Great Travel News Syndicate

By MICHAELEEN DOUCLEFF

The Wall Street Journal (illustration) Associated Press (photo); Universal Music Publishing (score)

Adele slightly modulates her pitch at the end of some long notes, adding to the tension.

On Sunday night, the British singer-songwriter Adele is expected to sweep the Grammys. Three of her six nominations are for her rollicking hit “Rolling in the Deep.” But it’s her ballad “Someone Like You” that has risen to near-iconic status recently, due in large part to its uncanny power to elicit tears and chills from listeners. The song is so famously sob-inducing that “Saturday Night Live” recently ran a skit in which a group of co-workers play the tune so they can all have a good cry together.

Adele, the Grammy-winning singer-songwriter performed “Someone Like You” from her latest album “21″ at WSJ Cafe

What explains the magic of Adele’s song? Though personal experience and culture play into individual reactions, researchers have found that certain features of music are consistently associated with producing strong emotions in listeners. Combined with heartfelt lyrics and a powerhouse voice, these structures can send reward signals to our brains that rival any other pleasure.

Twenty years ago, the British psychologist John Sloboda conducted a simple experiment. He asked music lovers to identify passages of songs that reliably set off a physical reaction, such as tears or goose bumps. Participants identified 20 tear-triggering passages, and when Dr. Sloboda analyzed their properties, a trend emerged: 18 contained a musical device called an “appoggiatura.”

An appoggiatura is a type of ornamental note that clashes with the melody just enough to create a dissonant sound. “This generates tension in the listener,” said Martin Guhn, a psychologist at the University of British Columbia who co-wrote a 2007 study on the subject. “When the notes return to the anticipated melody, the tension resolves, and it feels good.”

Chills often descend on listeners at these moments of resolution. When several appoggiaturas occur next to each other in a melody, it generates a cycle of tension and release. This provokes an even stronger reaction, and that is when the tears start to flow.

“Someone Like You,” which Adele wrote with Dan Wilson, is sprinkled with ornamental notes similar to appoggiaturas. In addition, during the chorus, Adele slightly modulates her pitch at the end of long notes right before the accompaniment goes to a new harmony, creating mini-roller coasters of tension and resolution, said Dr. Guhn.

To learn more about the formula for a tear-jerker, a few years ago Dr. Guhn and his colleague Marcel Zentner found musical excerpts—from Mendelssohn’s “Trio for Piano” and Barber’s “Adagio for Strings,” for example—that reliably produce the chills and then measured the physiological reactions (heart rate, sweating, goose bumps) of listeners.

Chill-provoking passages, they found, shared at least four features. They began softly and then suddenly became loud. They included an abrupt entrance of a new “voice,” either a new instrument or harmony. And they often involved an expansion of the frequencies played. In one passage from Mozart’s Piano Concerto No. 23 (K. 488), for instance, the violins jump up one octave to echo the melody. Finally, all the passages contained unexpected deviations in the melody or the harmony. Music is most likely to tingle the spine, in short, when it includes surprises in volume, timbre and harmonic pattern.

“Someone Like You” is a textbook example. “The song begins with a soft, repetitive pattern,” said Dr. Guhn, while Adele keeps the notes within a narrow frequency range. The lyrics are wistful but restrained: “I heard that you’re settled down, that you found a girl and you’re married now.” This all sets up a sentimental and melancholy mood.

When the chorus enters, Adele’s voice jumps up an octave, and she belts out notes with increasing volume. The harmony shifts, and the lyrics become more dramatic: “Sometimes it lasts in love, but sometimes it hurts instead.”

Adele, the Grammy-winning singer-songwriter performed “Rolling In The Deep” from her latest album “21″ at WSJ Cafe

When the music suddenly breaks from its expected pattern, our sympathetic nervous system goes on high alert; our hearts race and we start to sweat. Depending on the context, we interpret this state of arousal as positive or negative, happy or sad.

If “Someone Like You” produces such intense sadness in listeners, why is it so popular? Last year, Robert Zatorre and his team of neuroscientists at McGill University reported that emotionally intense music releases dopamine in the pleasure and reward centers of the brain, similar to the effects of food, sex and drugs. This makes us feel good and motivates us to repeat the behavior.

