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William Byrnes (Texas A&M) tax & compliance articles

Archive for February, 2011

NCOIL Warns a Federal Insurance Charter Would Hurt the States

Posted by William Byrnes on February 28, 2011


Federal interference in the regulation of the insurance industry could be around the corner, but the states are not going to cede their authority without a fight.

State legislators fear that “important funds and jobs could be lost if Congress authorizes a federal insurance charter and creates a new bureaucracy to regulate insurance.” According to a letter sent by NCOIL (The National Conference of Insurance Legislators) to every member of the 112th Congress, a federal insurance charter could cost states as much as $16 billion in revenue annually—representing lost fees and taxes generated for the states by insurance business. ….

Although the FIO itself is not given regulatory authority by the Wall Street Reform Act, the studies mandated by the Act may signal that the Feds are interested in expanding their reach into the insurance industry. And, it would be naïve to think that the FIO studies will find that federal regulation of insurance companies is absolutely unnecessary—given the role of insurance companies like AIG in the financial crisis.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the Federal Insurance Office in Advisor’s Journal, see The Federal Insurance Office (CC 10-55).

 

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Passive Foreign Investment Company Special Disclosure Tax

Posted by William Byrnes on February 27, 2011


A significant number of Offshore Voluntary Disclosure Practice cases (remember the Swiss Bank Accounts) involve Passive Foreign Investment Company (PFIC) investments.  A lack of historical information on the cost basis and holding period of many PFIC investments, the Service notes, may make it difficult for taxpayers to prepare statutory PFIC computations and for the Internal Revenue Service to verify them.  As a result, resolution of many Disclosure Practice cases are said to be unduly delayed.  Therefore, for purposes of this initiative, the Internal Revenue Service is offering taxpayers an alternative to the statutory PFIC computation that will resolve PFIC issues on a basis that is consistent with the Mark to Market (MTM) methodology authorized in Internal Revenue Code section 1296 but will not require complete reconstruction of historical data.

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SEC Approves FINRA Suitability and Know-Your-Customer Rules

Posted by William Byrnes on February 26, 2011


The SEC recently approved FINRA proposed rules—FINRA Rules 2090 and 2011—that amend and consolidate know-your-customer and suitability obligations for broker-dealers and their authorized representatives.  The new rules are based on, and replace in-part, similar NYSE and NASD rules. According to FINRA, the amended know-your-customer and suitability rules are intended to protect investors by “promoting fair dealing with customers and ethical sales practices.”

The new rules are effective as of October 7, 2011.  For previous coverage of the suitability standard and the debate over the proposed fiduciary standard in Advisor’s Journal, see What You Don’t Know Yet Might Hurt You: A Broker’s Duties under the Financial Reform Act (CC 10-40) and Study Finds that Universal Fiduciary Standard Will Hurt Investors (CC 10-97).

Under the know-your-customer rule, firms are required to use reasonable diligence respecting the opening and maintenance of every account and to know essential facts about every customer. “Essential facts” are facts required to …. Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

 

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Group-Term Life Policy Tax Consequences

Posted by William Byrnes on February 25, 2011


The Internal Revenue Code provides an exclusion from income for the first $50,000 of group-term life insurance coverage provided under a policy carried directly or indirectly by an employer. [1] Thus, there are no tax consequences to the individual if the total amount of such policies does not exceed $50,000.  However, the imputed cost of coverage in excess of $50,000 must be included in income to the individual, using the IRS Premium Table[2] and are subject to social security and Medicare taxes.

A taxable fringe benefit arises if coverage exceeds $50,000 and the policy is considered carried directly or indirectly by the employer. A policy is considered carried directly or indirectly by the employer if:

  1. The employer pays any cost of the life insurance, or
  2. The employer arranges for the premium payments and the premiums paid by at least one employee subsidize those paid by at least one other employee (known as the “straddle” rule).

A policy that is not considered carried directly or indirectly by the employer has no tax consequences to the employee.  Also, because the employees are paying the cost and the employer is not redistributing the cost of the premiums through an insurance system, the employer has no reporting requirements.

Read the analysis at AdvisorFYI

 

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“Wage” War: Round One

Posted by William Byrnes on February 24, 2011


The topic Self-Employment Tax on wages versus distributions has reared its head again – as shown by the recent Federal District Court case involving David E. Watson.

