VIDAL SASSOON DIAGNOSED WITH LEUKEMIA

An icon in the industry has been diagnosed with, and is receiving treatment for leukemia. Vidal has been a leader in the hairdressing profession and according to him has lived a charmed life.

According to Tony Beckerman, Vidal is very weak and depressed as the chemotherapy treatments are taking its toll and, of course, Vidal is becoming increasingly frustrated because he cannot carry out his usual routine, which includes a swim in his pool. Vidal is a fighter and he will defeat this illness. Those who have read his book and have seen the movie know him to be an extremely determined individual. We send prayers to him and his family.

ADOPTING A CHILD AND WHAT TO EXPECT TAX-WISE

Q: What are the tax benefits and expenses when adopting a child?

A: There are two tax benefits available to offset the expenses of adopting a child. For 2011, you may be able to claim a refundable credit against their federal tax for up to $13,360 ($13,170 for 2010) of “qualified adoption expenses” (see below) for each adopted child. The credit is reduced (phased out) if your income exceeds certain limits (see discussion below).

Qualified adoption expenses. To qualify for the credit or the exclusion, the expenses must be “qualified adoption expenses.” These are the reasonable and necessary adoption fees, court costs, attorney fees, traveling expenses (including amounts spent for meals and lodging) while away from home, and other expenses directly related to the legal adoption of an “eligible child” (defined below).

Qualified adoption expenses don't include expenses connected with the adoption of a child of a taxpayer's spouse, expenses of carrying out a surrogate parenting arrangement, expenses that violate state or federal law, or expenses paid using funds received from a federal, state, or local program. Expenses that are reimbursed by an employer don't qualify for the credit, but benefits provided by an employer under an adoption assistance program may qualify for the exclusion.

Expenses in connection with an unsuccessful attempt to adopt an eligible child before successfully finalizing the adoption of another child can qualify. Expenses connected with a foreign adoption (i.e., one in which the child isn't a U.S. citizen or resident) qualify only if the child is actually adopted.

Taxpayers who adopt a child with special needs will be deemed to have qualified adoption expenses in the tax year in which the adoption becomes final in an amount sufficient to bring their total aggregate expenses for the adoption up to $13,360 for 2011 ($13,170 for 2010). They can take the adoption credit or exclude employer-provided adoption assistance up to that amount, whether or not they had $13,360 for 2011 ($13,170 for 2010) of actual expenses.

Eligible child. An “eligible child” is a child under the age of 18 at the time the qualified adoption expense is paid. A child who turned 18 during the year is an eligible child for the part of the year he or she is under age 18. A person who is physically or mentally incapable of caring for his or her self is also eligible, regardless of age.

Special needs child. This refers to a child who the state has determined cannot or should not be returned to his parents and who can't be reasonably placed with adoptive parents without assistance because of a specific factor or condition, e.g., ethnic background, age, membership in a minority group, medical condition, or handicap. Only a child who is a citizen or resident of the U.S. can qualify as having special needs.

When to claim the credit or take the exclusion. If the qualifying expenses are paid before the year the adoption becomes final, the credit is claimed for the year after the one in which the expenses are paid. If the expenses are paid in the year the adoption becomes final or in a later year, the credit is claimed for the year in which the expenses are paid. For example, say $3,000 was paid in 2009, $2,000 in 2010, and $4,000 in 2011, when the adoption becomes final. The taxpayer claims a $3,000 credit in 2010 (for the 2009 expenses). The $2,000 of 2010 expenses and the $4,000 of 2011 expenses are combined to be claimed in 2011. In the case of a foreign adoption, the credit may not be taken until the year in which the adoption becomes final.

Adoption credit is refundable. The adoption credit is a refundable credit. So, if the sum of your refundable credits (including any adoption credit) exceeds your tax liability, the excess amount is an overpayment that can be refunded to you.

Phase out for high-income taxpayers. The credit allowable for 2011 is phased out for taxpayers with adjusted gross income (AGI) over $185,210 and is eliminated when AGI reaches $225,210. (For 2010, the phase-out begins at $182,520 and is completed at $222,520.) The 2011 credit is reduced by a percentage equal to the excess of AGI over $185,210 divided by $40,000. (For 2010, the credit is reduced by a percentage equal to the excess of AGI over $182,520 divided by $40,000). For example, say taxpayers who could otherwise claim a $2,000 credit have an AGI of $195,210 in 2011. Their $195,210 AGI minus $185,210 equals $10,000, and $10,000 divided by $40,000 is 25%. Accordingly, the taxpayers “lose” 25% of their credit ($2,000 times 25% is $500) and can only claim a credit of $1,500. (Special rules for determining AGI apply in some cases.) The phase out rules for high-AGI taxpayers apply for the exclusion as well.

Child's taxpayer identification number required for credit or exclusion. The IRS can disallow the credit and the exclusion if a valid taxpayer identification number (TIN) for the child if not included on the return.

Adopted child may qualify for dependency deduction, other tax benefits. Your legally adopted child will qualify as your dependent if the other dependency tests are met, e.g., you provide more than half of the child's support. Even if the adoption isn't yet final, the child will be your dependent if he or she was placed with you for legal adoption by an authorized placement agency and was a member of your household for at least part of the year. Special requirements apply to adoptions of foreign children who aren't U.S. citizens or residents. Once the child is your dependent, you will qualify for the dependency deduction and for other tax benefits, such as the child tax credit.

