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One tactic for accumulating the funds necessary to pay a future exercise price for either an ISO or a NQSO is for an executive to individually buy the underlying securities on the grant date. If the purchased stock appreciates significantly between the grant and exercise date, the executive can then sell the stock and use the proceeds to fund the exercise price. Provided that the executive held the stock for at least 12 months, the resulting gain will be taxed at long-term capital gain rates. Alternatively, the purchased stock can be sold independently of the ISO and NQSO rules should the executive later believe that the stock might fall in value.
Transferring assets to a child can accomplish family income and estate tax planning goals. Depending on the property transferred and the age or maturity of the child, the parent may wish to use a trust for the child’s benefit. The income tax benefit of transferring assets to a child results from taxing the income at the child’s lower income tax rate. However, the so-called kiddie tax eliminates much of the benefit of shifting income to children under age 14. Delaying the transfer of assets or investing in assets that defer income recognition past the child’s 14th birthday can minimize the kiddie tax.
A home office deduction is available to individuals who use the home office as a principal place for performing administrative or management functions, even if the principal income-producing activity is performed outside the home. Taxpayers who qualify for a home office deduction also may benefit from an increased travel expense deduction, since travel from the home to other places of work is usually nondeductible personal commuting.
Long-Term Capital Gains
Beginning in 2001, capital
gains otherwise
eligible
for the 10% long-term capital gain rate are taxed at 8% if the property
has a holding period of more than 5 years.
Capital gains taxed at 20% will be taxed at 18% beginning in 2006
if the holding period exceeds 5 years and the property was acquired after
2000. However, in 2001,
taxpayers can make a mark-to market election to recognize gain on capital
assets acquired before 2001 so that they are treated as acquired in 2001.
 | The Standard Mileage reimbursement rate was increased to $0.345/mile for 2001 from the $0.325/mile rate used in 2000 |
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For tax years beginning January 1, 2000, the PA Capital Stock/Foreign Franchise Tax has been reduced to 8.99 mills and will continue to be phased out through 2008; in addition, the $200 minimum has been eliminated |
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The maximum amount of Section 179 expense deductions allowed in 2001 was raised to $24,000, up from $20,000 in 2000 |
| January 16, 2001 | Final installment date for 2000 estimated tax (individuals). Use Form 1040-ES or pay by credit card |
| January 31, 2001 | Employee’s statements (W-2) for salaries and wages and the amounts of taxes withheld in 2000 are to be furnished by employers to employees |
| Information returns (1099s) must be furnished to recipients | |
| February 28, 2001 | Information returns must be filed with the IRS; W-2s must be filed with the Social Security Administration |
| March 15, 2001 | Due date of 2000 income tax returns (Form 1120 and Form 1120S) for calendar year U.S. corporations |
| Last day for filing application (Form 7004) by Calendar Year Corporation for automatic six-month extension to file 2000 income tax return | |
| April 16, 2001 | Due date for Individual income tax returns for calendar year 2000 |
| Last day for individuals to file application (Form 4868) for automatic four-month extension to file 2000 income tax return | |
| Payment of first installment of 2001 estimated income taxes by individuals | |
| April 30, 2001 | Employers must file Form 941 to report income tax withholding and FICA taxes for the first quarter of 2001 |
| June 15, 2001 | Payment of second installment of 2001 estimated income taxes by individuals |
| July 31, 2001 | Employers must file Form 941 to report income tax withholding and FICA taxes for the second quarter of 2001 |
| August 15, 2001 | Last day for filing 2000 income tax returns by individuals who obtained automatic four month filing extension |