Tag: Rich people

IRS Unit Fully Intends to Make Rich People’s Audit Experience as Unpleasant as Possible

As you my have heard, being mega-rich these days has its disadvantages, including but not limited to – 1) governments getting overly reliant on the wealthy pitching in with revenues; 2) people giving you a hard time when you buy new toys; 3) your own kind selling you out.

Because times are tough and elected officials are having difficulty convincing anyone that higher taxes for the middle class are a good idea, the affluent are having the unfortunate luck to experience the rigor of the Global High Wealth Industry Group – a new unit within the IRS designed to perform the financial equivalent of a full rectal exam:

The reviews performed so far have been particularly harsh, say attorneys. Investors are being asked to turn over numerous hard-to-get documents in short order. These are “the audits from hell that your grandfather warned you about,” says Charles P. Rettig, a partner at Hochman, Salkin, Rettig, Toscher & Perez in Beverly Hills, Calif.

And don’t think for a second that the Service is putting scrubs on these assignments. Extra-special auditees deserve extra-special auditors:

Miriam L. Fisher, a tax attorney and partner at law firm Morgan Lewis in Washington, says the audit teams comprise “A-list examiners” drawn from around the country who are knowledgeable and experienced with various financial products and industries. The audits are so intensive that each team is handling only a few right now and they aren’t far along in the process, she says.

IRS spokeswoman Michelle Eldridge says the group is looking at “individuals who have a complex set of situations, and looking at the complete financial set up.” She acknowledged that “these cases are full audits.”

Although you would never expect an IRS audit to be as delightful as, say, your average weekend in the Hamptons but haven’t rich people suffered enough? The least the IRS examiners could do is bring something from Maison du Chocolat to bring the tension down a notch.

[via TaxProf]

Study: Rich People Getting the Pleasure of Assisting Governments Increase Revenues Worldwide

The following post is republished from AccountingWEB, a source of accounting news, information, tips, tools, resources and insight — everything you need to help you prosper and enjoy the accounting profession.

The worldwide decline in top personal income tax rates over the past seven years generally appears to have come to an end, as this year’s average rate increased 0.3 percent globally, according to KPMG International’s 2010 Individual Income Tax and Social Security Rate Report, released this we remained static in most locations, including the United States, the finding of an upward moving trend in the KPMG report suggests some governments are beginning to opt for a personal tax rate increase to help combat deficits and raise additional revenue.

“In the current economic environment, as many countries are faced with increasing budget deficits, they need funding for various economic stimulus packages,” said Ben Garfunkel, national partner in charge of KPMG LLP’s (U.S.) International Executive Services practice. “Our study indicates that many of these countries are levying tax increases on their highest earning taxpayers in order to increase revenue. We also see governments becoming increasingly sophisticated and rigorous in the framing and application of their tax rules.”


According to the KPMG report, the majority of rate movement in 2010 originated in Europe. The United Kingdom implemented a 10 percent increase raising its top rate from 40 percent in 2009-10 to 50 percent in 2010-11 — the highest rate increase seen globally this year.

Other Western European governments have followed suit in an attempt to increase tax revenues. Iceland, amid the collapse of the banking sector, replaced its flat tax regime with a progressive approach raising the top personal income tax rate by approximately nine percent.

Greece, in response to public deficit concerns, raised its top rate by five percent. Portugal, and, most recently, France raised top rates by three percent and one percent, respectively, to help address budget shortfalls. Ireland’s top rate also increased by one percent in 2010.

Striking the Right Balance

“Personal tax rates can be a crucial deciding factor when evaluating where to locate workforces or the costs associated with international assignment programs,” said Garfunkel. “Tax authorities are trying to strike the right balance as they face increasing pressure to identify and secure greater revenues, while also trying to attract businesses to set up operations in their country.

“High income earners typically have the talent and credentials to migrate to countries that have lower personal income tax rates and a need for skilled labor,” added Garfunkel. “Attracting such individuals — including their tax revenues and disposable income — using a competitive personal tax rate, while also trying to address budget deficits, is a challenge, especially in the current economic environment.”

Top Rates Decrease in Some Countries

Some countries are decreasing their top personal income tax rates. Denmark opted to introduce a stimulus package in hopes of increasing consumer spending and as a result, decreased its top rate by almost seven percent. Croatia, this past July, also dropped its top rate by five percent.

