This is part one of a 2 part series on Partnerships & Networking. Today, I will be talking about Partnerships. 

We all have heard the saying “The whole is greater than the sum of its parts.”

Well we are going to touch on how to use collaboration, relationships and Networking to move your business forward.

When we talk about Partnerships there are various topics we can talk about. Here are a few we can touch on. There can be;

Business Partnering- where you have a partner in your business and it is registered as such. The official definition is a legal association of two or more persons who share in the risks of financing and managing a business and in its profits. In order to establish the terms of the relationship and to protect partners in the event of a disagreement or dissolution of the business, a partnership agreement should be drawn up with the assistance of a lawyer.

There is a general partnership, where two or more owners share the management of business, and each is personally liable for all the debts and liabilities of the business. This means that each partner is responsible and must assume the consequences of the actions of the other partner (s)

 A Limited partnership may involve limited partners who contribute capital only. Limited partners do not contribute to the management of the business and are personally responsible only for the amount of capital they have contributed. A limited partnership may also involve general partners. They are fully liable for the debts and obligations of the business, but may be entitled to a greater share of the profits. Partnerships also come under provincial jurisdiction.

 Advantages of a partnership:

Ease of formation

Low Start up costs

Additional sources of investment

Possible tax advantages

Disadvantages

Unlimited liability

Divided authority

Difficulty of raising new capital (based on the individual more than the company)

 Other forms of Partnerships can be:

Joint venturing- Joint Venture Partner’s is another way you may have heard it called. It is where you join hands with another business to move forward on a project but that person may not be involved in your business from a legal standpoint.

An example of this is working on a project together like Strategic Biz Builder does with Real Life Changes Productions to produce an educational business CD or IPod and ITunes, the examples are endless. They are separate entities but joined hands to deliver today’s information to the world.

Bartering- This is where a company works hand in hand to offer the other something that they need in exchange for something. This is very useful for small businesses who may not have the extra funds for instance to pay for a service but has the need. Here you are not bidding for price but sharing expertise equally for the good of both parties.

 The benefits of these types of partnerships are it can help you generate ideas. It can open new markets that you may never have thought of, and you can share risks and costs of whatever venture you are working on with that person or company.

Expanding your thinking about how partnerships can work for you will bring many opportunities in your life. Your business can be in a completely different industry and you can still benefit from the relationship. So begin to build those partnerships and relationships, as collaboration is one of the keys to running a successful business.

WANT TO USE THIS ARTICLE IN YOUR E-ZINE OR WEB SITE? Feel Free. Simply include this blurb with it: Darcelle Runciman is a Mentor, Author and CEO of Strategic Biz Builder.  Darcelle  mentors entrepreneurs and small business owners how to use systems and their brilliance to increase their profits and create money making businesses by showing you steps to take to gain clarity and retain that balance that we all strive for. Darcelle works with groups, through tele-classes, through her online products, and her Adventure Mentoring Programs. For more information visit www.darcellerunciman.com and sign up for her Free Ezine “Inspired Business.”Also check out www.strategicbizbuilder.com.

We have been operating a Home Improvement Agency service at West Dorset since 1994. The main aim is to help disabled and elderly people stay living independently in their homes for as long as possible by providing aids, adaptations and advice. Last year, as an additional service, we introduced a handyvan service in partnership with Help the Aged and Magna Housing who share the extra £40,000 cost. The idea was to help residents with those minor jobs that many would regard as DIY but which are tricky for older and disabled people to do or expensive if they employ a tradesman. Now I am very pleased that we have been successful in obtaining £31,000 to develop the service further. This will enable more people to benefit from the service by increasing referrals from GPs, nurses and community matrons. This emphasis on helping our residents to stay living independently has to be the right way for the future.

Ridin' the range and ropin' the headlines so you don't have to.

Your biweekly roundup of media coverage on the world of nonprofit and philanthropy (yee-ha).

Local:

Business Forum: Give Thanks and Help
(The Star Tribune) As the holiday season roles in, let’s not forget those Minnesotans in need.

Minnesotans Gave So Much, Now Givemn.org Needs Help
(Kare 11) The success of GiveMN.org’s recent “Give to the Max” day was truly unprecedented. Over 3,500 nonprofits received $13 million in donations through the GiveMN site. The sheer scale of this outpouring of generosity has sent GiveMN funders and staff scrambling to cover all transaction fees.

Northwest Area Foundation Awards $2M in Grants
(Minneapolis St. Paul Business Journal) The Northwest Area Foundation has announced over $2 million in grants awarded to 14 different organizations. The focus of NWAF’s recent grants was on organizations helping reduce poverty and promote prosperity.

Partnerships Are Key in the Economic Recovery
(Albert Lea Tribune) Tim Penny, president and CEO of the Southern Minnesota Initiative Foundation, reflects on the importance of partnerships in fulfilling SMIF’s mission to invest in the region’s future growth.

National:

Opinion: Are Metrics Blinding Our Perception?
(The New York Times) Anand Giridharadas discusses Western society’s preoccupation with metrics to the exclusion of other methods of perceiving, and speculates about the costs of using only numerically quantifiable evidence to guide our decision making about everything from what music to buy, to what charities to give to.

Clicking for a Cause
(The New York Times) Using social media as a tool for increasing engagement and giving has been created a lot of excitement and skepticism in the nonprofit and grantmaking sector. This article has a nice overview of some of the successful efforts, as well as reflections from social media big wigs like Randi Zuckerberg.

Grappling with a Wealth of Guilt
(The Washington Post) Young heirs wrestle with the advantages and responsibilities of their inheritance, and the question of how to use their wealth for the greater good.

Yesterday, the Houston Apartment Association hosted a program with the Brays Oaks Management District regarding the growing problems of electricity theft and meter tampering. 