I can help you to make sure that you get the full benefit of the substantial tax savings available to adoptive parents.

CELEBRITY TAX PROBLEM OF THE WEEK

Singer R. Kelly Faces IRS Tax Lien

The Internal Revenue Service has reportedly filed a tax lien against singer, R. Kelly for $837,442.59. The IRS filed the tax lien against the Grammy-winning R&B singer-songwriter in January 2010, according to the Detroit News. Last month, however, the IRS lifted an earlier tax lien for $1,036,858.

The singer, whose full name is Robert Sylvester Kelly, is also facing a $2.9 million foreclosure lawsuit against his mansion outside Chicago, according to Crain’s. He allegedly has not made mortgage payments since June of last year. Kelly has had many hit songs including, "I Believe I Can Fly," for which he won three Grammy Awards in 1998. He has also produced and remixed songs for a number of artists, including the Isley Brothers, Luther Vandross and Vanessa Williams. However, he has also faced arrests and lawsuits for disorderly conduct, sex with underage girls, assault and other incidents.

STEM CELL SKIN CARE LINE EXCEEDS SALES EXPECTATIONS

International Stem Cell (ISCO) has announced that it’s wholly owned subsidiary Lifeline Skin Care and its new stem cell skin care line has exceeded sales expectations since its trial launch at the tail end of last year. Lifeline carried out the evaluation of the product line in November and December 2010, and with the results, will now look to move forward with its general marketing program. "Sales to date have greatly exceeded our expectations for the trial launch,” said Dr. Ruslan Semechkin, CEO of Lifeline Skin Care. He explained that the initial sales resulted from a very limited product offering made to subscribers of only one of the several newsletters sent out, plus a small direct mailing to interested parties and ISCO's shareholders who had signed up for general corporate information through the website.

Parthenogenetic stem cell extract
Lifeline Skin Care products contain parthenogenetic stem cell extract and were developed by the ISCO research team in collaboration with cosmetic chemists. The company claims the breakthrough products deliver leading advances in skin rejuvenation technology that helped to prevent and repair damaged skin.

Thanks to the evaluation results, the California-based firm says it is now ready to move forward to the next phase of distribution, which will commence near the end of March. That phase will consist initially of a customer solicitation conducted by its marketing partner, John Mauldin's specialty internet and direct response marketing organization. "We almost never endorse or sell a retail product," said Mr. Mauldin, "but the results of both our informal testing and the company's formal studies have convinced us that the Lifeline Skin Care products really are a game-changing advance in skin care. I have not seen such a strong response in online marketing in the last ten years. We are all very excited and proud to be involved," he added.

First to incorporate stem cell
The Lifetime Skin Care line went on sale in the U.S., and was thought to be one of the first anti-aging lines to incorporate stem cell technology. The launch included two products, consisting of a defensive Day Moisture Serum, and Recovery Night Moisture Serum, which was distributed at select retail outlets in the US as well as online. Following the results however, Kenneth Aldrich, Chairman of ISCO, did issue a cautionary comment to its investors.
"We are incredibly excited by the prospects of this new product from our Lifeline Skin Care subsidiary. Selling over 7,000 bottles through a very limited trial launch, as we have done, represents a significant first step, but it would be imprudent for us to base projections of future sales or profits on a sample base of this size."

A DUMB LAWSUIT

And Here’s the Kicker~ On her way home from having dinner and drinks, Melanie from Chicago got angry with her husband and tried to kick him. Instead, she crashed through the window of a beauty salon, suffering several deep cuts. So naturally, she sued the salon. Part of her argument: The store’s plate glass window, which fronts a sidewalk, “frequently traveled by intoxicated pedestrians,” should have been stronger.

Source: wbbm780.com(Chicago)

SEVEN STEPS FOR FAMILY BUSINESS SUCCESS

Imagine this: An owner of a hair salon wakes up in the morning and heads to her studio. When she arrives, she discovers that she has no employees, no inventory, and no equipment. As she looks around, she realizes that she forgot to pay the bills, forgot to make orders, didn’t advertise and therefore, had no clients.

Although this is a pretty silly story, it is very similar to what happens when a business owner fails to prepare a succession plan.

Creating a succession plan is not that difficult once you realize how important communication is. The following are the seven steps that we discuss with clients as we talk about family business succession.

1. Communication
2. Business and estate planning
3. Leadership development
4. Trust
5. Personal resilience
6. Retirement investment planning
7. Non-key employees

All seven of these items need to be discussed as part of your succession plan. With good communication and realization of the hurdles that you need to take twice, a business plan can flourish. If you need some assistance with a family succession plan, please contact our office.

EMPLOYER'S BEWARE

DOL ‘Refocuses’ on Enforcement; Adds 33% More Investigators

The U.S. Department of Labor (DOL) is promising to “refocus the agency on its enforcement responsibilities”. It’s added 250 new field investigators—a staff increase of more than a third—to look into employer noncompliance on pay and overtime issues. This comes after a scathing report that cited DOL for weak response to complaints. For a free eight-step plan to prepare for a DOL audit, go to www.theHRSpecialist.com/DOLaudit.