walgreen co. investing presentation alan nielsen, cpa director, results alan nielsen, cpa director,...

Walgreen Co. Investing Presentation

Walgreen Co. Investing Presentation

Alan Nielsen, CPAAlan Nielsen, CPADirector, ResultsDirector, Results

Alan Nielsen, CPAAlan Nielsen, CPADirector, ResultsDirector, Results

David Smok, CFADavid Smok, CFAManager, Profit Sharing InvestmentsManager, Profit Sharing Investments

David Smok, CFADavid Smok, CFAManager, Profit Sharing InvestmentsManager, Profit Sharing Investments

Ed Van GuyseEd Van GuyseFinancial AnalystFinancial AnalystEd Van GuyseEd Van GuyseFinancial AnalystFinancial Analyst

The information presented is believed to be reliable, but there may be errors

The information is VERY GENERAL in nature

We can offer specific individual investment advice… but only if you pay our sizeable advisory fee

The information presented is believed to be reliable, but there may be errors

The information is VERY GENERAL in nature

We can offer specific individual investment advice… but only if you pay our sizeable advisory fee

Legal DisclaimerLegal Disclaimer

Things to UnderstandThings to Understand

Things to CheckThings to Check

Things to DoThings to Do

3 Main Topics3 Main Topics

Diversify, Diversify, Diversify Asset allocation is the key wealth driver

Diversify, Diversify, Diversify Asset allocation is the key wealth driver

Think Long-term Don’t market time

Think Long-term Don’t market time

Start saving NOW! Pay yourself first, the sooner the better

Start saving NOW! Pay yourself first, the sooner the better

Things to UnderstandThings to Understand

• There have been only 4 periods when the S&P produced two or more consecutive years of negative returns:

1

4

Great Depression 1929-19322Early World War II Years 1939-19413StagFlation Years 1973-1974Tech Bear 2000- 2002

• Total return the year after the final consecutive negative year.1933 54.0%1942 20.3%1975 37.2%2003 28.7%

Source: S&P500, U.S. Trust Company

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

1925 1929 1933 1937 1941 1945 1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001

1

1

2

3

4

54%

20%

37%

29%

Historical S&P 500 PerformanceHistorical S&P 500 Performance

9.6

6.7

4.6

2.8

1.3

0

2

4

6

8

10

12

Entire Period -10 Best Days -20 Best Days -30 Best Days -40 Best Days

Annualized Rates of Return of S&P 500 Index Annualized Rates of Return of S&P 500 Index for 20 Years 1982-2002for 20 Years 1982-2002

Source: FactSet

The Influence of TimeThe Hazards of Market TimingThe Influence of TimeThe Hazards of Market Timing

Sound Like Anyone You Know?Sound Like Anyone You Know?

Underestimating how long you will live

Reasonable expectations for returns / inflation

Investing too conservatively

Withdrawing too much

Neglecting to account for healthcare increases

Underestimating how long you will live

Reasonable expectations for returns / inflation

Investing too conservatively

Withdrawing too much

Neglecting to account for healthcare increases

Avoid the most common investment mistakesAvoid the most common investment mistakes

Definition: “Fancy” financial term for how you spread your

money among different investments (stocks, bonds, and cash)

Definition: “Fancy” financial term for how you spread your

money among different investments (stocks, bonds, and cash)

Investment performance driven by:Investment performance driven by:

Asset Allocation: 90% !!!! Stock Selection: 5% Market Timing, etc.: 5%

Asset Allocation: 90% !!!! Stock Selection: 5% Market Timing, etc.: 5%

Asset AllocationAsset Allocation

Source: Frank Russell Company

BEST

WORST

20051992

Investing Styles Move In and Out of FavorInvesting Styles Move In and Out of Favor

Index Funds

Mutual Funds

Individual Issues

Index Funds

Mutual Funds

Individual Issues

DiversificationDiversification

StocksStocks and Bonds and Bonds

Long-term performanceLong-term performance In both up & down marketsIn both up & down markets

Expense ratiosExpense ratios

and remember to pay close and remember to pay close attention to…attention to…

Beginner

Moderate

Advanced

Beginner

Moderate

Advanced

The AAA Rule is a very rough and conservative estimate you can use to determine how much of your assets should be in stocks and how much should be in bonds

Subtract your age from 100. This is a rough estimate of what % of your portfolio should be in stocks.