Other report findings include:

• The low flat tax initiatives of Eastern European governments have stagnated. Estonia has abolished its plan to reduce its flat tax rate to 18 percent by 2012, while Latvia increased its flat tax from 23 percent in 2009 to 26 percent in 2010.

•Average top rates in Asia-Pacific declined by 0.4 percent in 2010. New Zealand and Malaysia dropped their rates by five percent and one percent respectively.

•Although the average rates for Latin America jumped 0.8 percent in 2010, personal income taxes continue to remain relatively low in Latin America.

Accounting News Roundup: SEC at “Bottom of the Barrel” When it Comes to Diversity; More on Competition (or Lack Thereof) in the Audit Market; Define “Rich” | 10.01.10

SEC Plans to Hire More Women and Minorities Amidst Poor Rankings [FINS]
“At a recent panel discussion and networking event at the agency, Commissioner Luis Aguilar spoke about the need to hire ‘the best and brightest,’ while acknowledging that in the past it hasn’t done a good job of recruiting women and minorities.

In his speech, Aguilar said that as of FY 2009, 89% of the SEC’s senior officers were white, 4% African-American, 3% Hispanic and 2% Asian. Along gender lines, 67% of the officers were male and 33% were female.

Moreover, in a recent survey published by the Partnership for Public Service, the SEC fell from 11th to 24th place on a list of the ‘Best Places to Work’ rankings. With regard to diversity, the SEC ranked 24th out of 28 agencies when it came to diversity. In other words, the bottom of the barrel.”

PCAOB Fires Shot on Audit Issues, Calls for Enforcement [Compliance Week]
“The Public Company Accounting Oversight Board has published a report summarizing its observations after inspecting audits performed while credit market seized and the economy plunged into depression. The report says auditors generally didn’t adhere adequately to PCAOB standards when it came to some of the toughest areas in financial reporting through the credit crisis – namely fair value measurements, goodwill impairments, indefinite-lived intangible assets and other long-lived assets, allowances for loan losses, off-balance-sheet structures, revenue recognition, inventory and income taxes.”

Viacom Names New CFO [WSJ]
Controller James Barge succeeds Tom Dooley who jumped over to the COO seat.

Accounting niches [AccMan]
Are accountants doing enough to leverage their professional expertise?

Investors unhappy with lack of competition in audit market [Accountancy Age]
“The Association Of British Insurers (ABI), whose members account for almost 15 per cent of investments in the London stock market, is worried about the audit structure and said it has made its views known in a submission to a House of Lords inquiry into audit competition.”


H&R Block sees 5-cent hit from IRS policy change [AP]
Fewer rapid refunds doesn’t seem like a bad thing.

KPMG’s Fuzzy Math on Atlantic Yards [NYO]
The completion of the Atlantic Yards project remains on a timetable that runs parallel to the adoption of IFRS in the United States.

Tax the rich, whoever they are [Don’t Mess with Taxes]
Come out with your hands up!

Accounting News Roundup: How Secure is SaaS?; Highest Marginal Tax Rates by State Under Dem, GOP Plans; Familiar Rich People | 09.23.10

Blockbuster Files for Bankruptcy After Online Rivals Gain [Bloomberg]
“Blockbuster Inc., the world’s biggest movie-rental company, filed for bankruptcy after failing to adapt its storefront model to online technology pioneered by rivals such as Netflix Inc.

The company listed assets of $1.02 billion against debt of $1.46 billion on a Chapter 11 petition filed today in U.S. Bankruptcy Court in New York. The company said it reached a deal with a group of bondholders on a plan of reorganization and secured a $125 million loan to finance operations.”

SaaS security: McAfee’s response [AccMan]
“One question that gets raised time and again: Is SaaS secure? The answer depends on with whom you speak. My take is that any vendor that cannot answer a set of well defined questions is probably not going to meet the minimum requirements for me to recommend a service.

Earlier today I attended a Salesforce.com presentation and among the speakers were Dell, Wells Fargo and McAfee. Both companies are deploying Salesforce and in particular its Chatter service to thousands of users. I put the question to Marc Benioff, CEO Salesforce: ‘How do you demonstrate to users that services such as yours are secure without going down technical rat holes?’ “

Friended for $100 Million [WSJ]
“Mark Zuckerberg, the 26-year-old founder and chief executive of Facebook Inc., plans to announce a donation of up to $100 million to the Newark schools this week, in a bold bid to improve one of the country’s worst performing public school systems.”

