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Sweet marketing music

Tanner Montague came to town from Seattle having never owned his own music venue before. He’s a musician himself, so he has a pretty good sense of good music, but he also wandered into a crowded music scene filled with concert venues large and small.But the owner of Green Room thinks he found a void in the market. It’s lacking, he says, in places serving between 200 and 500 people, a sweet spot he thinks could be a draw for both some national acts not quite big enough yet for arena gigs and local acts looking for a launching pad.“I felt that size would do well in the city to offer more options,” he says. “My goal was to A, bring another option for national acts but then, B, have a great spot for local bands to start.”Right or wrong, something seems to be working, he says. He’s got a full calendar of concerts booked out several months. How did he, as a newcomer to the market in an industry filled with competition, get the attention of the local concertgoer?

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by Angela Alvig
March 2005

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Accounting

business builder accounting

Charitable plan
can max donations
and tax savings

Many businesses and individuals give to charity each year, but few have implemented a charitable giving plan. You may want to do this as part of your business and personal financial plan.

The establishment of a charitable giving plan can help ensure that you are maximizing the donations to your charities while also maximizing the tax benefits for you or your business.

When establishing your charitable giving plan, consider your organization’s or your own personal values to help select charities. Next, evaluate the giving options available and determine which options will maximize the donation and tax benefits of the gift.

Here are some areas to consider when determining which options are best for you:

Give stock, not cash

Consider giving a gift of appreciated stock rather than cash. You will receive a charitable deduction for the current fair market value of the stock, but you won’t have to pay any tax on the capital gain that you’ve incurred since you originally purchased the shares.

Shares of stock can be easily transferred from your account to the charity’s account; simply instruct your broker to do so. The charity will then sell the stock, and you will not have to report the sale on your tax return.

Thus, you’ve given the charity the same amount that you would have given in cash but also saved yourself some tax expense. The tax savings may also allow you to make a larger gift than you would have been able to contribute in cash.

Keep in mind that while cash gifts to public charities are limited to a maximum of 50 percent of your adjusted gross income, stock gifts have a 30 percent income limit. Contributions that exceed the income limit in the current year can be carried forward for five years.

New law on vehicles

Due to recent new tax legislation, the rules regarding donations of vehicles changed as of January 1, 2005. Previously, vehicle donation programs were booming, and many taxpayers expected to take a deduction for the blue book value of the vehicle. This was often a much larger amount than the charity actually received upon later sale of the vehicle (usually by an intermediary).

Under the new rules, the amount of the deduction will depend on how the charity uses the vehicle. If the charity sells the vehicle rather than using it toward its charitable purpose, the amount of the deduction cannot exceed the gross proceeds from the sale.

If you plan to take a charitable deduction of more than $500 for a vehicle donation, the charity must provide you with a written acknowledgment identifying the vehicle and stating the amount for which it was sold.

This acknowledgment must be provided to you within 30 days of the sale of the vehicle by the charity, and you must attach it to your tax return for the year of the donation. Failure to attach this statement (which the charity must also provide to the IRS) will result in disallowance of your deduction.

There are two exceptions to these new rules. Charitable contributions of property that are held for sale to customers or donor’s stock in trade (such as in the case of an automobile dealer) are not subject to these new requirements.

Also, when the charity intends to use the vehicle or refurbish it before selling it, the charity must provide you with a certification of its intentions, and you may make your own determination of fair market value. If the value of the donated vehicle is more than $5,000, a qualified appraisal will be required.

Although these additional reporting requirements were not in effect for tax years prior to 2005, taxpayers who have inflated vehicle deductions in past years are not home free. They are still required to provide proof of the value of their vehicle donation in the event of a tax return audit.

Non-cash options

Use these March snow days to do some early spring cleaning. Clear out your closets, basement and garage and be sure to keep track of what you give away to charity. You’d be surprised how these seemingly insignificant donations can add up to a nice-sized charitable deduction.

It is important to note that it is your responsibility, as the donor, to assign a value to the clothing, household and office items that you give to charity. So as you clean house, make a list of the items that you’ve gathered and assign a thrift shop value per item or per bag donated. Make sure to attach this list to the receipt you receive from the charity and keep it with your tax records.

If your total deduction for non-cash charitable donations (including any other gifts discussed above) is more than $500, you’ll have to file Form 8283 with your tax return. This form provides information regarding the charity name, address, description of the property donated, and the deduction value that you’ve determined.

Consider doing charitable work, and make sure you claim expenses that you incur when doing it. Current tax laws allow charitable deductions for expenses incurred while doing charity work.

For example, Scout leaders can deduct the cost of uniforms (and cleaning) that are worn when performing donated services but are not suitable for everyday wear. Travel expenses such as transportation (actual expenses or 14 cents per mile), meals and lodging can also be deducted if there is not a significant element of personal pleasure, recreation or vacation in the travel.

There are many ways to achieve your charitable goals while maximizing your tax-saving opportunities, including many that are beyond the scope of this article. Put some thought into the establishment of a charitable giving plan today and contact your financial planner, accountant or tax preparer to determine what giving options make sense for you.

[contact] Angela Alvig, CPA, is a manager in Wipfli’s Edina office. Wipfli is an accounting and business consulting firm serving clients throughout the upper Midwest: 952.548.3334; aalvig@wipfli.com; www.wipfli.com