Example:

You are 55 years old

100 - 55 = 45

45% of your assets should be in stocks and the rest (55%) should be in bonds.

The AAA Rule is a very rough and conservative estimate you can use to determine how much of your assets should be in stocks and how much should be in bonds

Subtract your age from 100. This is a rough estimate of what % of your portfolio should be in stocks.

Example:

You are 55 years old

100 - 55 = 45

45% of your assets should be in stocks and the rest (55%) should be in bonds.

Age/Asset Allocation RuleAge/Asset Allocation Rule

Market timingDon’t make a habit of chasing returns or hot sectors

Investing too conservativelyNeed to outpace inflation to gain purchasing power

Overestimating your investing/stock selection skills

Understand there is a difference between

luck and skill

Market timingDon’t make a habit of chasing returns or hot sectors

Investing too conservativelyNeed to outpace inflation to gain purchasing power

Overestimating your investing/stock selection skills

Understand there is a difference between

luck and skill

Avoid the common market mistakesAvoid the common market mistakes

0% $100.00

$162.895%

10%

$259.37

15%

$404.56

Time Value of MoneyTime Value of Money

Future Value of $100 after 10 YearsAt Different Interest RatesFuture Value of $100 after 10 YearsAt Different Interest Rates

Need at least 80-85% of your current incomeAvg. household is on track to save only 60%

Need at least 80-85% of your current incomeAvg. household is on track to save only 60%

Latest projections are closer to 100%Due to rising Health Care costs and minimal company provided insurance

Latest projections are closer to 100%Due to rising Health Care costs and minimal company provided insurance

How much will you need?How much will you need?


Let’s assume you make $80,000 per year you need $65,000 to pay living expenses8 years to retirementRetirement assets of $500,0008% annual return on retirement assets

6% return once retiredSave an additional 10% of income until 65

Let’s assume you make $80,000 per year you need $65,000 to pay living expenses8 years to retirementRetirement assets of $500,0008% annual return on retirement assets

6% return once retiredSave an additional 10% of income until 65


Today 2015 2030Age 57 65 80Income $80K $100K$65K worth $65K $80K $120K Balance $500K $1.02M $0

If spending grows with inflation, retirement assets are depleted by age 80. If spending stays constant, retirement assets are depleted by age 88.

Today 2015 2030Age 57 65 80Income $80K $100K$65K worth $65K $80K $120K Balance $500K $1.02M $0

If spending grows with inflation, retirement assets are depleted by age 80. If spending stays constant, retirement assets are depleted by age 88.

Withdrawing money the first few yearsLess is moreExercise restraint in the first few years especially (don’t have to go out & buy that boat right away)

Examples Increasing your withdrawal by just 1% (from 4% rate

to 5% rate) could decrease length of retirement money by 6 years (Source: Vanguard)

At a 4% withdrawal rate (increased 3% each year for inflation, there’s an 89% probability your portfolio will last for 30 years (40% stock/60% bond portfolio). If you withdraw 7% the 1st year, the probability that your money lasts 30 years is only 7% (Source: T. Rowe Price)

Withdrawing money the first few yearsLess is moreExercise restraint in the first few years especially (don’t have to go out & buy that boat right away)

Examples Increasing your withdrawal by just 1% (from 4% rate

to 5% rate) could decrease length of retirement money by 6 years (Source: Vanguard)

At a 4% withdrawal rate (increased 3% each year for inflation, there’s an 89% probability your portfolio will last for 30 years (40% stock/60% bond portfolio). If you withdraw 7% the 1st year, the probability that your money lasts 30 years is only 7% (Source: T. Rowe Price)

Withdrawal Rules and Best PracticesWithdrawal Rules and Best Practices

Profit Sharing Must start taking deductions at 70 ½ Can start at age 59 1/2 if not Walgreen employee Send an e-mail to Profit Sharing to get estimated payout

[email protected]

Profit Sharing Must start taking deductions at 70 ½ Can start at age 59 1/2 if not Walgreen employee Send an e-mail to Profit Sharing to get estimated payout

[email protected]

Traditional IRA Can start taking at 59 ½ (without penalty) Must start taking at 70 ½

Traditional IRA Can start taking at 59 ½ (without penalty) Must start taking at 70 ½

Social Security Can start taking at 62, with reduced benefits Must wait until 67 (if born after 1960) for full

benefits

Social Security Can start taking at 62, with reduced benefits Must wait until 67 (if born after 1960) for full

benefits

Withdrawal Rules and Best PracticesWithdrawal Rules and Best Practices

How much will you need?

