Tag: Taxes

Should Derek Jeter Be Asking for a Stake in the Yankees?

Fay Vincent is making the suggestion that sports stars, like DJ, should be negotiating for shares of their respective teams.

My question is why sports figures are not taking steps to generate tax-favored income by bargaining to get ownership interests in their teams. Imagine how much better off old timers like Mickey Mantle and Roger Maris would have been if they had been able to obtain even tiny shares of the Yankees franchise in 1961. In today’s context, it is true enough that the tax rate on capital gains income may soon rise to 20%—but that’s still far below the rates levied on top income earners.

Since Vincent – a former entertainment lawyer – has been around the block with big-time earners, he might be on to something here, although maybe the Steinbrenners aren’t interested, being the shrewd business family that they are (George died in a year with no estate tax for crissakes). Since neither Jeets nor the Yanks are budging in the negotiations, this idea could work. It’ been floated in the Times so it’s not like this option is a huge secret. Make something happen, people.

By most accounts, Jeter wants to finish his career in New York and the man has been the franchise for over the last decade. Forget the cash, ask for shares and save on some taxes. It’s not complicated.

Okay, maybe it’s a little complicated.

Chris Van Hollen Isn’t Buying the “Tax Cuts Create Jobs” Story

In case you needed another sign that we are heading full speed towards a stalemate on tax policy, the Representative from Maryland would like to be recognized for calling BS on the popular Republican rhetoric:

“It’s clear that the tax cuts for the folks at the very top have not created any jobs. After all, we’ve had them in place now for more than eight years, and we know what the jobs situation is,” Van Hollen said during an interview Monday on MSNBC.

“The notion that you’ve got to continue them in order to somehow boost the economy, when those are in place right now and we have a lot of people unemployed, is a clear indication that they are not a big job creator.”

Eric Cantor’s rebuttal will sound similar to this:

“Taxes shouldn’t be going up on anybody right now.”

[…]

“This election … was really the American people saying they are tired of the lack of results in Washington,” he said. “They want to see more jobs for more Americans. They want to see us … cut government spending, rein in the size of government so we can get this economy growing again. That was the prescription, that was the mandate that came from the people.”

So there’s no middle ground to be found here, guys? No chance you can put down the ideological rhetoric for the sake of, ya know, screwing the American people?

Van Hollen: Tax cuts for wealthy ‘not a big job creator’ [The Hill]

From Traditional IRA to Roth IRA: New Rollover Rules

For years prior to 2010, only taxpayers with modified AGI of $100,000 or less generally were permitted to convert a traditional IRA into a Roth IRA. For years beginning in 2010 and after, the AGI limitation has been eliminated. Thus, regardless of AGI, all otherwise eligible taxpayers will be allowed to convert an IRA to a Roth IRA. The amount converted is includible in income as if a withdrawal had been made, but no early withdrawal penalties are assessed.


Two-year income spread if conversion done in 2010 – For conversions occurring in 2010, unless a taxpayer elects otherwise, none of the amount is includible in gross income in 2010, with half of the income resulting from the conversion includible in gross income in 2011 and h, income inclusion is accelerated if converted amounts are distributed before 2012. In that case, the amount included in income in the year of the distribution is increased by the amount distributed, and the amount included in income in 2012 (or 2011 and 2012 in the case of a distribution in 2010) is the lesser of: (1) half of the amount includible in income as a result of the conversion; and (2) the remaining portion of such amount not already included in income. The following example illustrates the application of the accelerated inclusion rule.

Example – Betty has a traditional IRA with a value of $100,000 consisting of deductible contributions and earnings. Betty does not have a Roth IRA. She converts the traditional IRA to a Roth IRA in 2010, and as a result of the conversion, $100,000 is includible in gross income. Unless Betty elects otherwise, $50,000 of the income resulting from the conversion is included in income in 2011 and $50,000 in 2012.

Later in 2010, Betty takes a $20,000 distribution, which is not a qualified distribution and all of which, under the ordering rules, is attributable to amounts includible in gross income as a result of the conversion. Under the accelerated inclusion rule, $20,000 is included in income in 2010.

The amount included in income in 2011 is the lesser of (1) $50,000 (half of the income resulting from the conversion); or (2) $80,000 (the remaining income from the conversion). The amount included in income in 2012 is the lesser of (1) $50,000 (half of the income resulting from the conversion), or (2) $30,000 (the remaining income from the conversion, i.e., $100,000 – $70,000 ($20,000 included in income in 2010 and $50,000 included in income in 2011)).