The C.P.A. recently disputed and lost to the Government’s position which recharacterized dividend and loan payments from David E. Watson, P.C. (a Subchapter S corporation) to its sole shareholder and employee, David E. Watson.  The IRS assessed additional employment taxes, interest and penalties against Watson for each of tax years in which Watson’s salary was significantly lower than his total distributions.

Read the analysis at AdvisorFYI (sign up for a 2 week online free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

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Dodd-Frank Aftermath: CFTC Rule Making Process Stalls

Posted by William Byrnes on February 23, 2011


Despite Congress’s best efforts after the recent economic meltdown, a cadre of Wall Street’s biggest banks still dominates the derivatives markets, leaving some observers wondering whether the transparency the Act was supposed to bring was just a well-intentioned but overly optimistic dream.

The Dodd-Frank Wall Street Reform Act (Act) gave the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) extensive new authority over participants in the derivatives and swaps markets. But the transparency and equity many hoped the Act would bring to the markets is bottlenecked in the agencies charged with implementing the legislation.

The CFTC was scheduled to consider conflict of interest rules for swap execution facilities, derivatives clearing organizations and designated contract markets at their January 13, 2011 meeting, but disagreement about the scope of the rules resulted in the items being nixed from consideration at the meeting.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the Dodd-Frank Act in Advisor’s Journal, see Dodd-Frank Wall Street Reform and Consumer Protection Act (CC 10-35) and Wall Street Reform Act Mandates Study of Financial Planning Industry (CC 10-73).

 

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New Dodd-Frank Study Calls for Stringent Standards

Posted by William Byrnes on February 21, 2011


The Securities and Exchange Commission (SEC) submitted to Congress a staff study recommending a uniform fiduciary standard of conduct for broker-dealers and investment advisers — no less stringent than currently applied to investment advisers under the Investment Advisers Act of 1940– when those financial professionals provide personalized investment advice about securities to retail investors.

Section 913 of Title IX of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 required SEC to conduct a study to evaluate:

  • The effectiveness of existing legal or regulatory standards of care (imposed by current authorities) for providing personalized investment advice and recommendations about securities to retail customers; and
  • Whether there are legal or regulatory gaps, shortcomings, or overlaps in legal or regulatory standards in the protection of retail customers relating to the standards of care for providing personalized investment advice about securities to such customers that should be addressed by rule or statute.

In the study, the SEC notes that investment advisers and broker-dealers are regulated extensively under different regulatory regimes.  But, the study claims, many retail investors do not understand and are confused by the roles played by investment advisers and broker-dealers.  The study finds that “many investors are also confused by the standards of care that apply to investment advisers and broker-dealers” when providing personalized investment advice about securities.  Read the analysis at http://www.advisorfyi.com/2011/01/new-dodd-frank-study-calls-for-stringent-standards/

 

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Change in Muni Bond Market Could Help Producers

Posted by William Byrnes on February 19, 2011


The Wall Street Journal has recently noted that significant withdrawal of funds from municipal bonds throughout the country totaled over $4 billion in a one week period. [1] According to some estimates, the withdrawal accounts for only one tenth of one percent of the overall muni bond market.  [2] Yet, the numbers are record breaking.  The withdrawal is the largest from the muni bond market since last November, reports the Wall Street Journal.

However, the trouble seems to have started well before Meredith Whitney appeared on “60 Minutes”  in late December of last year when she call for the future “collapse” of the muni bond market.  In her opinion, the state and local governments will be forced to default on obligations made to bond holders because the governmental entities are quickly running out of liquidity.  Nevertheless, the muni bond numbers reflect the ”10th straight week of outflows, which total roughly $20.6 billion.” [3]

Whitney though may have created in the muni bond market what is now known as Gladwell’s “Tipping Point”.  Read the full analysis at AdvisorFYI

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Administrative Director of Graduate Programs

Posted by William Byrnes on February 18, 2011


Administrative Director of Graduate Programs

JOB DESCRIPTION

JOB TITLE: Administrative Director of Graduate Programs (previously LLM)

REPORTS TO: Associate Dean for Distance Education Programs

POSITION STATUS: Full-time, Exempt

GENERAL SUMMARY: Responsible for the coordination and support of the graduate distance education and continuing professional education programs with the departments of the central administration, including admissions, financial aid, business office, student services, information technology, and library. The Administrative Director is chiefly responsible for providing high level support to Associate Dean for Distance Education Programs and activities related to program development, relationship building with professional organizations, legal and financial institutions and individual students, and to the entrepreneurial activities related to the delivery of continuing education programming to a wide array of professionals globally.

