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Seven Tips to Help You Determine if Your Gift is Taxable

Posted By Rhette Baughman, Arizona Small Business Association, Wednesday, April 1, 2015

If you gave money or property to someone as a gift, you may wonder about the federal gift tax. Many gifts are not subject to the gift tax. Here are seven tax tips about gifts and the gift tax.

1. Nontaxable Gifts. The general rule is that any gift is a taxable gift. However, there are exceptions to this rule. The following are not taxable gifts:

  • Gifts that do not exceed the annual exclusion for the calendar year,
  • Tuition or medical expenses you paid directly to a medical or educational institution for someone,
  • Gifts to your spouse (for federal tax purposes, the term "spouse” includes individuals of the same sex who are lawfully married),
  • Gifts to a political organization for its use, and
  • Gifts to charities.

2. Annual Exclusion. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you give a gift to someone else, the gift tax usually does not apply until the value of the gift exceeds the annual exclusion for the year. For 2014 and 2015, the annual exclusion is $14,000.

3. No Tax on Recipient. Generally, the person who receives your gift will not have to pay a federal gift tax. That person also does not pay income tax on the value of the gift received.

4. Gifts Not Deductible. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).

5. Forgiven and Certain Loans. The gift tax may also apply when you forgive a debt or make a loan that is interest-free or below the market interest rate.

6. Gift-Splitting. You and your spouse can give a gift up to $28,000 to a third party without making it a taxable gift. You can consider that one-half of the gift be given by you and one-half by your spouse.

7. Filing Requirement. You must file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, if any of the following apply:

  • You gave gifts to at least one person (other than your spouse) that amount to more than the annual exclusion for the year.
  • You and your spouse are splitting a gift. This is true even if half of the split gift is less than the annual exclusion.
  • You gave someone (other than your spouse) a gift of a future interest that they can’t actually possess, enjoy, or from which they’ll receive income later.
  • You gave your spouse an interest in property that will terminate due to a future event.

To find out more see Publication 559, Survivors, Executors, and Administrators. You can view, download and print tax products on anytime.

This series is brought to you by the Southwest Area Stakeholder Liaison Team covering Arizona, New Mexico & Texas. It is designed for you to share with anyone who will find the information useful. We are interested to hear if you think this information is helpful. Please provide your feedback or topic request to us at and include "Workshop Wednesday” in the subject line.

To access previous editions, click here: Workshop Wednesday Archive links

Small business owners, especially new sole proprietors, can find a wealth of information covering their federal tax responsibilities on The SB/SE Tax Center is the "Go To” page for everything small business.

Tags:  donations  gifts  IRS  taxes 

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4 Tips For Managing Strategic Shifts

Posted By Debi Cobb, Cobb CPA PC, Tuesday, January 20, 2015

A basketball player recognizes their original route to the basket has been blocked: what do they do? Easy- without a second thought, they pivot and shift strategies, rerouting themselves onto the quickest and easiest route to the basket. Two points!

When it comes to obstacles in the original plan, Arizona small business owners need to act with the same grace, coordination and speed as a trained athlete does, taking in the scenario and shifting strategies with deft ability.

The art of the strategy shift is in changing the course while still moving towards the original goal. It’s not about abandoning ship. It’s all about evolution.

Sometimes the biggest challenge in this scenario is actually recognizing the need for a strategy shift.

Small businesses must constantly challenge themselves, evolving and pushing the envelope in the quest to stay relevant.

When a strategy shift becomes obvious, consider these tips:

1. Evaluate the strengths and weaknesses of the business. Listing out these factors will help in determining which strategies stay and which are in need of a change.

2. Start the conversation and ignite innovation on all levels. Be wary not to alarm employees of a potential stall in business but encourage them to discuss the competition and the obstacles in order to foster a think tank.

3. Evaluate threats and competition by talking to customers and employees.

4. Once identified, study the potential strategy shifts that would address the current threats. There will always be more than one route- consider all options and their ramifications.

