In reviewing prior columns, we ascertained that advice given a few years ago with respect to year-end tax planning is still applicable. Thus, if you have any interest in reducing your 2000 US income tax burden, you only have a few more days in which to do so. Planning to reduce income taxes should be a year round project, but the following ideas could allow you to minimise your 2000 US income tax liability.

TAX DEADLINES If you plan to sell securities at year-end as part of your tax strategy, remember that the timing of the sale is important. The trade date (the date your order is executed) on your buy or sell confirmation will determine the taxable year in which the gain or loss is recognised. Hence, trades must be executed on or before December 31, 2000 for the gain or loss to be counted on your 2000 US Federal individual income tax return.

December 31, 2000 is also the last day for converting a conventional IRA to a Roth IRA, and for establishing an IRA account for 2000.

TAX PLANNING As simplistic as it may sound, tax planning revolves around reducing taxable income, or increasing itemized deductions.

Salary/Bonus Consider deferring all or part of your salary/bonus for a period of time. If you are in the 39.6 percent tax bracket, and you receive your year-end bonus prior to December 31, 2000, you will only have about 60 percent of the after tax proceeds to invest. Ask your employer to either invest the deferred bonus into the company pension plan, or into a Rabbi Trust, where the funds can grow on a gross basis. The funds will be taxable in the future, but you should be able to control the timing of the taxable event, hopefully during a period in which you are in a lower tax bracket.

Even if you only defer receipt of the bonus until January 2, 2001, you will still be able to defer the payment of the tax from January 15, 2001, to four quarterly payments during 2001/2002.

Corporate Retirement Plans Some employers have US tax qualified retirement schemes in place that will allow you to contribute (on a before tax basis) to an employer-sponsored scheme, some of which may have matching employer contributions. This will allow you to invest on a before tax basis and also allow the investment income generated each year to accumulate on a tax-free basis.

Investment Income There are three potential tax savings opportunities to save taxes.

Municipal Bonds -- The first is reviewing the net investment income from your current investment with that of municipal bonds. For example, if you have a security that pays you $1,000 in dividends, and the underlying stock has shown little growth in price, your after tax income if you are in the 39.6 percent tax bracket is $604. You may be able to find a high-quality municipal bond that will give you a greater yield, on a tax-free basis. For example, if the stock has a fair market value of $50,000, your after tax dividend has a yield of 1.2 percent. A high quality, tax-free municipal bond should yield 6 percent or $3,000, a five-fold increase.

Annuities -- Second, you could consider investing in an annuity. You can either invest in a fixed annuity, which will provide you with a fixed income over a period of time, or a variable annuity, which will provide income subject to market performance. The tax benefit of both investments is that your investment grows on a tax-free basis, and you are not taxed until you withdraw the income.

Life Insurance -- Third, you could consider investing in a life insurance product such as a universal life policy. Under this concept your investment also grows on a tax-free basis, though a part of the income is used to buy a term life insurance policy, which can serve to pay the potential estate taxes on the investment.

However, before you do any of the above, sit down with your financial advisor to be sure that changing your investments makes good business sense. Making an investment solely for tax reasons usually is not a good investment decision.

Capital Gains and Losses If you are planning to sell stock prior to year-end, be aware of both the holding period and gain or loss to be realised. Selling a stock that you have held for a period of less than 12 months will result in a gain taxed at ordinary tax rates. Selling a stock that you have held for more than 12 months will result in a long-term gain taxed at a maximum of 20%.

To further minimise your taxes, you might consider selling stocks that have losses prior to year-end to offset any gains realised during the year. If you are going to pursue this strategy, be aware of the "wash sale rule'' which does not allow you to use the loss if you purchase the same or a substantially identical security within 30 calendar days before or after the trade date of the original stock. As you can only use $3,000 of losses to offset ordinary income each year, you might also consider selling stocks that have gains, to offset losses realised during the tax year.

Itemised Deductions If you are residing outside the United States, you probably will have few, if any, deductions to itemise. If you still own a home in the United States and rent it, the deductions for real estate tax and mortgage interest will go on Schedule E, to offset your rental income. And, you probably are no longer subject to a state income tax. Hence, the only other major deduction you may have is charitable contributions. As a charitable contribution can only be taken as an itemized deduction if the contribution is made to a US charity, you probably do not have much in the way of a deduction. Most US citizens residing outside the United States simply avail themselves of the standard deduction of $7,350 (married filing a joint tax return), as their itemised deductions do not exceed this amount.

The tax advice given by this column is, by necessity, general in nature. You should, of course, check with your own US tax consultant as to how specific transactions affect you since tax advice varies with individual circumstances.

James Paul Sabo, CPA, is the President of ETS Ltd., PO Box HM 1574, Hamilton HM GX, Bermuda. Questions should be sent to: jsabo yexpatriatetaxservices.com BUSINESS BUC