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Tax Implications of Business Losses
Business profits will always incur income tax, but a business loss does not necessarily provide a tax benefit. Typically, individuals may use business losses to offset income from other sources when determining their adjusted taxable income. But there are limitations.

A business owner with a loss can determine if the loss is tax-deductible by applying at-risk rules. The at-risk amount generally comprises money or property contributed to the activity in question plus the amount borrowed that, legally, the owner must repay personally.

Individuals in partnership businesses are also subject to the at-risk limitation; plus, they must satisfy the requirement for a sufficient tax basis. A partner's basis is generally the amount of money and property contributed to the partnership, plus the partner's allocation of undistributed profits that have accumulated over all past periods. A tax basis, therefore, decreases as a consequence of distributions received along with nondeductible expenses.

The income tax consequence for a partnership's profit or loss is assessed on the individual tax returns of the partners. But deduction of a loss is limited when a partner has no tax basis or at-risk amount. Here, a capital contribution or a personal guarantee of partnership debt is required so the partnership's pass-through of loss can be deducted from each partner's personal return.

This presents a complication for limited partners, who avoid liability for the entire enterprise because their exposure to a business is limited to their contributions of cash. That said, having less money at risk may also restrict a limited partner's ability to deduct a partnership loss.

The Face of the Future: Boomer Start-Ups
Prediction: Boomers will still make waves in 2018.

After years of working for others, these educated, experienced individuals are making the decisions - and taking the risks - to start their own businesses in retirement, impacting society for years to come.

Notes writer Wendy Mayhew in the Globe and Mail: "Many people can't wait to retire. They want to golf, travel, or just take it easy. Others can't wait to retire so they can start the business they have always dreamed about."

Boomers are doing what they love and doing it well.

According to the 2017 Kauffman Index of Entrepreneurship, individuals between 55 and 64 accounted for 25.5% of all new entrepreneurs in 2016, while the number of 20- to 34-year-old entrepreneurs declined by 34.3% over a 20-year period to 24.4% in 2016.

Why? It may be that the boomer generation is healthier and more energetic than previous generations, it may be that boomers (who are notoriously bad savers) need to supplement their income in retirement, or it may simply be that older workers have a lot to offer.

In a recent CNBC article, Jody Holtzman, senior vice president of market innovation for AARP, suggests: "[As a boomer] you know what works and what doesn't, you've been in small and big companies ... You have a network, possibly savings, or other ways to gain access to capital. All of those things come together as key success factors for building and sustaining a business."

Plus, boomers have always wanted to change the world. And now's their chance.

The Face of the Future: Experiential Marketing
A new approach to shopping is coming our way in 2018, and it's one that every business, no matter the industry, should be aware of.

It's all about the "experience." And while the charge is led by branded clothing and accessory retailers, it paints a picture of significant change to every company's interface with customers.

As the department store and the mall die off, corporations are experimenting with branded environments that function as marketing tools as well as retail outlets.

For decades, shopping - in malls, big-box showrooms, and tiny specialty boutiques - has been a cultural pastime. But the way people shop has changed dramatically as consumers become more digitally engrossed.

Interestingly, as noted in a recent article in CityLab, this may not be a good thing: "The current conventional wisdom on retail holds that digital sales cannot reach far enough on their own to build sustainable customer bases, so digital-first brands have migrated toward physical stores, pop-up shops, and other experiential marketing strategies."

Now, it's not just about buying a product, it's about experiencing it. From malls that once engaged customers just by presenting a cornucopia of brands, the experiential environments now engage shoppers in ways designed to promote a brand's online presence. Now, brick-and-mortar spaces serve as flexible settings or backdrops for retail "experiences" and incorporate advertising, design, events, multisensory input, social media, and more to woo and wow customers.

Clothing and accessory brands such as Warby Parker, Bonobos, and Everlane - known as digital-first retailers - have been out front in designing "experiential spaces" to connect offline with customers.

But others will follow. The experiential approach is resonating with the customer - who, as we know, is always right.

Tax-Deductible or Not? Ask Your Expert
As business owners prepare to file tax returns, many find they have to reconstruct some of last year's expenses. This is usually a result of paying business expenditures by personal means instead of through a checking account or credit card used exclusively for business. Delays and frustration result when there isn't sufficient information, or you can't remember the details required for some write-off claims.

