Financial planning

Hedge funds.Billionaire investor Warren Buffett thinks they're a fad, while fellow billionaire George Soros used them to strike it rich. Hedge funds are controversial, complex and often shrouded in mystery. And while they've long been a secret haven for the ultra-wealthy, mainstream investors are starting to take notice.

It's possible for transfers to a trust to be completed gifts for gift and estate tax purposes, even though that trust may still be treated as a grantor trust for income tax purposes, so that the income of the trust is taxable to the grantor even though retained in the trust or distributed to beneficiaries of the trust.

E&Y SHEDS INVESTMENT BANKING ARM: Big Four firm Ernst & Young has shed its investment banking arm by selling the practice to the consulting firm run by former New York City Mayor Rudolph W. Giuliani.Giuliani Partners LLC bought Ernst & Young Corporate Finance LLC, an affiliate of the Big Four accounting firm, and simultaneously launched Giuliani Capital Advisors LLC, which will advise companies on acquisitions, restructurings and other deals.

COLLEGE TUITION INCREASES SMALLER THAN LAST YEAR: Average tuition and fees at four-year public colleges and universities for the 2004-2005 year climbed 10.5 percent from last year's levels, to $5,132, while fees at four-year private schools rose 6 percent, to $20,082, the College Board reported.

A recent merger in wealth management has observers wondering if this time around, the cultures of banking and investment advisors will successfully mesh.

A taxpayer generally may exclude up to $250,000 ($500,000 for certain married couples filing joint returns) of gain realized on the sale or exchange of a principal residence. To be eligible for the exclusion, the taxpayer must have owned the residence and used it as a principal residence for at least two years during the five-year period ending on the date of the sale or exchange.

As part of its multi-pronged educational effort on financial literacy, the American Institute of CPAs has launched a consumer Web portal that offers information and articles organized by a series of life stages, such as college, entrepreneurship, marriage, parenthood, home ownership and retirement.

The American Jobs Creation Act of 2004 limits the deduction allowed for entertainment, amusement and recreation provided to certain specified individuals to amounts treated as income to the recipient for federal income tax purposes.

There's good news for accounting and finance professionals - starting salaries are expected to increase an average of 2.4 percent next year. But the news is far better for internal auditors and professionals focused on Sarbanes-Oxley and other corporate governance-related initiatives - they're poised to see huge boosts in base compensation, according to staffing giant Robert Half International Inc.

The American Institute of CPAs has named Thomas J. Purcell III to a two-year term as chairman of its Tax Executive Committee, the tax policy and standards-setting body of the AICPA.

At the end of a year of sideways markets, many tax advisors are focusing on the ramifications of the two recently passed tax acts. There is, however, a roster of other year-end strategies that are worth looking into.

For tax years beginning in 2004 and 2005, the American Jobs Creation Act of 2004, recently passed by Congress, allows taxpayers to elect to take state and local general sales and use taxes as an itemized deduction on their federal income tax returns for those years. However, a taxpayer who makes this election will not be able to take an itemized deduction for state and local income taxes for the same year.

WACHOVIA TO BUY TANAGER FINANCIAL: In an effort to strengthen its wealth management practice, Charlotte, N.C.-based Wachovia Corp., the nation's fifth-largest bank, agreed to acquire wealth advisory firm Tanager Financial Services Inc.

TRUST COS. CONSOLIDATE: A quartet of independent trust companies - First Trust Corp., Lincoln Trust Co., Resources Trust Co. and Retirement Accounts Inc. - have rolled up under a single brand, Fiserv Investment Support Services. The convergence represents the first of a three-phase consolidation effort designed to create an umbrella organization.

The defined-contribution world has never been more competitive. Retirement plan providers are fighting aggressively to keep existing clients, as pricing has come down dramatically, services have improved and, importantly, provider disclosures are significantly better.

When bonus first-year depreciation deductions end at the close of 2004, so will the extra first-year dollar limit for autos, light trucks and vans subject to the luxury auto rules.

529 ASSETS REACH $43 BILLION: Assets in 529 college savings plans totaled an estimated $43 billion at the end of the second quarter, up 7.4 percent over assets in the first quarter, according to a report from the College Savings Foundation. The quarterly asset total marks a 66.9 percent increase from the second quarter of 2003's total of $25.8 billion, according to data developed by research and consulting firm Financial Research Corp.

Federal Reserve Chairman Alan Greenspan sounded the death knell, again, for the Baby Boom generation's hopes for some external help during their retirement.

For most taxpayers, bonus first-year depreciation ends Dec. 31, 2004.

The College for Financial Planning has unveiled a new planning designation that it says is aimed at advisors working with high-net-worth clients, bringing the number of planning designations that it offers to six.