October 15, 2007
Synergy Financial Group
George Van Dyke
Financial Consultant 2007 Year-End Tax Planning Considerations
401 Washington Ave Suite
703 For the most part, the window of opportunity
Towson, MD 21204 for 2007 tax year planning closes on
410-825-3200 December 31. Here are a few points to
410-530-2500 (cell) consider as you contemplate any 2007 year-
gvandyke@synergyfinancialgrp.com
www.synergyfinancialgrp.com end tax moves, and look forward to the 2008
tax year.
New zero percent tax rate
Currently, the maximum federal income tax
rate for most long-term capital gains and
qualifying dividend income is 15%. Individuals
in the lowest two tax brackets receive the
benefit of an even lower 5% maximum rate.
Beginning January 1, 2008, however (and
continuing through 2010), the maximum rate
Securities offered drops all the way to zero for individuals in the
through Linsco Private lowest two tax brackets.
Ledger (LPL).
This presents an important planning opportu-
Member FINRA,SIPC. nity. Make year-end gifts (up to $12,000 per
individual gift tax free) of appreciated assets
to family members currently in the lowest two
tax brackets, who would then be able to sell
the assets after January 1, 2008 without any
resulting federal income tax. There's one big
catch, though: the new "kiddie tax" rules.
New "kiddie tax" rules
Generally, the kiddie tax rules apply when a
child has unearned annual income (e.g., inter-
In this issue:
est, investment earnings, taxable gain result-
2007 Year-End Tax Planning ing from the sale of an asset) exceeding
Considerations $1,700 (2007 figure).
The Power of Dividends in a
In 2007, the kiddie tax rules apply to children
Portfolio
under the age of 18. Beginning in 2008, how-
Figuring Out the College ever, the kiddie tax rules apply to children who
Payoff are under age 19, and to full-time students
Ask the Experts under age 24. (There's an exception for any
child who earns more than one-half of his or
her own support.)
So, if you want to take advantage of the zero
tax bracket in 2008 by transferring appreci-
ated assets to a low-tax-bracket family mem-
ber, make sure the kiddie tax rules won't ap-
ply. Otherwise, the resulting income--at least
the portion that exceeds $1,700--will be taxed
at your (presumably higher) tax rate, eliminat-
ing most or all of any potential tax savings.
For the remainder of 2007, though, the old
rules apply--a child who will reach age 18 by
year end is able to sell appreciated assets
and potentially pay tax on any resulting in-
come at the (still low) 5% rate.
AMT uncertainty
Legislation signed into law in early 2006
brought the most recent in a long series of
temporary "fixes" for the alternative minimum
tax (AMT), which continues to reach further
into the ranks of middle-income families. This
temporary fix, in the form of increased AMT
exemption amounts, expired at the end of
2006. If Congress doesn't act, the number of
taxpayers subject to AMT is projected to in-
crease from 4.24 million in 2006 to 23.19 mil-
lion in 2007 (Source: Joint Committee on
Taxation, March 5, 2007). Some action re-
garding the AMT is likely, but the form it will
take is uncertain, making it important to stay
up to date on any new developments.
Other important considerations
• Unless there is additional legislative
action, 2007 is the last year that a tax-
payer age 70½ or older is able to make
charitable contributions of up to $100,000
directly from an IRA to a qualified charity.
• 2007 is also the last year for other
deductions, including the option to deduct
state and local general sales tax (instead
of state and local income tax) and the
above-the-line deduction for qualified
higher education expenses.
• For small businesses, legislation this year
increased the Section 179 expensing
limits.
Talk to a professional
A financial professional can explain how these
issues, and others, might affect your 2007 tax
situation.
Page 2
The Power of Dividends in a Portfolio
It wasn't so long ago that many investors re-
garded dividends as roughly the financial
equivalent of a record turntable at a gathering
of MP3 users--a throwback to an earlier era,
irrelevant to the real action.
