Tax Tips from Walt’s Talk at NYSSCPA

TDG’s Walter Primoff spoke at the NY CPA Society’s “Tax and Financial Planning for Individuals” conference last week. Some of the law changes affecting our clients for 2021 tax returns include:

  • For joint return filers not itemizing deductions, the amount of charitable contributions that reduce taxable income has increased from $300 to $600.
  • Teachers can include costs of COVID protective equipment under the $250 Educator Deduction.
  • The 7.5% medical deduction floor has been made permanent and will not go back to 10%.
  • The income limitation on the Lifetime Learning Credit was increased to match the limitation for the American Opportunity Tax Credit but will no longer be adjusted for inflation.
  • For 2021 and 2022 only, the business meals deduction at a restaurant or for restaurant take-out goes back to 100% of the meal’s cost. Business meal food from a grocery store does not count.
  • The penalty for overvaluing non-cash charitable contributions is increased from 20% to 50%.
  • From 2020 through 2025 there is no income tax on forgiven student debt.

As always, you should verify with your advisor how these and other changes may or may not apply to your specific situation. Call or email us to discuss these points and learn what else you can do to minimize your tax burden before the year is over.

Walt’s favorite tax-related court case involved a physicist here in Connecticut with an ingenious idea. American Express offered a credit card giving 5% cash back for grocery and pharmacy chain purchases. The physicist charged $6 million of VISA gift cards to the card, earning $300K in cash back rewards. He then used the VISA cards to buy money orders that he deposited to his checking account to pay the AMEX bills. The gift cards and money orders cost about 1% ($60K), netting a nice $240K profit.

The physicist did not declare the $300K as taxable income, taking IRS at its word that such cash-back, airline miles and similar rewards were a non-taxable return of purchase price. The IRS disagreed and sent a bill for tax on the $300K. The physicist took the IRS to court, and the judge basically agreed with the physicist’s case. The judge noted that, had the physicist been more modest in the number of his transactions, he may never have been discovered as there was no requirement to report any of this on a 1099. The only reason the IRS had been alerted was because the sheer number of transactions caused automated money laundering procedures to be triggered!

Thanks to this case, AMEX and other card issuers have since updated their cardmember agreements to disallow this and other practices attempting to “game the system”.

The Markets

Economists like to joke that inflation is just right when no one notices it.

Last week, investors noticed it. The Consumer Price Index (CPI), which is a measure of inflation, rose 0.9 percent in October and 6.2 percent over the last 12 months, according to the Bureau of Labor Statistics. (When volatile food and energy prices were excluded, the CPI was 4.6 percent for the period.)

That’s the highest level for inflation in 30 years, according to The Economist, and well above the United States Federal Reserve’s policy goal of two percent inflation over the longer term.

Uncertainty about the nature of inflation has left the U.S. Federal Reserve wedged in an uncomfortable policy position. The Economist explained: 

“As inflation has accelerated economists and officials have debated whether it is a transitory phenomenon—reflecting overstretched supply chains—or a more persistent problem. It is far more than an academic debate. If inflation is short-lived, the right move for the Federal Reserve would be to look through it, aware that jacking up interest rates may do more harm than good. If, however, inflation is stubbornly high, the central bank is duty-bound to tame it,”

Taming inflation could mean tapering bond buying and raising rates more quickly than planned and higher rates tends to slow and, sometimes, stall economic growth.

When making policy decisions, Personal Consumption Expenditures (PCE) is the Fed’s preferred inflation gauge. The readings for the CPI and the PCE rely on information from different sources.

“The CPI uses data from household surveys; the PCE uses data from the gross domestic product report and from suppliers. In addition, the PCE measures goods and services bought by all U.S. households and nonprofits. The CPI only accounts for all urban households,” reported Fanglue Zhou of Callan Associates.

PCE data will be released on November 24.

Major U.S. stock indices retreated a bit last week, according to Ben Levisohn of Barron’s, leaving the Standard & Poor’s 500 Index up 24.7 percent year-to-date. The yield on 10-year U.S. Treasuries rose last week.

Data as of 11/12/21 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 Index -0.3% 24.7% 32.4% 19.8% 16.7% 14.1%
Dow Jones Global ex-U.S. Index 0.3 8.2 17.2 10.2 8.5 5.0
10-year Treasury Note (yield only) 1.6 N/A 0.9 3.1 2.2 2.0
Gold (per ounce) 3.3 -1.4 -0.8 15.6 8.9 0.5
Bloomberg Commodity Index 0.1 31.7 39.5 7.4 4.5 -3.6

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, MarketWatch,, Federal Reserve Bank of St. Louis, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

What Can James Bond Teach Us About Travel Medicine?

Recently, Travel Medicine and Infectious Disease, a research journal, published “No time to die: An in-depth analysis of James Bond's exposure to infectious agents.”

The authors focused their research on 007 because they felt an occupational kinship to the fictional British secret agent. “Life as infectious disease researcher is indisputably exciting. Daily encounters with life-threatening microorganisms, academic competitors, hostile reviewing committees, and extensive international travel can make for a thrilling career. International espionage is possibly the only profession that overshadows our branch of academia in these respects.”

The team spent almost 52 evening hours evaluating whether Bond, James Bond, adhered to international travel advice during the 86 trips he took to other countries, on film, between 1962 and 2021. The authors concluded the MI6 agent, “…is an exemplar of reckless disregard for occupational health but serves as a useful tool for drawing attention to the important issue of infectious disease risk while working and traveling.”

Among the many issues identified, the paper’s authors reported that James Bond was:

  • Woefully uneducated about the dangers of food-borne infections and the precautions necessary to prevent them. In particular, he is only seen to wash his hands twice. Viewers can only hope the soap-and-water action was occurring offscreen.
  • Cavalier about protecting against insect bites on trips to the Bahamas, Jamaica and India which put him at risk for malaria, dengue and chikungunya, respectively. Bond failed to apply insecticide and slept with his windows open. The researchers suggested that Bond’s watch be equipped with insect-fighting technology.
  • At high risk of dehydration. “Alcoholic beverages, shaken or stirred, do not prevent dehydration, which is a major concern given the extremes of physical activity he goes to, often in warm climates. On only three occasions was Bond observed drinking non-alcoholic drinks: orange juice, coffee and salt water, of which the latter is particularly unhelpful in maintaining fluid balance.”

In the end, the authors encouraged MI6 to better prepare its fictional agents for missions to foreign destinations. After all, they only live once.

Weekly Focus – Think About It

“To be yourself in a world that is constantly trying to make you something else is the greatest accomplishment.”

—Ralph Waldo Emerson, philosopher

Wishing you and your families well,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management

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  • Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
  • Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
  • The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
  • All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
  • The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
  • The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
  • Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
  • The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
  • The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
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  • Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
  • Past performance does not guarantee future results. Investing involves risk, including loss of principal.
  • You cannot invest directly in an index.
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  • The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts set forth may not develop as predicted and are subject to change. Investing involves risk including loss of principal.
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