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Posted: 14 Feb 2011

If you're an outdoor enthusiast, at some point or another
you've probably contemplated what you might do should you encounter a bear or
other wild animal. Wildlife experts typically recommend these tips: Stay calm
and don't run. Investors might also do well to heed that advice when traversing
the stock market.

Plan ahead -- Rather
than fret about which way the market is headed this week or even this month, do
what 87% of millionaires do to reduce worries -- be proactive and develop a
plan.1 A sound financial plan can keep you focused on your long-term financial
objectives and keep you from getting caught up in the doldrums of a short-term
market downturn or the hype of the latest hot sector.

Hold on -- A
buy-and-hold investing strategy can also help keep you from being distracted by
short-term market performance. It can also potentially help reduce the risk of
loss over time.

Maintain realistic
expectations -- Consider that since 1926, the average total annual return
of the S&P 500 has been 9.9%.2 Maintaining realistic return expectations
can make it easier to cope with short-term market downturns.

Make diversification
your ally -- Different types of investments lead the market at different
times. By holding a well-diversified portfolio of stocks and bonds, for
example, you may increase the possibility that those securities that increase
in value could offset those that decrease.

Try dollar cost
averaging -- Think about adding to your investments on a monthly basis as
opposed to purchasing or selling securities based on anticipated market changes
(called market timing).3 This disciplined strategy can take the emotion and
guesswork out of investing. It might also save you money. By regularly
investing in a mutual fund, for example, you buy fewer shares when prices are
high and more shares when prices are low. Over the long term, the average cost
that you pay for the shares may be less than the average price.

Seek expert advice -- Meet with a qualified financial advisor
regularly. In particular, you may want to get into the habit of beginning every
year with a comprehensive portfolio review.

Source/Disclaimer:

¹Source: The Millionaire Mind, Thomas J. Stanley.

²Source: Standard & Poor's, 2011.

###

January 2012 — This column is provided through the Financial
Planning Association, the membership organization for the financial planning
community, and is brought to you by Ronald J VanSurksum, CFP®, a local member
of FPA.

Required Attribution

Because of the possibility of human or mechanical error by
McGraw-Hill Financial Communications or its sources, neither McGraw-Hill
Financial Communications nor its sources guarantees the accuracy, adequacy,
completeness or availability of any information and is not responsible for any
errors or omissions or for the results obtained from the use of such
information. In no event shall McGraw-Hill Financial Communications be liable
for any indirect, special or consequential damages in connection with
subscriber's or others' use of the content.

Posted: 26 Jan 2012

Washington Hotline - January - Week 4 - 2012

Sen. Reid Supports Tax Extenders

Senate Majority Leader Harry Reid (D-NV) is negotiating with other Washington leaders to extend the payroll tax cut. Under the Temporary Payroll Tax Cut Continuation Act of 2011 (H.R. 3765), the employee contribution for January and February of 2012 was reduced 2% from 6.2% to 4.2%. The White House, Reid and other leaders are proposing to extend this tax reduction for all of 2012.

This week in Washington, an aide to Sen. Reid indicated that he favors including the tax extenders in the payroll tax cut bill. The tax extenders are 40 provisions have been passed each year for the past two decades. A provision of particular importance to philanthropy is the tax extender that permits qualified gifts from an IRA directly to a charity. These gifts are permitted for IRA owners over age 70½ and have a limit of $100,000 per year. The previous IRA rollover provision lapsed on December 31, 2011, so a new law must be passed for the IRA charitable rollover to be effective in 2012.

The key question for Senate and House leaders is the method of paying for the bill. The 10 months of additional payroll tax extension have an estimated cost of $99.5 billion. A one year extension of the tax extenders is estimated by the Joint Committee on Taxation to cost $36.9 billion.

Editor's Note: While there certainly will be debate over the best methods for paying for the extension, there does appear to be a general agreement that the tax extenders and the IRA rollover should be passed for 2012. However, given the uncertainties of an election year, it is possible that passage may be after the election. If this does occur, the IRA rollover will be retroactive to January 1, 2012. Donors with potential interest in using the IRA charitable rollover should stay tuned for future developments.

IRS Free File System Available

On January 17, 2012, the IRS announced that the Free File System is now available. There are two versions to help taxpayers. Those individuals with adjusted gross incomes of $57,000 or less can use the Free File Software System. All taxpayers with incomes of any level are permitted to use the Free File Fillable Forms.

Diane Fox, Director of the IRS Free File Program stated, "Free File can save you time and money. You can prepare and e-File your tax returns at no charge. And the software helps you find the tax breaks you are due. Free File helps make taxes less taxing."

