The Worker, Homeownership and Business Assistance Act of 2009 (WHBAA)

The Worker, Homeownership and Business Assistance Act of 2009 (WHBAA) was signed into law Nov. 6. Not only does the act extend unemployment benefits for millions of Americans, but it also extends and enhances the homebuyers credit and the five-year net operating loss (NOL) carryback election for businesses.

The Homebuyers Credit

Last year, a refundable tax credit equal to 10% of the purchase price of a principal residence was made available to qualified first-time homebuyers. This credit was set to expire July 1, 2009, and generally required repayment. But in February the American Recovery and Reinvestment Act of 2009 (ARRA) extended its availability to purchases made before Dec. 1, 2009, and generally removed the repayment obligation for qualifying purchases after Dec. 31, 2008.

WHBAA has now extended the credit to purchases made before May 1, 2010 — or July 1 if a binding contract is in place before May 1 to close on the purchase before July 1.

The maximum credit remains at $8,000 ($4,000 for married filing separately) for first-time homebuyers. For purposes of the credit, a first-time homebuyer is someone who has had no ownership interest in a principal residence in the United States during the prior three-year period.

In addition, WHBAA expands the credit to many "long-time" homeowners purchasing a subsequent home. The maximum credit for these taxpayers is $6,500 ($3,250 for married filing separately). To qualify, the homeowner must have maintained the same principal residence for any five-consecutive-year period during the eight-year period ending on the purchase date of a subsequent principal residence.

WHBAA also significantly increases the modified adjusted gross income (MAGI) phaseout ranges for the credit. For qualifying purchases made after Nov. 6, 2009, the phaseout range is $225,000-$245,000 for joint filers, $125,000-$145,000 for single filers.
WHBAA does add a few new limits. Effective for purchases made after Nov. 6, 2009, no credit is allowed if:

• The home's purchase price exceeds $800,000 (regardless of regional market factors),
• The homebuyer (or his or her spouse) is related to the seller,
• The homebuyer is under age 18 on the date of purchase (unless his or her spouse meets the age requirement), or
• The homebuyer is the dependent of another taxpayer.

There are other expansions, enhancements and limitations as well, so it's important to consult your tax advisor to determine whether you're eligible for the credit.

The NOL Carryback

Generally, when business deductions exceed gross income, the difference is an NOL for tax purposes and may be carried back two years to offset income. This generates a tax refund, providing a cash infusion in times of loss. Any loss that's not absorbed is carried forward up to 20 years.

ARRA allowed taxpayers to elect to carry back 2008 NOLs from qualifying small businesses (businesses with average gross receipts of $15 million or less for the three years ending with the loss year) for three, four or five years instead of two. WHBAA expands the longer carryback option to businesses that don't qualify as "small" and extends it to 2009 NOLs.

Under WHBAA, generally taxpayers can apply the longer carryback to only one tax year's NOL and to offset only 50% of income in the fifth year back, 100% in the other four. For qualifying small businesses, taxpayers can apply the longer carryback to both 2008 and 2009 NOLs, and the 50% limit applies only to 2009 NOLs. Taxpayers also have the option to use the normal two-year carryback or to waive the carryback period entirely and carry the loss forward.

Are you eligible?

The extension and expansion of the homebuyers credit and the five-year NOL carryback option could provide you or your business with a valuable tax-saving opportunity. But the rules surrounding these breaks are complex. We'd be glad to help you determine whether you're eligible and, if so, how you can make the most of these breaks.

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The Yen Warns Of The Crashing Dollar

Written by Hank Brock, CPA, MBA, CLU, ChFC
Wednesday, 30 September 2009 09:28

Remember I have told you that the Japanese Yen is the ONE currency that will go inversely to the dollar?  Unlike all the other currencies, there are major reasons why the Yen will see appreciation in years ahead, while ALL other currencies will fall. The dollar will fall the furthest of 1st world nations, with only the currencies of 2nd and 3rd world countries, perhaps, collapsing more.

I could explain this in greater detail, but basically it is because of Japan's deflation of the 1990's when it went for over a decade with their central bank at a zero-near zero interest rate, so people around the world borrowed trillions of Yen at zero, and then invested it elsewhere (especially the U.S. Stock Market and U.S. real estate) to make money on the spread between what they borrowed at and what they could earn.  Now, with the dollar plummeting against the Yen, those people have to sell their dollar-denominated assets and buy back the Yen to pay off their debts now, because if they wait until later, they will get squeezed on the currency exchange rate when they reconvert to Yen.  This puts an escalating cycle of selling pressure on the dollar, and buying pressure on the Yen, driving the Yen up, and the dollar down still further.  No such thing has occurred with any other country or currency over the past 2 decades, and so no other currency will appreciate. And because those investments were primarily in the U.S., no other currency will be sold more as those borrowers rush to pay off their Yen denominated debts.