Preparer note – While you cannot elect out of the two year spread on only a portion of the conversion income in 2010 (it’s an all or nothing election), husband and wife may each make separate elections for their individual IRA accounts. For example, a wife could elect to report her conversion income in 2010 and her husband could report his 2010 conversion income in 2011 and 2012. This may result a better spread of the income. The same taxpayer is allowed to make separate elections for separate IRA accounts.

If you need guidance on answering the question, “should my client convert to a Roth?” check out CPE Link’s Federal Tax Update: Part 2 webcast scheduled November-January.. You’ll get a myriad of planning ideas and even access to a simple, but sophisticated, calculator. (Note: The above information was excerpted from Vern Hoven’s manual used in the webcast.) In addition to coverage of the IRA & Individual Retirement area, you’ll get an update on Real Estate & Investment, and Estates, Trusts & Beneficiaries.

Lame Duck Tax Policy Prognostication

From tax policy cynic Joe Kristan:

It’s unlikely that the lame ducks will accomplish much.

Jesus, that’s no way to start.

I expect an AMT patch to pass (though you should bet the other way if they offer points). I would bet against the extenders getting past the lame ducks, though it could happen. Action on the Bush tax cuts and the estate tax seems unlikely to me. It would require a triumphal GOP to work out a deal with a President whose response to disagreement so far has been to repeat himself slower and louder. The same dynamics bode poorly for the next Congress when it meets in January.

After such an ugly campaign, we wouldn’t put it past a bunch of losers (read: Democrats) to spite the entire country just because they couldn’t effectively communicate any accomplishments from the past two years. Of course, that’s us being cynical to a fault.

Thinking a little more practically, we agree with Joe on his AMT patch prediction. The rules are such a mess that it could stand a complete overhaul but we realize that’s nothing short of water into wine with less than two months left in 2010.

As far as the tax cuts are concerned, the shred of political capital that the members of Congress who will remain in DC have left simply cannot be lost. And besides, the President and Congress fundamentally agree on a major portion of the policy – that is, to extend tax cuts for the middle class. Again, this could be a pipe dream, but compromising on the extension of the cuts for the wealthiest Americans for two years seems like a simple solution (as bad of an idea as it is).

As for the estate tax – it’s toast. No one seems to give a shit about it except for Jon Kyl but once the first decrepit billionaire (who is unwilling to pull the plug on themselves) kicks the bucket in 2011, thus paying 55% tax on the estate, it will only take one phone call and Congress will spring into action.

Sigh. Place your bets.

Earlier:
After Tomorrow, a Bunch of Losers Will Have to Quit Their Pouting and Come Up with Some Tax Policy Solutions

Jacques Cousteau’s Son Owes IRS $3 Million

Robert Snell over at the Tax Watchdog has another tax delinquent scoop and for the first time – as far as we can remember – it involves a dashing adventurous type as opposed to your run-of-the-mill hip-hop artist or Nicolas Cage.


Jean-Michel Cousteau (whose beard has to be the inspiration for Steve Zissou, even though the film is a parody of the old man) owes the IRS and the State of California around $3 million from a slew of liens:

• The IRS filed a $109,768 lien against him July 20.
• The IRS filed a $480,061 lien June 22.
• The IRS filed a $600,076 lien June 15.
• The state of California filed a $60,198 lien against him April 29.
• The IRS filed a $212,748 lien Dec. 16, 2009.
• The IRS filed a $238,852 lien Oct. 15, 2009.
• The state of California filed a $41,860 lien Oct. 8, 2009.
• The IRS filed a $193,496 lien April 14, 2009.
• The IRS filed a $187,423 lien April 14, 2009.
• The IRS filed a $518,227 lien April 6, 2009.
• The IRS filed a $396,586 lien Feb. 1, 2008.

Jesus, man. No room for a CPA on your boats? We realize that some have weight issues which could cause a problem but just throw them in the water regularly and they’ll shed the extra pounds in no time.

Ocean explorer underwater on taxes [Tax Watchdog]

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.

Paul Hogan Returns to Australia to Bury His Mother and Now Australia Won’t Let Him Leave

And you thought the IRS was a bunch of cold SOBs.

To be fair, the Aussies are pretty bent out of shape over the long-running dispute over taxes owed on Mick’s $37+ million in earnings. Hogan has responded to all the Australian Taxation Office’s requests with a consistent “blow me” which probably hasn’t gone over to well Down Under.

Actor Paul Hogan, best known for playing an outback hunter in the “Crocodile Dundee” movies, has been stopped from leaving Australia until he pays a multi-million dollar tax bill, according to his lawyer.

The Australian Taxation Office (ATO) served U.S.-based Hogan with a departure prohibition order when he returned to Sydney last Friday for the funeral of his 101-year-old mother Florence, his lawyer Andrew Robinson said in a statement.