An estimated 70% of taxpayers qualify for the Free File System. Under an agreement between the IRS and approximately 20 tax software providers, there are options available to use one of those software systems on www.irs.gov/freefile. The tax software providers must meet specific government standards and must qualify with the required security systems. Information transferred over the Internet must be appropriately encrypted so it is protected.

Taxpayers of any income level may use the Free File Fillable Forms from the IRS.gov site. These forms include some basic calculations and links to IRS publications. The Fillable Forms system requires a basic understanding of the IRS tax forms.

IRS Accuracy-Related Penalties

In Rev. Proc. 2012-15; 2012-7 IRB 1 (18 Jan 2012), the IRS updated earlier guidance on appropriate disclosures on a tax return to avoid the Sec. 6662(d) accuracy-related penalties.

The principal section of the ruling explains the basic penalties structure. Subsequent sections specify requirements for disclosure of various types of itemized deductions.

.01 Underpayment of tax will require a 20% penalty if the amount is deemed substantial. A gross valuation misstatement requires a penalty of 40% of the underpayment.
.02 A substantial understatement occurs if the underpayment is the greater of $5,000 or 10% of the tax due.
.03 A reasonable defense is permitted and will avoid penalties.
.04 The tax preparer may be subject to a Sec. 6694(a) penalty for understatements that are deemed an "unreasonable position."
.05 Taxpayers must furnish all required information for disclosure to be deemed adequate under Sec. 6662(d)(2)(B)(ii) and Sec. 6694(a)(2)(B).
.06 The procedures apply to both fiscal and short tax year returns.
.07 Complete disclosure of an uncertain tax position statement (UTP) may be made by a corporation on Form 8275 or Form 8275-R.

In the itemized deductions section of Rev. Proc. 2012-15, there is a description of requirements for charitable contributions.

Amount – The amount of the charitable contribution must be reduced by the value of any substantial benefit in goods or services provided by the donee organization.
Contemporaneous Written Acknowledgement – If the gift is $250 or more, the charity must provide a Sec. 170(f)(8) written receipt.
Cash Below $250 – For cash gifts below this level, there must be a bank record or written acknowledgement.
Non Cash Gifts Over $500 – Property transfers to charity will require filing IRS Form 8283, Non-Cash Charitable Contributions.
Car, RV or Boat Gifts – If the value is over $500, then a contemporaneous written acknowledgement under Sec. 170(f)(12) is required.

Applicable Federal Rate of 1.4% for February – Rev. Rul. 2012-7; 2012-6 IRB 1 (19 Jan. 2012)

The IRS has announced the Applicable Federal Rate (AFR) for February of 2012. The AFR under Sec. 7520 for the month of February will be 1.4%. The rates for January of 1.4% or December of 1.6% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2012, pooled income funds in existence less than three tax years must use a 1.8% deemed rate of return. Federal rates are available by clicking here.

Posted: 24 Jan 2012

AAM Weekly Market Wrap - January 23, 2012

Weekly Market Wrap: Stocks added to 2012 gains this week as the US
economy continue to slowly improve and European debt auctions were
uneventful. The S&P 500 index added
2% to close at 1,315. Gold also made
gains adding 1.68% to $1,666. Oil moved
lower on the week dropping 0.60% to $98.46.
The Dollar was lower this week against other major world currencies
settling down 0.34% to $81.15.

Year-To-Date for the major indexes:

The S&P index +4.59%
The Dow Jones Index +4.12
The NASDAQ Index +6.97%
The Russell 2000 Small cap Index +5.90
EAFE International Index +4.21%
The 10 year treasury is currently yielding 2.03%
and the 30 year is yielding 3.10%. Yields
are higher for the week and higher on the year.

Markets moved steadily higher for the week on earnings news that
was mostly positive and economic data showed an improving economy. Jobless claims resumed their drop after an
increase last week and news out of Europe avoided any major negatives. Regional manufacturing activity continues to
impress and inflation was tame in December.
Housing data also continued to show signs of improvement.

Later this week we get to see 4^th Quarter GDP
initial numbers and durable goods orders.
That will tell us whether economic activity continued to expand through
the end of 2011.

Mortgage rates moved higher this week. The Schwab Bank 15-year rate is now at 3.43%
and the 30-year rate is at 4.17%. These rates are as of 01/20/2012 and assume
no points, no origination fee and a $250,000 conforming rate mortgage.

What to watch for on the economic calendar next week:

Monday – No major news or data

Tuesday – FOMC Meeting begins

Wednesday – FOMC Meeting Announcement / Pending Home Sales

Thursday – Weekly Jobless Claims / Durable Goods Orders / New Home Sales

Friday – 4Q GDP / Consumer Sentiment

Ronald J. VanSurksum, CFP®

Advanced Asset Management, LLC

January 23, 2012

Posted: 23 Jan 2012

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