Senate Holds Hearing Today on Lessons from the Tax Reform Act of 1986 [TaxProf Blog]
“Senate Finance Committee Chairman Max Baucus (D-Mont.) will convene a hearing [today] to examine the lessons from the Tax Reform Act of 1986 and look at ideas for tax reform that will make the code simpler and fairer, while helping American businesses compete in the global economy.”


Top Marginal Effective Tax Rates by State under Rival Tax Plans from Congressional Democrats and Republicans [Tax Foundation]
The big winner is Hawaii with California taking first runner-up.

The Richest People in America [Forbes]
The usual: Gates, Buffett, Ellison, a lot of Sam Walton offspring, a pair of Kochs and Hizzoner.

Did an Accountant with a Penchant for Sex Chats with Underage Girls Rip Off a Wealthy Heiress?

[caption id="attachment_16785" align="alignright" width="260" caption="He's a pervert, dude"][/caption]

Maybe! That’s what the Manhattan’s DA office would like to know.

In a story that Dick Wolf is certain to get ahold of, an accountant – who is admitted perv – and a lawyer are being “probed” for their management of a wealthy heiress’s fortune.

You see, Irving Kamsler – the accountant – apparently got bored managing multi-millions for copper heiress Huguette Clark and got to poking around on the Internet. He ended up pleading guilty in 2008 and was sentenced to probation, “for engaging in sexual Web chats with detectives whom he believed were girls as young as 13 and sending porn to one of them,” (plot-line twist!).


Presumably Kamsler was out of hobbies and he refocused his energy on managing the money of Ms. Clark.

Kamsler, along with Clark’s attorney, Wallace Bock, have been overlooking the heiress’s fortune for years but now the Manhattan District Attorney’s office was curious why the “elderly eccentric” had spent ‘forever’ (according to one aide) at Beth Israel hospital.

This all came about after MSNBC got to wondering aloud about Huguette’s whereabouts. More or less asking, “Why on Earth is she in a dingy hospital (have you been to Beth Israel?) and not in her 42-room 5th Ave. apartment or sprawling estates in Santa Barbara or Connecticut?”

The DA’s probe into whether Kamsler and Bock were properly managing Clark’s money is ongoing but if you’re going by Kamsler’s looks alone, you can easily conclude that they’ve got every reason to be suspicious.

Empty mansions are legacy of mystery heiress Huguette Clark [MSNBC]
‘Princess’ of Beth Israel [NYP]

Accounting News Roundup: EisnerAmper Partner: GM Balance Sheet ‘Stronger’ Ahead of IPO; KPMG Moves on From New Century, Countrywide; No Bookie Needed for Betting on Grades | 08.19.10

GM’s balance sheet draws praise ahead of IPO [MarketWatch]
“Peter Bible, partner-in-charge at accounting firm EisnerAmper LLP, said General Motors is now carrying a much stronger balance sheet than its predecessor, based on the company’s initial public offering filed late Wednesday. ‘Their debt-to-equity ratio looks handsome,’ Bible said in an interview. ‘This thing has gotten restructured quite a bit. GM’s health care liabilities have fallen significantly. As I look at the balance sheet, it is much healthier.’ “

Move to converge just exported crisis [Re: The Auditors]
KPMG has put two major lawsuits behind them – Countrywide and New Century. One major difference between these two cases was that New Century had a bankruptcy examiner’s report while Countrywide did not.


Judge Denies Online Religious Group’s Bid for Church Status [WSJ]
A virtual “church” gets denied the whole “church” thing.

For the rich, ’tis better to give than wait [Reuters]
“With U.S. taxes almost guaranteed to rise next year, the rich have a rare opportunity to distribute some wealth and preserve their fortunes.

A weak economy has led to razor-thin interest rates and beaten-down valuations, which make giving less costly for and potentially more rewarding to heirs. Moreover, the U.S. government is widely expected to rein in a popular tax-avoidance scheme.

