The Tea Party is a buncha amateurs.
From the organization formerly known as National Public Radio:
Angry witches are using cat excrement and dead dogs to cast spells on the president and government who are forcing them to pay taxes. Also in the eye of the taxman are fortune tellers, who should have seen it coming.
And President Traian Basescu isn’t laughing it off. In a country where superstition is mainstream, the president and his aides wear purple on Thursdays, allegedly to ward off evil spirits.
And you can bet an eye of a newt that this is serious:
Queen witch Bratara Buzea, 63, who was imprisoned in 1977 for witchcraft under Ceausescu’s repressive communist regime, is furious about the new law.
Sitting cross-legged in her villa in the lake resort of Mogosoaia, just north of Bucharest, she said Wednesday she planned to cast a spell using a particularly effective concoction of cat excrement, a dead dog and a chorus of witches.
“We do harm to those who harm us,” she said. “They want to take the country out of this crisis using us? They should get us out of the crisis because they brought us into it.”
‘My curses always work!” she cackled in a smoky voice. She sat next to her wood-burning stove, surrounded by potions, charms, holy water and ceramic pots.
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.
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?
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.
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]
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.
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.
“If you wanted to irritate the raise-taxes folks with tax-hiking proposals designed to nettle and sting their tender flanks, what would you do?”
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.
How that 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!
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.
Auditors don’t know the meaning of ‘competition’ [FT]
In a letter to the Financial Times, David Herbinet, the UK Head of Public Interest Markets for Mazars, takes issue with the notion (he says ‘puzzled’) that there is robust competition in the audit market, “Figures calculated from the most authoritative research available – the Oxera report that first spurred examination of the issue – show that a FTSE 100 auditor can on average expect to remain in place for an eye-watering 48 years and their FTSE 250 counterpart for 36 years. When the research was conducted more than 70 per cent of the FTSE 100 audits had not been subject to tender for at over, 97 per cent of current FTSE 350 audits are held by just four firms. If this represents fierce competition I would not like to see a stagnant market.”
Facebook Said to Put Off IPO Until 2012 to Buy Time for Growth [Bloomberg]
“Facebook Inc. will probably put off its initial public offering until 2012, giving Chief Executive Officer Mark Zuckerberg more time to gain users and boost sales, three people familiar with the matter said.
Facebook would benefit from another year of growth absent the added scrutiny that comes with a public listing, instead of holding an IPO in 2011 as investors speculated, said the people, who asked not to be identified because Facebook doesn’t discuss share-sale plans. Still, Zuckerberg, who holds board control, could push for a stock sale at any time, they said.”
U.S. Financial System Still at Risk, Says IMF [WSJ]
Get RIGHT out of town. “The International Monetary Fund says the U.S. financial system is “slowly recovering,” but remains vulnerable to crisis, in part because Congress and the administration have failed to streamline a regulatory system marked by turf battles and overlapping responsibilities.
‘We asked many times why bolder action could not be undertaken,’ said the IMF’s Christopher Towe, who oversaw the agency’s first broad review of the U.S. financial sector.”
SEC Charges Citigroup and Two Executives for Misleading Investors About Exposure to Subprime Mortgage Assets [SEC]
That includes former CFO Gary Crittenden who agreed to pay a $100,000 fine.
Colbert on the Expiration of the Bush Tax Cuts [TaxProf]
|The Colbert Report||Mon – Thurs 11:30pm / 10:30c|
|The Word – Ownership Society|
Talk about wearing the guy thin.
Moral of the story? Call for an investigation of a wealthy guy – a wealthy Senator – with a wealthier wife and he’ll gladly cut a check to get you to shut the hell up.
Maybe! CT owes the Treasury $11.5 million for back taxes, according to reports. This covers the 2001-2002, 2004-2006 tax years.
This sum nips on the heels of the $14 million that Nic Cage paid the Feds last year (and the $3.8 million he owes California for this year). In addition to the sum due to Shulman & Co., Tucker owed California $3.5 million last year, so, clearly, we’ve got ourselves a race here.
The difference is that NC has been working, which gives him a glimmer of hope of being in full compliance.
Don’t any of you get the idea that John Kerry is docking his new $7 million yacht in Rhode Island to navigate around Massachusetts’ sales tax and the annual excise tax. That would be, in a word, ludicrous.
“Kerry spokesman David Wade said Friday the boat is being kept at Newport Shipyard not to evade taxes, but ‘for long-term maintenance, upkeep and charter purposes.’ ”
And Rhode Island is the Ocean State, so it makes perfect sense. “Isabel” is a 76′ beaut that has “two cabins, a pilot house fitted with a wet bar and cold wine storage.” A pretty swell ride.
It’s difficult to say why the Mass. Senator wouldn’t park the vessel near home base but we’d be willing to hear some theories.
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 pr robably 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.”
Meant to get this out there on Friday but you know how it is. Anyhoo, everyone’s favorite Bond-turned-Darrell Hammond impersonated celebrity, Sir Sean Connery is having a bit of tax trouble in the country now known as the World Cup champions:
Legendary James Bond actor Sean Connery is being investigated for alleged tax fraud involving the sale of two large tracts of land in Spain.