Measuring listeners’ responses, Dr. Zatorre’s team found that the number of goose bumps observed correlated with the amount of dopamine released, even when the music was extremely sad. The results suggest that the more emotions a song provokes—whether depressing or uplifting—the more we crave the song.

With “Someone Like You,” Adele and Mr. Wilson not only crafted a perfect tear-jerker but also stumbled upon a formula for commercial success: Unleash the tears and chills with small surprises, a smoky voice and soulful lyrics, and then sit back and let the dopamine keep us coming back for more.

—Ms. Doucleff is a scientific editor at the journal Cell.

By KATY MCLAUGHLIN

Chef and restaurateur David Burke’s business sounds like a financial-crisis perfect storm. Consider:

His restaurants are mainly in hard-hit areas including Manhattan’s Upper East Side and Las Vegas. Mr. Burke has no experience owning restaurants in a down economy; he launched his empire during restaurant boom times, starting in 2003. And the $7 billion fine-dining industry will see a 12% to 15% drop in sales this year, according to Technomic, a Chicago restaurant industry consultant.

And yet…Mr. Burke reports overall growth, some of his restaurants are booked to capacity on some evenings, and restaurant-industry analysts say he is one of the few high-end players with the right idea for the times.

How could this be? Mr. Burke, it seems, has figured out a way to navigate the downturn. His strategy is to throw out the high-end-dining playbook that says discounting should be subtle. Instead, he is offering dramatic, attention-getting and significant discounts. By engineering the menu carefully and keeping labor costs in check, he is able to slash prices without losing money, he says.

His promotions have included $20.09 three-course meals with items such as oysters and lobster at many of his upscale restaurants, including two in Manhattan (where, without discounts, entrees run $29 to $44), and $5 burgers and milkshakes at his Chicago steakhouse (where a 14-ounce sirloin is $48 on the regular menu). On one menu, he crossed out prices of wine and listed new prices with the term “sale” — a rarely seen word in fancy restaurants.

TRY IT! David Burke’s promotions include a wine auction and $20.09 three-course meals

One of his most unusual promotions is the Wine Auction at the tony David Burke Townhouse in Manhattan. Diners are handed a list of high-end wines with prices ranging from $200 to $600 struck out with red ink. The sommelier approaches the table, suggests that diners make him an offer and begins a negotiation. Wine director Bruce Yung says he sells an average of five bottles a night, meeting his reserve price or better.

“It’s worth a shot,” says Mr. Burke of his unorthodox approach to selling fine wine. “I’m sitting on close to $200,000 worth of wine anyway, already paid for.”

The D Word

Discounting is a strategy high-end restaurateurs have traditionally avoided or carried out in subtle ways, out of fear of eroding the cache of their brands. But this winter and spring, an unprecedented number of fine-dining restaurants slashed their prices.

Mr. Burke tries to set his restaurants apart from other bargains being offered mainly by making his discounts as drastic, easy-to-grasp and catchy as those of one of the few restaurants doing well these days: McDonald’s.

“I have teenage kids who go to McDonald’s for a dollar meal,” Mr. Burke says. The snappy ring to that promotion inspired him to come up with a high-end equivalent. “I see that it’s working for them at a buck, so it might work for me at $20,” Mr. Burke says.

 

Wooing Diners in a Down Economy

2:07

Chef David Burke is known for his creative cuisine. Now he’s using that same creative approach to weather a downturn in dining out. He talks with WSJ’s Beckey Bright about his strategy.

Starting in January, he rolled out $20.09 meals on Sunday nights at David Burke Townhouse and Fishtail in Manhattan, and at David Burke Fromagerie in Rumson, N.J. At Primehouse, in Chicago, he offers the $20.09 deal for lunch six days a week, excluding Sunday. At David Burke at Bloomingdale’s, in Manhattan, he serves a $20.09 dinner every night of the week. For a $5 supplement, diners can have a one-pound lobster or filet mignon entrée.

Last year, DB Global, Mr. Burke’s New York-based company, had $35 million in revenue, and for this year he predicts $45 million. Like many multi-unit operators, he reports that his less-expensive restaurants are doing well this year. For instance, David Burke at Bloomingdale’s, which has both a sit-down restaurant and a Burke in the Box take-out area, is up 2% over last year. Sales at all three Burke in the Box restaurants — the others are at McCarran International Airport in Las Vegas, and Foxwoods Resort Casino in Connecticut — are up from last year.

