On August 8, a CPA, living in Long Beach, N.Y., got up to commute to work in Manhattan via the Long Island Railroad. After getting dressed, the CPA made sure that the cell phone was charged, and the Palm was pocketed. A check was also made for the debit card, a credit card whose purchases increased the CPA's American Airlines frequent flyer mileage, a discount card for shopping at the Rite Aid drugstore chain, and a punch card for a free cup of coffee after 10 purchases. Picking up the laptop, railroad ticket, Metrocard for a later subway trip, and the Wall Street Journal which was then resting outside the front door, the CPA left to catch the train, the 7:04 to make it to work by 9:00 a.m.
Two articles from the newspaper caught the CPA's eye that morning: one was on a new hand-held devise that acts as a PDA and cell phone. Two concerns quickly came to the CPA's mind--the remaining months on the current cell phone service contract and how easy information could be synchronized between the office computer and this new device.
Then, there was the second article about some "possible tax strategies" for individuals who have IRAs that have experienced severe investment losses. One strategy is to empty out Roth IRAs and traditional IRAs funded with after tax contributions and harvest tax losses and the other is to convert a traditional IRA with heavy losses to a Roth IRA.
The article points out possible problems with the first strategy including a 10-percent penalty, the special treatment for such losses, the fact that the alternative tax might wipe out the loss, and the dangers if there are also deductible contributions to the traditional IRA, to name just a few. With regard to the second strategy, there is an AGI test that must be met and the resulting tax must be paid. The article also indicated that if there are further losses, the conversion could be undone in a stated time period and no tax would be due.
The CPA contemplated the strategies, the firm's client base, the pitfalls and advantages that had to be explored, the revenue opportunities, the ability to explain to clients, and if implemented, the need to ensure that proper execution subject to the myriad of restrictions, qualifications, and conditions of the tax laws. A decision was made.
When the train stopped at Penn Station in Manhattan, the CPA jumped on the subway and instead of going to work, decided to lay barefoot under a tree in the Central Park Sheep Meadow until the 5:55 had to be caught back to Long Beach. Oh, for the simpler life!
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