ESSENTIAL JOB FUNCTIONS:

• Coordinate the student registration process four times per year for new and current LLM and JSD candidates with the Registrar and within each course.

• Serve as one of three key point persons to handle the questions and needs of current and incoming graduate students, as well as those of working professionals seeking continuing education opportunities.

• Support adult learners through the processes and structures of engaging with financial aid, online learning systems such as blackboard and WIMBA, and online publisher databases via proxy access such as CCH.

• Serve as main point of contact for Embanet regarding operations: admissions, student registration and reconciliation.

• Developing quarterly contact list for leads and applicants and refreshing alumni contact list.

• Develop training materials for new students on technology and systems used in the program.

• Serve as main point of contact for faculty of the program in terms of their contracts and payment, scheduling of their classes and training on Wimba.

• Coordinate graduation for the LL.M. and JSD students, process their graduation forms, order their diplomas and certificates.

• Participate in supporting the collaborative entrepreneurial process of new program development and implementation via developing processes and protocols.

• Provide direct supervision to student workers, federal work study students and international interns who work for the Program to support above functions.

• Responsible for all administrative activities, working closely with other departments to ensure proper and timely processing and reporting related to programs.

• Provide support and organization for travel and entertainment.

• Other duties as assigned.

KNOWLEDGE, SKILLS AND ABILITIES

• Bachelor degree required, preferred graduate level or professional degree, in law, business or related area.

• Preferred 5 years working in the financial services with international experience.

• Must be comfortable working with senior partners and high level officials within the banking, finance, law, accounting, private business, and government arenas.

• Must have an understanding of asynchronous and synchronous distance technology education at the graduate level.

• Must have the ability to understand administrative and technical structures to ease adult learners through such processes and structures of financial aid, online learning systems such as blackboard and WIMBA, and online publisher databases via proxy access such as CCH.

• Multiple languages are a plus.

WORK SCHEDULE

Full time, Monday through Friday, 40 hours per week. Nights and weekends as needed.

CONTACT

All contact must be with Lisa Chigos (lchigos@tjsl.edu). Send CV and cover letter.

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Tax Courts Holds Employee Taxable for Value of Life Insurance Owned by Welfare-Benefit Plan

Posted by William Byrnes on February 18, 2011


A recent Tax Court case demonstrates the severe tax consequences for an employee when a welfare-benefit plan ceases to qualify under section 419A of the Tax Code.  Section 419A governs “qualified asset accounts,” which are employer provided welfare-benefits plans that set aside funds for (1) disability benefits, (2) medical benefits, (3) severance benefits, or (4) life insurance benefits. In general, contributions by an employer to a welfare-benefit plan are tax deductible by the employer if they are ordinary and necessary business expenses. In the case, part of the funds contributed to the plan were used to buy life insurance coverage for the principal and other employees, with the rest of the funds constituting excess contributions. 

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

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Agent as Trustee Liability

Posted by William Byrnes on February 17, 2011


A recent Delaware Court of Chancery decision illustrates the severe consequences that can befall an insurance agent trustee who violates his or her duties to the trust’s beneficiaries. The agent in the case agreed to serve as trustee of a client’s life insurance trust.  

The client, a Father, had a falling out with his son over the Father’s marriage to a woman 17 years his junior. Nevertheless, the Father and his second wife formed a trust for the benefit of the son. The couple asked their family insurance agent to serve as trustee of the trust. The trust purchased a second-to-die life insurance policy on their lives.  Although the trust was irrevocable, the Father ad young wife asked the trustee to revoke the trust only three years after it was formed. The trustee intelligently refused to revoke the trust, but did agree to loan the policy’s cash value to the couple. 

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

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Higher Filing Thresholds Doubles for Non-Profits

Posted by William Byrnes on February 16, 2011


Why is this Topic Important to Wealth Managers? Discusses the new income reporting threshold for non-profit organizations.  Provides details on the new level of reporting required on Form 990 for 501(c) organizations.  