The program featured three panelists, Director for Corporate Security for Centerpoint Energy - Lewis Griffith, Director of Public Relations for Crime Stoppers of Houston - Amy Smith, and HAA General Counsel – Howard Bookstaff. 

Griffith started his presentation by describing the increases in electric diversions that CenterPoint has seen over the past few years.  In 2004, CenterPoint confirmed 2,980 cases of electricity diversions, but this year over 14,000 cases have already been confirmed.  People may steal electricity in a few ways.

They may illegally slow their meter down to register less electricity than is actually being used, reconnect a meter after it has been disconnected for non-payment, or hook into a meter that does not belong to them.

Tampering with a meter can be dangerous and is illegal.  In fact, some meter tamperers are charged with a felony! That is why HAA is partnering with Crime Stoppers to encourage apartment residents to report electricity thieves! Download this flier to share information with your community on reporting electricity theft.

Here are signs that management and maintenance personnel should look for to determine if someone is tampering with meters on their property:

• Cut wires on the plastic closure tags on the meter cover. Meters should have little plastic and metal tags installed by CenterPoint.  The gray tag means that the meter is connected and receiving electricity.  A red tag means that the meter has been disconnected.
• Holes or metal in the plastic meter cover.  Foreign objects may cause the meter’s gears to slow down and not count electricity appropriately.
• A meter cover that is pried up from the meter box.  A loose meter cover may indicate that someone has tried to tamper with wiring behind the meter face.

Meter tampering is a big problem for apartment owners because the cost of repairing a meter or going after electricity that has been stolen is often borne by the owner.  If money is owed for use of a particular meter, headaches in getting power turned on can cause trouble for future residents. 

To report meter issues, contact CenterPoint:

• Emergency Response: Call 713-207-2222 or 1-800-332-7143. Select language, wait for prompt, enter 1, wait for prompt, enter 0.  CNP electric personnel will be dispatched ASAP.
• Non-emergency cases: call CNP Revenue Protection Meter Diversion at 713-207-7225.  Response is usually within 4-7 days.
• Corporate Security: Call 713-207-7423 or toll free 1-877-232-4911.

HAA General Counsel Howard Bookstaff warned managers to keep an eye out when signing Continuing Service Agreements with Retail Electric Providers, to ensure that damages are not sought from owners for stolen electricity.

CenterPoint says that the new Smart Meters should help detect tampering, but until they are installed throughout the city, we need your help in fighting electricity tampering!

Check out this blog post by Nancy Sarnoff for more information on the program.

Our thanks go to HAA members Direct Energy, TXU Energy, REPower, BLUTrend, and Gexa Energy for being at this event and sharing their knowledge with attendees!

Longtime sustainable builder brings 30 years experience

John Barrows

By Mike McKibbin

ASPEN – A nationally recognized “green” builder with more than 30 years of experience in sustainable and energy-efficient building projects will teach three days of certified green professional courses at Aspen Meadows Resort Dec. 2-4.

Through the Green Building Academy of Colorado Mountain College, students will learn about building to meet the national benchmark for green construction, the National Green Building Standard — the first and only green building rating system approved by the American National Standards Institute, said Dr. Rick Johnson, instructional chair at Colorado Mountain College’s Aspen Campus.

Nationally known green builder John Barrows will teach the courses. Barrows’ company has completed historic renovation, remodeling and new construction projects on the east end of Long Island, N.Y., and the resort areas of Nantucket, Mass., Hilton Head, S.C. and the Adirondacks of upstate New York, employing green building practices whenever possible. Those projects have included geothermal heating systems, passive solar design, photovoltaics, advanced insulation technologies and local materials.

Colorado Mountain College is also jointly sponsoring the Green Think Symposium on Dec. 4 at Aspen Meadows. In this symposium, Barrows will join other local, state and national leaders in discussions about new energy. New energy vendors and service providers will be on hand to discuss their products and services with homeowners and builders.

Ahead of the trend

Barrows incorporated sustainable building principles before “green” became a common buzzword.

“I tend to shy away from the use of the term,” he said. “It’s really just a better way to build. But I have been waiting for this wave to catch on.”

Barrows is the author, with Lisa Iannucci, of “The Complete Idiot’s Guide to Green Building and Remodeling” and a principal developer of certified green professional course material for the National Association of Home Builders’ University of Housing. The NAHB material will guide the content of the CMC workshop.

The course is offered in partnership with the Mountain to Mesa Home Builders Association, which serves professional members from Aspen to Parachute in the Roaring Fork, Crystal, and Colorado river valleys.

Barrows said Colorado’s elevation poses some unique challenges to green building.

“With heavy snowfall, abundant amounts of sunshine for solar power and high altitude, you really have to know your building science principles and how to apply them,” he said.

According to Barrows, one of his past students said he realized “how much most homes are built based on folklore. His father did things a certain way and that’s how he was taught. This is much more scientific.”

The workshop should help establish the Green Building Academy as “a premier green building training program,” Johnson said. The academy began operating out of the CMC campuses in Aspen and Rifle earlier this year, with plans to expand to other campuses in the future.

Builders, contractors, real estate professionals can learn

The first two days of Barrows’ workshop will focus on green building for building professionals.

“That will be a pretty comprehensive look at everything from site selection, to where building materials originate, to the use of water, landscaping, heating and cooling,” Johnson said.

The third day, Business Management for Business Professionals, will focus on developing green projects within a budget “so they make financial sense,” Johnson said.

Builders, contractors, Realtors and real estate agents are among those who can benefit from the workshop, Johnson said.

Colorado Mountain College’s West Garfield Campus in Rifle will offer the workshop Feb. 10-12, and plans also call for it to expand to other sites, such as the college’s Vail-Eagle Valley Campus in Edwards, Johnson said.