How will you get there?

What should you bring on your trip?

How much will you need?

How will you get there?

What should you bring on your trip?

The Road to RetirementThe Road to Retirement

Walgreen SavingsSocial Security IRA (Traditional and Roth)Other

Walgreen SavingsSocial Security IRA (Traditional and Roth)Other

Road to Savings…Road to Savings…

Profit-SharingEmployee Stock Purchase Plan (ESPP)

Share WalgreensOption 3000/Option 4000



Walgreen Ways to SaveWalgreen Ways to Save

Three Ways to Contribute Matched Contributions (before-tax) Unmatched Supplemental Contrib.

(before-tax)

Voluntary Investment Plan (after-tax)

Three Ways to Contribute Matched Contributions (before-tax) Unmatched Supplemental Contrib.

(before-tax)

Voluntary Investment Plan (after-tax)

The combination of your unmatched supplemental and VIP The combination of your unmatched supplemental and VIP contributions to the plan may total up to 25% of your contributions to the plan may total up to 25% of your compensationcompensation

Profit SharingProfit Sharing

Matched ContributionsMatched Contributions You contribute 2% of your salary up to

the Social Security wage base ($94,500 in 2007).

For your compensation over the Social Security wage base, you then contribute 5%

In 2006, for every dollar you invested up to $1,824, you received $3.16. For every dollar over $1,824, you received $2.10.

You contribute 2% of your salary up to the Social Security wage base ($94,500 in 2007).

For your compensation over the Social Security wage base, you then contribute 5%

In 2006, for every dollar you invested up to $1,824, you received $3.16. For every dollar over $1,824, you received $2.10.

Profit SharingProfit Sharing

Stable Value Bond Fund Conservative Stock/Bond Moderate Stock/Bond Total Stock Market Index S&P 500 Index Large Company Stock S&P Midcap 400 Index Mid-Size Company Stock Russell 2000 Index Walgreen Company Stock

Stable Value Bond Fund Conservative Stock/Bond Moderate Stock/Bond Total Stock Market Index S&P 500 Index Large Company Stock S&P Midcap 400 Index Mid-Size Company Stock Russell 2000 Index Walgreen Company Stock

RISK

Investment ChoicesInvestment Choices

LessLess

MoreMore

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

24.0%

0.0% 4.0% 8.0% 12.0% 16.0% 20.0% 24.0%

Std. Deviation

An

nu

aliz

ed R

etu

rn

Stable Value Conservative Fund S&P 500 Index Fund Large Co. Stock Fund

S&P400 Index Fund Walgreen Stock Fund Bond Fund Moderate Fund

Total Stock Mkt Fund Russell 2000 Index Fund Mid-Size Co. Fund

10 Year Annualized Risk/Return Chart10 Year Annualized Risk/Return Chart

Need your Authenticator ID and Personal Key to access

Profit Sharing Plan Enhancements Starting in

2008

Profit Sharing Plan Enhancements Starting in

2008

>$100,000 in ‘06

2% of pay

5% of pay

0%

0%

>$100,000 in ‘06

2% of pay

5% of pay

0%

0%

<$100,000 in ‘06

2% of pay

N/A*

1-25%

1-25%

<$100,000 in ‘06

2% of pay

N/A*

1-25%

1-25% TotalTotal

Employee total pre-tax contributions capped at annual IRS max.

($15,500 for 2007) + $5,000 if age 50 or older.


($15,500 for 2007) + $5,000 if age 50 or older.

Matched (pre-tax)Based on pay up to $94,500

Matched (pre-tax)Based on pay over $94,500

Unmatched (pre-tax)

VIP (after-tax)

Matched (pre-tax)Based on pay up to $94,500

Matched (pre-tax)Based on pay over $94,500

Unmatched (pre-tax)

VIP (after-tax)

If you earned If you earned

If you earnedIf you earned

Current Employee Contributions - 2007Current Employee Contributions - 2007

>$100,000 in ‘07

2% of pay

1-50%

0%

>$100,000 in ‘07

2% of pay

1-50%

0%

<$100,000 in ‘07

2% of pay

1-50%

1-50%

<$100,000 in ‘07

2% of pay

1-50%

1-50%

TotalTotal


(expected to be $16,000 for 2008) + $5,000 if age 50 or older.