This prevents the 70-year-old actor from leaving Australia until any alleged tax debts are paid or arrangements made for the tax liability to be discharged.

Taxman bars Crocodile Dundee from leaving Australia [Reuters]

Sometimes Billionaires Get Bad Tax Advice, Just Like Us!

It’s probably safe to say that billionaire hedge fund manager Leon Cooperman doesn’t get poor service very often. As the founder of Omega Advisors and #655 by Forbes‘ last count, the man has arguably earned the right to demand only the best, especially when it comes to something as important as tax services.

Howthat Cooperman is just the latest billionaire to have tax issues (McCombs, Anschutz have had troubles recently) that might cause a less prudent mega-rich person to flip their lid (e.g. Ted Turner, Steve Jobs).

Cooperman recently received a letter from the IRS informing him that despite the generous gift of $43 million to his own foundation, the contribution could not be allowed because the donation was a non-marketable security made to a private foundation, which is not allowed by the IRS. Had he made the donation to say, NORML (he looks like he could get behind it, couldn’t he?), or some other public charity everything would have been hunky-dory.


Unfortunately for Mr Cooperman, this isn’t the case and the IRS sent him a bill for $14 million in back taxes and $5 million in penalties. Understandably, this aggression will not stand and the “plain-speaking” Coop has taken the case to court to insist that he relied on his accountants to get this shit right. It’s complicated, after all. It’s not about the money, it’s the principle. Coop would gladly schlep in suitcases of consecutively numbered hundos to settle this here and now but the penalties are uncalled for and he’s bound and determined to prove that. But who actually is to blame?

The lawsuit says Cooperman’s two personal returns claiming the deductions were prepared by his longtime accountant, Mark I. Gittelman, a CPA with Gittelman & Co., Clifton, N.J. The formal appraisals to support the claimed deductions were done by RSM Business Services and Duff & Phelps, Cooperman’s suit adds.

[…]

McGladrey does tax work for other Cooperman entities, including his hedge fund, Omega Advisors. Cooperman told Forbes that McGladrey knew he was planning to donate a nonmarketable security to his private foundation and take a deduction when the firm rendered its appraisal for a fee that Cooperman said was about $20,000.

Again, the money isn’t important but for crissakes, McGladrey, you just don’t half-ass your work for Leon Cooperman. Forbes was all over this issue back in ’04. Where were you in 2004? Stumping for John Kerry?

Of course we all know where this is eventually going – litigation! When rich people get wronged, someone inevitably pays and it sounds like LC is happy to sit tight and let the tax court do its thing. Once that’s resolved, he’ll turn his sights towards the responsible parties:

Cooperman clearly is thinking about malpractice litigation. He acknowledged McGladrey is likely to assert it didn’t prepare or sign the tax returns with the disallowed deductions, although the firm’s formal appraisal was attached.

Best of luck to everyone involved!

Billionaire Leon Cooperman: I Got Bad Tax Advice [Forbes]

Here’s Why Nikki Haley’s Late Tax Returns Aren’t a Big Deal

Reportedly, South Carolina gubernatorial candidate Nikki Haley likes to cite her experience as an accountant on the campaign trail.

That’s all well and good but now there are reports all over the web that Ms Haley has a helluva time filing her taxes on time and that she and her husband racked up some fines because of their tardiness. This, of course, has people freaking out because A) she’s running for public office and B) because she’s an accountant.


The AP reports, “Tax records released Wednesday by Haley’s campaign show she and her husband have filed their taxes late since at least 2004. Haley is a fiscal conservative and tea party favorite who cites her experience as an accountant on the campaign trail. The state legislator and her husband have been fined nearly $4,500 over five years. Haley’s spokesman Rob Godfrey says the Haleys filed extensions when necessary and have paid what was required.”

What the AP doesn’t tell you, that everyone in the biz knows, is that accountants like Haley likely don’t know a damn thing about taxes. There’s nothing to indicate that she has work experience as a tax accountant. It’s a common misconception amongst non-beancounters that accountant = tax genius. Obviously this is bullshit and that the truth of the matter is that most non-tax accountants would rather chew broken glass than even consider picking up a Master Tax Guide.

Further, since Haley and her husband’s income has nearly tripled since the year she was elected to the SC house, they probably started using a CPA and got used to blowing off their taxes until October. Happens all the time.

Besides, since Ms Haley is endorsed by Sarah Palin and the Tea Party, this can only strengthen her base with these people. They only wish they had the money and the fortitude to blow off their tax responsibilities like Ms Haley.

Records: SC gov candidate Haley paid taxes late [AP]