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To: Andrew Vance who wrote (13619)	5/5/1998 7:16:00 AM
From: SE	Read Replies (1) \| Respond to of 17305

Andrew, I don't know the answer to your question off of the top of my head. Our firm does not do audits and our corporate clients put all of their money back into their business, so we don't have any clients that have substantial portfolios where this item would need to be calculated. If I get a chance I will look up the appropriate accounting treatment for you, but right off, I don't know. On another front, a couple of posters have mentioned paying in quarterly taxes due to your most recent success. Just to clarify that for you, in general, so you are fully aware of the details. What they are talking about is avoiding the underpayment of estimated tax penalty. The tax system is a pay as you earn system, not a pay on April 15th system. Normally, one does not need to worry about it too much as you have withholding throughout the year. When there is no withholding you must pay in quarterly. To avoid the underpayment of estimated tax there are safe harbors that you can meet. One such safe harbor for 1998 is 100% of prior year's tax liability. What this means is if you pay in quarterly an amount equal to 1997's tax liability (line 53, 1997 Form 1040) you will not owe the underpayment penalty even if you owe big dollars on April 15th. If the Federal tax liability for 1997 was $10,000 (tax liability, not what you owed on April 15th) then you should pay in quarterly $2,500. The quarters are not even and fall on the following dates: April 15, June 15, Sept 15, and Jan 15. Another safe harbor is 90% of current year tax. This would be 90% of 1998 tax liability. This is a bit more difficult as you need to estimate what your 1998 liability would be and pay in basically 1/4 of that liability. This may amount to figuring out your tax liability four times in 1998. For the administrative work involved in these calculations we rarely use this method except in extreme cases. These cases usually occur where 1997 was a very very good year and 1998 will be so-so. In that case it does not make sense to pay in 1997's liability and then get a huge refund, so we guess-timate as we go. Finally, if you are behind the underpayment penalty will stop as soon as you get caught up, so don't think that if you are behind there is nothing you can do till April 15th. Not so, figure out what you owe and send it in now. The form to send estimates is a 1040-ES. As a side note, withholding is considered withheld ratably throughout the year so that extra withholding in December would apply equally to all four quarters. Estimated tax payments are considered received on the date paid. Obviously, if you think you will owe a bundle come April 15th, the best money management system is to pay in just enough to avoid the underpayment penalty and let the rest work for you until the April 15th payment date. However, many people wish to pay it in as they go and avoid a big payment on April 15th. I will leave that to individual preference regardless of the best money management system. -Scott