‘This is a golden era for shifting estates and giving assets away,’ said Bill Fleming, a financial planner for PricewaterhouseCoopers in Hartford, Connecticut. ‘If you have an estate plan, keep going: Uncle Sam soon will be back in your pocket.’ “

Wager 101: Students Bet on Their Grades [WSJ]
“The website attracted wagers by 600 students from two colleges last year, said Mr. Gelbart and co-founder Steven Wolf, graduates of Queens College. This month, the site expanded to let students on 36 campuses—including Harvard, Stanford and Brigham Young University—place bets. More than 1,000 new bettors have signed on.

Lisa Lapin, a Stanford University spokeswoman, said school officials were ‘appalled’ when they learned Stanford students could place bets on their grades, adding, ‘the concept of betting on academic performance is contrary to academic development.’

Lance Miller, a finance major at the University of Pennsylvania, says the criticism misses the mark. Mr. Miller, with a GPA of 3.6, won about $80 on two $40 bets that he would earn A’s in business courses.

‘We’re acing classes to make money—isn’t that what they call a win-win?’ said Mr. Miller, 20.”

Facebook’s Places Feature Lets Users Share Their Whereabouts With Friends [Bloomberg]
“Services that help Web users share their whereabouts and find nearby friends could generate as much as $4.1 billion in annual ad sales by 2015, according to Borrell Associates. The features can help marketers more easily target customers — say, by reaching shoppers when they’re close to making a purchase.”

Filthy Rich Guy Loses Fight with IRS, Remains Filthy Rich

Phil Anschutz, like most multi-billionaires, didn’t get rich being a passive dude. Case in point, Mr Anschutz just lost a battle with the IRS over $143.8 million in capital gains taxes that the Service argues he and his company, Anschutz, Co. owed for for transactions related to Union Pacific and Anadarko Petroleum.

According to Forbes’ latest Billionaire list, Phil is worth $6 billion. Before you reach for your 10-key, we’ll just tell you – this little capital gain issue amounts to less than 2.5% of his net worth.


In a similar vein, these transactions occurred in 2000 and 2001 so this particular battle is entering it’s second decade if you consider the birth of the transaction that gave life to the IRS’ beef.

Yes, he’s appealing ruling. See you in another 10 years.

Billionaire Anschutz Loses Capital Gains Ruling Over $144 Million Tax Bill [Bloomberg]

Accounting News Roundup: Rangel Found to Have Violated Ethics Rules; Friends of “Miami’s Go-to Forensic Accountant” Ask for Leniency; A “Refreshing” Settlement | 07.23.10

Rep. Charles Rangel broke ethics rules, House panel finds [WaPo]
“A House ethics subcommittee announced Thursday that it found that Rep. Charles B. Rangel violated congressional ethics rules and that it will prrobably beginning in September. The panel is expected to make the details of his alleged violations public next Thursday.

Rangel (D-N.Y.) has been under the House ethics committee’s microscope since early 2008 after it was reported that he may have used his House position to benefit his financial interests. Two of the most serious inquiries have focused on Rangel’s failure to declare $239,000 to $831,000 in assets on his disclosure forms, and on his effort to raise money for a private center named after him at City College of New York using his congressional letterhead.”

Geithner: Taxes on Wealthiest to Rise [WSJ]
“The Obama administration will allow tax cuts for the wealthiest Americans to expire on schedule, Treasury Secretary Timothy Geithner said Thursday, setting up a clash with Republicans and a small but vocal group of Democrats who want to delay the looming tax increases.

Mr. Geithner said the White House would allow taxes on top earners to increase in 2011 as part of an effort to bring down the U.S. budget deficit. He said the White House plans to extend expiring tax cuts for middle- and lower-income Americans, and expects to undertake a broader revision of the tax code next year.

‘We believe it is appropriate to let those tax cuts that go to the most fortunate expire,’ Mr. Geithner said at a breakfast with reporters.”

FASB Requires More Disclosures Around Credit Risk [Compliance Week]
“Accounting Standards Update No. 2010-20, Receivables (Topic 310) calls for more credit risk disclosures to give investors a better view of the credit risk in a company’s portfolio of receivables as well as the adequacy of its allowance for credit losses. Under the update, companies will be required to say more about aging receivables and credit quality indicators in particular.

The new disclosure requirements affect financing receivables and trade accounts receivable, including loans, trade accounts receivable that are greater than a year old, notes receivable, credit cards and receivables for certain leases. The new disclosure requirement does not affect short-term trade accounts receivable, receivables that are measured at fair value or the lower of cost or fair value, and debt securities.”