Still, even his high-end restaurants, while taking a hit, are doing better than many of their high-end competitors: Primehouse had a 2% decline in sales in the last quarter of 2008 and beginning of this year, compared with the prior year; Fromagerie is down 5%, and David Burke Townhouse in New York City saw an 8% sales drop. Across Manhattan, meanwhile, fine-dining operators are reporting sales declines of around 15%, and some celebrated restaurants, including Fiamma, a highly praised Italian eatery in the same price range as Mr. Burke’s fanciest restaurants, recently closed.

Some of the impact of Mr. Burke’s discounting is measurable: The Sunday discount dinner at Townhouse in Manhattan turned a night that typically grossed $5,250 into a $12,750 night, Mr. Burke says. There are softer benefits, too, such as increased goodwill, publicity, and customers who discover the restaurants and return on full-price nights, Mr. Burke says.

Internal Breeding

Mr. Burke is somewhat insulated from the risk of besmirching his high-end image with discounts because of his unique public persona, says Ed Levine, founder of the food blog SeriousEats.com. “David Burke is the master of the culinary grand gesture, so this is perfectly in keeping with his brand,” Mr. Levine says. Mr. Burke now has “pricing gimmicks” that link up with other gimmicks he’s used over the years, Mr. Levine says. Mr. Burke, for example, bought his own breeding bull to sire the beef cattle used at Primehouse. He also lines his beef-aging cave with Himalayan rock salt, which he sells for $29.99 for a two-pound box.

Discounting, if done too often for too long by too many players, can erode pricing power in the long term, says Dennis Lombardi, executive vice president of WD Partners, a restaurant and retail consultant in Dublin, Ohio. Citing one example, “customers have been trained to expect to buy pizza at a discount,” because of all the coupons and deals, Mr. Lombardi says.

Mr. Burke says that by limiting most of his discounts to Sunday and varying the deals, he avoids such expectations.

Less Bass

With careful planning, Mr. Burke says he is able to keep food costs on his discounted menus at about 45% of the menu price, which is higher than the traditional 35% most fine-dining restaurants aim for but still enables him to earn a profit, because people tend to order more drinks when they are paying less for food. He sprinkles in luxurious ingredients, though some, such as dry-aged beef or black bass, are served in smaller portions than on the a la carte menu. He caught a break this winter when the wholesale prices he was paying for lobster fell to about $5 a pound, from a norm of $7.50, enabling him to include on the discounted menu items such as lobster carbonara and half an “angry lobster,” a spicy signature dish.

Stephen Hanson, a New York-based restaurateur who manages operations for the Chicago hotel where Primehouse is located and who helped devise the concept for the restaurant, disagrees with the discounting approach. Mr. Hanson says he fears that the customer will think, “Were you gouging me beforehand?” But Mr. Hanson, whose company, New York-based B.R. Guest Restaurants, owns 14 other restaurants in New York and Las Vegas, says he is content to let Mr. Burke, whom he calls “a marketing genius,” decide the menu pricing.

During a weeklong promotion in October at Primehouse in which Mr. Burke sold normally $12 burgers for $5, the restaurant made money, Mr. Burke says. Serving lunch to 30 to 40 people on an ordinary day yields about $8,000 per week. During the promotion, the restaurant served 300 lunches a day, Mr. Burke says, for a weekly lunch take of $30,000. While food costs were higher, because more was served, labor costs stayed almost the same, because waiters at the restaurant make most of their wages through tips and the kitchen required only two extra line cooks, who make $15 an hour, he says.

In addition to discounting, DB Global is reducing labor costs. Every week the company analyzes how many bookings have been made at each restaurant and looks at past history to determine how busy it will be. Then it pares or increases hourly staff — about 70% of all employees — accordingly. In winter, about a dozen cooks usually return to their home countries, including Mexico, India and France, for six weeks of unpaid vacation; this year, Mr. Burke encouraged them to take two or three months off. Because his three Manhattan restaurants are in close proximity, he also moves staff from less-busy to fuller restaurants and asks them to multitask. For example, the company butcher now also makes ravioli and crab cakes.

DB Global also focuses on retaining every potential customer. On a recent Tuesday, Fishtail was too full to accommodate more patrons. Mr. Burke instructed the Fishtail hostess to send patrons to nearby David Burke Townhouse, promising a free drink would be waiting. Out of 20 potential guests, 18 took the offer, Mr. Burke says.