(expected to be $16,000 for 2008) + $5,000 if age 50 or older.

Matched (pre-tax)Applies to all pay

Unmatched (pre-tax)

VIP (after-tax)

Matched (pre-tax)Applies to all pay

Unmatched (pre-tax)

VIP (after-tax)

If you earned If you earned

If you earnedIf you earned

New Employee Contributions - 2008New Employee Contributions - 2008

5-Year Avg.

$3.18 per $1.00

$2.12 per $1.00

N/A

5-Year Avg.

$3.18 per $1.00

$2.12 per $1.00

N/A

2% Employee Contribution


Unmatched and VIP



Unmatched and VIP

(based on Walgreens profits)

(based on Walgreens profits)

Current Company MatchCurrent Company Match

$2.00 per $1.00 = 4% of pay

Up to $2.00 per $1.00 = 4% of pay

Up to $4.00 per $1.00 = 8% of pay

$2.00 per $1.00 = 4% of pay

Up to $2.00 per $1.00 = 4% of pay

Up to $4.00 per $1.00 = 8% of pay

Guaranteed

Additional(based on WAG

profits)

Total (max.)

Guaranteed

Additional(based on WAG

profits)

Total (max.)

(part guaranteed & add’l based on profits)

(part guaranteed & add’l based on profits)

2% Employee Contribution2% Employee Contribution


N/A


N/A

2008 Company Match2008 Company Match

Guaranteed portion of company match (first $2) fully vested when issued.

Six-year vesting schedule still applies to pre-2008 contributions and add’l contributions based on profits.

Minimum allowed employee matched contribution lowered to 1%.

HOWEVER, participants must contribute 2% to get maximum allowable company match.

Guaranteed portion of company match (first $2) fully vested when issued.

Six-year vesting schedule still applies to pre-2008 contributions and add’l contributions based on profits.

Minimum allowed employee matched contribution lowered to 1%.

HOWEVER, participants must contribute 2% to get maximum allowable company match.

Other 2008 Plan ChangesOther 2008 Plan Changes

No more employee contributions All can go to regular Profit Sharing

Plan

May be additional discretionary matching contributions for HCE under this Plan.

No more employee contributions All can go to regular Profit Sharing

Plan

May be additional discretionary matching contributions for HCE under this Plan.

Executive Deferred Profit Sharing Plan - 2008Executive Deferred Profit Sharing Plan - 2008

Buy Walgreen stock at a 10% discount

Up to 25% of your income/year (limit $25k)

3 Ways to JoinLoan Plan

Cash Plan

% Deduction Plan

Buy Walgreen stock at a 10% discount

Up to 25% of your income/year (limit $25k)

3 Ways to JoinLoan Plan

Cash Plan

% Deduction Plan

Employee Stock Purchase PlanEmployee Stock Purchase Plan

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

For a person who bought 50

shares per year for 20 years

Total Gain Over 20 years

$303,990

Total Cost

$38,531

Total Value

$342,521

Employee Stock Purchase PlanEmployee Stock Purchase Plan

What is the annual rate of return* for

Walgreens stock over:

What is the annual rate of return* for

Walgreens stock over:

*Through 6/30/2007*Through 6/30/2007

1 year? -2.2%

3 years? 7.0%

5 years? 3.0%

10 years? 13.1%

20 years? 16.4%

1 year? -2.2%

3 years? 7.0%

5 years? 3.0%

10 years? 13.1%

20 years? 16.4%

ESPP for the Long Term…ESPP for the Long Term…

Should I Buy Now?Should I Buy Now?

“I’m expecting WAG to rally but I don’t know when”

Plan details The program is offered once every 4 years Depending on your eligibility year, you can

purchase from 2.5 to 10% of your salary in stock when sign-up. Potential next cycle in 2008.

You buy stock - the company gives you two options (historically) for each share of stock you purchase

All pharmacists, store managers, and corporate grade levels 10+ are eligible

Plan details The program is offered once every 4 years Depending on your eligibility year, you can

purchase from 2.5 to 10% of your salary in stock when sign-up. Potential next cycle in 2008.

