When considering your giving options, you might want to think about a charitable bequest--one of the easiest ways to make an impact for ministry.
With the help of an advisor, you can include language in your will or trust specifying a gift to be made to family, friends, or the ministry of your choice as part of your estate plan.
To learn more, visit our charitable bequests page on our website. We have providedsample bequest language on our website to assist you. You can also contact us at913.577.2983 or info@nazarenefoundation.org. To read more about our services, visitwww.NazareneFoundation.org.
Blessings,
Kenneth R. Roney, J.D.
President
Personal Planner
A family limited partnership (FLP) is usually created by a husband and wife. It has several purposes. An FLP can save estate taxes and permit transfers to family members. While it is uncertain what the futureexemptions and estate tax rates will be, large estates are nearly certain to face major taxes in the future. The FLP is a favored method for reducing estate tax.
Another benefit is protection of assets. The FLP interests can be given to children and other relatives. It is very difficult for any creditor to reach FLP assets. The protection also extends to limiting rights of in-laws if a child or grandchild is married and later divorced.
Parents typically are interested in transferring value but retaining control. With an FLP, they can retain the general partnership interest and control the management of the FLP assets.
There are several considerations with an FLP. First, there are legal and accounting costs to create the FLP. In addition to these costs, property must be transferred. There may be transfer costs or property taxconsequences upon the funding of the FLP.
Because the FLP interests are frequently given to family members, there will need to be an appraisal by a person who holds himself or herself out to the public as an appraiser. In addition, the selected appraiser must have appropriate credentials.
Finally, the parents will need to consider succession. At the point they no longer wish to manage the FLP, a child or other person will typically assume the role of general partner.
How the FLP Works
Assume that Bill and Alice have been successful real estate investors. They hold a number of parcels of development land, commercial buildings and apartment buildings. Bill and Alice would like to maintain control of their investment assets, but would like to start transferring equity to children.
An excellent solution is to create the "Jones FLP." Bill and Alice will be 1% general partners and 99% limited partners. In some circumstances, children already have assets and may contribute them in exchange for appropriate percentages of the limited partnership interest. But in the case of Bill and Alice, they transfer all of the assets to the FLP.
Bill and Alice transferred 11 parcels of commercial real property to the partnership. These 11 parcels include development land, commercial buildings with leases and apartment buildings. After transfer of the real estate, they employed a qualified appraiser to value the limited partnership interests.
After the appraisal was completed, Bill and Alice then begin to transfer limited partnership interests to their children and to trusts for grandchildren. The appraiser reduced or discounted the gift values due to the lack of control and for lack of marketability. Because the limited partners only own a small interest in the partnership and cannot force distributions, they do not have a high level of control. The appraiser determined that there is an 18% discount for the lack of control.
Because a limited partnership interest in real estate also makes it very difficult to sell at full value, there is a discount for lack of marketability. The qualified real estate appraiser determined that another 17% discount on total value is appropriate for lack of marketability. The two discounts together add up to a total of 35%.
When Bill and Alice make gifts of limited partnership interests to children and to trusts for grandchildren, they make use of both their present interest annual exclusions and a portion of each person's gift exemption.
Over a period of years, Bill and Alice were able to transfer a substantial portion of the limited partnership interests to family. However, because they still own the general partnership interests, they control and manage the real property. After a majority of the limited partnership interests are transferred to children, the growth in value of the assets will largely benefit their children rather than Bill and Alice.
Through this method, they can reduce future estate taxes and also maintain control. In addition, because it is difficult for the children to transfer the assets or for spouses of the children to acquire control, there is a substantial level of asset protection.
Creditors of the children are very restricted in their ability to gain control of the assets. Generally, under most state law, a creditor can only attach rights to distributions from the partnership. This makes it very difficult for any creditors to acquire a significant right to partnership assets.
Benefits and Disadvantages of Jones FLP
There are several specific FLP benefits that Bill and Alice appreciate. First, they are general partners and they have control. Second, because of the discounts they are able to make much larger gift transfers with little or no gift tax. Third, the assets are quite well protected from any creditors or spouses of the children. Fourth, assets transferred to the trust will be outside the probate process. While federal estate taxes will apply, even those will be greatly reduced. Fifth, the centralized management of the real estate property can be transferred to a successor general partner when they are ready to retire. This will enable the assets to be preserved long-term for the benefit of the family.
There are some disadvantages of Jones FLP. First, there is the cost involved in creating the documents, transferring the assets and maintaining all of the business records. Second, if there is excessive control by Bill and Alice, then the IRS may claim that they in effect have too much control over the assets. In that case the IRS may assess an estate tax based on the full value of the assets in their estate, including the value of the FLP assets.