For registration information for the Dec. 2-4 workshop or to learn more about CMC’s Green Building Academy, call Johnson at 970-925-7740.

For more information or to register for the Green Think Symposium, visit www.m2mhba.org.

Green Building Academy at Colorado Mountain College

The John Barrows workshop is just one of many offerings available through Colorado Mountain College’s Green Building Academy.

Courses offered through the academy help prepare students to analyze the energy efficiency of existing buildings; use energy-efficiency analysis to recommend retrofit and remodeling options; design and complete projects; use energy, water and other resources efficiently; develop and build landscape and construction projects in line with sustainable practices; use building analysis science and technology to manage properties more efficiently; and successfully complete required certification exams.

The academy offers two certification tracks: building science, to train envelope, heating and cooling professionals and building analysts; and green professional certification, which helps students become certified green professionals.

Partners in the academy are:

• Building Performance Institute, which supports a highly professional building performance industry through individual and organizational credentialing and a rigorous quality assurance program. A CMC student must pass the institute’s exam to be building science certified.
• The National Association of Home Builders, a trade association that promotes policies to make housing a national priority. The academy follows the association’s green professional certification curriculum.
• NYSERDA, a national pioneer in building efficiency and sustainability. The academy’s building science curriculum was developed and held under license from NYSERDA, and is regarded as the national standard.
• Formerly known as the Pitkin-Garfield Home Builders Association, the Mountain to Mesa Home Builders Association serves professional members from Aspen to Parachute in the Roaring Fork, Crystal and Colorado river valleys.
• The City of Aspen has collaborated with the Building Performance Institute and Colorado Mountain College to educate and train certified energy auditors through the professional building performance analysts program.

Marketing is the communication and representation of your brand, company, image, etc to your customers and general public.  What employees in your business are doing the marketing?  And  what controls do you have in place?

The companies we work with are small to mid-size businesses that may or may not have a marketing director.  Regardless of having a marketing director many of the people in the organization are facilitating the marketing.  For example: one business we work for has 9 different people in the company running the marketing in different departments and there are 9 different messages, different images, no consistency in brand management, and very little communication between these departments.  This is a major issue because it is confusing to the customers.  It is very important to protect the brand of a business and put in place controls to ensure there is oversight as to what can and can not be done.

There are many marketing channels that businesses utilize to get the word out:  Social media, events, direct mail, cross promotions, website, media, partnerships, collateral, etc.  All these initiatives need to have final approval and sign off by the most experiences marketing person to ensure controls and consistency of image and message.  If 9 people are running marketing in their silos without oversight then your brand is getting beat up!  All 9 of those people should have to seek final approval to print, publish, distribute, etc any and all marketing material and projects.

How many people can run marketing initiatives in your business without controls in place?

After six months of nearly round-the-clock work by consultants and campus planners, Nebraska Innovation Campus’s final business development strategy and campus master plans were presented and approved today by the University of Nebraska Board of Regents.

Lincoln, Neb., November 20th, 2009 —

(read more UNL News Release)

For more information about Nebraska Innovation Campus and to view the most up-to-date versions of the plans, go to http://innovate.unl.edu.

I want to be the best I can for you,
I want all your dreams to come true.
How can one accomplish this;
and give their fullest love certain bliss?

Lets search these waters high and low
amidst the darkest shadows that we sow,
For the perfection one can bring forward
-and the likes to which your heart preferred.

So we have come past all the romance;
made our silent vows, now step our dance,
Within that I wish to obstruct parts of me,
to give to you the best that we can be.

Time with flow unincidentally betwen us,
and now before too late I must confess,
That be all the strength within me now
-to the unspoken fantasies, do avow!

Allocation of Interest

The rules for deducting interest vary, depending on whether the loan proceeds are used for business, personal, or investment activities. If you use the proceeds of a loan for more than one type of expense, you must make an allocation to determine the interest for each use of the loan’s proceeds.

Allocate your interest expense to the following categories.

• Nonpassive trade or business activity interest
• Passive trade or business activity interest
• Investment interest
• Portfolio interest
• Personal interest

In general, you allocate interest on a loan the same way you allocate the loan proceeds. You allocate loan proceeds by tracing disbursements to specific uses.

The easiest way to trace disbursements to specific uses is to keep the proceeds of a particular loan separate from any other funds.

Secured loan. The allocation of loan proceeds and the related interest is not generally affected by the use of property that secures the loan.

Example.

You secure a loan with property used in your business. You use the loan proceeds to buy an automobile for personal use. You must allocate interest expense on the loan to personal use (purchase of the automobile) even though the loan is secured by business property.

If the property that secures the loan is your home, you generally do not allocate the loan proceeds or the related interest. The interest is usually deductible as qualified home mortgage interest, regardless of how the loan proceeds are used.

Allocation period. The period for which a loan is allocated to a particular use begins on the date the proceeds are used and ends on the earlier of the following dates.

• The date the loan is repaid.
• The date the loan is reallocated to another use.

Proceeds not disbursed to borrower. Even if the lender disburses the loan proceeds to a third party, the allocation of the loan is still based on your use of the funds. This applies whether you pay for property, services, or anything else by incurring a loan, or you take property subject to a debt.

Proceeds deposited in borrower’s account. Treat loan proceeds deposited in an account as property held for investment. It does not matter whether the account pays interest. Any interest you pay on the loan is investment interest expense. If you withdraw the proceeds of the loan, you must reallocate the loan based on the use of the funds.

Example.

Connie, a calendar-year taxpayer, borrows $100,000 on January 4 and immediately uses the proceeds to open a checking account. No other amounts are deposited in the account during the year and no part of the loan principal is repaid during the year. On April 2, Connie uses $20,000 from the checking account for a passive activity expenditure. On September 4, Connie uses an additional $40,000 from the account for personal purposes.