—Ms. McLaughlin is a staff reporter for The Wall Street Journal in Los Angeles.

Write to Katy McLaughlin at katy.mclaughlin@wsj.com

Printed in The Wall Street Journal, page R3

Edited by CRISTINA LOUROSA-RICARDO

Those hoping to occupy Easy Street in retirement may want to follow the lead of the 0.2%. That’s the topmost tiny fraction of savers who’ve managed to sock away more than $1 million in their 401(k) plans.

That figure, based on data from the Employee Benefit Research Institute, may depress those with sums closer to the median 401(k) balance of roughly $60,000. And for good reason. Even among employees 55 and up who have been contributing to the same 401(k) plan for more than 20 years, just 2% are estimated to have cracked the $1 million mark, says Jack VanDerhei, EBRI’s research director.

Who are these retirement savers who have managed to make the system work—and what are they doing differently?

They don’t necessarily have higher-than-average salaries or the investing IQ of Warren Buffett, Mr. VanDerhei says. “The one characteristic that differentiates the winners from the non-winners here is contribution rate—a high percentage of those million-dollar savers had constant participation and high contribution rates.”

Though many savers may be scarred by the past decade of lousy returns, getting to $1 million over the course of a 40-year career should be a manageable goal, even for some lower-income employees, says Greg Burrows, vice president of Principal Financial.

Someone who earns $35,000, saves 12% to 13%—including a company match, gets an annual raise of 3.5%, and annual returns of 7% would save a $1 million. And despite the current volatility, many may still do that, he says. “One thing you have to keep in mind is that the 401(k) hasn’t been around long enough for us to see people take full advantage of it over the course of an entire career.”

The recession did wipe out many 401(k) balances, and its fallout has hampered saving, particularly among the middle class, says Mike Alfred, CEO of Brightscope, which monitors and rates retirement plans.

On top of that, most participants can’t—or don’t—take full advantage of their 401(k)s, he says. While the Internal Revenue Service raised the contribution cap to $17,000 for 2012, just 9% of plan participants contribute that much, according to the EBRI.

—Jeremy Olshan, SmartMoney.com

Don’t Miss a Deal

By the National Retail Federation’s estimates, consumers left a whopping $20 billion on the table last year in missed price adjustments.

A new website and app called Savvy tracks store prices and price adjustment policies—letting consumers know if that pair of sneakers has gone on sale shortly after they’ve just bought them.

Upload a picture of a recent receipt to the site, or to the free app via an Apple or Android smartphone, and Savvy will send an alert if the price drops within the retailer’s window for adjustments. Users also can track prices of items they want, and get alerts when the price has dropped below a designated level. Savvy tracks 250 big retailers, and doesn’t compare prices across them.

A company spokeswoman says the site continues to add partners and capabilities, and does track broad categories like “black boots” across all stores.

—Kelli B. Grant, Pay Dirt Blog, SmartMoney.com

Stressful Work

Those who serve as caregivers to elderly relatives need no reminder of the potential toll it can take. For the rest of us, a new report from AARP Public Policy Institute may prove instructive.

According to the report, titled “Valuing the Invaluable: 2011 Update, The Growing Contributions and Costs of Family Caregiving,” 42.1 million adult Americans serve as caregivers to an elderly relative, friend or spouse experiencing difficulty managing daily activities.

The typical caregiver: She (some 65% are women) is 49 years old and works outside the home. She spends nearly 20 hours a week providing care—such as administering medications, providing transportation and serving as a health-care advocate—while juggling responsibilities to an employer and other family members. The average caregiver does this for nearly five years.

It’s not surprising, then, that the report finds that caregiving can take a considerable toll on the caregiver’s physical and emotional health.

• 69% of caregivers responding to an online survey said caring for a loved one was their No. 1 source of stress.
• A review of studies suggests that about 25% to 50% of caregivers meet the diagnostic criteria for “major depression.”

There also are signs that caregivers experience financial stress. Some even make sacrifices that could compromise their own retirement security.

One study found that in 2009, about 27% of caregivers reported a “moderate to high degree of financial hardship as a result of caregiving.”