Once you have reached this step it means a change is blowing in the wind. At this point it is time to map it out. Details are your friend at this step - how will this shift affect process, profits, costs, brand, team structure, and culture?

Decided on your move? Now put on your sales hat and get ready to sell that shift to your team. You need all hands on deck to implement strategy shifts.

Be sensitive to the effects of the change on your client base. Ensure that you include your long-term clients in the change process so they do not feel shocked by the new practices.

A plan of action that includes:

  • Tasks
  • Deadlines
  • Communication
  • Goals

Having a plan will assist along the bumpy road of shifting strategies for your Arizona business.

For more help with creating a new business strategy, join us for our monthly PERFORMING U workshops by registering at our Events Page at  .

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2014 Business Tax Organizer Just For You!

Posted By Debi Cobb, Cobb CPA PC, Friday, January 16, 2015


Specializing in Business & Tax Planning for Small Business Owners

Goodbye 2014...Hello 2015!

Whether you are Limited Liability Companies, S Corporations, C Corporations or Sole Proprietor, it is time to button up your 2014 tax returns.

CLICK BELOW to access our 2014 Business Tax Organizer

It will help you:

  • Organize 2014 Tax Returns
  • Understand Which Documents to Retain
  • Understand New IRS Policies
  • Learn the Changes in the Tax Compliance landscape

Filling out these important documents and booking an appointment 45 days before the deadline will create the best results and peace of mind on March 15th (Corporate Tax Returns due) and April 15th (Partnership Tax Returns are due).

This organizer will help business owners:

  • Be prepared
  • Be on time
  • Resolve any issues ahead of time

If you are an ASBA member and are in need of tax advice or interested in learning more about our Performance University, check out our website or give us a call!

We are here to help, you so as always, so please call us with any other questions you may have (480) 517-0988.

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Home Improvement Resolutions for the New Year

Posted By Vaunda Reese, Liberty Mutual, Wednesday, January 14, 2015

Liberty Mutual Insurance is proud to partner with Arizona Small Business Association to provide you with relevant auto and home safety tips for the way you live today.


Home Improvement Resolutions for the New Year


Improving things around your home can make your whole year happier and more comfortable. Here are a few do-it-yourself ideas to get your New Year’s resolution list started.

Focus on one room. Resolve to fix up just one room this year and give it your total attention. It can be as easy as replacing one old piece of furniture or hanging up some new artwork. Even tackling small home maintenance projects like cleaning out one drawer or cabinet each weekend will add up to a feeling of accomplishment.

Become more energy efficient with a programmable thermostat. Installing a programmable thermostat will help you save money. Program it to automatically lower your house temperature by 5 to 10 degrees while you're out, and again at night when you're sleeping.

Change your window treatments seasonally. Switch your window treatments to heavier drapes during colder weather to provide insulation and energy efficiency. Use sheer or lightweight curtains when the weather is warmer to give the room a lighter feel and allow more airflow.

Adorn your home with plants. Houseplants can absorb toxic substances in the air and release oxygen, helping to purify your home. NASA has even studied house plants as a means of purifying the air in space stations.

Commit to greening your home. Take a walk around your house and survey for opportunities to “green” your space. Switch to energy-efficient compact fluorescent lights (CFL) bulbs, look for areas that are drafty and add installation or weather stripping, and set up a recycling station in your garage to help reduce waste. These small updates can add up to energy savings in the long run, too.


To learn more about Liberty Mutual Auto and Home Insurance or get a free, no-obligation quote, call Vaunda Reese at (623) 572-4440 Ext. 56477 or visit Liberty Mutual.


Coverage underwritten and provided by Liberty Mutual Insurance Company and its affiliates, 175 Berkeley Street, Boston, MA 02116. Reprinted with permission from Liberty Mutual. ©2014 Liberty Mutual Insurance

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Tags:  Employee Benefits  Home  Insurance  Liberty Mutual  Safety 

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Why Should I Bother Valuing My Business?

Posted By Jason Trujillo, Woodbury Financial, Monday, November 24, 2014

By Steve Parrish, Originally posted on on December 3, 2013.

Read original post here.

