Mad Men and Taxes

November 2010

Issue No. 2

Greetings!

Michael and Tina Tannery, a couple in business and life, have over fifty years of combined business and financial wealth management experience. Together, we connect with our clients in remarkable ways to create extraordinary relationships that help simplify the demands of managing your wealth.

When it comes to wealth management, fall is more than just a time to watch the leaves change. Important tax changes are on the horizon that you need to prepare for. We went to a great IRA Workshop last week, led by the phenomenal Ed Slott. As he says, "Like milk, 2010 has an expiration date. Tax rates are on sale now--what are you planning to buy?"

We consider ourselves your neighborhood financial advisors. Our door is always open, and the coffee's always on. We sincerely appreciate having you as clients, friends, and neighbors.

Michael & Tina

The Hill Country Is Calling!

If you're like us, when the weather turns a bit chilly and the leaves change, we love to head to Texas's Hill Country. We enjoy taking off without a map to explore the scenic backroads of our Texas Heartland.

The leaves are changing late this year, so it's not too late to get out there to enjoy some phenomenal scenery. This list should give you some ideas:

If you've never visited Gruene, you've GOT to go! Gruene Dancehall is duly famous and they feature big-name bands. Lyle Lovett and his Large Band is coming in November, plus many others. Check here for schedule. The quaint downtown has great shops including The Grapevine, featuring tastings of German and Texas wines. Early November is an ideal time to float the Guadelupe River--you won't have to share it with throngs of rowdy college kids.
November is a perfect time to visit Texas wineries. We never miss a chance when visiting the Hill Country to stop into Becker Vineyards. Check their website for upcoming events--plus check out the historic bed & breakfast parked next to the winery. Why not tour Texas-style? Wine Tours of Texas out of Austin offers limo tours of many fine wineries. Plus, you can travel safely with a custom Texas limo for you and your friends that's a pickup in the front, party in the back.
If you want something a little more back-to-nature, our Hill Country has some real gems in our State Park system. For fall color, Lost Maples west of San Antonio can't be beat. If you have little ones, they will be thoroughly charmed by the 1930s gingerbread cottages snug in the "Lost Pines" at Bastrop State Park. Mountain bikers love Pedernales Falls by Austin.
For total luxury, check in for a week-end or week at world-famous celebrity destination Lake Austin Spa, just ranked #1 Destination Spa by Conde Nast's Traveler magazine. Just around the corner you'll find Horseshoe Bay Resort, a 54-hole golfer's paradise. Nongolfers can enjoy the marina, lake activities, fine dining and a top-notch fitness center.
No visit to the Hill Country is complete without a stop at our favorite restaurant--Hudson's on the Bend, just west of Austin. We dined there on our wedding night and plan to return for our upcoming 10th anniversary. They feature Texas game on their menu, along with great steak and seafood plus "way too many wines" according to their website. They also offer monthly cooking classes, taught by Chef Jeff Blank in his home overlooking Lake Travis. Many of our clients have visited, based on our recommendation. We've also delighted in giving away a number of Jeff's cookbooks--take a peek on Amazon.com.

Note: we got so many comments on our October feature of our visit to Big Texas and the State Fair! Clients said they wanted to come along next year. So, we'll be organizing an annual event for our clients and friends. The first corny dog is on us! We'll get you an invite next September.

Mad Men (and Women) and Taxes

Everywhere we turn, people seem to be angry about looming tax hikes in 2011. Steve Fuqua, CPA and principal with Farmer, Fuqua and Huff in Plano and one of our collaborative partners, called my attention to the most recent episode of Mad Men. Don Draper complains about the 48% capital gains tax rates as he is about to sell a home in 1965. Did that strike a chord with you? It just reminds us of the bad old tax rates in effect in the good old days.

Fast forward to 2010. Did you really think we could fight two wars without any tax implications? Let's review. In 1861, Congress enacted the first personal income tax of 3% for those earning above $800 to finance the Civil War. So far, so good. The top marginal rate was hiked to 77% during World War I. Rates scaled back after the war to a low of 24% just after the Crash of 1929, but hiked back up again during World War II to a whopping 94%! It reduced slightly after WWII, but went back to the low 90%s to pay for the Korean War. After President Kennedy pushed through across-the-board tax cuts in the 1960s, rates crept up again to 77% at the height of the Vietnam War. During the 1990s, we settled in at 39.6% but President Bush asked for and received a reduction in the top rate in 2003 to 35% which has stood until today.

Since the Bush Tax Cuts of 2003, the top marginal tax rate has held steady at 35% for households earning $373,651 or more. The Bush Tax Cuts are set to expire at the end of 2010, which means if Congress takes no action, our top rate will return to 39.6%. So, if you are in the highest tax bracket, what can you do NOW to prepare for higher rates?