Investigators say a property firm linked to the 79-year-old actor failed to pay taxes after he and his second wife sold land they owned on the outskirts of Malaga, Spain
The fact that the Connerys haven’t been arrested and are merely celebrities being investigated because some real estate companies involved in some shady dealings should be enough evidence to indicate that celebrity news is waning in the dog days of summer. Dr. Henry Jones wasn’t quote in the Daily Mail’s story but we’re hopeful that, if asked, it would go more or less go like this:
A Quebec man, fed up with his skyrocketing property taxes, carted more than 200,000 pennies down to City Hall to pay his bill. But he was denied, and asked to simply cut a cheque.
Normand Czepial of Ripon, Que. — less than an hour’s drive northeast of Gatineau — arrived at City Hall on Wednesday with a children’s pool filled with 213,625 pennies.
Now we’re wondering – did Normand roll into his bank that morning to make the withdrawal and demand the smallest denomination possible or had he been saving all the copper coins his entire life for this exact moment?
Whichever it is, we applaud this particular brand of awesome. The only beef we have this move is that he used the kiddie pool to schelp the pennies down to City Hall. What the hell, man? Depriving your kids of fun in the middle of summer? Sure you’re a little bit of smartass (which we like) but it appears also a bit of dick in the Dad Department. Not cool.
Czepial’s property tax bill reportedly rose by nearly $4,000 dollars last year to $6,400. Czepial tried to pay with pennies to protest the hike.
Ripon Mayor Luc Desjardins was surprised to see the stunt, but had to tell Czepial to find another way to pay his bill.
Under the Currency Act, nobody is obliged to accept more than 25 pennies as payment for any product or service. Normand Czepial, unfortunately, was 213,600 over the limit.
Even the Toronto Sun is throwing around the jokes! Everyone that is threatening to move to Canada given a particular election of [insert hated political figure] should take note that it sounds kinda fun up there!
Because the 11th Circuit Court of Appeals has ruined his day, “The district court acted well within its considerable discretion in sentencing Snipes to thirty-six months in prison.”
WS was looking for probation for his conviction of willful failure to file federal income tax returns.
It’s probably NBD for LW, as he’s dealt with the Service in the past, paying a $977k lien back in August of ’08.
What is interesting is that this particular legal snag is on top of several other accomplishments that Wayne-o has stacked up while in prison.
Last month, he pleaded guilty to a laundry list of drug charges – possession of a narcotic drug for sale, misconduct involving weapons, possession of drug paraphernalia, possession of dangerous drugs – related to a stop that occurred outside Yuma, AZ in 2008.
He [pleaded guilty] over a live video feed from Rikers, and will most likely get 36 months of probation in return (the official sentencing is scheduled for June 30). For those keeping track at home, the plea bargain follows sports blogging, life-saving, prison-rule flouting, and rapping as things Wayne has accomplished while in jail.
And now delinquent taxes. Very impressive.
Lil Wayne, big debt [Tax Watchdog]
Famously Hardworking Rapper Pleads Guilty to Drug Charges While Already in Prison [Vulture]
As Tax Cuts’ Expiration Date Nears, Little Consensus [WSJ]
“Lawmakers are negotiating a tax bill, but appear increasingly likely to wait until after the November election to take any final action that could anger voters—either by raising taxes, or by cutting them and thereby deepening deficits. Congress ultimately could decide to extend current tax levels for just a few months, leaving the issue for the next Congress to settle. Another option is a short-term extension of a year or two, avoiding for now the huge cost to the Treasury of a permanent extension. It’s even possible Congress might fail to take any action this year.”
From Jail, Conrad Black Fights $71 Million Tax Bill [Forbes]
“Imprisoned former media baron Conrad M. Black is fighting a $71 million bill from the U.S. Internal Revenue Service, which says from 1998 to 2003 he filed no tax returns and paid absolutely nothing on $120 million in taxable income.
In a previously unreported lawsuit in U.S. Tax Court, Black, now serving a six-and-a-half-year-sentence in a Florida federal prison, is challenging the IRS’ demands and asserting the income in question wasn’t taxable in the U.S.”
Americans More Optimistic on Economy Than Their Own Finances, Survey Says [Bloomberg]
Who said Americans only think about themselves? “Americans are generally hopeful, and much of the economic news leads us to conclude that we are out of the recession and a double dip is unlikely,” said Robert Glovsky, chair of the CFP Board and director of Boston University’s program for financial planners. “With that said, most Americans have not planned well for their futures.”
Harvey Golub Resigns as AIG Chairman [WSJ]
“A weeks-long standoff between the chairman and chief executive of government-controlled American International Group Inc. ended Wednesday, when Chairman Harvey Golub resigned, saying, ‘I believe it is easier to replace a chairman than a CEO.’
Mr. Golub’s decision marks a victory for Robert Benmosche, the company’s hard-charging chief, who chafed under Mr. Golub’s oversight. Mr. Benmosche had told the board their working relationship was ‘ineffective and unsustainable,’ Mr. Golub said in his resignation letter.”
FASB hires expert to review how new rules perform [Reuters]
“Mark Schroeder, a recently retired senior partner at Deloitte & Touche [DLTE.UL], will serve as the board’s first “post-implementation review leader” and also serve a similar role for the Governmental Accounting Standards Board, FASB said.
