ARKANSAS a OKLAHOMA

BOB JOHN execudve vtc€ pr€sid€nt

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He INTERPRETATIoNS of the new I tax reform bill may yet lead to our nation's demisel At the request of one of our members, we have researched the bill, specifically Title XIV Section G, entitled "Interest Deduction Limitations" to ascertain whether the deductibility of interest in connection with the taxpayer's trade or business is valid.

In short, the great majority of our lumber and building material dealers will not be affected. The limitation of deductions for business interest is based on whether or not the taxpayer is materially participating in the busi ness. Ifthe taxpayer is not, the indebtedness and the deduction ofthat interest is considered investment interest, and therefore subject to the proposed limitation.

The limitation essentially says that you cannot deduct investment interest ifthe deductions exceed income.

Lumber dealers who purchase a lumber yard with the intention of running that operation would be exempt from the interest limitations. The bill's explanation reads,''Interest expense that is paid or incurred in carrying on a trade or business is not subiect to the interest

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(Continued from previous page) course on Nov. 24-26 at the Holiday Inn Crown Plaza in Houston. deduction limitation under the bill, except for interest attributable to certain limited business interestsl'

Robert Bass, attorney at law, will moderate a credit seminar on Dec. 4 at the LAT office in Austin. A speaker from the National Institute of Credit, the education arm of the National Association of Credit Managers, will speak. All programs are open tlo both members and non-members.

The board of trustees of LAT's hospitalization and life insurance program has voted to expand the present services by adopting two additional plans to augment the one medical plan that has been offered over the years. The expansion of the program will provide our industry in Texas with the most comprehensive medical insurance program offered in the state and will be equal to any program presently available from local insurance agents. Joe Butler Sr., in his capacity as a consultant, will visit individual dealers to aid them in evaluating their medical and life insurance progftrms.

Limited business interests is later defined to include "interest as a limited partnership in a partnershipl' if the limited partnership is formed to evade the interest limitation provision, interest as a shareholder of an S corporation in whose activities the taxpayer does not materially participate, an interest as a lessor in a new lease, as well as an interest in any activity in which the taxpayer does not materially participate.

There is one potential problem with legislation that affects "net leasesl' but once again this provision would have a very limited impact on the lumber and building material industry since it would essentially affect dealers who are leasing property and the rental income greatly exceeds business incomethat is, the rental income is over 85 percent of the total income.

What impact will the new tax changes have on the lumber and building material industry? MLA has produced a 30-35 minute video tape featuring a top tax attorney explaining the various sections of the new law. The tape is available to dealers to view on a "lend" basis. Call MLA Headquarters for details.

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