—Anne Tergesen, Encore Blog, SmartMoney.com

By ANGUS LOTEN

Angel investors—wealthy individuals who provide capital to start-ups with the potential for fast growth—are an increasingly important source of capital to early stage companies, including in Europe, one recent report says.

The report by the Organization of Economic Cooperation and Development is among the first to gauge angel investing activity around the world.

Angus Loten/The Wall Street Journal

Katherine O’Neill of the JumpStart New Jersey Angel Network (foreground left) and Aaron Holiday of BR Venture Fund (background on O’Neill’s right) field pitches for start-up funding from entrepreneurs at a networking event in New York in December.

Calculations by the Paris-based think tank suggest that the total amount of capital raised from angel investors in the U.S. was $17.7 billion in 2009, compared to $18.7 billion for venture capital. The bulk of the venture capital money went to companies that were at later stages in their growth cycles, the report notes.

In Europe, the angel market in 2009 reached $5.5 billion, surpassing all venture capital funding by some $250 million, according to the report, which is based on interviews with roughly 100 investors, entrepreneurs and business leaders in 32 countries.

With banks reining in all but the safest loans since the recession, and venture capital firms now targeting less risky late-stage business startups, angel investors are nearly alone in backing young, fast-growth companies, the report says.

The VCs tend to target high-tech hubs, like Silicon Valley.

But angels are more prone to support entrepreneurs in their own back yards, with typical funding rounds ranging from $25,000 to $500,000, the report says. At the same time, they’re less sensitive to ups and downs in the economy and tend to invest in a “much wider range of innovation” than VC investment firms, the OECD report concludes.

In the U.S., angel investors are now putting more cash into biotechnology and health-related ventures, rather than IT, which was an investor magnet for decades, for instance. That’s partly due to the rise of angel investing groups over the past decade. By pooling smaller sums together into big funding rounds, these groups are able to spread the risk of betting on promising ventures in less hot sectors.

As a result, angel investing itself is becoming a more formalized process – complete with more rigorous due diligence.

Beyond cash, angels play an often overlooked but crucial mentoring role for new business owners as successful entrepreneurs themselves, offering hands-on experience and a network of valuable contacts, the report notes.

But policy makers have tended to focus efforts on the higher profile venture capital market, however. To better drive the global economic recovery, the OECD recommends tax incentives for angels and angel groups, co-investment programs, or even public funding for national angel associations.

Many fast-growth, entrepreneurial ventures that attract angels are the same start-ups that create jobs. Led by start-ups, small firms have generated 65% of net new jobs over the past 17 years, according to the Small Business Administration.

Still, some critics say wealthy investors shouldn’t need costly tax incentives to back promising ventures, especially as many countries enact tough austerity measures aimed at balancing national budgets in the wake of the financial market crisis.

Others worry tax breaks will draw in institutional investors. Institutional investors may not provide start-ups with the business-management expertise or potentially valuable contacts as the typical individual angel investors might provide.

Of the $8.9 billion in total investments by angels in the first half of 2011, 39% went into seed and start-up ventures, up from 26% of $8.5 billion in total investments over the same period in 2010, according to data from the University of New Hampshire’s Center for Venture Research. It hasn’t yet released data for 2011′s second half.

Write to Angus Loten at angus.loten@wsj.com

Epic failure in Washington is causing epic uncertainty for taxpayers.

This week, Congress’s special 12-member deficit-cutting committee failed to agree on even a broad outline for addressing the U.S.’s fiscal woes. It marked the third year in a row that taxpayers headed into December with major tax-code issues unaddressed.

Now tax experts don’t expect action on the most important issues—income-tax rates, capital-gains rates, estate-tax exemptions and rates, and the alternative minimum tax—until after next year’s election. Unless, that is, something happens in the economy to move lawmakers to act. “If the markets insist, Congress will respond,” says Michael Graetz, a professor at Columbia University Law School and a former top Treasury official.

Lawmakers have a lengthy to-do list. The 2% Social Security payroll-tax cut for employees expires at the end of 2011. So do a host of other provisions, including a fix to keep the alternative minimum tax from expanding to millions more taxpayers in 2012, and an extension of the popular IRA charitable contribution for people older than 70½.

Other changes are set to take effect at the end of next year, including the expiration of the tax cuts enacted in 2001 and 2003. The top tax rate on wages would reset to 39.6% from 35%, and the top rate on long-term capital gains would rise to 20% from 15%. The special 15% rate on dividends would lapse, as would the current generous estate-tax provisions. As many 10 million lower-income families and individuals would also be restored to the tax rolls, according to the nonpartisan Tax Policy Center.

