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Money Buzz 09/04

Deducting business lunches, investing help from your computer and more

Food for Thought

Hungry for more tax deductions? If so, you'll be heartened by new information supporting a return to the pre-1986 meals and entertainment deduction rate of 80 percent. A new study suggests that deduction "benefits small businesses more than large firms by a sizable margin," according to the SBA's Office of Advocacy, which sponsored the study.

Critics of Congress's 1986 move to reduce the deduction amount to 50 percent have long held that business lunches and dinners are the small-business equivalent of the marketing programs large companies use. "Big companies can deduct all their marketing expenses," explains John McDowell of the SBA's Office of Advocacy. "But small firms rely on meeting with potential clients to win deals. It doesn't seem fair that large businesses can get a full deduction, and small businesses can't."

Will the study help turn the tide? Already, bills to increase the meal and entertainment deduction back to 80 percent are pending in both the House and the Senate. The White House Conference on Small Business has also made restoring the deduction to its 100 percent threshold a top priority. "This is good news for both business owners and the restaurant industry," says McDowell. "As they say, 'Restaurant meals make business deals.'"

Fair Game

Afraid that your emotions are keeping you from making level-headed stock picks? Maybe it's time to let a computer model weigh in on your market options.

The Standard & Poor's Neural Fair Value 20 portfolio uses an assortment of computer models to select 20 stocks that Standard & Poor's believes will produce superior returns over the next six months. Since its inception in 2000, the portfolio has appreciated an average of 14.7 percent annually and has consistently beat the S&P 500 Index-even when those pesky transaction fees are taken into account.

"The model is driven mainly by consensus earnings and growth forecasts for each company, from which five-year return-on-equity projections are made for each company," explains Andre Archambault, fair value strategist for Standard & Poor's Investment Advisory Services in New York City. The computer model then considers price book value and other factors, such as the company's history and peer group, to assign each company a "fair value" rating and select a portfolio comprised of bargain stocks ripe for recovery.

So far, the model's results have been impressive, with the Neural Fair Value 20 portfolio returning 39.61 percent in 2003, compared to the S&P 500 Index's 28.69 percent, according to Archambault. He says investors seeking an unbiased recommendation can simply replicate the portfolio, which is available with a subscription to The Outlook, Standard & Poor's online weekly newsletter.


Productivity lost during research conducted through online search engines cost businesses an estimated
$31
BILLION
last year.
SOURCE: FIND/SVP

16%
of small- to midsize-business CEOs report their most significant business issue is the rising cost of doing business.
SOURCE: TEC International

is a freelance writer in New York City specializing in business and finance.

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This article was originally published in the September 2004 print edition of Entrepreneur with the headline: Money Buzz 09/04.

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