You buy stock - the company gives you two options (historically) for each share of stock you purchase

All pharmacists, store managers, and corporate grade levels 10+ are eligible

Share WalgreensShare Walgreens

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Stock$20,546

Options$41,376

Combined$61,922

150 shares purchased in 1996 for Share Walgreens

Assumes 10% contribution for manager making $57,000


How to learn more… Call the Share Walgreens

Administrator @ (847) 914-3907 StoreNet

How to learn more… Call the Share Walgreens

Administrator @ (847) 914-3907 StoreNet


Items # Shares

Option Price

Grant Date Vest Date Expiration

Date

Items # Shares

Option Price

Grant Date Vest Date Expiration

Date

Option 3000 75 – 500 shares

(based on yrs of service)

$29.1875

May 11, 2000

May 11, 2003

May 11, 2010

Option 3000 75 – 500 shares

(based on yrs of service)

$29.1875

May 11, 2000

May 11, 2003

May 11, 2010

Option 4000 100 shares

$27.75

March 11, 2003

March 11, 2006

March 11, 2013

Option 4000 100 shares

$27.75

March 11, 2003

March 11, 2006

March 11, 2013

Option 3000 and Option 4000Option 3000 and Option 4000

Walgreen Savings

Social Security

IRA (Traditional and Roth)

Other

Walgreen Savings

Social Security


Other


2017 Benefit costs exceed tax income for the 1st time

2017 Benefit costs exceed tax income for the 1st time

2041 Social Security system is bankrupt

2041 Social Security system is bankrupt

Avg. worker receives about $1,000/month $12,000 per year

Avg. worker receives about $1,000/month $12,000 per year

http://www.socialsecurity.govhttp://www.socialsecurity.gov

Social SecuritySocial Security

62 : Can elect to start receiving benefits (reduced)

62 : Can elect to start receiving benefits (reduced)

65 : Full Retirement age for those born before 1938

Remember to sign up for Medicare even if you are delaying your Soc Sec.

65 : Full Retirement age for those born before 1938

Remember to sign up for Medicare even if you are delaying your Soc Sec.

67 : Full retirement age for those born after 1959

67 : Full retirement age for those born after 1959

Social SecuritySocial Security

Walgreen Savings

Social Security


Other

Walgreen Savings

Social Security


Other


Year Under 50 Over 50 2005 $4,000 $4,500 2006-2007 $4,000 $5,000 2008 $5,000 $6,000 2009-2010 $5,000 $6,000 After 2010 $2,000 $2,000

* For 2009-2010, the contribution limit (first $5,000 if over 50) is indexed for inflation

Year Under 50 Over 50 2005 $4,000 $4,500 2006-2007 $4,000 $5,000 2008 $5,000 $6,000 2009-2010 $5,000 $6,000 After 2010 $2,000 $2,000

* For 2009-2010, the contribution limit (first $5,000 if over 50) is indexed for inflation

IRA Contribution LimitsIRA Contribution Limits

Not eligible if modified AGI is > $114,000 (single) or $166,000 (married)

Contributions are not tax deductible

Tax Free – growth is tax free if open 5 years and withdrawal requirements are met

No age limit for contributions and deductions

Not eligible if modified AGI is > $114,000 (single) or $166,000 (married)

Contributions are not tax deductible

Tax Free – growth is tax free if open 5 years and withdrawal requirements are met

No age limit for contributions and deductions

Roth IRARoth IRA

Eligibility – Anyone under age 70 ½

Tax-deferred – Taxes not paid until money withdrawn

Tax-deductible – Only if AGI below a certain level $62,000 if single

$103,000 if married

Withdrawal – IRS 10% penalty if before age 59 ½.

Must begin at age 70 ½.

Eligibility – Anyone under age 70 ½

Tax-deferred – Taxes not paid until money withdrawn

Tax-deductible – Only if AGI below a certain level $62,000 if single

$103,000 if married

Withdrawal – IRS 10% penalty if before age 59 ½.

Must begin at age 70 ½.