Under the interest allocation rules, the entire $100,000 loan is treated as property held for investment for the period from January 4 through April 1. From April 2 through September 3, Connie must treat $20,000 of the loan as used in the passive activity and $80,000 of the loan as property held for investment. From September 4 through December 31, she must treat $40,000 of the loan as used for personal purposes, $20,000 as used in the passive activity, and $40,000 as property held for investment.

Order of funds spent. Generally, you treat loan proceeds deposited in an account as used (spent) before either of the following amounts.

• Any unborrowed amounts held in the same account.
• Any amounts deposited after these loan proceeds.

Example.

On January 9, Edith opened a checking account, depositing $500 of the proceeds of Loan A and $1,000 of unborrowed funds. The following table shows the transactions in her account during the tax year.

Edith treats the $800 used for personal purposes as made from the $500 proceeds of Loan A and $300 of the proceeds of Loan B. She treats the $700 used for a passive activity as made from the remaining $200 proceeds of Loan B and $500 of unborrowed funds. She treats the $800 used for an investment as made entirely from the proceeds of Loan C. She treats the $600 used for personal purposes as made from the remaining $200 proceeds of Loan C and $400 of unborrowed funds.

For the periods during which loan proceeds are held in the account, Edith treats them as property held for investment.

Payments from checking accounts. Generally, you treat a payment from a checking or similar account as made at the time the check is written if you mail or deliver it to the payee within a reasonable period after you write it. You can treat checks written on the same day as written in any order.

Amounts paid within 30 days. If you receive loan proceeds in cash or if the loan proceeds are deposited in an account, you can treat any payment (up to the amount of the proceeds) made from any account you own, or from cash, as made from those proceeds. This applies to any payment made within 30 days before or after the proceeds are received in cash or deposited in your account.

If the loan proceeds are deposited in an account, you can apply this rule even if the rules stated earlier under Order of funds spent would otherwise require you to treat the proceeds as used for other purposes. If you apply this rule to any payments, disregard those payments (and the proceeds from which they are made) when applying the rules stated under Order of funds spent.

If you received the loan proceeds in cash, you can treat the payment as made on the date you received the cash instead of the date you actually made the payment.

Example.

Frank gets a loan of $1,000 on August 4 and receives the proceeds in cash. Frank deposits $1,500 in an account on August 18 and on August 28 writes a check on the account for a passive activity expense. Also, Frank deposits his paycheck, deposits other loan proceeds, and pays his bills during the same period. Regardless of these other transactions, Frank can treat $1,000 of the deposit he made on August 18 as being paid on August 4 from the loan proceeds. In addition, Frank can treat the passive activity expense he paid on August 28 as made from the $1,000 loan proceeds treated as deposited in the account.

Optional method for determining date of reallocation. You can use the following method to determine the date loan proceeds are reallocated to another use. You can treat all payments from loan proceeds in the account during any month as taking place on the later of the following dates.

• The first day of that month.
• The date the loan proceeds are deposited in the account.

However, you can use this optional method only if you treat all payments from the account during the same calendar month in the same way.

Interest on a segregated account. If you have an account that contains only loan proceeds and interest earned on the account, you can treat any payment from that account as being made first from the interest. When the interest earned is used up, any remaining payments are from loan proceeds.

Example.

You borrowed $20,000 and used the proceeds of this loan to open a new savings account. When the account had earned interest of $867, you withdrew $20,000 for personal purposes. You can treat the withdrawal as coming first from the interest earned on the account, $867, and then from the loan proceeds, $19,133 ($20,000 − $867). All the interest charged on the loan from the time it was deposited in the account until the time of the withdrawal is investment interest expense. The interest charged on the part of the proceeds used for personal purposes ($19,133) from the time you withdrew it until you either repay it or reallocate it to another use is personal interest expense. The interest charged on the loan proceeds you left in the account ($867) continues to be investment interest expense until you either repay it or reallocate it to another use.

Loan repayment. When you repay any part of a loan allocated to more than one use, treat it as being repaid in the following order.

1. Personal use.
2. Investments and passive activities (other than those included in (3)).
3. Passive activities in connection with a rental real estate activity in which you actively participate.
4. Former passive activities.
5. Trade or business use and expenses for certain low-income housing projects.

Line of credit (continuous borrowings). The following rules apply if you have a line of credit or similar arrangement.

1. Treat all borrowed funds on which interest accrues at the same fixed or variable rate as a single loan.
2. Treat borrowed funds or parts of borrowed funds on which interest accrues at different fixed or variable rates as different loans. Treat these loans as repaid in the order shown on the loan agreement.

Loan refinancing. Allocate the replacement loan to the same uses to which the repaid loan was allocated. Make the allocation only to the extent you use the proceeds of the new loan to repay any part of the original loan.

Debt-financed distribution. A debt-financed distribution occurs when a partnership or S corporation borrows funds and allocates those funds to distributions made to partners or shareholders. The manner in which you report the interest expense associated with the distributed debt proceeds depends on your use of those proceeds.

How to report. If the proceeds were used in a nonpassive trade or business activity, report the interest on Schedule E (Form 1040), line 28; enter “interest expense” and the name of the partnership or S corporation in column (a) and the amount in column (h). If the proceeds were used in a passive activity, follow the Instructions for Form 8582, Passive Activity Loss Limitations, to determine the amount of interest expense that can be reported on Schedule E (Form 1040), line 28; enter “interest expense” and the name of the partnership in column (a) and the amount in column (f). If the proceeds were used in an investment activity, enter the interest on Form 4952. If the proceeds are used for personal purposes, the interest is generally not deductible.