The hiring of Schroeder is one of the big steps that FASB has taken to formalize its process for review of how new standards are performing. Banks and investors had complained during the financial crisis that FASB’s new rules on mark-to-market accounting had contributed to freezing the credit markets, but there was no formal process for reviewing the rules.”
BP Mulls Selling Off Billions in Assets [WSJ]
“BP PLC is in talks with U.S. independent oil and gas pr on a deal worth as much as $10 billion that could include stakes in BP’s vast Alaska operations, according to people familiar with the matter.
A deal, which would go a long way to helping BP cope with the financial stress of paying for the clean-up of the Gulf oil spill, could be reached in the coming weeks, though there is no guarantee it will succeed, one of these people said.”
Bank Profits Depend on Debt-Writedown `Abomination’ [Bloomberg]
This abomination has an official name, SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities
“Bank of America Corp. and Wall Street firms that notched perfect trading records in the first quarter are now depending on an accounting benefit last used in the depths of the credit crisis to prop up their results.
Bank of America, the biggest U.S. bank by assets, may record a $1 billion second-quarter gain from writing down its debts to their market value, Citigroup Inc. analyst Keith Horowitz estimated in a June 23 report. The boost to earnings, stemming from an accounting rule that allows banks to book profits when the value of their own bonds falls, probably represented a fifth of pretax income, Horowitz wrote.”
Koss embezzlement ran in spurts, lawsuit says [Milwaukee Journal-Sentinel]
The most impressive “spurt?” $478,375 over three days in 2006. According to Koss’ lawsuit against S-squared and Grant Thornton, $145,000 also disappeared from the petty cash fund over the years, amongst other “unauthorized transactions.”
Bias At Work: To Sue or Not to Sue? [FINS]
Harassed? Discriminated against based on age, sexual orientation, race et al.? Of course suing your employer is an option. This is America after all, where the opportunity to slap someone with a lawsuit is your god-given right. But is it always the right move?
Bolt running from the taxman – Usain snub for British meeting [Daily Mail]
The fastest man in the world would prefer to keep a little money for himself, “Under present tax rules, if Bolt competes once in Britain and only five races elsewhere, the British taxman will demand one-sixth of everything he earns, whether in Britain or not. His taxable earnings would not only include his considerable appearance fees but also his hefty endorsement contracts.”
The Big Four’s UK Firms Pick Up Non-Executive Directors — And Then …? [Re:Balance]
Jim Peterson expands on his thoughts about the Big 4 non-executive directors in the UK, “Not only can good governance not be inflicted or imposed, in other words, because resistant leaders will find ways to disturb or subvert the purpose, but a virtuous culture will display its legitimacy without the need for pietistic overlays.”
Too Rich to Live? [WSJ]
The estate tax debate has gotten even more morbid than it would ordinarily be, ” ‘You don’t know whether to commit suicide or just go on living and working,’ says Eugene Sukup, an outspoken critic of the estate tax and the founder of Sukup Manufacturing, a maker of grain bins that employs 450 people in Sheffield, Iowa. Born in Nebraska during the Dust Bowl, the 81-year-old Mr. Sukup is a National Guard veteran and high school graduate who founded his firm, which now owns more than 70 patents, with $15,000 in 1963. He says his estate taxes, which would be zero this year, could be more that $15 million if he were to die next year.”
Everyone in the melanoma-for-sale business is perplexed about the tanning tax that goes into effect today and the Journal reports that the hella confusion is mostly about why some businesses are able to dodge the tax while others are not.
Case in point, health clubs get to offer their George Hamilton specials tax free while video stores (?) that offer tanning do not.
When Jeanne Chamberlain turns up at work Thursday, she’s going to have to grapple with America’s first federal tax on tanning services, a 10% levy designed to help pay for Congress’s health-care overhaul.
Ms. Chamberlain runs a video-rental store.
These would normally be unrelated facts, but 20 years ago, Ms. Chamberlain followed a number of her peers in adding tanning services to smooth out the bumps in her Rice Lake, Wis., business. Today, she wants to offer one free tan for every three rentals. Should that freebie be taxed? Ms. Chamberlain doesn’t know, and even if she did, she doesn’t yet have the software in place to help with the calculations.
For starters, video stores still exist? We had just assumed that they had gone out with powdered wigs. Netflix, Hulu, etc. etc. And since when do they offer tanning services? “Oh I see you’ve got Gigli there, great choice. Would like to hop in one of our tanning beds while I rewind the tape?”
Anyway, back to the tax:
Among the new details: “qualified physical fitness facilities” that include access to tanning beds as part of their membership fee won’t be subject to the tax.
That means customers at Sun Tan City in Owensboro, Ky., will pay 10% more for a dose of ultraviolet rays. But if they go to Anytime Fitness 100 yards away, and tan inside one of its two beds, they’ll escape.
“My jaw dropped,” said Rick Kueber, founder and chief executive of Sun Tan City, a 124-outlet chain based in Elizabethtown, Ky. Then he got to thinking. “If I had six treadmills in each of my stores, can I call myself a health club?”
Can anyone explain this? Our best guess is that since health clubs force you to get you off your ass, while video stores put you back on them, they’re getting a break. That seems to be pretty advanced for Congress logic but we’ll assume that it’s in the ballpark.