Third, if there are too many limits on sale of the FLP interests by children, the IRS may claim that there is no "present interest" annual exclusion. For transfers that exceed the lifetime gift exemption, the IRS may assess a gift tax. Finally, FLP valuations by the appraiser may be questioned by the IRS. That could lead to an audit and litigation with the IRS.
Jones FLP Do's
There are several actions that should be taken to make certain that the Jones FLP functions as intended.
1. Written Document – The written FLP document must state all of the rights and duties of the general partner and of the limited partners.
2. Business Licenses and Tax ID Numbers – The partnership must be treated like a business entity. There may be state business licenses and it will be necessary to obtain federal and state tax ID numbers for the partnership.
3. Title Transfer – To function properly, the partnership must receive title to Bill and Alice's real property. They will deed the property from themselves as individuals to the partnership. There may be transfer taxes as a result of those deeds. However, it is essential that the title be properly transferred to Jones FLP.
4. Retain Assets – Bill and Alice must retain sufficient assets for their lifestyle. If they transfer all of their assets into the Jones FLP, then the IRS will claim that this is not a business entity but is simply a personal entity. If it is managed as a personal entity, Bill and Alice's estates could face a very large estate tax on the full value of the assets.
5. Avoid Comingling Assets – Jones FLP needs to have a proper business purpose and be conducted like a business. If business assets and personal assets are comingled, then the IRS may claim that this was not treated like a business.
6. State Filing Taxes – There may be state franchise taxes or other taxes that apply to Jones FLP. The FLP should comply with all state requirements.
7. Federal and State Income Taxes – While partnerships pass through income and deductions, it will be necessary to obtain the assistance of a CPA who is knowledgeable about partnership taxes and tax returns.
8. Create FLP While Still Healthy – There have been "deathbed" FLPs created that the IRS contested. It is preferable to create Jones FLP while Bill and Alice are still healthy. It can then function for a number of years to demonstrate the business purpose of maintaining and operating their real estate enterprise.
FLP Don'ts
1. Transfer All Assets – If nearly all assets are transferred to the FLP, especially on the deathbed of the donor, then it appears that this is not a business investment but merely a substitute estate planning strategy. The IRS may contest the FLP discounts and could potentially win a claim for a very large tax deficiency.
2. Transfer Family Home or Vacation Home or Personal Assets – The FLP is a business enterprise and family homes and personal assets should be retained outside the FLP.
3. Unlimited Promise to Parents – If the children promise the parents that they can "take assets whenever needed" from the FLP, then the IRS may deny the discounts on the ground that the children and parents are not treating it like a business entity.
4. Do Not Omit Business Meetings – The appropriate business meetings, minutes and reports should be filed to indicate that the FLP is being operated as a business entity.
FLP-Lead Trusts
If Bill and Alice make currents gift to charity, a very effective way of maximizing the benefits of the FLP is the "double discount" combination of a family limited partnership and a lead trust.
The first discount is due to the transfer of assets into the FLP. Bill and Alice could transfer $4 million in real estate assets into a family limited partnership. While the underlying rent or income from the assets could continue (and it is best if the assets have no debt and therefore no debt payments), there is a substantial discount for lack of marketability and for minority interest. This discount could reduce the FLP value from $4 million to $2.5 million.
If the limited partnership interests in the family limited partnership are then transferred into a lead trust, there is a second deduction. The deduction is based on the present value of the income paid to charity. While Bill and Alice thought about a 6% payment on $4 million in assets or $240,000 per year to charity, this percentage of the discounted $2.6 million value is much higher. Therefore, the gift tax charitable deduction is much more substantial. With a lead trust that lasts for approximately eight years, they are able to obtain sufficient "double discounts" to transfer $4 million in assets. With the use of part of their gift exemption, there is no gift tax.
The benefit of the FLP-lead trust is that Bill and Alice are able to provide a very major inheritance for their family. They are significantly leveraging the use of their gift exemptions. This allows a reasonably short period of time for the payments to charity with a very large inheritance to family members at the end of that time.
Because the assets transferred to family members have a low cost basis to Bill and Alice, the children will receive FLP assets with a low cost basis. However, children could then use a tax-free sale and unitrust strategy to sell the appreciated assets with zero tax.
Bill and Alice are very pleased with this strategy and believe that this is going to be an excellent addition to their FLP plan.
FLP-Lead Trust-Unitrust
After attending a weekend conference where they were encouraged to think about the best ways to assist children in "becoming better persons," Bill and Alice think it would be good for the children to stretch out the inheritance. They also believe that income and capital gain taxes for the children will continue to increase. Ideally, they would like to add a method or plan that would stretch out the inheritance and enable the children to reduce their future income and capital gain taxes.
