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• Happy Halloween!
• Happy Thanksgiving!
• It's time for year-end tax planning.
• Yes, I actually did get to take a vacation this year!
• Another milestone.
• More tax legislation this year?
• IRS gives depreciation relief.
• Social Security wage base increases for 2002.
• Stock options for charities.
• Trust allowed to deduct donation by partnership.
• Big estate value discount allowed for minority interest in a management trust.
• IRS provides toll-free number for those affected by Terrorist attacks.
• Michael Gray presents "Secrets of Tax Planning for Employee Stock Options."
• If you have employee stock options...
• PS Marché Aux Fleurs.
• Visit our new articles.
• Subscribe/Unsubscribe from Michael Gray, CPA's Tax and Business Insight.

Happy Halloween!

Did you know the most popular holiday for adults now is Halloween? Hope yours is a safe one.

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Happy Thanksgiving!

Thanksgiving will be here before my next newsletter. With the tragic events recently in the news, it is especially appropriate to take a few moments to be grateful for the blessings we enjoy.

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It's time for year-end planning.

Only two months left for this year!

Will your withholding be enough to avoid penalties for underpayment of estimated tax?

How much cash should you plan to have for paying income taxes and estimated taxes next April 15?

Do you have stock received from exercising an incentive stock option earlier this year that has declined in value and should be sold before the end of the year?

Make your reservation soon for a planning appointment. My availability may be limited during the next two months.

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Yes, I actually did get to take a vacation this year!

Janet and I went to Cancun, Mexico for a greatly-needed one-week vacation after October 15. We had a great time.

The highlight of the trip was visiting the Mayan ruins at Chichen-Itza and Tulum. It was a sobering experience. Here was a highly advanced civilization that lasted about 2,000 years, that was abandoned shortly after the arrival of European explorers. Mayan society was not isolated to a few cities, but was a dense population covering a big area. We should avoid being so cocky as to believe our "empire" will last forever. One after another has risen and fallen. Why should ours be any different?

Will we see a continuing erosion of our ideals and values? These days, even having ideals and values seems to be "politically incorrect." But aren't they the cornerstone that a society is built on? Keep praying for Divine guidance.

Cancun, itself, is a modern marvel. According to one of our guides, in 1970, the population of Cancun was about 150 fishermen. The first hotel opened in about 1972. Today, the population of Cancun is about 900,000, and totally devoted to serving the tourist industry. Although there is no gambling, the hotel strip reminded us of Las Vegas. There are huge, beautiful, modern hotels, with about 27,000 rooms on the tourist strip.

There are white, sandy beaches. We found some decent snorkeling close to our hotel, and also went snorkeling at Isla de las Mujeres and Xel Ha. Fabulous!

One of the greatest scuba locations in the world, Cozumel, is a short boat ride away from Cancun. Since we aren't scuba divers and had limited time, we decided not to go to Cozumel on this trip.

The prices are expensive, so the "all inclusive" hotel packages seem to be a cost-effective way to go. (Meals and tips are included.)

(We experienced some of the stomach problems you have heard of, so be prepared.)

With some reservations, we decided to choose "economy" tours suggested by tour directors. We were very pleased. The air-conditioned buses were comfortable. The tour guides were well informed and spoke good English.

If you decide to go, bring a lot of dollar bills for tips. We found it much harder to find ATM machines than in Europe.

I highly recommend Cancun as one of those destinations you should put on your "must see" list.

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Another milestone.

I will be 50 this month. The half-way mark? I'm thankful for my good health, a great family and a business that enables me to be of service to some very nice people. Thanks!

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More tax legislation this year?

The House of Representatives has passed an "economic stimulus" package, including $160 billion in tax cuts. Since the Senate is no longer controlled by a Republican majority, getting the legislation passed without major changes seems unlikely. President Bush had only requested $60 billion in tax breaks. Stand by.

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IRS gives depreciation relief.

The IRS has announced that taxpayers that have a tax year including September 11, 2001 in the third quarter may elect to not apply the MACRS third quarter election for that taxable year. In most cases, taxpayers who acquire most of their depreciable assets during the last quarter of the year will have a higher depreciation deduction by making this election. Year-end depreciable asset purchases will be an important year-end planning strategy for businesses, this year. (Notice 2001-70, 2001-45 IRB.)

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Social Security wage base increases for 2002.

The wage base for computing Social Security tax will increase from $80,400 for 2001 to $84,900 for 2002.

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Stock options for charities.

The IRS recently ruled on the tax results of a stock option granted by a corporation to a charity. The corporation pledged an option to the charity to sell the corporations stock at a price equal to the fair market value of the stock on the date of the pledge.

The IRS ruled that, when the charity exercised the option, the corporation would be entitled to a charitable deduction for the excess of the fair market value of the stock on the date of exercise over the option price. (Letter Rulings 200141018, 200141019.)

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Trust allowed to deduct donation by partnership.

The IRS has ruled that a trust may deduct its distributed share of a charitable contribution by a partnership in which the trust has an interest, even though the trust instrument didn't authorize distributions for charitable contributions. The IRS based its ruling on two Tax Court cases, Lowenstein v Commissioner, 12 T.C. 694 (1949), affirmed 183 F.2d 172 and Estate of Bluestein v. Commissioner, 15 T.C. 770 (1950.) (FSA 200140080.)

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Big estate value discount allowed for minority interest in a management trust.

The Tax Court ruled a husband and wife who each had a minority interest in a trust holding Louisiana timberland were entitled to a 60% discount from the fair market value of the land for the amount includable in their taxable estates. (Estate of John L. Baird, et al. v. Commissioner, T.C. Memo, 2001-258.)

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IRS provides toll-free number for those affected by Terrorist attacks.

Taxpayers whose abilities to meet their federal tax obligations were affected by the terrorist attacks on September 11, 2001 may use a new toll-free number, 866-562-5227, to get their tax questions answered quickly. The number is available Monday through Friday from 7:00 a.m. to 10:00 p.m. for English speakers and from 8:00 a.m. to 9:30 p.m. for Spanish speakers.

The toll-free number for other taxpayers is 800-829-1040. (IR-2001-84.)

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Michael Gray presents "Secrets of Tax Planning for Employee Stock Options" Seminars.

The Employee Stock Options Advisors Association, LLC is offering two seminars this fall called "Secrets of Tax Planning for Employee Stock Options." I will be the featured speaker for both seminars.

For more information, please fill out our form at http://www.stockoptionadvisors.com/seminar.shtml.

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If you have employee stock options, have you subscribed to the ESOAA Option Alert?

To subscribe, go to http://www.stockoptionadvisors.com. You can review past issues at http://www.stockoptionadvisors.com/optionalert/.

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P.S.

My daughter and her husband, Holly and Dan Baker, have opened a Southern French Restaurant at 23 Ross Common, Ross, California, about 15 minutes north of the Golden Gate Bridge. The name of the restaurant is Marché Aux Fleurs. For the best meal of your life, call 415-925-9200 for a reservation and give them a try soon! For directions, visit our website at http://www.taxtrimmers.com/directions.shtml.

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Visit our new articles!

• The Gift of Fear Book Review
• "Don't Cry, Don't Eat!"

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P.P.S.

To receive the next issue of Michael Gray, CPA's Tax & Business Insight with more tax developments, another book review, and upcoming deadlines automatically via email, subscribe by filling out the form below.

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IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this communication was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.