"My command is this: Love each other as I have loved you. Greater love has no one than this: to lay down one's life for one's friends."--John 15:12-13 (NIV)
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Blessings,
Kenneth R. Roney, J.D.
President
PERSONAL PLANNER
Gifts of Stock
What will the market do this year? Perhaps the best answer is, "It will go up and down." Stock returns vary to a significant degree each year. However, long-term stock returns have been reasonably substantial.
Between 1990 and 2010, the average stock return was about 6%. While there was a very substantial increase during 1990-2000 and decreases during 2002 and 2008, the total return over two decades was approximately 6%.
Longer holding periods have generally resulted in higher total returns. The total stock return for seven decades between 1940 and 2010 was in excess of 10%. Returns for long periods of time have paralleled this amount.
Because many stocks have increased in value over time, you may hold stocks with substantial appreciation. If you're considering a major gift or end-of-year gift, a gift of public company stock to charity provides two major benefits. First, there is a charitable deduction for the value of the stock. Second, the charity does not pay tax on the sale of the stock so you bypass the capital gain.
Two fairly common reasons for making a substantial gift of stock are that you may have sold an appreciated asset with a large capital gain or you have good income. If you have a large gain or substantial income, you may want to offset that gain or income with a charitable deduction through a gift of stock. Because you receive both the charitable deduction and a bypass of capital gains tax, there is a double benefit for your gift of stock.
Lisa Considers a Stock Gift
Lisa was considering a gift of stock. She had purchased stock 10 years ago in a well-known company with many retail stores. With the worldwide expansion of this company, the stock had increased from her original purchase price of $50,000 to a total of $100,000 in value.
Lisa decided to visit with CPA Susan about the potential gift.
Lisa: "Susan, I bought the stock years ago and earlier this year my broker suggested that I sell half of the stock. I sold $50,000 of the $100,000 of the stock. I still have $50,000 left."
Susan: "Under the IRS rules, Lisa, you are required to divide your $50,000 cost basis between the half you sold and the half that remains. That means that half of the gain or $25,000 is going to be reported as income this year. However, if you decide to give the other half to your favorite charity, you will receive a deduction for $50,000. The deduction is based on the value of the stock on the gift date. The IRS calls that value the mean between the high and low sale price on that day. In addition, you will save capital gains tax because you bypass the gain on the half that you've given to your favorite charity."
Lisa: "That sounds like a great plan. If I make that gift, I'll be able to benefit from a large tax deduction that will more than offset the tax on my gain. Plus, the charity won't have to pay the tax on my stock when it sells. Finally, my charity will enjoy a very nice major gift."
Bill has Good Income This Year
Another reason for making a stock gift is that you may have a very substantial income that could cause you to pay a large income tax. Bill had purchased stock in a company recommended by his son eight years ago. His son used a computer made by this company and said to his dad that this would be a good stock to own. During that eight-year time, Bill's $15,000 initial investment had grown to a value of $165,000. Bill also had a very good year with a large income and was talking to his CPA Tom about a charitable deduction.
Bill: "Tom, I had a great year this year and I have been thinking about making a charitable gift with my stock in the computer company. It has gone way up in value and now is worth $165,000. I could sure use that deduction."
Tom: "Yes, that would be the right property to give. You will be able to claim a large deduction. Because you have a high income this year, you can take the full write-off. Plus, by giving the stock you bypass the gain. If you later would like to take your tax savings and make another stock investment, that is perfectly fine."
Bill decided to make the gift. While there is a limit of a deduction in one year to 30% of Bill's adjusted gross income, he has a high income this year and is able to take the full charitable deduction.
How to Make a Stock Gift
Most stock is held in an account at a brokerage firm. Relatively few people now wish to hold the actual certificates in their safety deposit box. If you hold actual certificates, you may mail the certificate and a signed stock power in separate envelopes to the charity.
Because most stock is held by the brokerage firm, the stock is transferred directly from the account at the brokerage firm to an account for the charity. For any gift more than $250, the charity will issue a receipt. With that receipt and the information on the stock, CPA Susan and CPA Tom will include IRS Form 8283 with the tax returns for Lisa and Bill. The gift of stock will produce a large deduction that will save huge income taxes this year.
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SAVVY LIVING
Tips and Support Services for Family Caregivers
What resources do you recommend that offer help to caregivers? I've been caring for my 82-year-old mother and it's wearing me to a frazzle.
Caring for an elderly loved one over a period of time can be incredibly taxing, both physically and mentally. Fortunately, there are several services that can help. Consider the following services and helpful tips.
Assemble a Care Team: First, put together a network of people that are willing to help when you are not available to take care of your mother or need a break. This team might include family, friends or even helpful neighbors.
Tap Local Services: Most communities offer free or subsidized services to help seniors and caregivers. These services might provide home delivered meals, transportation, senior companion services and more. Also, respite services provide short-term care so that a family caregiver can take some time off (see respitelocator.org). Your Area Agency on Aging can refer you to services available in your community (call 800-677-1116 for contact information).
Use Financial Aids: If you are handling your mom's financial affairs, make things easier by arranging direct deposit for her income sources and setting up automatic payments for her utilities and other routine bills.
If you need help, hire a professional daily money manager to pay bills, make deposits, decipher health insurance statements and balance her checkbook. Daily money managers typically charge $25 to $100 per hour. If your mom is low-income, a similar service is offered by AARP (aarpmmp.org) in select communities for free.
Benefitscheckup.org is another excellent resource you should use to look for financial assistance programs for lower-income seniors.
Get Insurance Help: If you have questions about Medicare, Medicaid or long-term care then contact your State Health Insurance Assistance Program (SHIP). This is a great resource that provides free counseling on all these issues. Call 800-633-4227 or visit shiptalk.org to locate a nearby counselor.
For Medicare questions, you can get help online at medicare.gov/campaigns/caregiver/caregiver.html and through the Medicare Rights Center hotline at 800-333-4114.
Use Technology: If your mom lives alone, consider renting a medical alert device. A medical alert device is a small pendent-style "SOS" button that would allow your mom to call for help if she falls and is injured. These devices are available through companies such as lifelinesys.com and lifefone.com for about $1 per day. Also, check out home monitoring systems at mylively.com, beclose.com or grandcare.com.
There are a number of great websites you can visit for care-giving information and support including aarp.org/caregiving, caregiver.org and caring.com. Additionally, you can visit alz.org/care, alzheimers.gov or thiscaringhome.org if your mother has Alzheimer's or dementia. If you are sharing care responsibilities with others then sites like lotsahelpinghands.com, caresolver.com and caringbridge.org can help you coordinate your efforts.
Hire Help: Depending on your mom's needs and budget, consider hiring a part-time "home-care aide" or "home-health aide." A home-care aide can help with things like preparing meals, doing laundry, bathing and dressing. A home-health aide can provide health-care services. Aids typically charge $12 to $40 per hour depending on where you live and the aide's qualifications. To find an aide, ask for referrals through friends, doctor's offices or hospital discharge planners or visit medicare.gov/homehealthcompare.
If you need additional guidance, consider hiring a geriatric care manager (caremanager.org) who can help you manage and facilitate your mom's care. Care managers generally charge between $100 and $200 per hour.
Take Care of Yourself: Make your own health a priority. Caring for an elderly loved one can cause emotional and physical stress that may lead to illness and depression. Be aware that the only way you can provide the care your mother needs is to make sure you stay healthy.
Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Senior" book. The articles are offered as a helpful and informative service to our friends and may not always reflect this organization's official position on some topics. Jim invites you to send your senior questions to: Savvy Senior, P.O. Box 5443, Norman, OK 73070.
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YOUR PLAN
John and Orlene Pierson's Legacy
Heroes of generosity don't always have big bank accounts. For years, John Pierson drove a milk route and worked long hours. But he and his wife, Orlene, found time and energy to maintain their church facilities, call on those who were sick and homebound, and make a bold lead pledge in the capital campaign to build a new church facility.
It is as if the spirit of generosity was ingrained in the Piersons. One holiday morning their pastor, after bringing his wife home from the hospital to recuperate after major surgery, found John and Orlene waiting at his home with dinner. What a moving and appropriate gift of love for that clergy family.
John and Orlene were Nazarene Legacy Partners, modern day heroes who made a difference in advancing God's Kingdom. In the later stages of their lives, a member of the Nazarene Foundation staff visited the Piersons in their assisted living facility and was moved to tears as John tenderly cared for his wife who was in the late stages of Alzheimer's disease. Just a few weeks later, Orlene died.
Not long after this at 95 years old, John was playing his violin, sharing beautiful music with other senior adults. As he concluded the last chorus of "To God Be the Glory" where the lyrics state: "O come to the Father, thro" Jesus, the Son," this dear saint slumped over with a heart attack and died. One of his caregivers, who often tried to keep up with John on his afternoon strolls, said, "This was John's good-bye party."
Through the Piersons' Charitable Trust and Charitable Gift Annuities, the Church of the Nazarene Foundation was privileged to make significant distributions to the local church John and Orlene attended as well as to other Nazarene ministries that were near to the hearts of the Piersons.
Faithful people, such as the Piersons, who have modeled generous living and Christlike service, give us cause to offer thanks as Paul did when he wrote his letter to the Romans.
Learn more about the many planned giving services the Foundation offers and how to leave a legacy gift to the ministries you love, contact the Church of the Nazarene Foundation and we will be happy to assist you.
Note: This is one in a series of articles for "Modeling Generosity" a series where Holiness Today partners with the Church of the Nazarene Foundation and other entities. Learn how God's people model generosity in their lives. Help inspire others to leave a lasting legacy by sending your stories, or the story of someone you know who lives generously, to info@nazarenefoundation.org.
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WASHINGTON NEWS
Chairman Camp's Tax Simplification Proposal
On February 26, House Ways and Means Chairman Dave Camp (R-MI) published a 979 page discussion draft on tax reform. The draft of the "Tax Reform Act of 2014" is a comprehensive overview of proposed reforms for individual taxes, capital gains taxes and business taxes. There was no significant change in gift or estate tax rules.
Chairman Camp stated that there were three major goals for the Tax Reform Act of 2014. First, the seven current tax brackets would be changed to a 10% and 25% bracket. Second, a large increase in the standard deduction and child tax credit would simplify filing for most Americans. Third, with the two tax brackets and the large increase in the standard deduction, 95% of Americans would not itemize their deductions.
While 979 pages is an extensive discussion draft, the estimate of the Joint Committee on Taxation (JCT) is that the 70,000 page Internal Revenue Tax Code would be reduced by 25% under the bill. This would represent the greatest level of tax simplification in the past 25 years.
According to JCT, there are four major potential benefits of this tax reform bill.
1. Employment – 1.8 million new jobs will be created over the next decade.
2. Growing Economy – The new employment and increased hiring by American companies will lead to $3.4 trillion in additional economic growth.
3. Average Family Income – With the growth in employment and the economy, there will be a net benefit per family of $1,300 per year.
4. Increased Charitable Giving – The growth of the economy will lead to greater gifts that could amount to $2.2 billion per year.
At a press conference, Camp stated, "The last time we reformed the tax code was 1986. That was 28 years ago – and America, once the beacon for investment, hiring and strong wages, is now falling behind – and it risks falling even further behind unless we take action. The time to act is now. America cannot afford to wait."
The Ranking Member of the House Ways and Means Committee is Rep. Sander Levin (D-MI). He observed, "It is vital that tax reform encourage economic growth, support working families, broaden the middle class, and address income inequality. It must produce a fairer and more adequate tax code for all Americans."
The Senate taxwriters are Senate Finance Committee Chairman Ron Wyden (D-OR) and Ranking Member Orrin Hatch (R-UT). They issued a joint press release and stated, "Today, Dave Camp put out a comprehensive vision to remake our tax code. While we look forward to reviewing this proposal, there can be no doubt that Mr. Camp deserves credit for working hard on these vital issues."