Generally the Internal Revenue Code requires the filing of an annual return by exempt organizations. [1]  However, there are certain mandatory exceptions to the annual filing requirement for exempt organizations provided by the Code.  [2] 

Further, the tax law provides that the Secretary of the Treasury, through the Commissioner of the Internal Revenue Service may relieve exempt organizations from the annual filing requirement if the Secretary determines that such filings are not necessary to the efficient administration of the internal revenue laws. [3]

Before, exempt organizations were relieved from the Form 990 (Return of Organization Exempt from Income Tax) filing requirement for organizations described in § 501(c) (other than private foundations) whose annual gross receipts are normally not more than $25,000. [4]

Read the full analysis and on similar issues – AdvisorFYI

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Retirement Plan Approved and Prohibited Investments

Posted by William Byrnes on February 15, 2011


Why is this Topic Important to Wealth Managers? Discusses retirement plan investments with regards to client retirement planning.  Provides types of investments retirement plans can and cannot make.

What types of investments can a retirement plan make?

Although there is no list of approved investments for retirement plans, there are special rules contained in the Employee Retirement Income Security Act of 1974 (ERISA) that apply to retirement plan investments.

In general, a plan sponsor or plan administrator of a qualified plan who acts in a fiduciary capacity is required, in investing plan assets, to exercise the judgment that a prudent investor would use in investing for his or her own retirement.

In addition, certain rules apply to specific plan types.  For example, there are different limits on the amount of employer stock and employer real property that a qualified plan can hold, depending on whether the plan is a defined benefit plan, a 401(k) plan, or another kind of qualified plan.

Read the entire analysis at AdvisorFYI.

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Cost Competitiveness of Life Insurance

Posted by William Byrnes on February 14, 2011


Cost competitiveness of life insurance policies is an obvious determinant of suitability.  Keeping costs low is critical because every dollar spent on expenses is one less dollar available to purchase more death benefit.  In fact, a recent study by Morningstar revealed that “Low fees are likely to be the best predictor of a mutual fund’s future success,” and the same certainly holds true for life insurance products. 

While different insurers refer to different policy expenses in different ways, all policy expenses in all life insurance policies fall into the following four categories: 1) cost of insurance charges (COIs), 2) fixed administration expenses (FAEs), 3) cash-value-based “wrap fees” (e.g., M&Es), and 4) premium loads.   Each type of policy expense and its role and relevance in pricing and suitability is discussed in the complete analysis at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of life insurance product suitability in Advisor’s Journal, see Life Insurance Product Suitability (CC 10-90) and Financial Strength and Claims-Paying Ability (CC 10-115).

We invite your questions and comments by posting them or by calling the Panel of Experts.

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Congress Extends Deduction for State and Local Sales Taxes

Posted by William Byrnes on February 12, 2011


The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Tax Relief Act) extended the income tax deduction for state and local sales taxes through December 31, 2011.  The deduction expired on January 1, 2009, but Congress amended the provision retroactively, which will allow taxpayers to take the deduction on their 2010 taxes.  The deduction, which has been slated to expire a number of times, has been revived by Congress repeatedly since it was introduced but has not yet been made a permanent part of the Code.   Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the Tax Relief Act of 2010 in Advisor’s Journal, see Obama Tax Compromise Provides 100 Percent Bonus Depreciation of Business Assets Through 2011 (CC 11-01), Obama’s Social Security Tax Holiday: Penny Wise and Pound Foolish? (CC 10-119), Does the New Estate Tax Make the Bypass Trust Obsolete? (CC-10-122), & 2010 Estates: To Elect or Not to Elect (CC 10-124).

For in-depth analysis of income tax deductions, see Advisor’s Main Library: B4—Business Income and Deductions.

We invite your questions and comments by posting them or by calling the Panel of Experts.

Posted in Taxation | Tagged: , , , , , , , | Leave a Comment »

Some Clarity Brought to Uncertain Tax Positions

Posted by William Byrnes on February 11, 2011


Recently, in a series of Announcements the Internal Revenue Service stated that it was developing a schedule requiring certain business taxpayers to report uncertain tax positions on their tax returns.

Now the new requirements have been finalized, businesses and wealth managers have a better idea of the direction of Uncertain Tax Position reporting.

Reported under Schedule UTP for Form 1120 series, the Uncertain Tax Position reporting currently applies to a select number of corporations (however phase-in provisions will change this by 2012 and 2014).

Who must file a Schedule UTP?