But fast-forward a few years, and things look a
little different. Since 2003, when the top fed-
eral income tax rate on qualified dividends
was reduced to 15% from a maximum of
38.6%, dividends have acquired renewed
respect. Favorable tax treatment isn't the only
reason, either; the ability of dividends to pro-
vide income and potentially help mitigate mar-
ket volatility also is attractive to investors. As
baby boomers approach retirement and begin
to focus on income-producing investments,
the demand for high-quality, reliable dividends
is likely to increase.
Why consider dividends?
Dividend income has represented roughly
one-third of the monthly total return on the
Standard and Poor's 500 since 1926. Accord-
ing to S&P, the portion of total return attribut-
able to dividends has ranged from a high of
53% during the 1940s--in other words, more
than half that decade's return resulted from
dividends--to a low of 14% during the 1990s,
when investors tended to focus on growth.
Dividends and If dividends are reinvested, their impact over
interest: A bigger time becomes even more dramatic. S&P
piece of the pie
Average Return
In 2006, personal
Jan. 2006-Jan. 2007
dividend income
represented roughly 20
15.85
$696.3 billion--6.3% of
15
% Increase
the $10.98 trillion in
personal income in the 10 7.78
U.S. that year. That
was up from 5 come, consider whether the company's cash
approximately 5.5% in
0 rate is scheduled to expire at the end of 2010,
2004. Interest income
represented about 10% S&P 500 S&P 500 Non-
of personal income in Dividend Payers payers
2006, compared to
9.2% in 2004. Source: Standard and Poor's
Source: U.S. Dept. of
calculates that $1 invested in the Standard
Commerce, Bureau of
and Poor's 500 in December 1929 would have
Economic Analysis
grown to $57 by September 2005. However,
when coupled with reinvested dividends, that
same $1 investment would have resulted in
$1,353. (Bear in mind that past performance is
no guarantee of future results, and taxes were
not factored into the calculations.)
Dividends can be especially attractive if the
market is producing relatively low or mediocre
returns. If a stock's price rises 8% a year,
even a 2.5% dividend yield can push its total
return into the double-digit range; in some
cases, dividends could also help turn a nega-
tive return positive. Also, many dividend-
paying stocks represent large, established
companies that may have significant re-
sources to weather an economic downturn.
The corporate incentive
Financial and utility companies have been
traditional mainstays for investors interested in
dividends, but other sectors of the market also
are beginning to offer them. For example,
investors are stepping up pressure on cash-
rich technology companies to distribute some
of their profits as dividends. In June 2007, the
number of companies offering dividends was
3% higher than the year before, according to
S&P, though increases in the amounts paid
have been slowing in recent years.
Dividends are by no means guaranteed; a
company's board of directors can decide to
reduce or even eliminate them. However, a
steady and increasing dividend is generally
regarded as one sign of a company's ongoing
health and stability. For that reason, most
corporate boards are reluctant to send nega-
tive signals by cutting dividends.
Look before you leap
Investing in dividend-paying stocks isn't as
simple as just picking the highest yield. Some
dividends, such as those paid by real estate
investment trusts (REITS) and master limited
partnerships, don't qualify for the 15% maxi-
mum tax rate, and a portion may be taxed as
ordinary income. If you're investing for in-
flow can sustain its dividend. Also, the 15%
and there is no guarantee dividends will con-
tinue to receive favorable tax treatment.
If you're interested in a dividend-focused in-
vesting style, look for terms such as "equity
income," "dividend income," or "growth and
income." Also, some exchange-traded funds
(ETFs) track an index comprised of dividend-
paying stocks, or that is based on dividend
yield; be sure to check the prospectus for in-
formation about expenses, fees and potential
risks, and consider them carefully before you
invest. A financial professional can evaluate
the role dividends might play in your portfolio.

Figuring Out the College Payoff
If you have a child or grandchild approaching
college age, you may be wondering if an Ivy
League education is really worth the steep
price of admission. Will a diploma from an
elite college guarantee your offspring a bright
and prosperous future, or just a pile of debt?
