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Roth IRA
The much touted Roth IRA became available in 1998. While a traditional IRA allows deductible contributions and taxable distributions, this new IRA variety allows nondeductible contributions and nontaxable qualified distributions. Other important differences setting the Roth IRA apart from regular IRA’s include allowable contributions after age 70 1/2 and no mandatory distributions.
Note that the $2,000 IRA contribution, employer plan eligibility and AGI limits apply to all types of retirement IRAs. The option of rolling over a regular IRA into a Roth IRA, which may be a particularly attractive option for many taxpayers, is limited to those taxpayers having AGI less than $100,000.
For 1998 rollovers only, the taxable amount from the rollover is spread over four years, unless the taxpayer elects to include it all in 1998.
Increased mileage
deduction
Other interesting items include the raising of the standard mileage rate for charitable deduction purposes from 12 to 14 cents per mile and the increase in the individual estimated tax de minimis threshold from $500 to $1,000. In addition, NOL (net operating loss) carryback/carryforward rules changed from three years back/fifteen years forward to two years back/twenty years forward.
Also, all payments made in the course of business by businesses to attorneys — regardless if incorporated — must be reported on Form 1099, and home office deduction rules expanded to include more taxpayers.
Estate tax law changes
Also worth noting are some long awaited changes to estate tax laws which warrant extra attention by many taxpayers — particularly those owning businesses, farms or land.
Most significant are the gradual raising of the estate and gift tax unified credit exemption to $1 million, the indexing of the current $10,000 annual gift exclusion, the ability of an estate executor to elect to deduct a qualified family-owned business (in conjunction with the unified credit exemption) and the ability of an estate executor to elect to exclude 40 percent of the value of land subject to conservation easement.
As you can see, in spite of all the recent rhetoric surrounding tax simplification, the Tax Code continues to grow and grow. Happy tax season.
Nina Carter McKee, CPA, P.C. 7 Hotel Street, Warrenton, Virginia m»6 (54Q) 347-0703 , t, ,•
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