When you sell securities or some other capital asset, you must report the resulting capital gain or loss on your personal tax return. Don’t capital gains and losses simply cancel each other out? Actually, it’s more complicated than that. In fact, even experienced investors are often perplexed by these tax rules. Furthermore, you should be aware of a significant tax break looming on the horizon.

For simplicity, we will limit this discussion to capital gains and losses arising from sales of securities, assuming you have no other capital asset transactions. (Other special rules apply to sales of collectibles and property that is subject to depreciation recapture.)

Starting Point: There are different rules for long-term gains and losses versus short-term gains and losses. A gain or loss is long-term if you have held the security for more than one year before the sale occurs. For example, if you bought stock on July 1, 2006, and sell it at a profit on June 30, 2007, the gain is treated as a short-term gain. However, holding the stock for just two more days -- until July 2 -- qualifies the transaction as a favorable long-term capital gain.

To net your gains and losses, first put your long-term gains and long-term losses in one basket. This gives you either a net long-term gain or a net long-term loss. Next, put your short-term gains and short-term losses in another basket. This results in either a net short-term gain or a net short-term loss. Finally, combine the net long-term gain or loss with the net short-term gain or loss to arrive at an overall net capital gain or loss.

If your capital gains for 2007 exceed your capital losses, any net long-term gain is taxed at a maximum tax rate of 15%. For a taxpayer in one of the two lowest regular tax brackets -- either the 10% or 15% tax bracket -- the maximum tax rate on long-term capital gain is only 5%.

Future Tax Break: The long-term capital gains rate is zero percent for lower-income taxpayers in 2008. This tax break was recently extended through 2010 by the Tax Increase Prevention and Reconciliation Act (TIPRA) passed last year. However, as this issue goes to press, Congress is debating legislation that would bar the zero percent tax rate for certain dependents.

Conversely, if your capital losses exceed your gains, the net loss can be used to offset up to $3,000 of ordinary income such as salary. Any excess is carried over to future years. Once you understand the netting rules, analyze your current tax situation and act accordingly. For example:

• If you are currently showing a net loss, you can realize capital losses before the end of the year. The capital gains are effectively tax-free up to the amount of your losses.
  
  
• If you are currently showing a net gain, you can realize capital losses before the end of the year. The losses effectively absorb the tax you would have had to pay on the gains. If the situation dictates it, you can realize an excess loss that may be used to offset up to $3,000 of ordinary income.

Caution: If you sell a stock and buy back the same stock within 30 days, you cannot deduct the loss on your tax return. This is called the “wash sale” rule. To avoid this harsh tax result, wait at least 31 days before you reacquire the stock.

1. Reward employees for wellness participation.
   Typically, a company may offer employees a reduction in health insurance premiums based on participation in various health-related initiatives. In the end, this may result in a healthier workforce, thereby reducing overall costs.



2. Hold “nonsmoking workshops” for employees.
   This may help employees to curtail smoking activities or end them completely. Employees who attempt to quit smoking are usually on the honor system, but having others to talk to may help. Smoking on the business premises should be banned (if not already prohibited by state law).



3. Encourage employees to be physically active.
   It can be as simple as starting a “walking club” at lunch. Similarly, a company can provide discounts or some other enticement for using a nearby fitness center, assuming the company does not have one on the premises.

4. Stock vending machines with nutritious foods.
   If your supplier won’t go along with this, you might consider finding another source. This will show employees that you are truly committed to the cause.



5. Perform regular health screenings.
   You might conduct the screenings one to four times a year. Have a qualified health care professional check each participating employee’s weight, blood pressure, body fat, flexibility, etc. Then have the results reviewed by the appointed wellness program manager. Set individual goals based on your findings.

Other college savings devices, such as Section 529 plans, may be flashier, but recent “improvements” can give parents a reason to reconsider the Coverdell Education Savings Account (ESA). Furthermore, this device is now available for education of younger children or grandchildren.

Background: Originally called the “Education IRA” when it was first introduced in the late ‘90s, a Coverdell ESA is a financial product that is used to pay for a college or graduate school education. Unlike a traditional IRA, contributions are never tax deductible, but the amounts are able to grow within the savings account without any current tax.

The designated beneficiary (e.g., the child who will be attending school) must be under the age of 18. Distributions that are used to pay for “qualified expenses” are exempt from income tax. This includes tuition, books, supplies and equipment required for enrollment as well as room and board for full-time students.

Amounts withdrawn for noneducational purposes are generally subject to regular income tax, as well as a 10% penalty tax. The balance remaining in the account is generally required to be distributed within 30 days after the beneficiary reaches age 30 (but funds may be rolled over tax-free to another account for a different beneficiary).

Back when the Coverdell ESA was called the Education IRA, the maximum contribution amount was only $500 a year. Other limitations on the availability of such accounts for high-income individuals effectively discouraged use of this tax-saving device.

However, the massive tax law enacted in 2001 - the Economic Growth and Tax Relief Reconciliation Act - added some much-needed impetus to Coverdell ESAs. Here are some of the key improvements.

• The maximum annual contribution was increased from $500 to $2,000 -- or four times as much. This makes it easier to build up a sizeable fund for college expenses.



• The limitations on availability of contributions were loosened. Currently, allowable contributions are phased out for single filers with a modified AGI between $95,000 and $110,000; $190,000 and $220,000 for joint filers.



• Previously, you could not take a claim on a tax exclusion for an ESA and still claim the Hope or Lifetime Learning credit in the same tax year. This prohibition has been removed, so you are not required to allocate the same expenses to each one.



• Contributions will be allowed as late as the tax return due date (e.g., generally April 15 of the following tax year). Previously, contributions to an Education IRA were required to be made by December 31 of the same tax year.



• The age restrictions no longer apply to special-needs beneficiaries.

1. Egress: Ensure that a continuous and unobstructed path of travel to the outside of the building has been established. Make sure that emergency exits are similarly open.



2. Maintenance: The fire alarm system and automatic sprinklers must be up to code and maintained in good working order. Also, be certain that access to these systems is unencumbered.



3. Evacuation Planning: It’s not enough to have a written evacuation plan in place. Test it regularly to determine that your employees truly understand their responsibilities in the event of a fire. Don’t make assumptions that all of the bases have been covered.

3. Material Storage: This can be a bit tricky, because you normally won’t have enough storage space needed for all items. But the building cannot allow storage concerns to impede egress from the building.



4. Fire Barriers: Fire and smoke barriers can be an important element of fire safety. If proper accommodations have been made, these barriers may contain, or at least curtail, the spread of fire and smoke. This could be a life saver if occupants need to flee the building in a hurry.



5. Regular Checks: Whenever a renovation or other work to a building takes place, be sure to recheck all of the fire safety areas to make certain the original plan still works. Don’t let the plan collect dust without being reviewed periodically.