Masonry Magazine May 1969 Page. 23
TAXES
By MIRIAM McD. MILLER
PRESIDENT NIXON'S TAX REFORM
President Nixon's tax reform proposals have now been finalized and sent to the House Ways and Means Committee. Needless to say, it is a multifaceted program but here are a few of its highlights.
Surprisingly, the Administration is recommending that the 7% investment tax credit be repealed effective April 21, 1969. This, the Administration says, enables it to recommend that the full surcharge (10%) be extended only to January 1, 1970 with a reduction to 5% on January 1, 1970 and, hopefully, an elimination of the surcharge entirely on June 30, 1970.
In an aim toward equity in the Federal tax system, the Administration has proposed a "low income allowance" which will remove more than 2,000,000 of the low income families from the Federal tax rolls. Hopefully, this measure, if enacted, will offer genuine tax relief to the young, elderly, the disadvantaged and the handicapped.
For those at the other end of the income scales the Administration is proposing a minimum income tax. This would be accomplished (in part) by setting an ultimate 50% limitation on the use of the tax preferences now granted for such items as accelerated depreciation on real estate, certain excessive farm losses and the percentage depletion on minerals.
Some items for the middle income taxpayer are a liberalization of the deductions for moving expenses, and, tax credits to encourage investment in poverty areas and for hiring and training of the hardcore unemployed.
One final item the existing rules permitting small business corporations to be taxed similar to partnerships to avoid the double tax on corporate earnings would be substantially liberalized by expanding existing size and types of income limitations, eliminating technical requirements and simplifying their operation.
Now we have to wait and see what the Congress will do with these proposals.
MOVING EXPENSES
Because of the school year, summertime is the busiest time for families to move. It may be of interest to note when these expenses are deductible from Federal income tax.
An employee may deduct the reasonable expenses of moving from one location to another if the expenses are incident to his beginning work in a new location. Note: the requirement is that it be to a new location and not for a new employer. However, the new job site must be at least 20 miles farther from the employee's former residence than was his prior job site. Thus, where a company moves from the inner city to a suburban location, an employee may be able to deduct the cost of moving if the new work site is at least 20 miles farther from the employee's former residence than was his prior job site.
Another condition for this deduction is that the taxpayer must be a full-time employee in the general location of the new job site for at least 39 weeks of the 12 month period following the move.
Moving expenses considered to be deductible are: transporting the taxpayer, his family and members of his household (not servants though) and pets; cost of moving the employee's household and personal goods and belongings- including the employee's personal car; costs of packing and crating, and insurance on the move.
However, storage charges after arrival do not qualify. Nor, are expenses caused for breaking leases, refitting rugs and draperies and prepayment penalties on mortgages deductible.
The expenses of transporting himself and his family that would be deductible are those for lodging, actual transportation costs, and meals including those on the day of arrival.
One final note-deductible moving expenses are deducted from the gross income. Therefore, these expenses may be claimed even though an employee uses the standard deduction and does not itemize deductions.
EMPLOYEE PLAN WITH RELATIVES
The IRS has restated its position with regard to the qualification of a pension plan established by a partnership that employs relatives of the partners. In the case presented, twelve of the partnership's bona fide employees were eligible to participate in the plan. Five of the twelve were relatives of the two partners.
The IRS advised that so long as the partner's relatives are bona fide employees there is no reason to prevent their participation in the plan merely because of this relationship. In this Ruling, reference was made to Rev. Rul. 68-436, which holds that a sole proprietor's wife must be covered under his self-employed plan where she is a bona fide employee of his business and meets all the other requirements for coverage.
Therefore, the IRS ruled that this partnership's pension plan will not fail to qualify merely because five of the twelve eligible participants are relatives of the two partners. Rev. Rul. 69-144.
INCOME NOT GIFT
Should an employer wish to give his employees some money or its equivalent, he can call it what he wishes but the IRS will probably regard it as compensation. In a recent Ruling by the IRS, a majority stockholder of a corporation transferred some of his stock in the corporation to the employees of that corporation, the number of shares transferred to each employee was dependent on the number of years of service to the corporation that the employee had.
Advice was then requested of the IRS whether these shares could be considered gifts to the employees.
In its Ruling, the IRS pointed out that in order for a voluntary transfer of property to be considered a gift under the tax laws, it must proceed from a "detached and disinterested generosity." The intention of the parties is determined by a consideration of all the factors involved in the transfer to determine whether a gift was intended.
Here, the majority stockholder stood to benefit economically from the transfers of stock through the increased initiative in the employees resulting from their ownership of stock in their employer corporation. Also, the number of shares given each employee was based on the number of years of employment by the corporation. These facts
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