This is just one more of the dominoes I have been referring to for months.  I guess there are more than 8-9 other major dominoes yet to fall, because as I listed them the other day, they still have yet to make their impact known to the general markets. There are SO many things intertwined, and as one domino falls, it tips the other, and they all go in the SAME direction for the greatest debtor nation in the world (U.S.):  Down!

Let me discuss briefly a number of things that have happened with the Yen in the past couple of months.  Of major political significance was the election on August 30th.  Japan had one of the most significant party changes in 50 years with the election of Yukio Hatoyama.  This election marked a change of the ruling party to the left-of-center Democratic Party of Japan.

As little as a month later, we are seeing the Yen make significant movement against the U.S. Dollar.  Last week we saw the U.S. Dollar drop from 91.27 Yen to 89.63 Yen, or by more than 1.81% in just 24 hours.

I need to emphasize a point here.  When the value of the U.S. dollar crashes globally, your purchasing power falls locally.  We are all intertwined.  The decreased dollar raises the cost on all of the imports into the country, and we are a debtor country.  This means that prices will rise in all major areas of your life.  You will see increases at Wal-Mart, Best Buy, the gas station, and almost everywhere else that we depend on imports.

As the dollar decreases, these countries also begin to pull their money out of our markets.  They begin to look for more attractive investments elsewhere.  When they pull out the markets, what happens to your investments?

I've found that most people missed the two articles published the week before last that: (a) Warren Buffet has used the most recent market climb to sell-off TENS of Billions worth of stocks, to buy fixed investments and gold/silver, and (b) the comment by a repentant former Fed Chairman Alan Greenspan that he now sees a pending world-wide "economic implosion."  As I have been saying for 18 months, the problem is too big for all the world governments to solve. And as Warren Buffet commented a few weeks ago: the worst is still yet ahead of us, the stock market will be up 10 years from now, but for now he sees "very significant" inflation ahead

We have met with many of our clients about how to protect themselves against this, and even profit from it in the months and years ahead. But, there are FAR many more and people that have attended our workshops that we have not met with yet.

Many of them are believing their "money managers" and leaving their dollars in the U.S. stock and real estate markets. They don't understand how those assets, and even CDs, fixed annuities and other dollar assets will be impacted. 

Hank Brock is president of Brock and Associates, LLC, a fee-based financial planning firm specializing in retirement, estate, and tax planning.  For more information on how to protect yourself in the volatile years ahead, we encourage to your schedule a time to meet with our qualified financial advisors.

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The Reason Married People Need A Will

Thursday, 09 July 2009 09:34

Many married people have never prepared a will, although they recognize that this is something that should be done. Perhaps the rather morbid title, “Last Will and Testament,” has caused them to delay taking action.

If you do not prepare a will, the state will draw one for you, and chances are very good that your survivors will not like the provisions. The legal term for dying without a will is “intestacy,” and the distribution of your property will be based on the intestacy laws of the state in which you reside at the time of death.

In the absence of a will, the Probate Court will appoint an administrator, such as a family member or local attorney. Then after a complicated procedure, all of your assets will be distributed according to the state’s formula.

Your estate consists of personal property (furniture, jewelry, clothes, automobiles), investments (cash, savings, securities), real estate, employee benefits (group insurance, retirement or profit sharing) and other items such as the proceeds of a lawsuit against someone who accidentally caused your death.

You cannot rely on joint property title as a substitute for a will because it does not solve problems arising with the second death. Some forms of joint title do not pass entirely to the surviving spouse.

Having a will drawn can prevent family disputes, and will give you the opportunity to be certain that your property will be distributed promptly to the parties designated as beneficiaries.

Your will should designate an Executor to carry out your bequests efficiently and promptly and with less expense than if there had been no will. See our posting on selecting an executor for your estate for more information. The will should also provide for flexibility in the administration of your estate. You may also wish to provide special bequests to non-profit organizations. Having a will prepared will also help establish a relationship with an attorney, which could be extremely valuable in the future. Naturally, a will should be periodically reviewed and updated to reflect changing personal circumstances and new tax laws.

Perhaps you’ll find it easier if, instead of thinking of Last Will and Testament, you think of fulfilling your wishes and controlling your own assets.

Brock and Associates, LLC is a financial planning firm specializing in asset protection and generational wealth preservation.

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Spend vs. Invest – The Art of Money Accumulation

Tuesday, 09 June 2009 09:24

How a person spends money can be far more important than how he or she invests it. It is much easier to reach retirement goals by deciding how to live, rather than how to invest. Deciding what to do with the money we earn - how to spend it - is what brings about peace of mind, not how much we make or how much we have.

The late Loren Dunton, founder of the non-profit National Center for Financial Education in San Diego, wrote about his lifestyle decisions to buy new cars and spend weekends in Reno, instead of investing a hundred dollars each month in a mutual fund when he was in his late twenties. That fund would have been worth over a million dollars today.