One strategy to do that is to add a 5% charitable remainder trust to the end of the FLP-LT plan. The plan then starts with the Jones FLP interests that are transferred into a lead trust for eight years. At the end of eight years, the $4 million in assets may have grown to a larger amount. Assuming that they have grown to $5 million in value, then the two children of Bill and Alice would each benefit from a distribution of $2.5 million in assets to a 5% unitrust.
The unitrust would last for the life of each child. Each 5% unitrust funded with $2.5 million could produce an additional $125,000 of income for the life of the child. Because the trust may earn more than 5%, there may be inflation protection of this amount for the life of the child.
There are two major tax benefits for the child. When the appreciated assets of $2.5 million with low basis are transferred to the unitrust, they can be diversified tax-free. In addition, earnings above the 5% payout compound tax-free for life in the trust. Both of these benefits will save tens of thousands of dollars of income tax for each child.
Bill and Alice are delighted with the unitrust addition to their plan. The FLP-LT will leverage their transfers. After eight years, the lead trust principal is transferred to the unitrusts for the children. This will produce a long-term inheritance that they think is very helpful in encouraging the child to be a productive citizen.
In addition, there will be large savings in capital gains tax and future income tax for the children. With the belief of Bill and Alice that capital gain and income taxes will only increase in the future, these savings are a welcome addition to the overall plan.
Savvy Living
Is it safe for seniors with dementia to drive? If so, when should they stop? My dad has early-stage Alzheimer's disease but still drives himself around town just fine.
Most doctors agree that people with moderate to severe dementia should not drive. In the early stages of the disease, however, many doctors agree that it is the person's driving performance and not the presence of the disease that should dictate when the person stops driving.
It is important to note that a person with dementia may not realize as their driving skills deteriorate over time. So, family members and other loved ones should monitor the person's driving skills closely. Here are some tips that may help.
Warning Signs
The best way to monitor your dad's driving skills is to take frequent rides with him and watch for key warning signs. For example, does he have trouble remembering routes to familiar places? Does he drive at inappropriate speeds, tailgate or drift between lanes? Does he react slowly or make other poor driving decisions? Also, has your dad been involved in any fender benders or received any traffic tickets lately? Have you noticed dents or scrapes on his vehicle? These are red flags.
If you need assessment help, hire a driver rehabilitation specialist who is trained to evaluate older drivers. To locate a specialist see driver-ed.org or aota.org/older-driver.
Transition Tips
If you believe it is still safe for your dad to drive, then you may want to recommend some simple adjustments to ensure his safety. Important adjustments might include driving only in daylight, on familiar routes and avoiding busy roads and bad weather. Also, see if he will sign an Alzheimer's "driving contract" (see alz.org/driving to print one) that designates someone to tell him when it is no longer safe to drive.
In addition, you should also consider getting a GPS vehicle tracking system for his car (likemotosafety.com or mobicopilot.com) to help you keep an eye on him. These devices will let you track exactly where he's driving and allow you to set up zones and speed limits that will notify you via email or text message when he exits an area or arrives at a designated location.
Time to Quit
When your dad can no longer drive safely, you will need to talk to him. It is actually best to start having these conversations in the early stages of the disease, before he needs to quit driving so he can prepare himself.
You also need to have a plan for alternative transportation (including a list of family, friends and local transportation services) that will help your dad get around after he stops driving.
For tips on how to talk to your dad, the Hartford Financial Services Group and MIT AgeLab offer a variety of resources at safedrivingforalifetime.com (click on "Dementia and Driving").
Refuses To Quit
If your dad refuses to quit you have several options. First, suggest a visit to his doctor who can give him a medical evaluation and "prescribe" that he stop driving. Older people will often listen to their doctor before they will listen to their own family.
If he still refuses, contact your local Department of Motor Vehicles (DMV) to see if they can help. Some states require doctors to report new dementia cases to the DMV, who can revoke the person's license.
If all these fail, consider hiding his keys or just take them away. You could also disable his vehicle, park it in another location so he can't see it or have access to it, or sell it.
Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Living” book. Any links in this article are offered as a service and there is no endorsement of any product. These 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 Living, P.O. Box 5443, Norman, OK 73070.
The Dairy Farm Produced More Than Milk
"For every animal of the forest is mine, and the cattle on a thousands hills." Psalm 50:10
Late in October, as the leaves were in their amber and crimson prime, I made my way deep into the heart of Maine. I would soon set foot on the Cold Brook Farm. Herman and Clarice Dunlop, faithful members of the Skowhegan, Maine First Church of the Nazarene welcomed me to their home.