Dollars and cents
The cost of tuition, fees, and room and board
at Harvard University for the 2007/08 year is
$45,620. (Source: Harvard Crimson, March
22, 2007) If your child entered the freshman
class this September, that would translate into
a total cost of $196,628 for four years
(assuming a rather tame
5% annual rate of college
inflation). And this doesn't
include money for books,
transportation, and per-
sonal expenses!
By comparison, the cost
for the 2007/08 year at the
University of North Caro-
lina at Chapel Hill, a
school widely regarded as
a top-notch public college, is $28,684 for out-
of-state students and $13,036 for in-state stu-
dents. (Source: UNC Financial Aid Office)
This equals a four-year cost of $123,632 for
the out-of-state student and $56,187 for the
in-state student (again, assuming a 5% rate of
inflation). That's an out-of-pocket savings of
$72,996 and $140,441, respectively, com-
pared to the cost of Harvard.
The debt factor
The Ivies often note that, while their schools
might be expensive, most students rarely pay
the full sticker price. But even as Ivy League
colleges dole out millions of dollars in need-
based aid each year from their huge endow-
ments, non-Ivy private schools and public
colleges distribute more merit aid, which is aid
awarded on the basis of good grades or some
special talent. Up-to-date college guidebooks
can tell you how generous each college is in
helping its students meet annual costs, and
the breakdown of loans vs. grants.
Still, you won't actually know what your child
will receive in the way of "free" grant and
scholarship money until he or she actually
applies to a particular college. So you won't
know for sure how much you or your child
might need to borrow. But if your child does
require student loans, here's an idea of what
he or she will owe each month:
Page 3
If your child graduates The monthly student
with this much debt... loan payment will be...
$10,000 $115
Will a diploma
$15,000 $173
from an elite
$25,000 $288 college guarantee
your offspring
$50,000 $575
a bright and
$75,000 $863 prosperous
future, or just a
Note: Results are based on a standard 10-year
repayment term and a fixed interest rate of 6.8%--
pile of debt?
the current rate on all new federal Stafford loans.
As you weigh the cost factor, keep in mind
that a high amount of debt might impact your
child's future major life decisions on job oppor-
tunities, living arrangements, graduate school,
getting married, and/or starting a family.
What about the intangibles?
Putting aside cost, there are benefits to an Ivy
education that can't be measured in nickels
and dimes--the prestige of the name on your
child's resume, strong mentoring that can lead
to coveted jobs and graduate school spots
after graduation, the opportunity to build
friendships with future leaders, and an alumni
network that can open doors throughout life.
But critics of the "Ivy-at-any-cost" group point The corner office--
to excessive competition at the Ivies. They public vs. private
claim that students are more likely to get indi-
vidualized attention at other colleges, and In 2001, about 10%
note that as time goes on, achievement in the of top executives
workplace will matter more than the name on at Fortune 100
your child's resume. Indeed, Warren Buffett, companies received
CEO of Berkshire Hathaway and graduate of their degrees from
the University of Nebraska-Lincoln, once Ivy League colleges
stated: "I don't care where someone went to (down from 14% in
school, and that never caused me to hire any- 1980) vs. 48% who
one or buy a business." What counts most, graduated from
some CEOs say, is a person's ability to seize public colleges (up
opportunities. (Source: Wall Street Journal, from 32% in 1980).
Any College Will Do, September 18, 2006) Source: Wharton School
of Business, University
The bottom line
of Pennsylvania
To decide if an Ivy League education is worth
it, weigh the cost with the potential long-term
economic and life experience benefits. But
keep in mind that highly motivated students
who are independent thinkers and hard work-
ers will likely do well in life no matter where
they attend college. The important thing is to
make sure that the match between your child
and the college is a good one.

