■^ 



-J«- 



the dollar value assigned to that agreement must be 

 written off over 15 years. 



DEPRECIATION ON NON-RESIDENTIAL 

 REAL ESTATE 



Non-residential real estate put into service in a trade 

 or business after May 13, 1993, will be depreciated 

 over 39 years, up from 31.5 years. Congressional think- 

 ing on this change was that the extended useful life 

 of property was more in keeping with the actual eco- 

 nomic life of the property. However, the 39-year life 

 also applies to improvements made to leased prop- 

 erty, regardless of the term of the lease. In other 

 words, if a taxpayer signs a five-year lease on a busi- 

 ness property and invests $15,000 in improvements, 

 those improvements have to be depreciated over 39 

 years, instead of the term of the lease. 



CLUB DUES, BUSINESS MEALS AND TRAVEL 



Effective January I, 1994, no deduction is permitted 

 for membership dues in any club organized for busi- 

 ness, pleasure, recreation, or any other social pur- 

 pose. In the same vein, the deductible portion of 

 meals and entertainment expense has been reduced 

 from 80 percent to 50 percent effective for taxable 

 years beginning after 1993. 



For travel expenses of a spouse to be deductible 

 after 1993, the taxpayer must show that the spouse is 

 an employee of the taxpayer's business and that the 

 spouse's presence on the trip has a bona fide busi- 

 ness purpose. These restrictions also apply to depen- 



dents and other individuals accompanying the tax- 

 payer on business trips. 



TARGETED JOBS CREDIT 



The targeted jobs credit program allows an employer 

 to generate tax credits by employing economically 

 disadvantaged individuals and other "targeted 

 groups". This program expired on |une 30, 1992, but 

 was extended under the new tax law to apply to indi- 

 viduals hired after June 30, 1992, and before Decem- 

 ber 31, 1994. Generally, the credit is 40 percent of up 

 to $6,000 of wages, or a tax reduction of $2,400. For 

 summer help, the credit is 40 percent of up to $3,000 

 of wages, or $1,200. There is some paperwork in- 

 volved in having employees certified as members of a 

 "target group ". However, considering the tax savings 

 opportunity, its worth pursuing. 



THE BOTTOM LINE 



Depending on your point of view, and your tax 

 bracket, the new law is either a valiant attempt at tax 

 fairness or legal extortion. In any case, readers are ad- 

 vised to consult with their tax consultants to deter- 

 mine exactly how the various sections of the law will 

 affect them and their businesses, i' 



Patricia M Murphy is a principal with Atlantic Management 

 Company, \nc, Orchard Park — Suite A-\2, Portsmouth, NH 

 03801 She can be reached at (603) 436-8009 

 Atlantic Management has been providing financial advisory 

 services to closely held businesses for over 25 years 



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The Plantsman 