I had met Herman and Clarice at a Prime Time retreat and was now having the opportunity to once again spend time with them. What a blessing! Though diagnosed with terminal pancreatic cancer, Herman retains his humor and uncompromising reliance on our Lord and Savior. He has numbered our days and Herman is at total peace with whatever God's plan is for his life, be it measured in days or in years. He has a peace that the world cannot give, but only envy.
As I sat at their dining room table the story of the Cold Brook Farm began to unfold. Herman's grandfather in the early years of the twentieth century moved his family and cattle from Canada, south into Maine and established the Cold Brook Farm, a dairy farm situated about two miles north of the town center of Skowhegan. Within a short time, his grandfather began meeting with other Christians in a tent. These tent meetings gave birth to the First Church of the Nazarene in Skowhegan. Herman's parents and then Herman and Clarice continued to operate the dairy farm and help build the Skowhegan church. In the words of Herman, "this farm has produced a lot more than milk". Truer words have never been spoken.
Perhaps as many as a dozen preachers have come off that dairy farm, including Herman's brother, Roland, who served as the District Superintendent in Maine, and Herman and Clarice's daughter. Countless unsuspecting young men have worked at the dairy farm only to have a personal encounter with Jesus prompted by the faithful witness of the Dunlop family.
Today, a brand new First Church of the Nazarene sits on six acres of land that once was the site of the old farmhouse on the Cold Brook Farm. Only an apple tree stands at the drive to the Church to conjure up the memories of the farm of long ago for Herman.
The farm no longer exists. Much of the property has been sold. There are no dairy cows; no more milk production; only the countless lives that have been transformed by the faithfulness of those who lived and worked on the farm. For nearly one hundred years the farm has been a tool for ministry. Now, Herman and Clarice have written the last chapter of Cold Brook Farm. They have placed the remaining parcels of the farm in two Charitable Remainder Unitrusts to perpetuate its legacy. Herman and Clarice will receive lifetime income from the trusts based on the sale of the farm property. At some point in the future, in God's timing, the trusts will be used to establish two endowments to fund ministries of the Church of the Nazarene.
Until that day, when time shall be no more, Cold Brook Farm will continue to produce "more than milk".
If you would like more information about leaving a legacy of faith through planned giving please give us a call. We would be thrilled to visit with you and help you write the final chapter of your own story.
Thank you for your interest in the Church of the Nazarene Foundation. Our hope is to serve you and your family with helpful information. We have an increasing number of friends at CNF who now are benefiting from life income gifts, gift annuities and other plans. Thank you for taking the time to explore the benefits of gift planning.
Washington News
Obamas and Bidens Publish 2014 Tax Returns
Each year President Obama and Vice President Biden publish their tax returns. For 2014 President and Mrs. Obama paid $93,362 in federal tax on total income of $477,383. The tax rate is approximately 19.6% of their income.
President and Mrs. Obama gave $70,712 to 27 charities. This represents about 14.8% of their adjusted gross income. While most gifts were $1000 or $1500, two charities received larger transfers. The Sidwell Friends School, a private school that daughters Malia and Sasha attended, received a $5,000 gift. The Fisher House, which provides housing for families of injured veterans who are in VA hospitals, received a major gift of $22,012.
Vice President and Mrs. Biden received income from his salary from the federal government and her position on the faculty of Northern Virginia Community College. Their income was $388,844 and the Federal tax paid was $90,506. This was a tax rate of 23.3%.
The Bidens gave $7,380 to charity. This represents about 2% of their adjusted gross income. Their largest gifts were $2,400 to the Annual Catholic Appeal for the Diocese of Wilmington, Delaware, $1,200 to the Northern Virginia Community College Foundation and $2,755 to the USO.
Top 10 Tax Failures
On April 15, Senate Finance Committee ranking member Ron Wyden (D-OR) published his “top ten” failures for the income tax code.
Wyden stated, “As Americans race to meet tonight’s midnight tax filing deadline, we are reminded that it is long-past time to clean up our nightmare tax system. Such a complex code is only dividing taxpayers into two different camps – the fortunate who have extra resources to successfully navigate the system to their benefit and the rest of Americans.”
Wyden explained the top ten tax failures that impact Americans.
1. Unfair Tax Rates – The average wage earner pays a higher tax rate than better-off Americans who have capital gains from asset sales.
2. Tax Code Too Complex – With 74,608 pages in the Internal Revenue Code and references, many Americans fail to understand tax-saving provisions that could benefit them.