If you are a business owner, postpone major business expenses until 2011 and make an effort to complete and invoice as much revenue now through 12/31 as possible.
Double down on property taxes--pay 2010 taxes in the first quarter of 2011, and pay 2011 taxes by 12/31/2011.
Evalute whether you should take capital gains on appreciated stock and property, as rates on capital gains tax is scheduled to move next year for high wealth individuals from 15% to 20%. Or, you could avoid cap gains taxes altogether by making a contribution of your appreciated assets to a nonprofit rather than cash.
If you are an S corporation, look into whether it might make sense to switch to a C corp.
Bump up your contribution rates to tax-sheltered retirement accounts.
Shift some of your savings into tax-free municipal bonds.*
Avoid marriage! Steve Fuqua, CPA, advises that "married taxpayers can have a higher combined tax bill than if they both filed as single taxpayers. The Bush tax cuts reduced this penalty by adjusting the tax brackets for married taxpayers and allowing a larger standard deduction. The reductions to the marriage penalty will go away in 2011." This may be tongue-in-cheek advice, but married couples will probably be back in the penalty box during 2011.
Get all of your vices out of your system during 2010. Virtually all states are considering hiking "sin taxes" on cigarettes, alcohol and other recreational activities to help stem mounting state budget deficits.
If you don't live in Texas, get here as fast as you can! So, even if federal taxes go up, you'll get a net raise. Texas is one of only seven states that does not levy a personal income tax, and yet our sales taxes also remain relatively low compared to, say--California!

Bottom line: All financial decisions must be evaluated in the bigger context of your long-term investment strategy. Do NOT make key financial decisions solely to avoid taxes. Speak to your CPA before you make any changes based upon information in this article.

*Note: municipal bond interest may be subject to the alternative minimum tax. Federally tax free but other state and local taxes may apply.

Do You REALLY Want to Change?

At Tannery & Company Wealth Management, we talk to clients first about their dreams and goals, and then set that into a context of a wealth plan. How they invest their time is usually more important to our clients than investing money, as it should be.

We talk to so many people who want to make sweeping changes in their lives--train for a triathlon, write a novel, lose 50 pounds, spend more time with their kids or grandkids. Lofty goals! Yet without setting aside time, establishing a discipline, and making some intermediate goals--too often people's dreams just fade into the distance.

If you are serious about achieving a goal that's important to you, the most effective way to accomplish something new is to make a radical and permanent shift in your schedule. You write the Great American Novel one page at a time. If you commit to getting up an hour earlier every day and work without distraction, you'll be able to finish it in a year. Start work an hour earlier and give the family undivided time in the evenings.

The same strategy works toward achieving your health goals. Even though we are active fitness enthusiasts, Michael was noticing a slight decrease in energy and fitness levels. Client Devita Widmer introduced him to renowned Dallas fitness trainer, Mike Thornton. Michael signed up for his 5:30 a.m. Transformation Boot Camp, known for converting beer guts into six-pack abs. "What we try to do is walk the fine line between pushing and pacing," said Mike recently in the Dallas Morning News. "I'm asking every person to give everything they can, but at the same time, they know they are allowed to do the work at their own pace." For more information on Mike's classes, visit www.transformationbootcamp.com.

This is the perfect time of year to make that schedule adjustment. On November 7, we "fall back"--setting our clocks back an hour to Standard Time. Instead of sleeping in, why not invest that extra hour in the morning to achieve one of your dream goals? What would you like to accomplish, if time and money were no barriers to your success?

As a valued client or friend of Tannery & Company Wealth Management, thank you for spending time with us today. If you have any financial issues or concerns, pick up the phone and give us a call. We are always happy to hear from you and welcome your referrals.

michael@tannerywealth.com tina@tannerywealth.com

214.239.4700

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor Member FINRA/SIPC (www.finra.org www.sipc.org)

The LPL Financial registered representative associated with this site may only discuss annd/or transact securities business with residents of the following states: CO, DC, FL, GA, IL, KS, MO, NY, OK, PA, TX, VA, WA, and WI.

This e-letter is not meant to provide financial or investment advice. No financial decisions should be made as a result of information provided herein. All financial trades or portfolio decisions should be made directly with your LPL Financial registered representative.

The information contained in this email message is being transmitted to and is intended for the use of only the individuals(s) to whom it is addressed. If the reader of this message is not the intended recipient, you are hereby advised that any dissemination, distribution or copying of this message is strictly prohibited. If you have received this message in error, please immediately delete.

Disclaimer on Usage of Internet Links

The links provided in thie e-letter are solely intended for convenience and are not intended to be advertisement whatsoever. The linked sites are not under the control of Tannery & Company Wealth Management and Tannery & Company is not responsible for the content of any linked site or any link contained in any linked site. If you decide to access any of the third party sites linked to this site, you do this entirely at your own risk