Convicted accountant Lewis Freeman’s friends urge leniency [Miami Herald]
“Miami’s go-to forensic accountant” Lewis Freeman is to be sentenced today for stealing nearly $3 million from victims of fraud who he was appointed to protect. He faces a dozen to fifteen years in prison but his friends and supporters have turned on the pity party, sending nearly 300 letters to Judge Paul Huck, asking for leniency.

“[E]very one of those letter writers also asks the judge to show mercy, emphasizing that the affable New York native should not have to languish in prison because he has done so much for institutions like his alma mater, the University of Miami, Miami Children’s Hospital and the Miami Children’s Museum, among others.”

No need for non-audit ban, regulator claims [Accountancy Age]
“Accountants will not have to give up their non-audit work for audit clients, under proposed guidelines released today, which have not recommended an outright ban, suggested by politicians in the wake of the financial crisis.

The Auditing Practices Board, of the Financial Reporting Council, which publishes guidance for auditors, does not believe an outright ban on non-audit services should be enacted and has instead proposed to tinker with present disclosure requirements.”

Could This Be a Real Deterrent? [Floyd Norris/NYT]
Despite the usual fare in the SEC’s settlement yesterday, Floyd Norris writes that the $4 million fine for Michael Dell and other executives is “refreshing.”

Billionaire’s Heirs May Beat the Estate Tax and They Have Congress to Thank

The New York Times has interesting story on Dan Duncan, a Houston billionaire who couldn’t beat death but his heirs may just beat the taxes thanks to Congress falling asleep at the wheel.

Duncan did all right for himself. He became the richest man in Houston and was ranked 74th on Forbes’ latest list by creating a natural gas empire that he started with a couple of trucks and $10k. Getting self-made crazy rich involves a little bit of luck so now it appears that he has passed on a little of that luck on to his heirs who may be inheriting his $9 billion fortune tax-free.

In case you estate tax mess continues to drag on, and on and on.


The Times story says that the Treasury collected $25 billion in estate taxes in 2008. With that kind of haul how could Congress let this happen? Joe Kristan passed along a little background to us from a Tax Analysts report 2001, some time ago that explains:

Although President Bush is scheduled to sign the tax bill into law next week, the bill contains a sunset provision that invites further debate in Congress during the next decade on whether many of the provisions will become permanent or take effect at all.

Just after H.R. 1836 becomes fully phased-in and estate taxes are repealed, the entire tax cut bill would expire as of December 31, 2010, under the bill’s sunset provision unless Congress enacts new law before that date.

The sunset provision opens up a new arena for debate among conservatives who are eager to make the provisions permanent and liberals who would prefer to postpone phasing in the provisions to pay for other government programs. Meanwhile, tax planners are left questioning the final outcome as they examine the new law.

As originally designed, the bill would have extended through 2011 and made the tax cuts permanent. However, that bill would have been subject to a budgetary procedure known as the “Byrd Rule,” which requires 60 votes in the Senate to alter revenue beyond a 10-year period. To avoid the procedure, Republican taxwriters adjusted the tax cut agreement for H.R. 1836 by allowing the provisions to sunset by December 31, 2010.

Democrats have argued that the sunset provision masks the true cost of the bill because the revenue loss accounts for only nine years of the budget window and less than one year of the bill’s full effect, including repeal of the estate tax. “Not only have they increased the back-loading to hide the true cost of this tax bill, but they have actually eliminated a year from the calendar,” said Senate taxwriter Kent Conrad, D-N.D., in a May 26 floor statement. “What they have done is graduated to a whole new level of accounting gimmickry to disguise the full cost of this tax bill.”

Joe’s emphasis. He then wrote to us, “Stupid? Well, it’s Congress, what do you expect?”

Blame who you want – George W. Bush for signing the expiration into law in 2001 or the Democratic controlled Congress for letting it expire – but at this point in time, regardless of your political persuasion, Duncan’s family and other wealthy families (some wealthier than others) are catching a huge break.

The Duncans didn’t talk to the Times for the story but it does state, “Many lawyers say Mr. Duncan’s heirs have the means and motivation to wage a fierce court battle to challenge the constitutionality of any retroactive tax.”

Good for them. If Congress tries to pull a fast one on them with a retroactive tax they should fight it tooth and nail. Despite the fiscal situation facing the country, Congressional incompetence and inaction shouldn’t get a mulligan.