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Show Tlmos-Thurada- Pog July y, 1, 1982 EDITORIAL AND OPINIONS HINCKLEY The NEED VERDICT HIGHLIGHTS New tax nilas affect established businesses FOR INSANITY DEFENSE REFORM ,ajHatch HDUlliffimiOrt bvSmfcrOrrin SALT LAKE CITY, Young & Company, one of the nations largest accounting and business consulting firms, today released the following analysis of new tax laws affecting established closely held businesses. Established do6ely held face a multitude of businesses decisions. . A smaller business business ability to compete against larger companies can be critical to its future as a going concern. In the Econmic Recovery Act of 1981, Congress has armed the small operator with various tax benefits whose cumulative effect could have significant impact on a closely held business. Corporate Rate Reductions The new act reduces the corporate tax rate for the lower two brackets by one percentage point a year for two years beginning in 1982 and 1983, respectively. The Accelerated Cost Recovery System The new act has substantially altered the depreciation of tangible property. In response to problems of complexity, subjective determination, and heavy capital investment under previous law. Congress enacted the Accelerated Cost Recovery System (ACRS) to replace the present depreciation system. Under ACRS, the cost of tangible personal property five-yea- r, is recoverable over a three-yea10- - year, or 15 - year period, depending on the type of asset. Real property is placed in a separate category. Provided the property is classified correctly, the recovery period cannot be challenged by the IRS . Taxpayers can. however, elect to recover over longer periods. ACRS allows a 67 percent faster write-of- f over the first five years. Closely held businesses needing cash to help finance operations should find the tax savings resulting from ACRS helpful. It should be remembered, however, that ACRS merely accelerates the timing of the investment UT-Art- hur I mm Lid, Less than a month before John Hinckley Jr. attempted to assasinate the President. I introduced legislation that would reform the federal insanity defense. If that legislation had been enacted into law at the time, I am confident that last weeks Hinckley verdict would have been far different. If anything good is to come out of last week's stunning decision that John Hinckley was insane at the time of the assasination attempt, it is that Congress may finally be moved to act on this issue. At the same time, it may be prompted to act on a variety of other criminal justice reforms that will a proper balance between the rights of criminal defen-denand the rights of victims and society. My insanity defense reform, which is supported by the Reagan administration. would make two major changes in the way this defense operates in federal courts. First, the mo6t important, it would redefine the insanity defense so that juries are faced with the basic question, Did the defendent intend to kill his victim?" Under present law, the fundamental question is far different. Instead of focusing on the defenders intent, present law is focused on a series of complex psychiatric questions that divide even most psychiatrists: Did the defendent know right from wrong?. Did the defendent have some irresistable impulse he could not control?, and so forth. My reform would make it far more difficult for an individual to prevail with a claim of temporary insanity, and would eliminate the present courtroom spectacle of psychiatrists battling it out with each other .. The second major change in my reform would be to ensure that individuals who are genuinelyinsane would not be released to the streets (as may happen under present federal law) but would remain confined in suitable institutions. Under my legislation, James Brady, Thomas Delahanty, and the others seriously injured in the Hinckley attack would know that justice has been done. Others, such as Jody Foster, would not have to remain in fear of Hinkleys release. Unfortunately , none of this is now the case. ts r, ar Help needed for children The new outbreak of violence in Lebanon has claimed the lives of thousands of victims while leaving countless more homeless, without access to even the most basic necessities of life. The International Red Cross estimates that overSOO ,000 are homeless; others put the figure closer to one half million. In the rural areas, while communities have fled, many of them huddling on open beaches, scavenging for food and water. Beirut itself is in fear, death and engulfed destruction, empty streets and shuttered shops stand amid the unremitting shelling. Stunned and grieving families stretch from one end of this tiny country to the other. through their established health centers. A team of 45 trained professionals is working around the dock to alleviate the suffering. Volunteers have been mobilized to assist the displaced by locating temporary shelter and distributing medical supplies, dothing and blankets. Save the Children, in cooperation with the United Nations and other voluntary and agendes. is making both an immediate and long-tercommitment to the relief and rehabilitation of the Lebanese people. In order to assist those struggling for survival. Save the Children is issuing an urgent appeal for funds. As a member of the organizations 50th Anniversary Committee, I strongly And as always, it is the children who urge you