But It’s really NBD for the committed to skin cancer crowd however, “[Fifteen-year-old Grace] McCleary and others who lounged last week in the notorious Land of the Tanned – see MTV’s Jersey Shore – said a few dollars tacked on wouldn’t deter them.”
Fortunately, the IRS has advice (as it always does) for those affected and our resident tax sage, Joe Kristan has the details. So, there’s no risk to the industry as a whole – thank god – just a little extra bureaucracy in the pot in the form of Form 720. Enjoy!
Federal Tan Tax Burns Some Badly but Keeps Everybody in the Dark [WSJ]
Tanning-bed enthusiasts say tax won’t deter them [Philadelphia Inquirer]
Yesterday we learned about Joe Biden not taking too kindly to a custard shop manager’s suggestion that he can eat all the free custard he wants as long as JB & the rest of the crew “lower our taxes.”
The Veep retorted that maybe the dude in the funny paper hat should try saying nice for change instead of being a smartass. It was the typical Joe Biden charm that you would expect. Perhaps he should have suggested visiting the White House’s tax savings tool instead of name-calling but the past is the past and we’ll just chalk up another Joe Biden moment of hilarity/political liability.
But wait! What if the VP was right about this portly custard slinger? We read over a little mini memoir over at Daily Intel that indicates that the guy probably had it coming:
First of all, as anyone who has ever lived in Milwaukee knows: Kopp’s Frozen Custard is the most delicious dessert on the planet. It’s basically ice cream with twice the fat. So when Smilin’ Joe Biden showed up at Kopp’s in Glendale, Wisconsin, last week, you can only imagine his annoyance at being interrupted in the middle of his first taste — from the looks of things, Friday’s special flavor, chocolate chip cookie dough — by a store manager cracking that the cone was free, as long as the vice-president would agree to “lower our taxes.” Biden being Biden, he called the manager “a smartass.” And who was that smartass? None other than my nemesis of twenty years ago — the first boss I ever hated and feared.
Said smartass is Scott Borkin and the author of this piece, Dan Kois, proceeds to tell a tale of a lunatic boss from hell (thanks, Richard Lewis):
Once, very late on a long, hot night of customers piling in and the custard machines jamming and the store’s owner, Carl Kopp, walking around in his apron and hat terrifying everyone, Scott Borkin came over to collect a shake for order number 87. “What the hell is this?” he asked me.
Inside, I panicked. What had I done wrong this time? But I had the ticket right in my hand — malt with chocolate — and was positive that’s what I had made. “It’s a chocolate malt.”
“No, this,” he said, pointing at my Sharpied “7” on the lid. I’d written it with a line through the center because once someone had mistaken my non-lined 7 for a 2.
“Uh, it’s a seven,” I replied.
“This is a seven,” he said, taking the ticket from my hand and drawing a non-lined numeral. “Do it right or you’re outta here.” He plucked the malt off the counter and stalked away. “This isn’t Germany!” he called over his shoulder.
Christ. Threatening termination because of lined 7 and anti-Germany? PLUS he likes bitching about taxes? This guy could be the next Joe the Plumber. Oh wait, he’s already been on Fox & Friends. Mission accomplished.
FSA accuse auditors of failing to question management bias [Accountancy Age]
The Financial Services Authority has decided that it was about time it called out a few people, “Auditors have become yes men who don’t adequately question management bias according to concerns raised by the UK’s chief financial regulators. The Financial Services Authority (FSA) and the Financial Reporting Council today released a scathing discussion paper into the profession following concerns raised in the wake of the financial crisis. Among its concerns is that auditors ‘portrays a worrying lack of skepticism’ when scrutinising potential management bias.”
Not onl ef=”http://www.accountancyage.com/accountancyage/news/2265630/fsa-audit-report-regulator”>FSA wants new enforcement powers including the ability to ” fine, censure or disqualify audit firms.” The FSA also wants to meet with auditors several times a year, rather than just once, as well as direct access to audit committees.
Alex to Become Hurricane as Swells Reach Gulf Spill [Bloomberg]
“Tropical Storm Alex, the first named system of the Atlantic hurricane season, strengthened today, forcing the evacuation of rigs in the Gulf of Mexico and pushing swells toward the worst U.S. oil spill.
The storm, packing maximum sustained winds of 70 miles (110 kilometers) per hour, was 460 miles southeast of Brownsville, Texas, before dawn today, moving north-northwest at 8 mph, the U.S. National Hurricane Center said in an advisory. The circulating winds were near reaching hurricane status of 74 mph.”
New York state may tax out-of-state hedge fund execs [Reuters]
Desperate idea of the day from the brain trust in Albany, “Recession-hit New York could raise an extra $50 million a year by collecting income taxes from people who work for hedge funds in the state but live elsewhere, according to a legislative plan to raise revenue…A spokesman for Democratic Assembly Speaker Sheldon Silver said by telephone on Monday that it means hedge fund managers would be treated the same way as other commuters.”
Aprill: The Impact of Bilski on Tax Strategy Patents [TaxProf Blog]
In non-PCAOB SCOTUS news, the decision in Bilski v. Kappos addressing “Whether a ‘process’ must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (‘machine-or-transformation’ test), to be eligible for patenting….” was examined by Ellen P. Aprill of Loyola-L.A. regarding the impact on tax strategy patents:
“Bilski is at best a mixed bag for those who think tax strategies should be patentable. It gives little help and does allow business method patents, albeit somewhat begrudgingly. It demonstrates that for those who believe that tax strategies should not be patented, legislation is needed.”
Method Man pleads guilty to NYC tax-evasion charge [AP]
“Hip-hop star Method Man pleaded guilty to a tax-evasion charge Monday, writing a check on the spot for the final $40,000 restitution payment after owing about $106,000.” What, no cash?
U.S. Court to Hear Janus Appeal In Securities Case [Reuters]
“The lawsuit, brought on behalf of those who bought Janus stock from mid-2000 through early September 2003, alleged that the prospectuses of several of Janus funds created the misleading impression that the company would adopt measures to curb market timing, when in fact secret arrangements with several hedge funds permitted such transactions, to the detriment of long-term investors.”
It was actually over the weekend but talk about ruining a perfectly good photo-op.
For starters, taxes – like healthcare reform – are a big fucking deal and need to be debated in an environment more suitable for policy debate. Secondly, if you listened to the Veep’s advice, maybe you wouldn’t be complaining in the first place.
G-20 Agrees to Cut Debt [WSJ]
“The wealthiest of the Group of 20 countries said they would halve their government deficits by the year 2013 and ‘stabilize’ their debt loads by 2016, a signal to international markets and domestic political audiences they are taking seriously the need to wean themselves from stimulus spending.”
Once you catch your breath from laughing, the President also cited the tax code specifically and his threatening to put some (i.e. Congress) in a tight spot:
“They might have to make deeper cuts in deficits to comply with its pledge. A White House statement said that government debt in the fiscal year 15, would be at an “acceptable level.” President Obama said that next year he would present “very difficult choices” to the country in an effort to meet deficit goals.
The president cited his disappointment with the U.S. tax code. ‘Next year, when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits and debt step up, ’cause I’m calling their bluff,’ Mr. Obama said.”
Bank auditors eyed for whistleblower role [FT]
A paper from the UK’s Financial Services Authority puts forth the discussion of requiring auditors to work more closely with regulators on irregularities found during the bank’s audit engagement.
“Experts say bank executives are nervous about the prospect of increased bilateral discussions between regulators and auditors. Auditors have been fearful the paper could thrust the profession into a regulatory spotlight it has so far avoided.”
Koss Fraud: We didn’t bother to look at the endorsements on our own checks, but Grant Thornton should have! [Fraud Files Blog]
Fraud sage Tracy Coenen presents her latest view on the Koss fraud mish-mash and how Koss management has managed to make themselves “look like absolute morons.”
BP Loses $22 Billion in Legacy of Share Buybacks [Bloomberg]
“The sum represents the hole after the 52 percent plunge in BP shares since the Deepwater Horizon exploded and sank, resulting in the worst oil spill in U.S. history. BP bought back more than $37 billion of its stock in a bid to return money to investors between 2005 and 2008. Those shares are now worth $15 billion, excluding dividends.”
Martin Ginsburg, Noted Tax Lawyer and Husband of Justice Ginsburg, R.I.P. [ATL]
Mr Ginsburg was a tax law professor at Georgetown for many years and was known for his great sense of humor, as evidenced by his faculty bio, noted by our sister site, Above the Law:
Professor Ginsburg is co-author, with Jack S. Levin of Chicago, of Mergers, Acquisitions, and Buyouts, a semi-annually updated treatise which addresses tax and other aspects of this exciting subject. The portions of the treatise written by Professor Ginsburg are, he is certain, easily identified and quite superb.
Open Letter to the Securities and Exchange Commission Part 9: Overstock.com’s Excuses Simply Don’t Add Up [White Collar Fraud]
It appears Sam Antar has caught Overstock.com in another disclosure snafu but this time it isn’t really clear whether the company gave the wrong excuse, lied to the SEC or simply doesn’t know what they’re doing, “Overstock.com’s 2008 10-K report claimed that a reportable “gain contingency” existed as of November 7, 2008. However, the company contradicted itself and claimed to the SEC reviewers that reportable reportable ‘gain contingency’ did not exist on November 7, 2008.
If Overstock.com’s 10-K disclosure is true, the company’s explanation to the SEC Division of Corporation Finance can’t be true. Likewise, if Overstock.com’s explanation to the SEC Division of Corporation Finance is true, the company’s 2008 10-K disclosure can’t be true.”
Accounts bodies revise workplan [FT]
If it wasn’t for WS, there would be no vampire craze. Sure the last Blade film was six years ago. And sure the first in the series was twelve years ago but it doesn’t mean the man still didn’t start the popularization of bloody-thirsty, sexy undead types. However, this prison sentence thing hanging over his head has probably made him a bit of a liability. But thanks to some crafty lawyering, he’s been able to stave off the joint long enough to catch a bit of luck. A federal appeals panel is considering whether the arrest of actor Wesley Snipes’ former financial adviser could pave the way for a new trial on tax evasion charges. Snipes was convicted and sentenced to three years in prison in 2008, but his attorneys asked the 11th U.S. Circuit Court of Appeals in Atlanta to allow a new request to dismiss the movie star’s conviction or grant him a new trial. The motion centers on the arrest of Kenneth Starr, the one-time financial adviser to Snipes and other celebrities.