Interest You Can Deduct

You can generally deduct as a business expense all interest you pay or accrue during the tax year on debts related to your trade or business. Interest relates to your trade or business if you use the proceeds of the loan for a trade or business expense. It does not matter what type of property secures the loan. You can deduct interest on a debt only if you meet all the following requirements.

• You are legally liable for that debt.
• Both you and the lender intend that the debt be repaid.
• You and the lender have a true debtor-creditor relationship.

Partial liability. If you are liable for part of a business debt, you can deduct only your share of the total interest paid or accrued.

Example.

You and your brother borrow money. You are liable for 50% of the note. You use your half of the loan in your business, and you make one-half of the loan payments. You can deduct your half of the total interest payments as a business deduction.

Mortgage. Generally, mortgage interest paid or accrued on real estate you own legally or equitably is deductible. However, rather than deducting the interest currently, you may have to add it to the cost basis of the property as explained later under Capitalization of Interest.

Statement. If you paid $600 or more of mortgage interest (including certain points) during the year on any one mortgage, you generally will receive a Form 1098 or a similar statement. You will receive the statement if you pay interest to a person (including a financial institution or a cooperative housing corporation) in the course of that person’s trade or business. A governmental unit is a person for purposes of furnishing the statement.

If you receive a refund of interest you overpaid in an earlier year, this amount will be reported in box 3 of Form 1098. You cannot deduct this amount. For information on how to report this refund, see Refunds of interest later in this chapter.

Expenses paid to obtain a mortgage. Certain expenses you pay to obtain a mortgage cannot be deducted as interest. These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses. If the property mortgaged is business or income-producing property, you can amortize the costs over the life of the mortgage.

Prepayment penalty. If you pay off your mortgage early and pay the lender a penalty for doing this, you can deduct the penalty as interest.

Interest on employment tax deficiency. Interest charged on employment taxes assessed on your business is deductible.

Original issue discount (OID). OID is a form of interest. A loan (mortgage or other debt) generally has OID when its proceeds are less than its principal amount. The OID is the difference between the stated redemption price at maturity and the issue price of the loan.

A loan’s stated redemption price at maturity is the sum of all amounts (principal and interest) payable on it other than qualified stated interest. Qualified stated interest is stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a single fixed rate.

You generally deduct OID over the term of the loan. Figure the amount to deduct each year using the constant-yield method, unless the OID on the loan is de minimis.

De minimis OID. The OID is de minimis if it is less than one-fourth of 1% (.0025) of the stated redemption price of the loan at maturity multiplied by the number of full years from the date of original issue to maturity (the term of the loan).

If the OID is de minimis, you can choose one of the following ways to figure the amount you can deduct each year.

• On a constant-yield basis over the term of the loan.
• On a straight-line basis over the term of the loan.
• In proportion to stated interest payments.
• In its entirety at maturity of the loan.

You make this choice by deducting the OID in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued.

Example.

On January 1, 2008, you took out a $100,000 discounted loan and received $98,500 in proceeds. The loan will mature on January 1, 2018 (a 10-year term), and the $100,000 principal is payable on that date. Interest of $10,000 is payable on January 1 of each year, beginning January 1, 2009. The $1,500 OID on the loan is de minimis because it is less than $2,500 ($100,000 × .0025 × 10). You choose to deduct the OID on a straight-line basis over the term of the loan. Beginning in 2008, you can deduct $150 each year for 10 years.

Constant-yield method. If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. You figure your deduction for the first year using the following steps.

1. Determine the issue price of the loan. Generally, this equals the proceeds of the loan. If you paid points on the loan (as discussed later), the issue price generally is the difference between the proceeds and the points.
2. Multiply the result in (1) by the yield to maturity.
3. Subtract any qualified stated interest payments from the result in (2). This is the OID you can deduct in the first year.

To figure your deduction in any subsequent year, follow the above steps, except determine the adjusted issue price in step (1). To get the adjusted issue price, add to the issue price any OID previously deducted. Then follow steps (2) and (3) above.

The yield to maturity is generally shown in the literature you receive from your lender. If you do not have this information, consult your lender or tax advisor. In general, the yield to maturity is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan.

Example.

The facts are the same as in the previous example, except that you deduct the OID on a constant yield basis over the term of the loan. The yield to maturity on your loan is 10.2467%, compounded annually. For 2008, you can deduct $93 [($98,500 × .102467) − $10,000]. For 2009, you can deduct $103 [($98,593 × .102467) − $10,000].

Loan or mortgage ends. If your loan or mortgage ends, you may be able to deduct any remaining OID in the tax year in which the loan or mortgage ends. A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event.

If you refinance with the original lender, you generally cannot deduct the remaining OID in the year in which the refinancing occurs, but you may be able to deduct it over the term of the new mortgage or loan. See Interest paid with funds borrowed from original lender under Interest You Cannot Deduct, later.

Points. The term “points” is used to describe certain of the charges paid, or treated as paid, by a borrower to obtain a loan or a mortgage. These charges are also called loan origination fees, maximum loan charges, discount points, or premium charges. If any of these charges (points) are solely for the use of money, they are interest.

Because points are prepaid interest, you generally cannot deduct the full amount in the year paid. However, you can choose to fully deduct points in the year paid if you meet certain tests. For exceptions to the general rule, see Publication 936.

The points reduce the issue price of the loan and result in original issue discount, deductible as explained in the preceding discussion.

Partial payments on a non-tax debt. If you make partial payments on a debt (other than a debt owed the IRS), the payments are applied, in general, first to interest and any remainder to principal. You can deduct only the interest. This rule does not apply when it can be inferred that the borrower and lender understood that a different allocation of the payments would be made.

Installment purchase. If you make an installment purchase of business property, the contract between you and the seller generally provides for the payment of interest. If no interest or a low rate of interest is charged under the contract, a portion of the stated principal amount payable under the contract may be recharacterized as interest (unstated interest). The amount recharacterized as interest reduces your basis in the property and increases your interest expense.