to take this opportunity to are the most vulnerable. Moving from extend a helping hand to the suffering place to place looking for what might children of Lebanon in their time of temporarily be safe shelter, sleeping crisis. Any contribution, no matter on open staircases or in empty how small, can make a difference. fields lacking food, dean water or a Please mail your check today to Save change of clothes, the toll of young the Children. Lebanon Emergency lives continues to mount. AppeaL Dept. P. Westport, Conthe Children, the international necticut 06880. agency that has been Sincerely, Rev. Theodore Hesburgh CSC working in Lebanon for over 25 years, is providing emergency services for President these children and their families University of Notre Dame write-of- f. Liberalized Investment ' Tax Credit The new act. as it applies to closely held businsses. has modified the investment tax credit in several ways. The credit is now equal to 10 percent of the cost of five-yeproperty and 6 percent of the cost of three-yea- r property, conforming the investment credit to the new ACRS property classifications. The act has also changed the method of recapturing the credit for early disposition of property. The investment credit is now earned at 2 percent a year. This, allowing a full 10 percent credit in connection with a write-offive-yea- r Prior law allowed a or 10 percent credit only on longer write-offThe used property limitation has been raised from $100,000 a year to $125,000 for 1981 through 1984 and to ar -- f. ar s. Jave thereafter. $150,000 rule similar to the rule An k applicable to losses has now been extended to the investment tax credit. This means that to the extent a taxpayer is not personally liable for at-ris- A tfgsr in tfta streets - kzs GYSl Here are some air ditioner energy-savin- g tips unit. Try to schedule laundering and cooking for the cooler hours, and remember to use your range and bathroom exhaust fan to draw heat and moisture outside. Be sure to turn the exhaust fans off after theyve done the job. Avoid frequent opening of doors . . . and keep windows closed while the air conditioner is operating. If you have a central heating system, be sure to close floor or wall ducts so that the cool air is not pulled through them. Insurance bids are due back ir our office on or before August 25, 1982 at 5:00 p.m. This insurance is for a one year period. BRENT E.HUISH Magna Water Manager KIMCHH Published every Thursday Application for mail at second class postage rates is pending at Magna, Utah. Postmaster may send address change to 9 24 W. 2700 So.. Magna. Utah ID 0 o ID E CM o 0 0 5 a o I k, at-ris- k. Companies acquiring property on a basis must make sure they obtain financing from the proper lenders to qualify for the full credit. Safe Harbor Leasing The new law now allows taxpayers to trade or sell tax benefits to other companies through the vehicle of equipment leasing. A company that shows little or no earnings for the current tax year can get cash for the tax benefits it cannot use. Conversely, a profitable company can purchase another companys tax benefits to cut its own tax bill. Both parties gain economically from the transaction. The new law guarantees that if certain requirements are met, a lease transaction will be treated as such for tax purposes, even if the transaction in reality merely finances the purchase of property. A typical safe harbor leasing transaction will entail a sale of ACRS property and a leaseback of this The buyer property to the seller-use- r. of tax benefits will usually put up a down payment for the purchase price and issue a note for the balance. The lessee will in turn, enter into a lease contract whereby he will be obligated to make lease payments over the term of the lease for the use of the property. The respective obligations of each party are structured so that the periodic payments exactly offset each other. Other than the down payment, no cash need change hands between the parties. Accumulated Earnings Credit The accumulated earnings tax is designed to penalize corporate accumulation of earnings by the closely held businesses attempting to avoid tax at the shareholder level. Congress recognized that smaller incorporated businesses often do not have definite plans requiring capital accumulation, but are reluctant to distribute funds that may be needed in the future. Therefore, in order to facilitate the internal generation of which would reduce capitol. borrowing costs, the new act increases the accumulated earnings credit from $150,000 to $250,000. Closely held businesses that had to pay out dividends in order to avoid the penalty tax can now retain an extra $1 00 ,000 in the corporation. 9 J e PEGGY ADAMS Editor STAHLE 3101 Fallon. NV ar after 1981. The election to expense may be made for any recovery property acquired for use in a business that would otherwise be eligible for the investment tax credit. Business typically having a light investment in recovery property may want to expense the property annually and avoid the additional of recordkeeping requirements ACRS. However, the benefits of must be immediate expensing weighed against the loss of tax credit and accelerated cost recovery deductions. Any gain on the sale of expensed property will be treated as ordinary income to the extent previously expensed. In addition, the gain on disposition of expensed property cannot quality for installment sale Closely held businesses that exceed limitations should consider expensing assets not likely to be sold on the installment basis. Consideration should also be given to expensing three-yea- r property in order to forego less investment tax the expensing . VITALS Deputies reported possession of alcohol by minor at Gr. Salt Lake beach. June 17 Deput ies reported possession of beer by minor at Saltair. June 18 A theft was reported at Cyprus High School. Alcohol in an open container, possessed by two minors at Saltair Beach was reported. A minor was dted at GSL Beaches for possession of alcohol and a controlled substance. A man was dted for possession of controlled substance at GSL Beaches. 