Since Ponzi-schemer-to-the-stars Kenneth Starr has been outed as a complete shame (not to mention a complete wuss) Wes can get back to the business of making truckloads of cash in this bloodsucking phenomenon:
He was a key witness in Snipes’ 2008 trial but was charged in May with securities fraud worth $59 million.
If it wasn’t for WS, there would be no vampire craze. Sure the last Blade film was six years ago. And sure the first in the series was twelve years ago but it doesn’t mean the man still didn’t start the popularization of bloody-thirsty, sexy undead types.
However, this prison sentence thing hanging over his head has probably made him a bit of a liability. But thanks to some crafty lawyering, he’s been able to stave off the joint long enough to catch a bit of luck.
A federal appeals panel is considering whether the arrest of actor Wesley Snipes’ former financial adviser could pave the way for a new trial on tax evasion charges.
Snipes was convicted and sentenced to three years in prison in 2008, but his attorneys asked the 11th U.S. Circuit Court of Appeals in Atlanta to allow a new request to dismiss the movie star’s conviction or grant him a new trial.
The motion centers on the arrest of Kenneth Starr, the one-time financial adviser to Snipes and other celebrities.
Seriously people. We thought that the fog of confusion around this issue had been lifted. We’ll go over it again for those of you just joining us.
If you are not a well-connected bureaucrat with a fabulous coif, you are not afforded the same privileges as though who are/do.
And tax court debunks the latest attempt to draw some likeness between a regular schmo and T Geith:
We shall address briefly petitioner’s contention that the IRS granted “favorable treatment” in a case involving U.S. Secretary of the Treasury Timothy Geithner, which petitioner described as “incredibly similar” to the instant case. According to petitioner, “there should not be different, or favorable rules for the well-connected”. The record in this case does not establish any facts relating to the case to which petitioner refers involving U.S. Secretary of the Treasury Timothy Geithner. In any event, those facts would be irrelevant to our resolution of the issue presented here. Regardless of the facts and circumstances relating to the case to which petitioner refers involving U.S. Secretary of the Treasury Timothy Geithner, petitioner is required to establish on the basis of the facts and circumstances that are established by the record in his own case that there was reasonable cause for, and that he acted in good faith with respect to, the underpayment for each of his taxable years 2005 and 2006 that is attributable to his failure to report self-employment tax.
New Accounting Rules Ruffle the Leasing Market [NYT]
The convergence efforts by the FASB and the IASB have managed to produce a consensus on lease accounting and it has repercussions on both sides of the balance sheet.
“The two boards have come up with a new standard, which will be completed next year and enacted in 2013, that will require companies to book leases as assets and liabilities on their balance sheets. Currently, American and foreign companies list many leases as footnotes in their financial statements. As a result of the change, public companies will have to put some $1.3 trillion in leases on their balance sheets, according to estimates by the Se e Commission. Because many private companies also follow GAAP accounting, the number could be closer to $2 trillion, experts said.”
Middle-Class Tax Boost Is Broached [WSJ]
Reaction to Steny Hoyer’s call in a speech for Congress to quit lying to themselves was not met with enthusiasm.
The Journal reports that the GOP has different ideas, including House Orange leader John Boehner is quoted in the Journal, “Mr. Hoyer’s speech brought a round of criticism from Republicans, who emphasize spending cuts instead, and oppose allowing any Bush tax cuts to expire. House GOP Leader John Boehner of Ohio said Mr. Hoyer was admitting ‘that he supports raising taxes on the middle class to pay for more government spending.’ ”
Rep. Oompa Loompa obviously didn’t hear the part of the speech where Hoyer addressed the “cut spending” broken record, “The eagerness of so many to blast spending in the abstract without offering solutions that come close to measuring up to the size of the problem.”
California could turn license plates into ad revenue space [Silicon Valley/San Jose Business Journal]
The latest out of the brain trust in Sacramento, “As California faces a $19 billion deficit, the Legislature is considering whether to allow license plates to become traveling ad spaces.
When the vehicle is moving the license plate would look like the ones we’re used to now, but when the vehicle stops for more than four seconds a digital ad or other message would flash. The license plate number would always be visible.”
Madoff crony sprung [NYP]
“Earlier yesterday, former Madoff CFO Frank DiPascali Jr. was released to house arrest.
A grizzled-looking DiPascali refused to answer questions about the report in Monday’s Post that Madoff told fellow jailbirds that DiPascali knows the identity of three people the Ponzi king gave money to shortly before his arrest.
A judge initially refused prosecutors’ requests that DiPascali be released so he could assist in their ongoing probe, but in February he won a $10 million bail package based on his extensive cooperation.”
BP confirms Bob Dudley in key Gulf clean-up role [AP]
Knock ’em dead!
Business Leader Slams ‘Hostile’ Policies on Jobs [WSJ]
“In comments marking one of the sharpest breaks between top executives and the Obama White House, [Verizon Communications CEO Ivan] Seidenberg used a speech at Washington’s Economic Club to unleash a list of policy grievances over taxes, trade and financial regulation.