How can individual taxpayers cope with this chaos? Here are our best suggestions for moves to make before the end of the year as well as longer-term issues to consider.

Investments

It isn’t clear what rates on capital gains, interest and dividends will be in 2013. What is clear: The current top rate of 15% on long-term gains and dividends is a historic low, and a new 3.8% tax on net investment income is set to take effect in 2013 for many joint filers.

That tax will affect taxpayers with adjusted gross incomes of $250,000 or more (or $200,000 for single filers), and the levy applies to taxable interest, dividends, rents, some annuities, royalties and capital gains, including the sale of a house, after a $500,000 exclusion ($250,000 for single filers).

Cost-basis reporting. This year is the first brokers must furnish the Internal Revenue Service with “cost-basis,” or purchase-price, information on stocks sold from a taxable account. The requirement affects stocks bought on or after Jan. 1, 2011.

Most brokers already have urged customers to pick a cost-basis method for use when less than 100% of a position is sold. This choice makes a big difference, because profits and losses are measured from the purchase price.

Example: If an investor has four 200-share lots of a stock selling for $100 a share, each with a different cost basis—say $49, $90, $110 and $121—then the result of selling 100 shares could range from a $51-a-share gain to a loss of $21 a share, depending on which shares were deemed sold.

According to Stevie Conlon, a senior director at WoltersKluwer Financial Services, brokers should offer customers a choice of at least four reporting methods on stock sales: first-in, first-out; last-in, first-out; highest-cost, first-out; and specific identification. If a customer doesn’t specify, IRS rules specify first-in, first-out as the default—which could raise taxes paid. A customer may switch methods, but only before selling shares, not after.

Be careful. Robert Gordon, CEO of Twenty-First Securities, an investment-management firm in New York, was dismayed earlier this year to find that not all brokerages are set up to offer customers highest-cost, first-out, which can minimize taxes on gains. “Make sure your firm is up to speed,” he says.

Stock gains and losses. The tax code is wondrous for investors. Not only is the top rate on long-term capital gains 15%, but investors also can time gains and losses to minimize tax. Also, up to $3,000 of long-term losses can be deducted against ordinary income from wages or other sources, which are taxed at up to a 35% rate. Unused losses carry over to future years.

The upshot: Investors with access to low transaction costs should maximize these benefits. Depending on the portfolio, experts often recommend “harvesting” current losses to offset current or future gains and then rebuying a stock if it has good long-term prospects.

Avoid “wash sales,” however. IRS rules disallow current loss deductions if the same investment is acquired fewer than 30 days before or after a sale, even in an individual retirement account or stock-option exercise. In contrast, a stock may be repurchased immediately if it is sold at a gain, even if the gain will be offset by a loss.

Charitable Gifts

The current regime for most donations appears set through 2012, but several proposals in Washington would clip or chop the value of deductions for people in higher brackets in 2013 and beyond. The Pease limit also is scheduled to return in 2013; this provision reduces a taxpayer’s itemized deductions above a threshold that varies by filing status and is also adjusted for inflation. The reduction is equal to 3% of adjusted gross income.

Current rules allow a deduction up to 50%, 30% or 20% of adjusted gross income, depending both the recipient and type of property donated. In general, the 50% limit applies to gifts of cash and the 30% limit to appreciated assets.

Experts often advise giving appreciated assets—such as shares of stock—rather than cash, because the donor avoids capital-gains tax and can get a full deduction for the gift’s value.

IRA charitable donation. Congress extended this highly popular provision through 2011, but it will lapse for 2012 unless lawmakers act.

Donors over age 70½ may contribute up to $100,000 of IRA assets directly to one or more qualified charities (but not a donor-advised fund). The IRA trustee must send the gift directly to the group. There is no deduction, but the gift is excluded from income, so it doesn’t swell income in a way that raises taxes on Social Security or Medicare premiums. The gift can count as part or all of the required minimum distribution.

Alternative Minimum Tax (AMT)

The AMT rescinds tax breaks for people deemed to use them too well, imposing alternate tax at a 26% or 28% rate, depending on a complex set of variables. According to Melissa Labant, a tax specialist with the American Institute of CPAs, the tax benefits most likely to trigger the AMT are high deductions for state and local taxes, miscellaneous deductions, personal exemptions (such as having many children or dependents) and incentive stock options.