702-42- J a subscriptions jrc 5 1 A minor female wks dted for possession of alcohol at GSL Beaches. Three minor males were dted for above infradion. June 20 Member Utah Press Association USPS . J 9 325-58- 0 . Why were owls depicted oh DUR.IHS ANCIENT TIMES? COINS, A gasoline theft was reported at Double Kwik. June 21 A vehide burglary was reported at 7653 W . 3100 South. June 22 A theft was reported at 8701 W . 3500 South. An assault was reported at 3654 South 8400 West. June 23 An assault was reported at Double Kwik. June 25 A theft was reported at Desert Industries. June 26 A vehide burglary was reported at 2865 South 9200 West. A rivil dispute was reported at 7466 West 3755 South. ;C ifTTiTTS qOOOQOGOOOQOOQOOOOOOOOOOQOOOQOQO Mid Summer It takes money. For tuition, room and board, and books. And thats just the beginning. To help meet these costs, the Army proudly introduces tne Aiiny College Fund. You can join it, upon qualifying, when you join the Army. for every dollar you put in, Unde Sam puts in five. Or more. So, after just two years in the Army, you can have up to $15,200 for college. After three years, up to $20, 100. Call for your free copy of the Army College Fund booklet. It cocnd be the most important book you In California, read. Call toll free 800-282-586- no $ 1 0 00 outside Utoh 7 Estimated Taxes for Small Corporations For larger corporations, the new law increases the estimated tax requirements. Smaller corporations whose taxable income was under $1 million for the preceding three years, on the other hand, are eligible for an exception allowing them to pay estimated taxes for the current year in an amount equal to the preceding years , tax liability. A small corporation whose current taxable income exceeds that of the prior year now may have the use of the additional cash until such time as the tax return is filed. This will be especially valuable to a corporation experiencing rapid growth. Employee Stock Ownership Plans An Employee Stock Ownership Plan (ESOP) is a plan under which employer stock is held for the benefit of employees. An employees benefits under an ESOP are generally not taxed until they are distributed or made available. At the same time, the ESPO provides a deduction for employer contributions. In addition to the normal ESOP, two unique ESOPs have flourished under the tax law. A tax credit ESOP allows an employer to contribute cash or stock in order to qualify for a credit against income. A leveraged ESOP allows an employer to borrow to acquire employer stock. The act made three significant revisions with respect to the treatment of ESOPs: -- The credit allowed for contributions to a tax credit ESOP is now based on a percentage of participant compensation instead of on the amount .of investment in capital equipment. -- The limit on deductions allowed for contributions to leveraged ESOPs has increased from 15 percent to 25 percent of participant compensation. -- Voting rights need not be passed through to employees to whose account stock has been allocated under a profit-sharin- g ESOP. Closely held corporations that do not currently have an ; ESOP may want to consider establishing one. Although numerous drawbacks exist, and G.e., costs of administering potential dilution of control), the advantages in certain circumstances may outweight them. For example, and ESOP is a good way to transfer control to family members and to key ESOPs can also employees tax-frebe used to establish a market ' for closely held stock for valuafioii purposes. With the credit computation shifting from capital investment to labor costs, closely held businesses may now find tax credit ESOPs attractive. Extension of Carryover Periods Carryover periods for net operating losses and for the investment tax credit have been extended to 15 years. An Arthur Young & Company publication entitled The Closely Held Business has been prepared addressing those parts of the 1981 Tax Act that will have greatest impact cm forming, operating, and disposing of a closely held business. It is available free of charge through the Arthur Young Salt Lake City Office. Arthur Young and Company, the international tax. accounting, auditing, and consulting firm, is a general partnership. Founded in 1894, Arthur Young has 84 offices throughout the Uni ted S tates. The firm is a member of Arthur Young International, whose member firms have offices in more than 300 cities in 65 countries throughout the free world. June 19 800-423-36- Y early percent instead of 10 per- e. treatment. TOGOTOCCLLGGL 1 J. HOWARD year-at-ris- (6 cent). IT TAIES MORE THAN BRAINS 801 Sir Arthur Conan Doyle, the author of the famous Sherlock Holmes sagas, supposedly modelled Holmes' assistant and friend. Dr. Watson, after himself. k credit