Mark Bole <makbo[at]pacbell.net> wrote:
- quote -

Sure, have a good time while you can enjoy it!

But, becoming a landlord probably won't help. If the OP has
as much income as indicated, the passive loss rules will not
allow him even the $25,000 special loss allowance. Any losses
incurred in rental real estate activities will be suspended
until he has passive income to absorb the losses or he sells
the propberty.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

spoca2005[at]yahoo.com wrote:

- quote -

Adopt one or more children (complete in 2006) and incur
qualified expenses up to the limit.

Take an unpaid leave of absence from work for a while and go
have some fun.

Buy residential rental real estate early in the year and
become a landlord.

-Mark Bole

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

TheMightyAtlas wrote:
- quote -

Actually, I believe the SS wage limit for 2006 is $94,200 or
so, not that it makes a difference in this case.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

spoca2...[at]yahoo.com wrote:

- quote -

No tricks, but you will not have to pay any additional SS
tax on this because you would hit the cap of wages subject
to SS tax with or without this payment, assuming that you
have 90k in "normal" wages.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

I will have a large "wage" income coming up in January (for
details see the 2 paragraphs below the signature line). Well,
large to us anyway.

There's very little flexibility in receiving the payment:
it must be received between January 31, 2006 and March 31,
2006. It will be ordinary income, and employer will deduct
ordinary payroll taxes. Let me roughly describe my tax profile.

Married with 2 children; both spouses working; all US citizens
Calif resident; both maximizing 401k; NOT qualified for Roth
Funding 529 for both kids at $3k/year
2004 AGI = $200K; Schedule A ded. (only mortgage + state tax): $38K
2005 AGI expected to be $220K. Income split between spouses: 60%:40%
About $10K of dividend income

The large wage-like payment in January 2006 will be $200K,
doubling our AGI for the tax year 2006. As such, I am expecting
about 46% tax hit (US Federal + Calif + SS + Medicare + CA SDI).

I am pleased with income, of course. Still, I would appreciate
tips, tricks and suggestions on LEGAL ways to minimize taxes.

Thanks.

SPOCA2005

================================================== ==========
Story of SPOCA (if you are interested):

About 5 years ago, the majority stake in my employer was bought by
another company (employer was and remains a private company). At the
time of purchase, the new company canceled all outstanding stocks &
options through a SPOCA (stock purchase and option cancellation
agreement). In its place, Payment Interest (PIs) were issued.

The deal was "fair" -- all kinds of future projections, and valuations
were used to set the formula for the growth and valuation of the PIs.
Basically, PIs are valued based on a polynomial formula that uses cube
root of (rolling) three year revenue growth and profit margin. The
value of PIs, over the last 5 years, has increased from less than $5 to
$25.05, the MAXIMUM allowed under agreement.

There are only about 7-8 people who have this "instrument", and I am
the only "serf" -- all others have PIs to the tune of $1million to
$5million. They have explored all possibilities, and there's no way to
convert this ordinary income to capital gain via some sort of new
option / stock replacement. Also, the agreement stipulates that PIs
MUST be cashed in the first sale window after maximum value is reached.
Maximum value was reached on October 1, 2005, and first sale window in
January 1, 2006 through March 31, 2006.
================================================== ==========

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >