November 2011 Financial Questions & Answers

Q: My mother turned 70½ last year and took her first required minimum distribution (RMD) from her traditional IRA in March 2011. Does she have to withdraw any more money this year?

A: The annual RMD usually must be taken by year-end. But the tax law provides a little extra time for taking the first RMD (until April 1 of the year after a person turns 70½). The RMD your mother withdrew in March was technically for 2010, and she should take her second RMD, for 2011, by December 31, 2011.

Q: I know that only 50% of business meal and entertainment expenses are tax deductible. Are there any exceptions to this general rule?

A: Yes, certain types of meal and entertainment expenses are fully deductible. For example, businesses may deduct the full cost of hosting holiday parties for their employees. Promotional tickets (e.g., to a sporting event) and food and beverage samples provided to customers and potential customers are other examples of costs not subject to the 50% disallowance rule.