please look at the below links for further information.  

If you have employees that fall under the jurisdiction of the new laws, then you will be required to act.  At a minimum, even if your current hourly wages and paid leave exceed the new requirements, you are still required to provide notice of the new laws to Employees in the Employee’s primary language.

One of the most complicated aspects of the new laws is defining which employees are covered.  For example, under the final Paid Leave Rules, an employee who travels through the City may or may not be covered by the Paid Leave Ordinance.  An Employee who travels through the City is not covered by the Ordinance if they make no stops for work purposes.  However, an Employee who travels through the City, and stops in the City as a purpose of their work (e.g. to make pickups or deliveries), is covered by the Ordinance for all hours worked in the City.  However, an Employee who travels through the City, and stops in the City solely to attend a convention, conference, training, educational class, or similar event is not covered by the Ordinance.  This is only one example of complication involving the implementation of the new law.  Other areas like telecommuting employees, donated paid leave, premium pay programs and shift swapping are also covered in the Paid Leave Rules.

Unlike the Paid Leave Rules, the Minimum Wage Rules are still in draft form.  The draft rules are in the final states of editing and review, and will be posted by the City of Tacoma as soon as possible.  The finalized rules and workplace notice will be sent out to Minimum Wage Email Update subscribers as it becomes available.

If your business has employees working in or traveling through Tacoma then make sure you are familiar with the rules going into effect as of February 1st, 2016.  Please call our office if you need any assistance.

Nick S. Wold, CPA, MA