3. Too Much Time – Americans spent 6.1 billion hours and paid $168 billion to prepare and file their2014 tax returns.
4. Family Business Burden – Small businesses spend over 80 hours per year preparing their tax returns. They could use this time much more productively to operate their business and hire moreemployees.
5. Wrong Retirement Benefits – Most of the current retirement benefits help upper-income Americans. Only 16% of the total retirement benefits are transferred to the lowest 60% of income-earners.
6. IRS Busy Signal – With the cutbacks in IRS customer service, only 4 in 10 taxpayers who call the IRS are actually able to speak to an IRS representative. Wyden noted that “calling the IRS is like shouting into a void.”
7. Scams and Identity Thefts – The Federal Trade Commission (FTC) notes that its top complaint is now tax-related identity theft. In addition, the Federal Communications Commission (FCC) reported that tax-related identity theft over the past four years has increased from 15% to 43% of all its identity theft complaints.
8. Offshore Accounts – Some wealthy Americans transfer funds offshore into various tax havens. The total cost for this tax avoidance is $110 billion per year.
9. Unqualified Tax Preparers – Because there are no basic standards, some preparers are incompetent, unethical or give incorrect advice.
10. Financial Product Loopholes – There are complicated financial products that are designed to lower the taxes paid on investments. These loopholes must be closed because they only benefit a few affluent persons.
Finances
Late in October, as the leaves were in their amber and crimson prime, I made my way deep into the heart of Maine. I would soon set foot on the Cold Brook Farm. Herman and Clarice Dunlop, faithful members of the Skowhegan, Maine First Church of the Nazarene welcomed me to their home.
I had met Herman and Clarice at a Prime Time retreat and was now having the opportunity to once again spend time with them. What a blessing! Though diagnosed with terminal pancreatic cancer, Herman retains his humor and uncompromising reliance on our Lord and Savior. He has numbered our days and Herman is at total peace with whatever God's plan is for his life, be it measured in days or in years. He has a peace that the world cannot give, but only envy.
As I sat at their dining room table the story of the Cold Brook Farm began to unfold. Herman's grandfather in the early years of the twentieth century moved his family and cattle from Canada, south into Maine and established the Cold Brook Farm, a dairy farm situated about two miles north of the town center of Skowhegan. Within a short time, his grandfather began meeting with other Christians in a tent. These tent meetings gave birth to the First Church of the Nazarene in Skowhegan. Herman's parents and then Herman and Clarice continued to operate the dairy farm and help build the Skowhegan church. In the words of Herman, "this farm has produced a lot more than milk". Truer words have never been spoken.
Perhaps as many as a dozen preachers have come off that dairy farm, including Herman's brother, Roland, who served as the District Superintendent in Maine, and Herman and Clarice's daughter. Countless unsuspecting young men have worked at the dairy farm only to have a personal encounter with Jesus prompted by the faithful witness of the Dunlop family.
Today, a brand new First Church of the Nazarene sits on six acres of land that once was the site of the old farmhouse on the Cold Brook Farm. Only an apple tree stands at the drive to the Church to conjure up the memories of the farm of long ago for Herman.
The farm no longer exists. Much of the property has been sold. There are no dairy cows; no more milk production; only the countless lives that have been transformed by the faithfulness of those who lived and worked on the farm. For nearly one hundred years the farm has been a tool for ministry. Now, Herman and Clarice have written the last chapter of Cold Brook Farm. They have placed the remaining parcels of the farm in two Charitable Remainder Unitrusts to perpetuate its legacy. Herman and Clarice will receive lifetime income from the trusts based on the sale of the farm property. At some point in the future, in God's timing, the trusts will be used to establish two endowments to fund ministries of the Church of the Nazarene.
Until that day, when time shall be no more, Cold Brook Farm will continue to produce "more than milk".
If you would like more information about leaving a legacy of faith through planned giving please give us a call. We would be thrilled to visit with you and help you write the final chapter of your own story.
Thank you for your interest in the Church of the Nazarene Foundation. Our hope is to serve you and your family with helpful information. We have an increasing number of friends at CNF who now are benefiting from life income gifts, gift annuities and other plans. Thank you for taking the time to explore the benefits of gift planning.
Washington News
Each year President Obama and Vice President Biden publish their tax returns. For 2014 President and Mrs. Obama paid $93,362 in federal tax on total income of $477,383. The tax rate is approximately 19.6% of their income.
President and Mrs. Obama gave $70,712 to 27 charities. This represents about 14.8% of their adjusted gross income. While most gifts were $1000 or $1500, two charities received larger transfers. The Sidwell Friends School, a private school that daughters Malia and Sasha attended, received a $5,000 gift. The Fisher House, which provides housing for families of injured veterans who are in VA hospitals, received a major gift of $22,012.