Interest You Cannot Deduct

Certain interest payments cannot be deducted. In addition, certain other expenses that may seem to be interest are not, and you cannot deduct them as interest.

You cannot currently deduct interest that must be capitalized, and you generally cannot deduct personal interest.

Interest paid with funds borrowed from original lender. If you use the cash method of accounting, you cannot deduct interest you pay with funds borrowed from the original lender through a second loan, an advance, or any other arrangement similar to a loan. You can deduct the interest expense once you start making payments on the new loan.

When you make a payment on the new loan, you first apply the payment to interest and then to the principal. All amounts you apply to the interest on the first loan are deductible, along with any interest you pay on the second loan, subject to any limits that apply.

Capitalized interest. You cannot currently deduct interest you are required to capitalize under the uniform capitalization rules. See Capitalization of Interest, later. In addition, if you buy property and pay interest owed by the seller (for example, by assuming the debt and any interest accrued on the property), you cannot deduct the interest. Add this interest to the basis of the property.

Commitment fees or standby charges. Fees you incur to have business funds available on a standby basis, but not for the actual use of the funds, are not deductible as interest payments. You may be able to deduct them as business expenses.

If the funds are for inventory or certain property used in your business, the fees are indirect costs and you generally must capitalize them under the uniform capitalization rules. See Capitalization of Interest, later.

Interest on income tax. Interest charged on income tax assessed on your individual income tax return is not a business deduction even though the tax due is related to income from your trade or business. Treat this interest as a business deduction only in figuring a net operating loss deduction.

Penalties. Penalties on underpaid deficiencies and underpaid estimated tax are not interest. You cannot deduct them. Generally, you cannot deduct any fines or penalties.

Interest on loans with respect to life insurance policies. You generally cannot deduct interest on a debt incurred with respect to any life insurance, annuity, or endowment contract that covers any individual unless that individual is a key person.

If the policy or contract covers a key person, you can deduct the interest on up to $50,000 of debt for that person. However, the deduction for any month cannot be more than the interest figured using Moody’s Composite Yield on Seasoned Corporate Bonds (formerly known as Moody’s Corporate Bond Yield Average-Monthly Average Corporates) (Moody’s rate) for that month.

Who is a key person? A key person is an officer or 20% owner. However, the number of individuals you can treat as key persons is limited to the greater of the following.

• Five individuals.
• The lesser of 5% of the total officers and employees of the company or 20 individuals.

Exceptions for pre-June 1997 contracts. You can generally deduct the interest if the contract was issued before June 9, 1997, and the covered individual is someone other than an employee, officer, or someone financially interested in your business. If the contract was purchased before June 21, 1986, you can generally deduct the interest no matter who is covered by the contract.

Interest allocated to unborrowed policy cash value. Corporations and partnerships generally cannot deduct any interest expense allocable to unborrowed cash values of life insurance, annuity, or endowment contracts. This rule applies to contracts issued after June 8, 1997, that cover someone other than an officer, director, employee, or 20% owner. For more information, see section 264(f) of the Internal Revenue Code.

Capitalization of Interest

Under the uniform capitalization rules, you generally must capitalize interest on debt equal to your expenditures to produce real property or certain tangible personal property. The property must be produced by you for use in your trade or business or for sale to customers. You cannot capitalize interest related to property that you acquire in any other manner.

Interest you paid or incurred during the production period must be capitalized if the property produced is designated property. Designated property is any of the following.

• Real property.
• Tangible personal property with a class life of 20 years or more.
• Tangible personal property with an estimated production period of more than 2 years.
• Tangible personal property with an estimated production period of more than 1 year if the estimated cost of production is more than $1 million.

Property you produce. You produce property if you construct, build, install, manufacture, develop, improve, create, raise, or grow it. Treat property produced for you under a contract as produced by you up to the amount you pay or incur for the property.

Carrying charges. Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. You can choose to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. For more information, see chapter 7.

Capitalized interest. Treat capitalized interest as a cost of the property produced. You recover your interest when you sell or use the property. If the property is inventory, recover capitalized interest through cost of goods sold. If the property is used in your trade or business, recover capitalized interest through an adjustment to basis, depreciation, amortization, or other method.

Partnerships and S corporations. The interest capitalization rules are applied first at the partnership or S corporation level. The rules are then applied at the partners’ or shareholders’ level to the extent the partnership or S corporation has insufficient debt to support the production or construction costs.

If you are a partner or a shareholder, you may have to capitalize interest you incur during the tax year for the production costs of the partnership or S corporation. You may also have to capitalize interest incurred by the partnership or S corporation for your own production costs. To properly capitalize interest under these rules, you must be given the required information in an attachment to the Schedule K-1 you receive from the partnership or S corporation.

Additional information. The procedures for applying the uniform capitalization rules are beyond the scope of this publication. For more information, see sections 1.263A-8 through 1.263A-15 of the regulations and Notice 88-99. Notice 88-99 is in Cumulative Bulletin 1988-2.

When To Deduct Interest

If the uniform capitalization rules, discussed under Capitalization of Interest, earlier, do not apply to you, deduct interest as follows.

Cash method. Under the cash method, you can generally deduct only the interest you actually paid during the tax year. You cannot deduct a promissory note you gave as payment because it is a promise to pay and not an actual payment.

Prepaid interest. You generally cannot deduct any interest paid before the year it is due. Interest paid in advance can be deducted only in the tax year in which it is due.

Discounted loan. If interest or a discount is subtracted from your loan proceeds, it is not a payment of interest and you cannot deduct it when you get the loan. For more information, see Original issue discount (OID) under Interest You Can Deduct, earlier.