Editor's Note: The release of a comprehensive discussion draft on tax reform is a major step in this process. While there are many additional steps to follow, members of both parties recognize the potential economic benefit to the nation. As is true with all tax reform efforts, there will be over 100 organizations that now undertake a major effort to protect a specific credit or deduction. Given the inevitable political controversy of major tax reform, it is probable that actual votes by Congress will not occur until after the fall election. While a final bill is one to three years into the future, the Camp bill will be the starting point for an eventual tax act. Many of his tax reform principles could be incorporated in a final bill.
Proposed Tax Reform Overview
The proposed Tax Reform Act of 2014 includes major changes for both individual and business taxes.
Individual Taxation Changes
1. Brackets – The existing 7 brackets from 10% to 39.6% are reduced to three brackets of 10%, 25% and 35%. Income over $35,600 for an individual or $71,200 for a couple will be taxed at 25%. The 35% bracket will apply to modified adjusted gross income (MAGI) over $400,000 for individuals or $450,000 for couples.
2. Standard Deduction – The standard deduction is nearly doubled to $11,000 for an individual and $22,000 for a couple.
3. Child Credit – The child credit is increased to $1,500 per qualifying child.
4. Phase-outs – Individuals with incomes over $250,000 or couples with incomes over $300,000 will have phase-outs of the 10% bracket benefit, the standard deduction and the child credit.
5. Repealed Items – The extensive repeal list includes the personal exemption, the Pease itemized deduction limits, the alternative minimum tax (AMT), the state and local tax deduction, the real estate tax deduction, most energy credits, medical expense deductions, moving expense deductions and mortgage interest for loans over $500,000.
6. Capital Gains and Dividends – These are taxed at ordinary rates with a 40% exclusion. Sale of a major asset will be taxed at 35% less the 40% exclusion, producing a 21% tax rate. Adding the 3.8% Medicare tax produces a 24.8% rate. The various phase-outs could increase this to approximately a 26% federal rate.
Business Taxation Changes
While the individual tax changes are projected to lose federal tax revenue, the net effect of the business changes is to recover that loss. The proposed Tax Reform Act of 2014 includes six major business tax changes.
1. Corporate Rate – The reform proposes lowering the top corporate rate from 35% to 25%.
2. Depreciation – The modified accelerated cost recovery system (MACRS) will be lengthened to a system similar to the alternative depreciation system (ADS).
3. Manufacturing – If a manufacturing entity is a passthrough, then the top 35% individual rate is reduced to 25%.
4. Foreign Operations – In a fairly complex series of provisions, the current $1 trillion plus of accumulated overseas corporate earnings would be subject to a tax of 8.75%. Future earnings overseas will be subject to a 95% exclusion with a system that generally follows territorial tax principles.
5. Energy – Many oil industry and green energy deductions and credits are repealed.
6. Expensing – Small businesses will be permitted to expense $250,000 of equipment each year.
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FINANCES
Stocks - Pizza Wars: Papa John's v. Domino's
Papa John's International, Inc. (PZZA) and Domino's Pizza, Inc. (DPZ) announced their 2013 fourth quarter results on Tuesday, February 25. Although both companies demonstrated strong financial momentum, Papa John's showed that it is gaining on its larger rival.
Domino's quarterly revenue increased 5% to $566.5 million while Papa John's revenue increased 5.6% to $387.9 million. In terms of comparable store sales, Domino's domestic and international same-store sales increased 3.7% and 7.0%, respectively. Papa John's also recorded international same-store sales of 7.0%, but beat Domino's on the domestic front with a same-store sales increase of 9.0%.
Domino's net income for the quarter was $44.7 million, an 18.9% increase over the $37.6 million reported during the same period last year. Papa John's recorded net income of $18.8 million, an increase of 8.3% over the $17.4 million reported during the comparable period in fiscal year 2012.
Domino's President and CEO, J. Patrick Doyle, commented on the company's results: "We made consistent progress in 2013 building a bigger and better Domino's brand. We had strong global momentum in sales, store growth and innovation. Consumers worldwide are redefining convenience – and we are meeting their evolving needs by pioneering technology in the restaurant industry."