Synergy Financial Group
George Van Dyke
Financial Consultant
401 Washington Ave Suite
703
Towson, MD 21204
410-825-3200
410-530-2500 (cell)
gvandyke@synergyfinancialgrp.com
www.synergyfinancialgrp.com
George Van Dyke is a Financial
Consultant with Synergy Financial
Group of Towson Maryland. Securities
offered through Linsco Private Ledger
(LPL) - Member FINRA, SIPC. LPL
does not provide legal or tax advice.
The information contained in this
report should be used for informational
purposes only.
Synergy's mission is to build, preserve
and protect the capital of our clients by
offering a comprehensive and
professional level of advisory and
planning services as well as providing
exceptional customer service. Our
investment objective is to provide
serious investors with a very
acceptable after tax (where
applicable) total return over a long
term horizon. We recommend
investing in a diversified portfolio of
high quality securities spread over
multiple asset classes. We place
emphasis on creating tax efficient
portfolios and managing risk. Through
modern asset allocation techniques,
portfolios are assembled to match
each investor's individual investment
goals and risk tolerance. We believe
that strict adherence to a disciplined
approach increases the likelihood of
generating consistent returns and
limits the risk of significant loss.
Copyright 2007 Forefield Inc.
All Rights Reserved.
Ask the Experts
Two-career couples--who should retire first?
You and your spouse are
both employed and nearing
retirement age. Even if
you've accumulated enough
assets to allow you both to
retire at the same time, however, you might
not want to do so. The transition into retire-
ment can often be difficult, and doubly so if
you're both struggling through that phase si-
multaneously. So, who should retire first?
If one spouse is earning significantly more
than the other, then it usually makes sense for
that spouse to continue to work in order to
maximize current income, ease the financial
transition into retirement, and perhaps even
increase your retirement nest egg.
But what if your incomes are relatively equal?
Here are some other factors to consider:
• Pensions: If only one of you is covered by
an employer pension plan, it may make
sense for that person to continue to work
if he or she hasn't yet maximized that
pension benefit. Similarly, consider how
Are online retirement planning calculators useful?
The answer is an unqualified "maybe." Online
retirement calculators are designed to help
you determine whether or not you've saved
enough for retirement, and if not, how much
you'll need to save each year in order to elimi-
nate the shortfall.
But the output of a retirement calculator is
only as good as the data that goes in, and it's
here that the various online calculators differ
greatly. Some ask you only a few simple
questions, and base their results on a large
number of assumptions. These are easy to
use, but the results can be suspect. Other,
more sophisticated, calculators require more
effort on your part, but may (or may not) come
up with more meaningful results.
In many cases, online calculators fall short
because you can't override their built-in as-
sumptions, even though they clearly don't
apply to you. Some specific items to consider:
• Can you insert your own life expectancy?
If a calculator is using standard life
continuing to work would impact your
Social Security benefits.
• Insurance: Are either of you eligible for
retiree health insurance? If so, are you
required to work to a certain age to get
that important coverage?
• Plans: Does one of you have specific
plans for your retirement years? Perhaps
you'd like to concentrate on a hobby, or
spend time volunteering, or even learn a
new skill? If so, consider whether that
person should retire first in order to pur-
sue those goals.
• Job satisfaction: Does one of you find
working more self-fulfilling than the other?
Would one of you feel more lost without
your current routine?
One thing is clear--you'll need to discuss this
with your spouse, preferably well ahead of
time.
expectancy tables, it could significantly
understate the amount of retirement as-
sets you'll need.
• Can you input your own expected rates of
return? Does the calculator take inflation
into account? At what rate?
• Can you specify your anticipated ex-
penses during retirement?
• Are amounts you've already saved taken
into account?
• Can you input your expected income dur-
ing retirement (for example, from a part-
time job, Social Security, a retirement
plan, or an annuity contract)?
All retirement calculators, sophisticated or not,
have one good trait in common--they get you
thinking about your retirement. But in most
cases, the results should be considered a
ballpark estimate, and a starting point for a
more detailed discussion with a seasoned
financial professional.