Traditional IRATraditional IRA

Catch-up contribution to PS allowed$5,000 each year

Additional $1,000 limit on IRA contribution

2007 limit is $5,000 for over 50

You can join AARP You have a party and the neighbors don’t even

know it You can sing along with elevator music

Catch-up contribution to PS allowed$5,000 each year

Additional $1,000 limit on IRA contribution

2007 limit is $5,000 for over 50

You can join AARP You have a party and the neighbors don’t even

know it You can sing along with elevator music

Pluses to being Over 50Pluses to being Over 50

Walgreen Savings

Social Security


Other

Walgreen Savings

Social Security


Other


529 Plans College savings program for kids or grandkids

Annuities Variable or fixed

Deferred or Immediate

Life Insurance Walgreen Co. Additional

HSAs (Flex Pay) Lower tax bill Must use yearly

529 Plans College savings program for kids or grandkids

Annuities Variable or fixed

Deferred or Immediate

Life Insurance Walgreen Co. Additional

HSAs (Flex Pay) Lower tax bill Must use yearly

OtherOther

Average annual price increase over past 50 years was 5% (Freddie Mac)

More recent Median Home price % increases:1996-2000: 4+%2001-2005: 9%2005 (alone): 12% Largest gain since late 1970s

2006: 1.5%2007: -2% (est.)

Source: National Assoc. of Realtors

Average annual price increase over past 50 years was 5% (Freddie Mac)

More recent Median Home price % increases:1996-2000: 4+%2001-2005: 9%2005 (alone): 12% Largest gain since late 1970s

2006: 1.5%2007: -2% (est.)

Source: National Assoc. of Realtors

Real Estate FactsReal Estate Facts

Massachusetts: 1990-1994: -10%California: 1991-1996: -13%

Source: Fannie Mae

Massachusetts: 1990-1994: -10%California: 1991-1996: -13%

Source: Fannie Mae

OFHEO: Office of Federal Housing Enterprise Oversight

Prices Can Fall TooPrices Can Fall Too

FidelityVanguardCharles SchwabT. Rowe PriceMerrill Lynch

FidelityVanguardCharles SchwabT. Rowe PriceMerrill Lynch

Websites to VisitWebsites to Visit

Profit Sharing Beneficiary Status Current Address on file Asset Allocation, at least once per year…

choose a date

Profit Sharing Beneficiary Status Current Address on file Asset Allocation, at least once per year…

choose a date Employee Stock Purchase Plan

Statements from Fidelity / Computershare Cost Basis

Employee Stock Purchase Plan Statements from Fidelity / Computershare Cost Basis


Share Walgreens and Other Option PlansFidelity, Computershare or ML statementsOption PriceVesting DatesExpiration DatesEstimate after-tax value

Share Walgreens and Other Option PlansFidelity, Computershare or ML statementsOption PriceVesting DatesExpiration DatesEstimate after-tax value


Making a will See a lawyer

Forming a trust See a lawyer

Referrals from family, friends, clergy, investment / tax advisors

Contact your local bar association www.abanet.org

Making a will See a lawyer

Forming a trust See a lawyer

Referrals from family, friends, clergy, investment / tax advisors

Contact your local bar association www.abanet.org

Wills and TrustsWills and Trusts

Gift Tax The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.

The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule.

Generally, the following gifts are not taxable gifts: Gifts that are not more than the annual exclusion for the calendar year, Tuition or medical expenses you pay directly to a medical or educational institution for someone, Gifts to your spouse, Gifts to a political organization for its use, and Gifts to charities.

Annual exclusion A separate annual exclusion applies to each person to whom you make a gift. For 2006, the annual exclusion is $12,000. Therefore, you generally can give up to $12,000 each to any number of people in 2006 and none of the gifts will be taxable.

Gift Tax The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.

The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule.

Generally, the following gifts are not taxable gifts: Gifts that are not more than the annual exclusion for the calendar year, Tuition or medical expenses you pay directly to a medical or educational institution for someone, Gifts to your spouse, Gifts to a political organization for its use, and Gifts to charities.

Annual exclusion A separate annual exclusion applies to each person to whom you make a gift. For 2006, the annual exclusion is $12,000. Therefore, you generally can give up to $12,000 each to any number of people in 2006 and none of the gifts will be taxable.

GiftingGifting

Thank Youand

Good Luck!

Thank Youand

Good Luck!

The Road to RetirementThe Road to Retirement

walgreen co. investing presentation alan nielsen, cpa director, results alan nielsen, cpa director,...

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