NEW YORK (AP) _ The new year brings a new fear for companies,
executives and other big earners.
Anticipating higher personal income taxes and reduced
corporate deductions under the Clinton administration,
individuals and companies are finding ways to cash in now to
avoid a bigger tax bite in 1993.
The moves range from accelerated year-end bonuses to the
exercise of stock options by CEOs to multimillion-dollar signing
bonuses for baseball free agents.
President-elect Clinton has backed raising personal income
taxes to 36 percent from 31 percent for individuals earning
$150,000 or more and families earning $200,000 or more. He has
also endorsed a 10 percent surtax on income above $1 million.
Clinton has supported eliminating corporate tax deductions for
executive pay exceeding $1 million. All compensation currently
can be deducted from corporate taxes as a normal business
Further complicating matters, new accounting rules could take
effect in 1993 requiring companies to deduct the value of
employee stock compensation from profits. Stock compensation
currently isn't considered an expense.
All of that means a busy season for tax planners, financial
consultants and accounting departments. Though tax law changes
are only a possibility, the impending arrival of Democrats in
Washington has prompted a rush of planning.
"The level of year-end planning activity is the highest it's
been in years," said William J. Goldberg, national director of
personal financial planning services at KPMG Peat Marwick, a big
"Everybody feels with a Democratic president and a Democratic
Congress the likelihood of enactment (of tax increases) is
extremely high," he said. "Consequently, people have felt
confident to go ahead and accelerate income into 1992 and delay
deductions until 1993."
Baseball's stars were prominent tax strategists. Pitcher David
Cone received a $9 million signing bonus to join the Kansas City
Royals _ half the value of his three-year contract.
First-baseman Mark McGwire and outfielder Ruben Sierra
received signing bonuses of $7 million and $6 million,
respectively, in their matching five-year, $28 million contracts
with the Oakland Athletics.
(Tax considerations, however, weren't the only issues for
baseball players. Agents said bonuses could ease the pain of lost
pay in the event of a work stoppage next spring, which is
On Wall Street, virtually all firms have accelerated year-end
bonus payments into December from the traditional January or
February to ease employees' tax bite.
The changes are especially noteworthy because 1992 was a
banner year in the securities industry. …