Refunds of interest. If you pay interest and then receive a refund in the same tax year of any part of the interest, reduce your interest deduction by the refund. If you receive the refund in a later tax year, include the refund in your income to the extent the deduction for the interest reduced your tax.

Accrual method. Under an accrual method, you can deduct only interest that has accrued during the tax year.

Prepaid interest. See Prepaid interest, above.

Discounted loan. See Discounted loan, above.

Tax deficiency. If you contest a federal income tax deficiency, interest does not accrue until the tax year the final determination of liability is made. If you do not contest the deficiency, then the interest accrues in the year the tax was asserted and agreed to by you.

However, if you contest but pay the proposed tax deficiency and interest, and you do not designate the payment as a cash bond, then the interest is deductible in the year paid.

Related person. If you use an accrual method, you cannot deduct interest owed to a related person who uses the cash method until payment is made and the interest is includible in the gross income of that person. The relationship is determined as of the end of the tax year for which the interest would otherwise be deductible. See section 267 of the Internal Revenue Code for more information.

Below-Market Loans

If you receive a below-market gift or demand loan and use the proceeds in your trade or business, you may be able to deduct the forgone interest. See Treatment of gift and demand loans later in this discussion.

A below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. A gift or demand loan that is a below-market loan generally is considered an arm’s-length transaction in which you, the borrower, are considered as having received both the following.

• A loan in exchange for a note that requires the payment of interest at the applicable federal rate.
• An additional payment in an amount equal to the forgone interest.

The additional payment is treated as a gift, dividend, contribution to capital, payment of compensation, or other payment, depending on the substance of the transaction.

For any period, forgone interest is:

1. The interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31,
   minus
2. Any interest actually payable on the loan for the period.

Applicable federal rates are published by the IRS each month in the Internal Revenue Bulletin. Internal Revenue Bulletins are available on the IRS web site at www.irs.gov/irb. You can also contact an IRS office to get these rates.

Loans subject to the rules. The rules for below-market loans apply to the following.

1. Gift loans (below-market loans where the forgone interest is in the nature of a gift).
2. Compensation-related loans (below-market loans between an employer and an employee or between an independent contractor and a person for whom the contractor provides services).
3. Corporation-shareholder loans.
4. Tax avoidance loans (below-market loans where the avoidance of federal tax is one of the main purposes of the interest arrangement).
5. Loans to qualified continuing care facilities under a continuing care contract (made after October 11, 1985).

Except as noted in (5) above, these rules apply to demand loans (loans payable in full at any time upon the lender’s demand) outstanding after June 6, 1984, and to term loans (loans that are not demand loans) made after that date.

Treatment of gift and demand loans. If you receive a below-market gift loan or demand loan, you are treated as receiving an additional payment (as a gift, dividend, etc.) equal to the forgone interest on the loan. You are then treated as transferring this amount back to the lender as interest. These transfers are considered to occur annually, generally on December 31. If you use the loan proceeds in your trade or business, you can deduct the forgone interest each year as a business interest expense. The lender must report it as interest income.

Limit on forgone interest for gift loans of $100,000 or less. For gift loans between individuals, forgone interest treated as transferred back to the lender is limited to the borrower’s net investment income for the year. This limit applies if the outstanding loans between the lender and borrower total $100,000 or less. If the borrower’s net investment income is $1,000 or less, it is treated as zero. This limit does not apply to a loan if the avoidance of any federal tax is one of the main purposes of the interest arrangement.

Treatment of term loans. If you receive a below-market term loan other than a gift or demand loan, you are treated as receiving an additional cash payment (as a dividend, etc.) on the date the loan is made. This payment is equal to the loan amount minus the present value, at the applicable federal rate, of all payments due under the loan. The same amount is treated as original issue discount on the loan. See Original issue discount (OID) under Interest You Can Deduct, earlier.

Exceptions for loans of $10,000 or less. The rules for below-market loans do not apply to any day on which the total outstanding loans between the borrower and lender is $10,000 or less. This exception applies only to the following.

1. Gift loans between individuals if the loan is not directly used to buy or carry income-producing assets.
2. Compensation-related loans or corporation-shareholder loans if the avoidance of any federal tax is not a principal purpose of the interest arrangement.

This exception does not apply to a term loan described in (2) above that was previously subject to the below-market loan rules. Those rules will continue to apply even if the outstanding balance is reduced to $10,000 or less.

Exceptions for loans without significant tax effect. The following loans are specifically exempted from the rules for below-market loans because their interest arrangements do not have a significant effect on the federal tax liability of the borrower or the lender.

1. Loans made available by lenders to the general public on the same terms and conditions that are consistent with the lender’s customary business practices.
2. Loans subsidized by a federal, state, or municipal government that are made available under a program of general application to the public.
3. Certain employee-relocation loans.
4. Certain loans to or from a foreign person, unless the interest income would be effectively connected with the conduct of a U.S. trade or business and not exempt from U.S. tax under an income tax treaty.
5. Any other loan if the taxpayer can show that the interest arrangement has no significant effect on the federal tax liability of the lender or the borrower. Whether an interest arrangement has a significant effect on the federal tax liability of the lender or the borrower will be determined by all the facts and circumstances. Consider all the following factors.
   1. Whether items of income and deduction generated by the loan offset each other.
   2. The amount of the items.
   3. The cost of complying with the below-market loan provisions if they were to apply.
   4. Any reasons, other than taxes, for structuring the transaction as a below-market loan.

Exception for loans to qualified continuing care facilities. The below-market interest rules do not apply to a loan owed by a qualified continuing care facility under a continuing care contract if the lender or lender’s spouse is age 62 or older by the end of the calendar year.

A qualified continuing care facility is one or more facilities (excluding nursing homes) meeting the requirements listed below.