Papa John's founder, Chairman and CEO, John Schnatter, had this to say about the company's results: "I'd like to congratulate our operators on delivering a great year for Papa John's, with several notable milestones and accomplishments including the opening of our 1,000th International restaurant and continued strong growth in sales, earnings and units."
The 2013 fourth quarter was further evidence that Papa John's is gaining on its much larger rival, Domino's Pizza. Papa John's opened 132 new restaurants during the quarter to bring its total count to 4,428 restaurants. Domino's, on the other hand, opened 348 restaurants to bring its total to 10,886. However, Papa John's must be pleased that its domestic same-store sales increase of 9.0% beat Domino's 3.7% domestic same-store sales increase.
Papa John's International, Inc. (PZZA) shares ended the week at $50.90 and Domino's Pizza, Inc. (DPZ) shares ended the week at $79.07.
SodaStream's Quarter Beats Estimates
SodaStream International Ltd. (SODA) announced its fourth quarter and full-year results on Wednesday, February 26. Although the company saw net income decrease, the results still managed to beat estimates.
Revenue for the fourth quarter was $168.1 million, a 26.4% increase over the comparable period's $132.9 million figure. Full-year revenue was $562.7 million, a 29% increase over fiscal year 2012's $436.3 million annual revenue.
SodaStream reported fourth quarter net income of $700,000, much lower than the $7.5 million reported during the same period last year. For the full-year, net income was $42.0 million, a 4.2% decrease from fiscal year 2012's $43.9 million figure.
Daniel Birnbaum, CEO of SodaStream, had this to say about the quarter, "While the fourth quarter proved to be more challenging than we expected there were several highlights, along with important lessons from the past year that give us confidence about the future. Our ability to grow revenue 29% to $563 million in 2013, including selling a record 4.4 million soda makers and increasing gas refill unit sales 30% to a record 21.5 million, underscores the high level of consumer interest and activity in home carbonation."
Mr. Birnbaum went on to say, "Our plan is to capitalize on our first mover advantage and leadership position by accelerating investments in brand building and demand creation in 2014 to capture a greater share of the global carbonated beverage market." Mr. Birnbaum's reference to SodaStream's "first mover advantage" was an allusion to a recent partnership between Green Mountain Coffee, maker of the Keurig, and Coca-Cola on the development of a new home carbonation machine. Many analysts believe the deal spells further trouble for SodaStream, which has seen its net income decline this past year. However, the company's fourth quarter results still beat expectations, resulting in a 6% increase in the company's stock price on Wednesday, February 26. In addition, the company was able to generate significant buzz and brand awareness during the recent SuperBowl with a popular ad featuring actress Scarlett Johannson.
SodaStream International Ltd. (SODA) shares ended the week at $39.48.
AMC Profits from High Ratings
AMC Networks Inc. (AMCX), owner of several cable TV channels, reported its fourth quarter and full-year results on Thursday, February 27. The company produced impressive financial results that reflect its strong lineup of TV programming.
AMC reported impressive double-digit fourth quarter and full-year revenue increases. Fourth quarter revenue increased 18.7% to $435 million and full-year revenue increased 17.7% to $1.592 billion.
Net income for the fourth quarter was $35 million compared to $15 million reported during the same period last year. For the full-year, net income increased 112% to $291 million compared to $137 million during 2012.
"In 2013, we delivered strong financial results, with double digit increases in both net revenues and adjusted operating cash flow driven by the success of our original programming at AMC, IFC, SundanceTV and WE tv," said President and CEO Josh Sapan. "AMC set ratings records for Breaking Bad and The Walking Dead, which continues to be the #1 show on all of television among adults 18-49."
AMC Networks continues to see incredible financial success, led by The Walking Dead, which drew 16 million viewers during its midseason premier in early February. The company reported that ad sales for its core channels increased 31% during the fourth quarter. With the departure of the popular hit Breaking Bad during 2013, the company faces the challenge of finding popular replacements. AMC announced that it had to write off $52 million with the cancellation of two shows during the quarter, Low Winter Sun and The Killing. The company hopes future programming set to air this year can fill the void and join the ranks of Breaking Bad and The Walking Dead as hits with viewers.
