Re: 2009 Year-end Tax Planning - Capital Asset Purchases

Dear Client:

The economic downturn has taken a toll on many businesses, both small and large, but Congress acted to curb the
financial strain with legislation aimed at stimulating business investment. The Economic Stimulus Act of 2008,
Emergency Economic Stabilization Act of 2008, and American Recovery and Reinvestment Act of 2009 all
provide tax incentives for businesses, including additional 50 percent bonus depreciation, higher limits for first-year
expensing, and shorter recovery periods for asset depreciation.

If you have been contemplating the purchase of business equipment, and have the cash and credit score to do so,
you may want to consider taking advantage of these tax provisions in order maximize their potential tax savings
before they expire at the end of the year. Taking advantage of these tax benefits has the potential to reduce your
current taxable income and increase your cash flow.

Vehicle depreciation. The limits on depreciation of "luxury" automobiles have been raised through 2009. The
first-year depreciation limit would have been $3,060, but the cap has been raised to $11,060 (an $8,000 increase)
through the end of the year on new vehicle purchases. The limit is higher for vans and trucks. To qualify, the
vehicle must be used more than 50 percent for business. Again, these enhanced amounts apply only for 2009.

Bonus depreciation. Bonus depreciation and Code Sec. 179 expensing are the primary business incentives set to
expire at the end of 2009. Congress extended 50 percent additional first-year bonus depreciation through
December 31, 2009 in the 2009 Recovery Act. You deduct 50 percent of the property's basis in the first year,
before reducing the basis for normal depreciation computed over the property's recovery period, including the first
year. However, you can "elect out" of bonus depreciation, but the election is irrevocable.

You can claim bonus depreciation for property with a depreciation (recovery) period of 20 years or less, water
utility property, off-the-shelf computer software, and qualified leasehold property (farming equipment also qualifies
for bonus deprecation, as well as first-year expensing). The property must be new. You must purchase and place
the property in service before December 31, 2009.

First-year expensing. In lieu of bonus depreciation, you can elect to write off part, or all, of the cost of one or
more assets, up to the limit on expensing. The limit is $250,000 through 2009. Unlike bonus depreciation, first-year
expensing applies to tax years beginning in 2009. Therefore, if you are a fiscal-year taxpayer you are not faced
with a December 31, 2009 deadline for acquiring property and placing it into service. First-year expensing can be
claimed on used as well as new property, unlike bonus depreciation.

The amount that you can expense must be reduced dollar-for-dollar by the amount of the Code Section 179
property placed in service during the year exceeds a specified threshold. The threshold for 2009 is $800,000. The
benefit does not fully phase out until investment reaches $1.05 million.

Shorter recovery period. Congress also reduced the recovery period from 39 years to 15 years for leasehold
improvements, restaurant property and retail improvement property placed in service by December 31, 2009.
Leasehold improvements also qualify for bonus depreciation as well.

Investing in assets for your business is not just about taxes, so when considering whether to buy business assets
this year, you need to ensure that such a move makes financial sense. However, if you are considering investing
in your business in the near future, action before the end of 2009 rather than even a few months after may mean
a significant savings to your bottom line, thanks to the tax incentive now available. Please call this office if you
have any questions about how this year-end strategy would work specifically for your business.

Sincerely yours,