LIFO S implication in the engaged Taxpayers production, purchase, or sale of merchandise are required by law to keep inventories. The LIFO method provides the best way to reduce income taxes resulting from inflation, however, many businesses have found its requirements too complex. As a result, the new act attempts to simplify these rules. One obstacle to using LIFO, is the that certain IRS requirements businesses maintain inventory accounts to pools for each major product line. Under the act, qualifying small businesses can now elect under speical rules to use a single dollar-valu- e LIFO pool Businesses that use LIFO must restore any reduction of inventories due to obsoleseene, market declines, etc., to original cost. Taxpayers must report the resulting adjustment as taxable income over a three-yea- r period beginning with the year LIFO is elected, replacing the former rule requiring the adjustment to be reported in the year prior to the adoption of LIFO. accounting inventory Many systems cannot readily provide the price indexes necessary to make the various LIFO calculations. Under if a proposed IRS regulations, business wants to sue a government index, rather than one developed internally, it can use 80 percent of the price change reflected by the index. The act authorizes the IRS to issue regultions on the use of government price indices. Expensing Business Property Tax law prior to 1981 allowed an additional 20 percent first-yedepreciation deduction (generally limited to $2,000) for qualified business property placed in service during the year. The new act repeals this deduction and replaces it with an election to expense $5,000 to $10,000 of qualified property placed in service June 16 con- from Whirlpool home economists that can help you get the most from your air conditioner dollar: Improve your homes insulation (seal doors, windows,' and close fireplace flue.) Clean or replace filters frequently. Draw drapes' or blinds on the sunny side of the house, and dont block the air conditioner with drapes or an object in front of the THE MAGNA TIMES 9124 W 2700 S Mfn.UT 84044 c0 at-ris- k EWERGV elected government . Cassidy said. In fact, courts across the land have established the that principle government has no obligation to provide protection to the individual citizen. "Two recent court decisions, system cast serious doubt on the one in New York and one in Washington. D.C., have upheld this efficiency and rationality of the countrys approach to crime and criminal principle that the police are not legally bound to protect you.Cassidy said. behavior. If the police and our cities have no In its lead editorial June 23, the Post struck a chord noting that when obligation to protect us, who then there is a wild tiger in the streets, you does? dont ask whether he actually means Ironically, other court decisions to harm you or whether his fantasies such as the recent new Jersey court have produced an irresistible impulse supreme ruling finding to kill. You just want him off the shopkeepers liable for failing to streets.. .trends in legal standards and exercise reasonable care to protect their customers from crime, coupled in our psychiatricaUy oriented culture have led toward a place where we are with municipal efforts in Morton disarmed unable or simply not Grove. Illinois. Washington, D.C. and permitted either to honor our values now San Francisco and other areas to or to protect the innocent and un- deny honest citizens the means to provide protection against criminals suspecting from acts of violence. The NRA couldnt agree more, does exactly what the Post said, they said J. Warren Cassidy, executive leave us disarmed and unable to director of the NRA institute for defend ourselves, our family and loved legislative action, the lobbying arm of ones. Cassidy said. We join the Post in the hope that the2.4 million memberorganization. the priorities and obligaions of our It is readily apparent that our be criminal justice system is criminal just fee systems and on refocused reevaluated the to a message chilling sending citizens of this land that they can removing violent criminals from our expect little justice and even less streets and out ofour homes,.Cassidy protection from the courts or their said. D.C.-T- he WASHINGTON, and National the Post Washington Rifle Assodation certainly do not see eye to eye on the gun control issue, but one thing they are in agreement. Trends in the nations criminal justice CO amounts borrowed to purchase investment credit property, the credit will not be allowed. There is. however, a major exception to what is considered at risk for investment credit purposes. Financing, whether or not on a nonrecourse basis, from government agencies, certain unrelated financial institutions, insurance companies, and qualifying pension trusts is treated as capital. This is true if 20 percent of the propertys unadjusted with full recourse at all basis is times and the property is acquired froma party unrelated to the lender. If the credit is not allowed due to limitations, it will be allowed in the k amounts are increased. If ceases to be property recapture occurs to the extent the property is no longer considered 2 4. ARMY B2 ALLYOU CAN BE. CALL: SSG RICHARD PEW 882-85- 06 Extravaganza This Thur,Fri& Sat MONDAY NITE SPECIAL All Food Itoms Vi S8p.VVI. m3 PRICE (Oisnfct not WKtwdtd1 TOJIE PHONE 230-922- 5 Magna. Utah fyyXyyTyySOOWpaoooeOQOOOOOOOCOOaOQOOd1 |