Mr. Seidenberg’s comments are particularly notable because he heads the Business Roundtable, a group encompassing the chief executives of the nation’s largest listed companies whose members have enjoyed frequent access to the president and his top aides. Its leaders have advised the White House on topics from economic recovery to health care to clean energy.”
SEC Self-Funding Is A Mistake! [The Summa]
“In support of SEC self-funding, SEC chairs always argue in public that they lack sufficient and consistent funding to enforce securities laws and regulations. As proof, they point out that Congress occasionally cuts back on SEC funding.
What they don’t mention is that the budgetary review process provides an opportunity for Congressional oversight of the SEC. When the SEC is performing poorly, say due to the atrocious leadership of the Chairs (i.e., Cox and Schapiro), a Congressional budget cut is a natural and effective response. Of course SEC chairs want self-funding, it gives them a pass from oversight. Who wouldn’t want that?”
Wait! You mean we have to pay taxes if we receive cash? When the hell did this happen? What if you’re part of the “self-reliant nonconformists who don’t pay much heed to everyday rules and regulations” community? Does that earn you a pass?
The AP reported on some workers on the Gulf Coast who are simply not aware of the notion of income taxes and would very much like to keep it that way:
Out-of-work Gulf Coast shrimper Todd Pellegal spent his first $2,500 check from BP quickly, paying off bills and buying groceries for his family.
He never even considered putting some of it away for taxes.
Now he’s among the people up and down the Gulf Coast reeling from the oil spill disaster who are surprised — and frustrated — to find out the Internal Revenue Service may take a chunk of the payments BP PLC is providing to help them stay afloat.
Many were already angry about how long the oil giant took to cut the checks. So when they got the money — generally about a few thousand dollars each so far — they spent it fast.
“If they’re going to pay you a lump sum, like for a year, then bam, take the taxes out of the check,” said Pellegal, of Boothville, La. “But a little bit at a time, they shouldn’t.”
Right, because withholding taxes from a paycheck isn’t how it works for every other person in the country who pays income taxes. Whoever heard of “net pay”?? But don’t bother suggesting planning for such a phenomenon as being paid by check:
“They should do a projection of their taxable income and determine if there is going to be a tax liability and have enough to cover that,” said Crystal Faulkner, a partner in the Cincinnati-based accounting firm of Cooney Faulkner & Stevens LLC.
That doesn’t sit well with Cherie Edwards, who is now only working one day a week at her job booking charter fishing trips at Zeke’s Landing in Orange Beach, Ala. The lost hours due to the oil spill are costing her about $270 week.
She said she got her claim number from BP on Thursday and plans to file an application in the coming day. So far, she said, no one has mentioned to her about a potential tax liability.
“I haven’t even thought about taxes. Wow. That makes me mad,” said Edwards, who has one child in college and another in high school. “I’m already losing money, and now I’ve got to figure out how to hold back money to pay taxes?”
Jesus lady, you’re right. Getting used to the $0 tax liability and then all of a sudden learning that you are required by law to pay them would piss off just about anyone.
Maybe! But we’ll get back to that in a minute.
There was a fair amount schadenfreude aimed at the University of Southern California when the school was slapped with sanctions a couple weeks back and at Reggie Bush for his role in the whole sitch.
How Bush really feels about it seems to be a mystery since he’s been quoted saying, “[This] is the closest thing to death without dying” but also a less passionate response, “Whatever happens, happens.”
Borderline schizophrenia aside, Fox News reports that Reg might have to pay some back taxes on the estimated $300,000 in luxury gifts he allegedly received:
“If the entire $300,000 is determined to be taxable,” Los Angeles-based CPA Mark Greenberg said, “about 50 percent of that would go to the IRS and Franchise Tax Board. And with penalties and interest, it could go up to 60 percent since it’s going back a few years.”
Greenberg estimates that Bush, now the star running back for the New Orleans Saints, “ultimately will wind up paying about $150,000,” but “it could be up to $200,000” if his financial team can’t get the penalties and interest waived.
We’re sure Bush would never have to give up his trophy a la the Juice since A) he didn’t kill anyone and B) his sponsors are still firmly in his corner, so the money shouldn’t be a problem. That being said, having the IRS snooping around your financial situation is about annoying as a Keeping Up with the Kardashians marathon.
One of the promised benefits of feminism was that both men and women would reap benefits from allowing women to achieve their potential in the workforce. And for Mr. Steve Lowe, it absolutely worked that way.
The Tax Court gives a hint at Mrs. Lowe’s achieved potential:
During the years at issue petitioner wife (Mrs. Lowe) worked full time as a “controller” for Fry Steel Co., where she has worked for over 38 years. She earned $177,219 and $184,181 in 2005 and 2006, respectively, with an additional $12,000 per year for taking notes at the board of directors meetings.
And how did that work out for Mr. Lowe?
In 2005 Mr. Lowe fi ts run by either American Bass, FLW Strem Series, or Western Outdoor News (WON) and reported gross income on petitioners’ Schedule C of $4,241. In 2006 Mr. Lowe fished in 15 tournaments run by those same organizations and reported $10,932 of gross income. The entry fees ranged from $280 to $825 with an additional $325 for a “coangler” amateur in FLW events.
Yes, Mrs. Lowe’s empowerment enabled her to hold down a fulfilling and well-paid job, freeing her husband to follow his dreams – to go fishing every day.
