World Class Mergers & Acquisitions  |  For Companies $5 Million to $250 Million in Revenue

Mergers & Acquisition FAQ – March 2009

Q: What is new concerning the tax laws in 2009?

A: While a blanket statement cannot be made, there are some notable changes for business owners and individuals: 1) The gift exemption amount raises from $12,000 per year, per person to $13,000 annually per year, per person; 2) The estate exemption rose from $2,000,000 to $3,500,000; 3) The IRA contribution limits have changed from $4000 in 2008 to $5000 in 2009; 4) The 5% capital gain tax rate on capital gains and dividends is reduced to zero.

Q: The company that I hold stock in recently announced a stock split.  How do I pay taxes on such an occurrence?

A: A stock split does not result in income or an increase in wealth.  It is therefore not a taxable event.  A stock dividend, on the other hand, is taxable.  If a company announces a stock dividend, the fair value of the stock distributed is taxable to the shareholder as it would be had it been cash.

Q: I am interested in purchasing rental property this year.  What closing costs are deductible?

A: The only closing costs that are deductible are costs associated with real estate taxes and interest.  Closing costs for transfer taxes, recording fees, surveys, et cetera are includible in the property’s basis.

By: Basi & Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors