Tax Planning Checklist - Morgan Stanley

education / tax planning checklist november 20102010 Year-EndTax Planning ChecklistPlanning strategies to discuss with your Financial Advisor and tax professional before year-end.general tax issuesFind out if you carryover any losses from the sale of investments. Usethis information to determine if you want to use these losses to offsetany investment gains from 2010 or in future years.When selling securities, ask your Financial Advisor how to comply withwash sale rules that govern the purchase and sale of similar investmentswithin a 30-day period.Have your tax advisor estimate your adjusted gross income and tax ratenow to determine if you have any Alternative Minimum Tax (“AMT”)liability for 2010. If so, you may consider deferring taxable income to2011 or accelerating or deferring deductions in 2010 to minimize AMT.Tell your tax advisor if you purchased any big-ticket items this year orare intending to by year-end. You may qualify for valuable tax credits ordeductions if you made energy-saving home improvements, purchased ahome, or paid for a college education.retirement accountsFully fund your IRA and company retirement accounts as soon aspossible. You have until April 15, 2011, to fund your IRA for 2010.You should consult your tax advisor to determine the deadline forcontributing to your company retirement plan.If you are age 70½ or older and have a Traditional, SEP, SAR-SEPor SIMPLE IRA, remember to take your Required MinimumDistribution (“RMD”) for 2010.Explore the benefits of a Roth IRA. Tax law changes in 2010 enable allinvestors to convert to a Roth IRA, which not only provides tax-deferredgrowth, but also tax-free income in retirement.If you own a business which has a calendar tax year, you have untilDecember 31, 2010, to adopt a qualified plan in order to deductcontributions for 2010. If you miss this deadline, a SEP plan can beestablished and funded by the due date for filing the plan sponsor’s2010 tax return (with extensions)—which, if you are a sole proprietor,could be as late as October 15, 2011.Check with your employer if your company’s retirement plan containsa designated Roth account. As a result of the Small Business Jobs Actof 2010, you may be able to complete a Roth conversion within youremployer-sponsored plan.Diversifying your retirement portfolio with a variable annuity may helpcomplement your existing investment strategy by providing a number oftax advantaged benefits—including opportunities to reduce your currenttax liability, increase retirement savings, and possibly supplement socialsecurity and/or pension benefits.

education / tax planning checklistgifting plansComplete any gift transfers to individuals or use the annual exclusion tomake gifts to an Irrevocable Life Insurance Trust by year-end. Not onlywill this make you feel good, but you will help reduce the value of yourestate and future estate taxes. You can transfer up to $13,000 perrecipient in 2010 without incurring any federal gift tax. Spouses togethermay gift up to $26,000 per recipient.If you plan to gift shares of stock to charity, you must act by year-end.By gifting long-term appreciated stock, you can qualify for a potentialincome tax deduction—or by selling stock that has lost value anddonating the proceeds, you can realize a loss to offset other gains.Talk with your Financial Advisor about gifting through a 529 plan.Transfers to 529 plans can help reduce income or future estate taxes.By making an accelerated gift through a 529 plan, you can gift up to$65,000 ($130,000 for couples) per beneficiary. 1Ask your Financial Advisor about the charitable benefits of theMorgan Stanley Smith Barney Global Impact Funding Trust (“GIFT”),a suite of services designed to help you build your philanthropic legacythrough a professionally-managed donor-advised fund and related grantmaking and reporting tools. 2business ownersIn light of the expected expiration of the Bush tax cuts after 12/31/10,consider taking capital gains and accelerating income in 2010 to avoidpotential higher taxes in 2011. Conversely, losses may prove to be morebeneficial if held until 2011.Consider how the new Small Business Jobs Act may benefit yourbusiness. The extension of the 50% depreciation bonus may allowyour company to preserve or increase cash flow by reducing currenttax liability.If you are in the process of selling your business via an installment salemethod, consider electing out of that approach and accelerating incomein 2010, ahead of potential tax increases.If your company has a 401(k), 403(b) or 457(b) plan, consider offeringemployees the opportunity to convert their existing retirement accountto a Roth account.other issuesUse any balance in your employer’s Flexible Spending Account (“FSA”)for qualified medical expenses by year-end 2010. When estimating yourcontributions for next year, consider the increasing costs of uncoveredmedical expenses and changes in your company’s medical insurance plan.Ask your Financial Advisor for help rebalancing your portfolio to remain inline with your goals, time horizon and risk tolerance. Discuss any newopportunities for investing that might be appropriate for you.Consider using a securities based loan to help you meet a tax obligation.Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Smith Barney Financial Advisors do not providetax or legal advice. This material was not intended or written to be used for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Individualsare urged to consult their personal tax or legal advisors to understand the tax and related consequences of any actions or investments described herein.Please consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. The offering statement containsthis and other important information. To obtain an offering statement, please call your Financial Advisor. Read the offering statement carefully before investing.1 No further annual exclusion gifts and/or generation-skipping transfers to the same beneficiary may be made over the same five-year period, and the transfermust be reported as a series of five equal annual transfers. If the donor dies within the five-year period, a portion of the transfer amount will be included in thedonor’s estate for estate tax purposes.529 college savings plan funds not used for qualified educational expenses are subject to applicable taxes and penalties.Before investing, investors should consider whether tax or other benefits are only available for investments in the investor’s home-state 529 college savings plan.Variable annuities are sold by prospectus. Investors should carefully consider the investment objectives, risks, charges and expenses carefully before investing.The prospectus contains this and other important information and should be read carefully before investing.Variable annuities are long-term investments designed for retirement purposes and may be subject to market fluctuations, investment risk, and possible loss ofprincipal. All guarantees are based on the claims-paying ability of the issuing insurance company. Taxable distributions (and certain deemed distributions) aresubject to ordinary income tax and, if taken prior to age 59½, may be subject to a 10% federal income tax penalty.For clients whose account is carried by Morgan Stanley Smith Barney, insurance products are offered in conjunction with Morgan Stanley Insurance ServicesInc. For clients whose account is carried by Citigroup Global Markets Inc., Morgan Stanley Smith Barney offers insurance products in conjunction with SBHU LifeAgency, Inc.Since life insurance is medically underwritten, your client should not cancel their current policy until their new policy is in force. A change to their current policymay incur charges, fees and costs. A new policy will require a medical exam. Surrender charges may be imposed and the period of time for which surrendercharges apply may increase with a new policy. Your clients should consult with their own tax advisors regarding any potential tax liability on surrenders.Rebalancing does not protect against a loss in declining financial markets. There may be a potential tax implication with a rebalancing strategy. Please consultyour tax advisor before implementing such a strategy.2 Morgan Stanley Smith Barney GIFT, Inc. is an organization described in Section 501(c) (3), of the Internal Revenue Code of 1986, as amended, andMorgan Stanley Smith Barney Global Fund Trust is a donor-advised fund. Various divisions of Morgan Stanley Smith Barney LLC provide investment managementand administrative services to Morgan Stanley Smith Barney GIFT.© 2010 Morgan Stanley Smith Barney LLC. Member SIPC. GP10-02276P-T11/10 CLF96001 JV6491481 11/10