1. Designed to provide services under continuing care contracts (defined below).
2. Includes an independent living unit, and either an assisted living or nursing facility, or both.
3. Substantially all of the independent living unit residents are covered by continuing care contracts.

A continuing care contract is a written contract between an individual and a qualified continuing care facility that includes all of the following conditions.

1. The individual or individual’s spouse must be entitled to use the facility for the rest of their life or lives.
2. The individual or individual’s spouse will be provided with housing, as appropriate for the health of the individual or individual’s spouse in an:
   1. independent living unit (which has additional available facilities outside the unit for the provision of meals and other personal care), and
   2. assisted living or nursing facility available in the continuing care facility.
3. The individual or individual’s spouse will be provided with assisted living or nursing care available in the continuing care facility, as required for the health of the individual or the individual’s spouse.

Maybe it started after seeing James Natchwey speak at Photo Plus Expo – the desire to create awareness with my camera. But I think it started long ago and in fact goes back to my roots and why I wanted to be a photographer. Simply put, I know that a camera can be a powerful tool in bringing awareness to a cause and with that the ability to bring about change.

I’ve always been interested in the power of the individual, those that are so passionate about a conviction they let nothing stop them. One young woman Maggie Doyne who graduated from high school with my daughter 5 years ago, decided to travel instead of going off to college. She wound up in a small village in Nepal and using her babysitting money, started a school/orphanage for Nepalese children orphaned by war. Learn more about Maggie’s Kopila Valley Children’s Home.

But what’s equally impressive about Maggie is that she speaks to students about how they can make a difference, thus planting seeds in the minds of our youth. That’s a powerful thing and each one of those people she speaks to has the potential do something that could make a difference.

This leads me to the point of this blog and how you can help. I’m embarking on an international project – to make a documentary that features people who are truly making a difference around the world. I am currently searching for those people who have a compelling story to tell. For this project, I am not looking for those who are specifically working for an NGO or some type of organization, such as the Peace Corps, because their stories – the stories of those organizations – have already been widely told.

I am searching for individuals who have embarked on their own personal projects to help make the world a better place – people who have followed their passions, ambitions, dreams, to start something that they care about. Their projects do not have to be massive or overly ambitious – it could be something as basic as restoring old churches in Russia. The people can be natives of their country or expatriates, young or old. Ideally, I would like to find 7 people, one on each continent.

So, if you know someone who is making a difference, please let me know.  gail@kellymooney.com And if you don’t know someone, please pass this blog along and get the word out virally. My hope is that by using my skills to tell these stories, I will play my part in paying it forward.

Do

In Threat to Black Colleges, Inside Higher Ed reports on a Mississippi proposal to merge the state’s three historically black colleges and universities (HBCUs).  Governor Barbour cites financial reasons for his recommendation.

In reading the article, I realized that this story exemplifies an underlying tension in the nonprofit sector: numbers versus nuance.

For numbers, we focus on quantity.  We want to do what the most people need, and what the most people will support.  We seek economies of scale and are driven by efficiency goals.  We want to get the most bang for our buck – striving to be good stewards of charitable dollars.  We may consider mergers, consolidation of backroom services, or program partnerships.

On the other hand…

For nuance, we understand that there are differences among individuals.  We know that people have unique needs and effectiveness depends on our ability to address individual circumstances.  We recognize that minority issues may be too easily ignored:  a disease that only affects one hundred people annually, a need for multi-lingual resources in a small rural community, or an artist’s distinct perspective.  We want to focus on the people and the issues that may be overlooked by the for-profit sector and/or the public sector.

In the various approaches to nonprofit work, I suggest there is a continuum with nuance and numbers at each extreme.  I often fall closer to the nuance approach.

Where do you fall on the continuum – nuance or numbers?  Please leave a comment with your feedback!

The three newsletters that have been published so far this year are available to read [see pages]. You will need to have Microsoft Word software on your computer.

The February newsletter gives information about the Trust’s Design Awards, the proposed development at Shotley Spa, the new Neighbourhood Partnership and traffic and highway issues.

In May the newsletter mentions the Derwent Valley Partnership, action on litter and an update on the planning application at The Spa.

September’s issue deals with the village centre Open Weekend, the ‘parking Lot’ study and a suggestion to enter the Northumbria in Bloom competition.

If you work for yourself, are an artist/musician or run a small business you will place a high priority on attracting new clients or projects. Sometimes, conventional approaches do not work as well as we’d like them to and we have to learn to Think Differently. Here is one opportunity to learn how to do just that.

Sign up for the free webinar: “Marketing via Partnership: The Power of Strategic Alliances”.

If we could all hear one another’s prayers, God might be relieved of some of his burdens.  ~Ashleigh Brilliant

Who in the fuck do you think you are?
Moping around throughout these days,
as if you had problems that hurt the heart-
But how is that so when there are no people,
no outward happenings, goings, comings
To provoke this sadness that dwells within?
How often do I want to smack those tears,
they fall without worthy from your prying eyes;
How often will I bite my lip, clench my jaw,
in belief that this is all an elaborate act?
Since when did you shrug around silently,
with a heavy weight upon your shoulders.
We are all just as torn as the person to our side,
we are all in the exact amount of pain – as humanity,
So where do you get off thinking you can go
To a far edge of this matter and weep?
I wrap my fists around themselves constantly,
begging my raging thoughts to calm right down,
But how can that happen with you before me?
-Your exaggerated features that etch deeper,
I want to tear them off quite vigorously…
But I stop myself because I know later,
at some strange point when you forget to ACT
(even if you don’t feel yourself doing so),
I love the blissful feeling of you inside of me.
Now, how will I be able to enjoy that…
When I’ve gone and dismembered you??

We are defined by our experiences, not our lack thereof.