Tax Strategy Scan: RMD Deadline Looms for Boomers

Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.

Baby boomers must act fast to avoid a significant tax hit: The first generation of Baby Boomers who turned 70-1/2 this summer must take required minimum distributions on their retirement accounts to avoid a tax penalty equivalent to 50 percent of the distribution, according to The Detroit Free Press. If they're going to withdraw money this year, they'd need to move by Dec. 31. However, they do have a one-time chance at delaying that first distribution a few more months. -- The Detroit Free Press

Financial Planning: How much tax will I pay if she sells her stock? Aging clients who own stocks should know the tax impacts from giving the securities away or selling them, according to The Monterey Herald. In one example, an 80-year-old client will need to file a gift tax return if she opts to give her stocks to her daughter, and the securities turn out to be worth more than the annual gift exclusion of $14,000. If the client sells the stocks, she will pay tax on the capital gains. -- The Monterey Herald

Is it a business or an expensive hobby? Clients can determine when to treat an expensive, money-losing hobby more like a business based on nine factors provided by the IRS, according to The Wall Street Journal. "No one factor alone is decisive,” the agency says. In general, an activity is considered a business if it has generated a profit “in at least three of the last five tax years, including the current year,” the IRS explains. However, “the absence of a profit in those years does not per se create a presumption that the activity is not engaged in for profit,” says an official. -- The Wall Street Journal