It is almost impossible to tell whether a taxpayer will be subject to the AMT without running the numbers, she adds, and it is often difficult to avoid the AMT by rearranging deductions. “Sometimes taxpayers can bunch payments like state taxes to avoid this tax, but not often,” Ms. Labant says.

The AMT “patch” enacted late last year cut the number of people paying AMT to 4 million from a potential pool of more than 20 million last year. It expires at the end of this year.

Retirement

According to Fidelity Investments, two-thirds of all IRA holders haven’t yet taken their required payouts, which must be withdrawn by Dec. 31.

There is one exception: Taxpayers taking their first required payout may do so by April 1, 2012. But think twice—doing so could cause “bracket leap” by raising income for 2012.

Roth IRA conversions
. These must be complete by year end in order to count for 2011. There is no longer an income limit as to who may convert regular IRAs to Roth accounts. Full income tax is due on the conversion, but qualified withdrawals are tax-free. They don’t raise reported income, possibly raising Medicare premiums or taxes on Social Security income. Roth IRA income won’t be subject to the 3.8% tax on net investment income that arrives in 2013.

Taxpayers who converted to Roth IRAs in 2010 had the option of paying taxes due in 2011 and 2012. That option isn’t available for 2011 conversions.

Miscellaneous Income Tax

Medical and miscellaneous deductions
. A wide variety of unreimbursed medical expenses are deductible—from out-of-pocket insurance premiums to mileage to remediation for special-needs students—but only above 7.5% of a taxpayer’s adjusted gross income (10% for AMT payers). Some taxpayers “bunch” deductions into one year, when possible, to jump this hurdle. For a list of qualified expenses, see IRS Publication 502, Medical and Dental Expenses.

The same bunching can work with miscellaneous deductions, which are deductible above 2% of adjusted gross income for regular taxpayers and not at all for AMT payers. The category includes everything from magazine subscriptions to tax-preparation fees. See IRS Publication 529, Miscellaneous Deductions.

Depreciation. Sole proprietors and other businesses reporting on Schedule C of a personal return should check expanded write-offs that become less generous at the end of 2011.

One provision allows an immediate deduction for up to $500,000 of qualified costs, which can be for a car, truck, computer, desk, chairs or other equipment, as long as it is purchased and placed in service before the end of the year. Small retailers may deduct up to $250,000 in leasehold improvements under this provision.

Another provision, “bonus” depreciation, is also changing. A favorite use is to take a full write-off of SUVs over 6,000 pounds in the first year. See IRS Publication 946 or a tax expert—depreciation is complex.

Estate and Gift Taxes

Despite rampant rumors, this area is expected to remain stable through the end of 2012. At that point, the estate tax is slated to snap back to its 2001 version, with a $1 million exemption per individual and a top rate of 55%.

That is far worse for taxpayers than current law, which has a gift- and estate-tax exemption of $5 million per individual and a top rate of 35%. The possible change is prompting some people to make gifts to use the exemption before 2013.

Columbia Law School’s Prof. Graetz and other experts expect that in the end the estate and gift regime won’t be any less generous that it is now—but there isn’t any guarantee.

Separate from the $5 million gift-tax exemption, any taxpayer may give anyone up to $13,000 of cash or property a year, free of gift tax. So if Ed and Edna have three married children and six grandchildren, they could give away up to $312,000 per year free of tax. If the property isn’t cash, the giver’s cost basis carries over to the recipient.

In one twist, some taxpayers use this provision to forgive up to $13,000 of intrafamily loans a year. In another, a taxpayer may bunch up to five years of such annual gifts—$65,000 per donor—in one contribution to a “529 plan” that will be used for qualified education costs. The giver may withdraw principal free of penalty if needed.

All payments for qualified medical care and tuition also are free of gift tax if the donor pays the institution directly.

—Email: taxreport@wsj.com

Corrections & Amplifications

The Pease limit reduces a taxpayer’s itemized deductions above a threshold that varies by filing status and is also adjusted for inflation; the reduction is equal to 3% of adjusted gross income. An earlier version of this article condensed this definition by saying the Pease limit disallows 3% of itemized deductions.