Vice President and Mrs. Biden received income from his salary from the federal government and her position on the faculty of Northern Virginia Community College. Their income was $388,844 and the Federal tax paid was $90,506. This was a tax rate of 23.3%.
The Bidens gave $7,380 to charity. This represents about 2% of their adjusted gross income. Their largest gifts were $2,400 to the Annual Catholic Appeal for the Diocese of Wilmington, Delaware, $1,200 to the Northern Virginia Community College Foundation and $2,755 to the USO.
Top 10 Tax Failures
On April 15, Senate Finance Committee ranking member Ron Wyden (D-OR) published his “top ten” failures for the income tax code.
Wyden stated, “As Americans race to meet tonight’s midnight tax filing deadline, we are reminded that it is long-past time to clean up our nightmare tax system. Such a complex code is only dividing taxpayers into two different camps – the fortunate who have extra resources to successfully navigate the system to their benefit and the rest of Americans.”
Wyden explained the top ten tax failures that impact Americans.
1. Unfair Tax Rates – The average wage earner pays a higher tax rate than better-off Americans who have capital gains from asset sales.
2. Tax Code Too Complex – With 74,608 pages in the Internal Revenue Code and references, many Americans fail to understand tax-saving provisions that could benefit them.
3. Too Much Time – Americans spent 6.1 billion hours and paid $168 billion to prepare and file their2014 tax returns.
4. Family Business Burden – Small businesses spend over 80 hours per year preparing their tax returns. They could use this time much more productively to operate their business and hire moreemployees.
5. Wrong Retirement Benefits – Most of the current retirement benefits help upper-income Americans. Only 16% of the total retirement benefits are transferred to the lowest 60% of income-earners.
6. IRS Busy Signal – With the cutbacks in IRS customer service, only 4 in 10 taxpayers who call the IRS are actually able to speak to an IRS representative. Wyden noted that “calling the IRS is like shouting into a void.”
7. Scams and Identity Thefts – The Federal Trade Commission (FTC) notes that its top complaint is now tax-related identity theft. In addition, the Federal Communications Commission (FCC) reported that tax-related identity theft over the past four years has increased from 15% to 43% of all its identity theft complaints.
8. Offshore Accounts – Some wealthy Americans transfer funds offshore into various tax havens. The total cost for this tax avoidance is $110 billion per year.
9. Unqualified Tax Preparers – Because there are no basic standards, some preparers are incompetent, unethical or give incorrect advice.
10. Financial Product Loopholes – There are complicated financial products that are designed to lower the taxes paid on investments. These loopholes must be closed because they only benefit a few affluent persons.
Finances
Stocks -
Intel Reports Flat Earnings
Intel Corporation (INTC), manufacturer and distributor of digital technology platforms, reported its latest quarterly results on Tuesday, April 14. The company reported revenue that disappointed investors due in part to a drop in revenue generated by its personal computer segment.
The company reported revenue of $12.8 billion for the quarter. This is the same revenue as Intel reported during the comparable quarter last year.
"Year-over-year revenues were flat, with double-digit revenue growth in the data center, IoT and memory businesses offsetting lower than expected demand for business desktop PCs," said Intel CEO Brian Krzanich. "These results reinforce the importance of continuing to execute our growth strategy."
Intel reported quarterly net income of $2 billion or $0.41 per share. This represents a slight increase from the $1.9 billion in net income the company reported during the same quarter last year.
Intel is adjusting to a shift in the market for personal desktop computers. As businesses become increasingly mobile, the demand for traditional desktop computers continues to fall. As a result, demand for Intel's PC chips is also decreasing. However, Intel sees the rise of cloud computing and the Internet of Things as new streams of revenue that could replace the revenue generated by its PC segment. Intel reported double digit growth in both segments.
Intel Corporation (INTC) shares ended the week at $32.47, up 2.07% for the week.
Johnson & Johnson Disappoints
Johnson & Johnson (JNJ), manufacturer and seller of health care products, announced its latest quarterly earnings on Tuesday, April 14. Johnson & Johnson reported disappointing earnings due to the current strength of the dollar.
The company reported quarterly revenue of $17.4 billion. This represents a decrease from the comparable quarter last year when Johnson & Johnson reported revenue of $18.1 billion.
"The company delivered strong underlying growth in the first quarter driven by new products and the strength of the core business. Of note is the continued robust growth of the Pharmaceutical business and the solid performance of our Consumer brands," said Alex Gorsky, Chairman and CEO of Johnson & Johnson. "I am proud of our global teams who focus every day on delivering innovative solutions to address evolving health care needs."