An Expensive Car

Perhaps you think the difference between a full sized car, fully equipped, and a compact is only about $10,000. Actually, it is more like a million dollars. Consider this; borrowing $25,000 for a new car over four years will cost about $634 a month, while borrowing just $15,000 will cost only $381 a month.

If one saved the difference of $253 each month for 35 years, earning an 8% average rate of return, it would swell to $580,352. However, that is just the accumulation of the funds. What about the earnings as the funds are withdrawn during retirement?

If one were to get monthly payments of $4,479 from that sum from ages 65 to 90 (and some predictions say there may be over 250,000 people over the age of 100 in America in the 21st century), the total amount collected would be $1.3 million.

This is the magic of compound interest. However, it is not retroactive! One must save now to enjoy the benefits of compound interest in the future.

Waiting To Invest

For instance, if the difference in the example above were saved for only 25 years it would grow to just $240,000. Paid out at $1,857 a month, the total would be $557,000. It is amazing that the difference in saving an additional ten years is about a half million dollars. However, the monthly difference in payments of $2,622 monthly shows how today’s lifestyle decisions can be worth a million dollars in retirement years.

When should people begin saving money? Never soon enough. If ten years could mean a difference of $2,622 in retirement income each month, can you imagine what 15 or 20 additional years of savings would mean when you reach age 65?

Just A Little Postponement

For some, no doubt saving now would be easier if there was more current income. People 17 to 23 years old may think: “Me save? Are you kidding? I am just getting my education and besides I want to have a good time. When I get out of college and start my career, I’ll start saving.”

People 24 to 30 may be tempted to think: “You don’t expect me to save now? I have only been working a few years. Right now, it is important to dress well. I’ll save later.”

From 31 to 42, the reasoning may go something like this: “How can I save now? I am married with small children. Perhaps when they are older I can think about saving.”

Those 43 to 55 wish they could save now. However, many just do not, saying they cannot because of children in college and education loans to pay.

From 56 to 65 most recognize the urgency to begin saving now. However, money is tight. It is not easy for people that age to better themselves. It is tough to break years of over-spending habits. “Maybe something will turn up,” many say.

At age 65 and older, it is too late to begin saving money. You cannot save when there is no income. Many older people live with their children and are dependent on Social Security, which is inadequate, since Social Security was only designed to be supplemental.

If the choice between cars can impact retirement income, imagine the possibilities when applied to lifestyle choices such as a home, vacations, dining out, entertainment, wardrobes, furnishings, etc.

Try to develop the art of money accumulation now. Begin by saving every day. Start today!

Brock and Associates, LLC is a fee-based financial planning firm, specializing in financial planning, retirement, estate, and tax planning.

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Emergency Funds Become Critical During Volatile Years

Wednesday, 06 May 2009 10:03

Emergency funds are needed to meet unexpected expenses that are not planned for in the family budget, such as short-term illness causing a loss of income, unexpected medical expenses, property losses that purposely are not covered by insurance (deductibles and co-insurance) and to provide a financial cushion against such personal problems as prolonged unemployment or some other financial crisis.

The need for emergency funds have received greater attention in recent years. Many capable people have lost their jobs because of mergers and acquisitions, economic dislocations or plant closings. A reasonable emergency fund can help to prevent a temporary unemployment from becoming a personal financial crisis. The fund will give the family time to adjust without having to drastically change its living standards or disturb other investments.

The size of the needed emergency funds varies greatly. It depends upon such factors as family income, number of income earners, stability of employment, assets and debts. The size of insurance deductibles, health and property insurance exposures and the family’s general attitudes toward risk and security are also important.

The size of the emergency funds can be expressed as so many months of family income. As a guideline, it is advisable to reserve a minimum of two months and up to a year or more (current economic conditions, industry outlook, and other external factors may necessitate more caution). A good practice is to do the "sleep test" on it. Estimate an amount, sleep on it, and then see if you are still comfortable with it in the morning. The larger the percentage of your monthly expenses that are fixed and must be paid, the larger should be the emergency fund.

By its very nature, the emergency fund should be invested conservatively. There should be almost complete security of principal, marketability and liquidity. Within these investment constraints, the fund should be invested so as to secure a reasonable yield, given the primary investment objective of safety of principal. Logical investment outlets for the emergency fund would include:

• Bank savings accounts (regular accounts)
• Credit Union accounts
• Money market accounts
• Life insurance cash values

Access to emergency funds is important. If check-writing services are available, even at a fee, it might be wise to arrange for them. The careful person may also want to have some ready cash available for emergencies, even if it is non-interest earning. Such an individual might consider setting aside $200 in cash at home to be used ONLY in case of dire emergency.

Brock and Associates, LLC is a fee based financial planning firm. For more articles on financial planning, retirement, estate, and tax planning, be sure to explore our website.

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