The only thing that could possibly be better than fishing every day while your wife brings home a nice paycheck is to get a tax deduction for fishing every day while your wife brings home a nice paycheck. And Mr. Lowe gave it a try, deducting $49,067 of fishing expenses in 2005. Unfortunately, he hooked a snag.
The tax law disallows losses from activities “not engaged in for profit” – the so-called “hobby loss” rules. The Tax Court summed it up (my emphasis):
Mrs. Lowe earned substantial income from her job at Fry Steel Co., and the losses from Mr. Lowe’s fishing activity resulted in substantial tax benefits. During the years at issue Mrs. Lowe earned an average of about $180,000 a year from her job, and petitioners were able to deduct an average of about $41,000 per year on their joint Federal income tax returns due to Mr. Lowe’s fishing activity losses. Mr. Lowe was not employed before the fishing activity and was able to pursue this activity because of Mrs. Lowe’s substantial income. We also note that Mr. Lowe fished for recreation and pleasure long before commencing his competitive bass fishing activity. He clearly enjoyed that activity and likely would have incurred significant fishing costs yearly for personal pleasure had he not conducted his claimed business activity.
The case illustrates some hobby loss red flags:
• The activity loses money and shows no sign of doing otherwise – It’s fishing, for heavens’s sake.
• The losses offset significant other income – If you would be getting the earned income credit otherwise, the IRS doesn’t invoke the hobby loss rules.
• The activity is fun – If your money-losing business can be perceived as fun – like fishing, say, or playing slots – it’s that much harder to convince the IRS that you’re really in it for profit. Remember, though, that even miserable activities (like selling Amway or writing blog posts) can run afoul of the hobby loss rules.
So Mr. Lowe lost his deductions. The Tax Court waived penalties, though, and Mr. Lowe, as far as we know, still can fish every day while his wife works. Millions of red-blooded men would take that deal, even without tax deductions.
Oregon attorney Micaela Renee Dutson and her husband Tony Dutson were convicted of defrauding the U.S. Government of over $7 million but not before doing their damnedest to stave off the IRS and DOJ investigating them.
The Dutsons were a creative couple, selling “pure trust” packages to their clients who were told that their income would be tax free if it were placed in trust. They sold these products despite “several warning letters from the IRS, articles in the Oregonian newspaper warning the public against tax shelter scams, and a compl stice Department on behalf of the IRS in an effort to stop them from selling their tax shelters.”
The IRS started auditing the Dutsons’ clients who, prior to engaging the dynamic tax duo, were seemingly compliant taxpayers. The IRS informed these clients that the “trusts” were actually illegal tax shelters and that they were being bamboozled.
This was, of course, unacceptable to the Mr and Mrs and they went on a serious offensive:
[T]he Dutsons began a campaign to obstruct the IRS’s audits and investigation, and to harass and intimidate the individual IRS employees who were auditing or investigating them. First, they created and presented dozens of fictitious financial instruments to the IRS purporting to pay off back taxes for themselves and a number of their clients.
Even though they knew the bogus instruments had no financial value and had never been accepted by a creditor, they continued to sell them to their clients with false promises they would pay off their tax liability. The Dutsons also advised clients to use them to pay off commercial debts, including mortgages and court-ordered obligations. Together, the Dutsons and their clients presented over $44 million worth of these bogus financial instruments over a four-and-a-half-year period.
To further obstruct the IRS, and harass and intimidate its employees, the Dutsons advised clients to file frivolous lawsuits against the IRS employees. The Dutsons charged their clients $3,500 each to prepare court documents and help their clients file them. They continued to advise clients to file these lawsuits — even after a federal court had dismissed the first of these suits as frivolous and without merit — without telling their clients about the dismissal.
After the Justice Department filed the complaint for a permanent injunction, and IRS special agents had notified the Dutsons in person that they were under criminal investigation, the Dutsons filed a $1 trillion lien in California against several IRS employees who had attempted to audit or investigate the Dutsons, as well as the DOJ attorneys who filed the complaint. A federal court later ruled that the lien was null, void and without legal basis, but one week later, the Dutsons prepared a $108 million lien for a client against John Snow, who was then Secretary of the Treasury.
The Dutson probably figured the jig was up and since $1 trillion is a nice round number the figured “why the hell not?!?” Back in the early ’00s a trillion was fantastical number (for the most part), not tossed willy-nilly like it is these days. The Dutsons could have filed the lien for $1 gabizillion and it would have made as much sense.
Oh and while they were at it, just file another one against the Secretary of the Treasury. If it was Tim Geithner, sure we can see that happening for a whole host of reasons but John Snow? Wasn’t he one of the most harmless cabinet members of the Bush Administration? If they would have filed the lien against Dick Cheney they could have garnered a little popular support at least.
UK watchdog launches Lehman audit probe [Reuters]
The UK’s Accountancy and Actuarial Discipline Board (AADB), investigative and disciplinary body for accountants, has started an investigation into the Ernst & Young’s final audit of Lehman Brothers’ UK operations for the year ending November 30, 2007.
E&Y, completely familiar with this drill, is sticking to their guns, “Ernst & Young’s audit opinion stated that Lehman’s financial statements for that year were fairly presented in accordance with the relevant accounting standards, and we remain of that view.”