Johnson & Johnson reported net income of $4.3 billion, or $1.53 per share, for the quarter. This represents a decrease from the same period last year when the company reported net income of $4.7 billion or $1.64 per share.
The drop in Johnson & Johnson's year-over-year earnings is mostly due to the strength of the U.S. dollar. Since Johnson & Johnson is a multinational company, it must adjust earnings for currency exchange rates. Since the dollar is strong compared to other currencies, this adjustment takes its toll on the bottom line. Excluding the currency impact, Johnson & Johnson's revenue grew by 3.1% on an operational basis.
Johnson & Johnson (JNJ) shares ended the week at $99.58, down 1.97% for the week.
Netflix Continues to Grow
Netflix, Inc. (NFLX), an Internet television network, reported its latest quarterly earnings on Wednesday, April 15. The company reported an increase in both U.S. and international subscribers that beat expectations.
Netflix reported quarterly revenue of $1.02 billion. This represents a decrease from the revenue reported during the comparable quarter last year when revenue was $1.27 billion.
In a letter to shareholders, CEO Reed Hastings and CFO David Wells said, "We added a record 4.9 million new members globally in Q1, against our forecast of 4.1 million and prior year of 4 million, bringing our total global streaming membership to 62.3 million. In the US, we gained 2.3 million new members, well above our expectations of 1.8 million due to both acquiring and retaining more members than forecast. Internationally we added 2.6 million members versus a forecast of 2.25 million due to stronger growth than expected across a number of markets."
The company reported net income of $2.69 million. This represents a decrease from the same period last year when the company reported net income of $53.11 million. Earnings per share came in at $0.05 per share.
Netflix has made international expansion a priority. This entrance into new territories has increased the company's costs. However, the most recent membership numbers show that this investment is paying off. Netflix added 2.6 million international members, above its forecast. Investors noticed and Netflix's stock price rose significantly following its earnings announcement.
Netflix, Inc. (NFLX) shares ended the week at $571.55, up 21.43% for the week.
The Dow started the week of 4/13 at 18,052 and closed at 17,826 on 4/17. The S&P 500 started the week at 2,102 and closed at 2,081. The NASDAQ started the week at 5,002 and closed at 4,932.
Intel Reports Flat Earnings
Intel Corporation (INTC), manufacturer and distributor of digital technology platforms, reported its latest quarterly results on Tuesday, April 14. The company reported revenue that disappointed investors due in part to a drop in revenue generated by its personal computer segment.
The company reported revenue of $12.8 billion for the quarter. This is the same revenue as Intel reported during the comparable quarter last year.
"Year-over-year revenues were flat, with double-digit revenue growth in the data center, IoT and memory businesses offsetting lower than expected demand for business desktop PCs," said Intel CEO Brian Krzanich. "These results reinforce the importance of continuing to execute our growth strategy."
Intel reported quarterly net income of $2 billion or $0.41 per share. This represents a slight increase from the $1.9 billion in net income the company reported during the same quarter last year.
Intel is adjusting to a shift in the market for personal desktop computers. As businesses become increasingly mobile, the demand for traditional desktop computers continues to fall. As a result, demand for Intel's PC chips is also decreasing. However, Intel sees the rise of cloud computing and the Internet of Things as new streams of revenue that could replace the revenue generated by its PC segment. Intel reported double digit growth in both segments.
Intel Corporation (INTC) shares ended the week at $32.47, up 2.07% for the week.
Johnson & Johnson Disappoints
Johnson & Johnson (JNJ), manufacturer and seller of health care products, announced its latest quarterly earnings on Tuesday, April 14. Johnson & Johnson reported disappointing earnings due to the current strength of the dollar.
The company reported quarterly revenue of $17.4 billion. This represents a decrease from the comparable quarter last year when Johnson & Johnson reported revenue of $18.1 billion.
"The company delivered strong underlying growth in the first quarter driven by new products and the strength of the core business. Of note is the continued robust growth of the Pharmaceutical business and the solid performance of our Consumer brands," said Alex Gorsky, Chairman and CEO of Johnson & Johnson. "I am proud of our global teams who focus every day on delivering innovative solutions to address evolving health care needs."
Johnson & Johnson reported net income of $4.3 billion, or $1.53 per share, for the quarter. This represents a decrease from the same period last year when the company reported net income of $4.7 billion or $1.64 per share.
The drop in Johnson & Johnson's year-over-year earnings is mostly due to the strength of the U.S. dollar. Since Johnson & Johnson is a multinational company, it must adjust earnings for currency exchange rates. Since the dollar is strong compared to other currencies, this adjustment takes its toll on the bottom line. Excluding the currency impact, Johnson & Johnson's revenue grew by 3.1% on an operational basis.