By hiring an accounting professional, you can be sure every expense deduction your business is entitled to will be captured in a timely manner. Bookkeeping experts know how to record expenses regardless of the payment method. And they understand the conditions that make certain types of expenses tax-deductible.

Double-entry systems

With a double-entry bookkeeping system, every transaction records a balanced combination of debits and credits. Unlike spreadsheet entries, double-entry accounting will debit an expense category and simultaneously record the offsetting credit to an account that shows how the expense was paid.

Using accounting software for do-it-yourself bookkeeping is not a complete solution because it leaves you with the burden of learning about account categories and tax classifications. But when a skilled bookkeeper sees checking account outflow or credit card use, he or she will immediately seek information about the balancing expenditures. Even when your personal funds are spent for business purposes, your accounting professional will know the account that offsets the expenditure.

Normal expenses

A deductible business expense must be necessary and normal for your type of enterprise; personal expenses are never tax-deductible just because they're paid by your business or have a loose connection to business operations. These types of transactions are considered owner draws.

For example, an accounting professional knows that business owners are prohibited from claiming tax deductions for wardrobe items or personal grooming. Expenditures such as haircuts and gym memberships are strictly personal, regardless of the intangible benefit derived from maintaining a good appearance.

Businesses also cannot deduct costs for the owner's residence. However, if you meet home office requirements, the business may reimburse you for a percentage of your home expenses. This is based on the portion of your home used regularly and exclusively for business; in most cases, the home office space also must be the primary business location.

Special rules

There are special tax rules that allow deductions for business education and travel. General business education is deductible, but seminars and conferences must maintain or improve skills required in your current line of business.

Business travel is generally associated with overnight stays away from home. A deduction for all the travel cost is allowed when the primary purpose of the trip is to conduct business. When the trip is primarily for pleasure, only expenses directly related to business are tax-deductible. In this case, deductions for transportation and lodging costs are based on the percentage of days during the trip that business is conducted.

Obviously, caution must be exercised when claiming certain tax deductions. Your accounting professional is a valuable source of knowledge about what can - and can't - be claimed.
Michele Ball
Perfect Additions
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Worth Reading
6 Ways to Survive Retirement Income Shocks
By John Wasik
As much as you'd like a smooth road to retirement, there's no way to avoid the unpredictable bumps that happen along the way. "Income shocks" - like suddenly losing your job - can come at any time. And while you can't predict these setbacks, you can survive the blows. Find out how to get yourself back on track.

Work and the Loneliness Epidemic
By Vivek Murthy

Harvard Business Review

Despite living in the most technologically connected era in history, more people are lonely. In the workplace, employees (and some 50% of CEOs) say they feel lonely in their jobs. Many now work from home, but even office workers still spend the majority of work time in front of a computer screen. Loneliness, which Murthy describes as a feeling of not being connected socially, isn't just a health problem; it saps productivity at work. We social animals need to connect in real time. Here's how.

How to Retire at 40
By Ben Steverman

Bloomberg Businessweek

Think it's impossible to retire by the age of 40? Three people who retired in their 30s and 40s can tell you all about how they made the seemingly impossible possible. What do the three have in common? Discipline. They all live on 3% to 4% of their investment portfolio annually. Easier said than done? Not for these individuals. Or maybe for you.

2018 Marketing Trends
In a dynamic marketplace, it can be difficult to keep up with current marketing trends. Maintain a solid marketing presence in 2018 with these links:

Content marketing is shifting from product-centered to audience-centered. Discover what trends to watch for this year:
Content Marketing Trends to Watch for 2018

What works best in digital marketing today? Here are the top 10 digital marketing trends for 2018:
10 Marketing Trends to act on in 2018

What about social media? Where and how does that fit in? Get the scoop here:
3 Social Media Marketing Trends to Watch in 2018

Many businesses must enhance their marketing approaches to survive. Transform your methods with these trends:
Top 10 Trends For Digital Transformation In 2018

From chatbots to geofencing, you won't want to miss out on these innovative marketing strategies
10 Marketing Trends to Think About for 2018
This newsletter and any information contained herein are intended for general informational purposes only and should not be construed as legal, financial or medical advice. The publisher takes great efforts to ensure the accuracy of information contained in this newsletter. However, we will not be responsible at any time for any errors or omissions or any damages, howsoever caused, that result from its use. Seek competent professional advice and/or legal counsel with respect to any matter discussed or published in this newsletter.
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