AMC Networks Inc. (AMCX) shares ended the week at $76.02.
The Dow started the week of 2/24 at 16,102 and closed at 16,322 on 2/28. The S&P 500 started the week at 1,837 and closed at 1,859. The NASDAQ started the week at 4,273 and closed at 4,308.
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Bonds - Treasuries Fall on Upbeat Economic Data
Treasury prices fell on Friday, February 28 for the first time in four days upon the release of better-than-expected economic indicators that signaled underlying strength in the U.S. economy. Still, a revised GDP report showed the U.S. economy expanded at a slower pace than originally reported.
A Chicago business barometer increased to 59.8 in February from 59.6 in January. February's reading surprised economists who had been expecting the barometer to fall to 56 during the month. A reading above 50 indicates growth.
In addition to the business barometer, the University of Michigan and Thomson Reuters consumer sentiment gauge increased to 81.6 in February, slightly higher than the 81.2 recorded for January. This number matched expectations as economists projected the February reading to be between 78.5 and 82.5.
Despite the positive business and consumer sentiment news, a revised GDP report showed the U.S. economy grew at a 2.4% rate in the fourth quarter of 2013 compared to the previously estimated 3.2%. The downward revision reflected less consumer spending than previously estimated. A Bloomberg survey of economists revealed that the revision was in line with expectations as they had expected a revision downward to 2.5%.
Even though the revised GDP report painted a less positive picture of the U.S. economy than initially believed, many analysts continue to have confidence in the economy. "I'm not sure [the downward revision in GDP] makes me any less optimistic about 2014," said James Bullard, President of the St. Louis Federal Reserve in a television interview on Friday.
Mr. Bullard's comments are echoed by other analysts who believe the soft economic growth of the past few months is the result of colder weather as opposed to a slowdown in the U.S. economy. As a result, the mildly encouraging economic reports on Friday caused investors to abandon the security of Treasuries, which pushed prices down and caused yields to rise.
The 10-year Treasury note yield finished the week of 2/24 at 2.66% while the 30-year Treasury note yield finished the week at 3.59%.
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CDs and Mortgages - Interest Rates Increase Slightly
Freddie Mac released the results of its weekly Primary Mortgage Market Survey on Thursday, February 27. Sales of new homes exceeded expectations in January, which gave mortgage rates a slight boost for the week.
This week, the 15-year fixed rate mortgage averaged 3.39%, an increase from last week when it averaged 3.35%. One year ago, the 15-year fixed rate mortgage averaged 2.76%.
The 30-year fixed rate mortgage averaged 4.37% this week, an increase from last week when it averaged 4.33%. Last year at this time, the 30-year fixed rate mortgage averaged 3.51%.
Frank Nothaft, Vice President and Chief Economist at Freddie Mac, commented on this week's rates: "Mortgage rates edged up with new home sales exceeding expectations and rising to a seasonally adjusted pace of 468,000 units in January, the strongest annual rate since July 2008. The 9.6% increase in new home sales for January followed an upward revision of 13,000 units in December. The S&P/Case-Shiller 20-city composite house price index rose 13.4% over the 12-months ending in December 2013."
The money market fund finished the week of 2/24 at 0.4%. The 1-year CD finished at 0.7%.
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Are you a Nazarene Legacy Partner (NLP)? The answer is “YES” if you have designated any gift to a Nazarene ministry in your will, bequest, or estate plan. This could be a tithe on your estate, an insurance beneficiary designation to your local church, college, global mission, or any other Nazarene ministry you support.
Send us your name and contact information by reply email and indicate “I am a Nazarene Legacy Partner” and we will add your name to our NLP honor roll. To model generosity inspires others to do the same. Thank you for your interest in gift planning. To access any of this updated financial and gift planning information, please select our website.
Church of the Nazarene Foundation
17001 Prairie Star Parkway, Suite 200
Lenexa, KS 66220 United States
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