Johnson & Johnson (JNJ) shares ended the week at $99.58, down 1.97% for the week.
Netflix Continues to Grow
Netflix, Inc. (NFLX), an Internet television network, reported its latest quarterly earnings on Wednesday, April 15. The company reported an increase in both U.S. and international subscribers that beat expectations.
Netflix reported quarterly revenue of $1.02 billion. This represents a decrease from the revenue reported during the comparable quarter last year when revenue was $1.27 billion.
In a letter to shareholders, CEO Reed Hastings and CFO David Wells said, "We added a record 4.9 million new members globally in Q1, against our forecast of 4.1 million and prior year of 4 million, bringing our total global streaming membership to 62.3 million. In the US, we gained 2.3 million new members, well above our expectations of 1.8 million due to both acquiring and retaining more members than forecast. Internationally we added 2.6 million members versus a forecast of 2.25 million due to stronger growth than expected across a number of markets."
The company reported net income of $2.69 million. This represents a decrease from the same period last year when the company reported net income of $53.11 million. Earnings per share came in at $0.05 per share.
Netflix has made international expansion a priority. This entrance into new territories has increased the company's costs. However, the most recent membership numbers show that this investment is paying off. Netflix added 2.6 million international members, above its forecast. Investors noticed and Netflix's stock price rose significantly following its earnings announcement.
Netflix, Inc. (NFLX) shares ended the week at $571.55, up 21.43% for the week.
The Dow started the week of 4/13 at 18,052 and closed at 17,826 on 4/17. The S&P 500 started the week at 2,102 and closed at 2,081. The NASDAQ started the week at 5,002 and closed at 4,932.
Bonds - Bond Yields Fall after CPI Report
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Treasury yields fell and prices rose after the U.S. Labor Department released a report on consumer spending on Friday, April 17. The combination of uncertainty regarding inflation and soft economic data has caused investors to speculate that the Federal Reserve will not raise interest rates as early as June.
The U.S. Labor Department announced on Friday that the Consumer Price Index rose a seasonally adjusted 0.2% in March compared to February. The Federal Reserve has said that it wants to see inflation near 2% before it will begin raising interest rates. The Fed's primary gauge of inflation is the personal consumption expenditure index. That index has not risen above 1% since November 2014. The CPI report released Friday suggests that inflation is beginning to stabilize, giving the Federal Reserve the impetus to raise rates.
The CPI report suggesting stabilizing inflation and perhaps a rate increase caused investors to purchase U.S. Treasury bonds. Bond prices rose and yields fell in early Friday trading to 1.898% for the 10-year Treasury note and 2.584% for the 30-year Treasury note.
While stabilizing inflation suggests that the Federal Reserve may raise interest rates. Other economic data released this week suggested that the Federal Reserve may wait to raise rates. For example, the March employment report showed a slowdown in hiring. In addition, reports showed only moderate spending at retail establishments, a drop in industrial output, a strong dollar that is hurting U.S. exports and a drop in home-building.
"Data available for the first quarter of this year have been notably weak," said Dennis Lockhart, President of the Federal Reserve Bank of Atlanta. "That is giving rise to heightened uncertainty about the track the economy is on."
Many analysts believe that the economy will rebound in the second quarter of 2015. If that happens we may see the Federal Reserve raise rates before the end of the year.
The 10-year Treasury note yield finished the week of 4/13 at 1.85% while the 30-year Treasury note yield finished the week at 2.50%.
CDs and Mortgages - Interest Rates Remain Steady
Freddie Mac released the results of its latest Primary Mortgage Market Survey (PMMS) on Thursday, April 16. The results showed average fixed mortgage rates remaining largely unchanged for the week ending April 17.
This week, the 30-year fixed rate mortgage averaged 3.67%. This represents a slight increase from last week when it averaged 3.66%. One year ago, the 30-year fixed rate mortgage averaged 4.27%.
The 15-year fixed rate mortgage averaged 2.94% this week. This is up from last week when it averaged 2.93%. Last year at this time, the 15-year fixed rate mortgage averaged 3.33%.
"Mortgage rates were little changed following a light week of economic reports and remaining low at the spring home buying season," said Len Kiefer, Deputy Chief Economist at Freddie Mac. "Of the few releases, the advance estimate of retail sales rebounded 0.9% in March though slightly below market expectations. Meanwhile, the National Association of Home Builders/Wells Fargo Housing Market Index jumped 4 points to 56 in April, suggesting home builders are optimistic and the housing market will continue to strengthen in 2015."
The money market fund finished the week of 4/13 at 0.4%. The 1-year CD finished at 0.7%.
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