It’s not uncommon to be asked by a business owner, “why should I bother with a business valuation?” Sometimes the question is because of concern over the cost of an appraisal, sometimes because of the time involved and sometimes simply because the business owner sees no purpose in the exercise. Why bother valuing a family business when the owner plans to pass the business on to the next generation anyway?

Why you should value your business
Let me offer a checklist of reasons why you may want to have your company independently valued. You might find these reasons move this task up on your priority list. A business valuation is important, because:

  1. Someone else is going to value your business anyway: If you are seeking a bank loan, the bank will have its own criteria for valuing your business. You may want, indeed need, to demonstrate a higher valuation. Similarly, whether you sell your business during your lifetime or leave it in your estate at death, the IRS may have an interest in valuing your business. And in many cases, their valuation will be comparatively high, simply because a higher value means more tax revenue.
  2. You question a potential buyer’s valuation: I was recently asked why a valuation we did of a company, came in lower than a valuation done by a private equity company.  Typically one would expect a potential investor to come in with a lower, not higher valuation. Of course, the answer is that it’s never that simple. The higher up-front valuation may exist to entice the seller to give the party an exclusive during the due diligence period. Or, it may be offered in anticipation that some of the valuation premium will be recovered through earn-out provisions in the buy-sell agreement. This may all sound somewhat sleazy, but the best defense for the seller is to have a firm grip on what the true value of the business is
  3. Your retirement depends on it: It’s not uncommon for me to ask a business owner what his or her retirement plan is, and I get the tongue-in-cheek answer, “my BUSINESS is my retirement plan!” If you don’t know the value of your business, it is difficult to determine if your retirement plan involves clipping coupons or furling the mainsail of your yacht. How can you calculate your retirement income when you don’t know the value of your primary asset?  This issue is compounded if there is an existing, and outdated, buy-sell plan in place. If your valuation finds your business is worth $3 million, but the buy-sell places the value at only $2 million, you are short-changing your own financial happiness in retirement.
  4. It affects your estate plan:  I’m aware of a family-owned business that did some excellent estate planning years ago. The parents placed much of the stock in their eldest son’s hands, while putting other assets in trust for the remaining children. The parents tried their best to make sure the gifts were roughly equal from a valuation standpoint. The Great Recession changed everything. The family business is now struggling and suddenly the eldest son, who is the CEO, may have a legacy that is worth less than that of the other children. A valuation of the business will help the parents determine how much the business is really worth, and  can help them decide what estate planning changes may be appropriate. For example, because the son’s share of the legacy ( the family business) is suffering, the parents may decide to change their life insurance designations so that he would receive more than the children not involved in the business. This is just one example of how dependent estate planning is on the valuation of the business.
  5. It’s useful in key person planning: You have a key person who wants to share in the success of your business. Even though he or she will not be a successor owner, you still want to provide the right financial incentives. Profit, sales and other annual measures may not truly reflect the growth of the business, and may not encourage the long range thinking you want from that key employee. If you obtain a current valuation of your business, you now have a baseline value to use in deferred compensation arrangements, such as phantom stock and stock appreciation rights (SAR) plans. You can’t measure growth until you know where you’re starting from. 

Still not sold on the need for a valuation?  Perhaps you should consider this reason:

You may get challenged in Court:  Unfortunately, many companies have been caught off guard when a valuation issue rises to the level of litigation. A family-owned business recently had their case go all the way to their state’s supreme court because the family disagreed over the correct valuation for buying out a sibling. In another case, a business owner had, for years, used and enforced a book value approach to buying out family members. The IRS ignored that valuation, using a higher, earnings-based valuation. In addition to assessing millions more in estate taxes, the IRS also secured a multi-million dollar penalty.

It’s your choice to have a business valuation done, but with all of the reasons why you should, why wouldn’t you?

Tags:  book value approach  business valuation  deferred compensation arrangements  estate planning  family-owned business  Forbes  key person planning  legacy  phantom stock  potential buyer  potential investor  private equity company  retirement plan  Steve Parrish  stock appreciation rights 

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