The class of organizations that must file is limited (for now).   Generally, for 2010 tax year returns most small businesses will not be included in the reporting, but that will probably change.    Nevertheless, a corporation must file Schedule UTP with its 2010 income tax return if:  To read this article excerpted above, please access AdvisorFYI

 

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Congress Extends Wage Credit for Employees Who Are Active Duty Members of the Military

Posted by William Byrnes on February 10, 2011


A member of the U.S. military who takes a leave of absence from his private sector job in order to go on active duty will often face a pay cut—the differential between his military and private sector pay.   Some employers make up this differential by paying employees who are on active duty a partial salary.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the Tax Relief Act of 2010 in Advisor�s Journal, see Obama Tax Compromise Provides 100 Percent Bonus Depreciation of Business Assets Through 2011 (CC 11-01)Obama’s Social Security Tax Holiday: Penny Wise and Pound Foolish? (CC 10-119)Does the New Estate Tax Make the Bypass Trust Obsolete? (CC-10-122), and 2010 Estates: To Elect or Not to Elect (CC 10-124).

 

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Foreign Trust Disclosure

Posted by William Byrnes on February 9, 2011


Although trusts can be taxpayers, Sections 671 to 679 of the Internal Revenue Code contain the so-called ‘grantor trust rules’, which treat certain trust settlors (and sometimes persons other than the settlor) as the owner of a portion or all of a trust’s income, deductions and credits for US tax purposes. A trust where the settlor (or other person) is treated as the owner of the trust assets for US tax purposes is referred to as a ‘grantor trust’. The grantor trust rules apply to both foreign and domestic trusts, but in different ways.

Under the grantor trust rules, a US person who transfers property to a foreign trust is generally treated for income tax purposes as the owner of that portion of the trust attributable to the transferred property, even if the trust would not have been a grantor trust had it been domestic.

This is the result for any tax year in which any portion of the foreign trust has a US beneficiary.  A foreign trust is treated as having a US beneficiary for a tax year unless (i) under the terms of the trust, no part of the trust’s income or corpus may be paid or accumulated during the tax year to or for the benefit of a US person, and (ii) if the trust is terminated at any time during the tax year, no part of the income or corpus could be paid to or for the benefit of a US person.  The Internal Revenue Service (IRS) regulations under Section 679 of the Internal Revenue Code generally treat a foreign trust as having a US beneficiary if any current, future or contingent beneficiary of the trust is a US person.  To read this article excerpted above, please access AdvisorFYI.

 

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Selected Provisions and Analysis of the Tax Relief Act of 2010

Posted by William Byrnes on February 8, 2011


Written by the foremost experts in the field – Professor William H. Byrnes, Esq., LL.M, and Robert Bloink, Esq., LL.M

Understand the Act’s Implications for You and Your Clients

  • Analyzes important insurance, estate, gift, and other elements of the Act
  • Provides pertinent information on other important 2010 tax developments
  • Convenient Q&A format speeds you to the information you need – with answers to over 100 important questions

Summary Table of Contents

  • Analysis of the Tax Relief Act of 2010
    • Income Tax Provisions
    • Estate Tax Provisions
    • Generation Skipping Transfer Tax
    • Deduction for State and Local Sales Taxes
    • Alternative Minimum Tax
    • Tax Credits
    • Payroll Tax Holiday
    • Wage Credit for Employees who are Active Duty Members of the Military
    • Charitable Distributions from Retirement Accounts
    • Bonus Depreciation and Section 179 Expensing
    • Basis Reporting Requirements for Brokers and Mutual Funds
    • Regulated Investment Company Modernization Act of 2010
    • Health Care Act
    • Form 1099 Reporting Requirement for Businesses
    • American Jobs and Closing Tax Loopholes Act of 2010
    • Requirements for Tax Return Preparers

Price: $12.95 + shipping & handling and applicable sales tax

To order:

With our Custom Imprint program, you can place your company’s logo on the cover of this analysis and you’ll leave a lasting impression.  Call 1-800-543-0874 for additional information.

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National Underwriter Offers Tax Advisors Expert Analysis of the Impact of the Tax Relief Act on Their Clients

Posted by William Byrnes on February 7, 2011


NEW YORK, Feb. 4, 2011 /PRNewswire/ — Tax and insurance advisors looking for answers on how the new Tax Relief Act of 2010 will impact their clients are finding them in The National Underwriter Company’s just-published Selected Provisions and Analysis of the Tax Relief Act of 2010.  The proprietary analysis is the only practitioners’ guide in Q&A format that answers the most critical questions asked by clients on insurance, estate and gift tax law changes.

Copies of the 64-page report are available for only $12.95 plus shipping and handling here.  Producers and their companies can also license use of their logos and contact information directly on the cover of the guide for a marketing and client-management tool.

National Underwriter’s wealth management experts and report authors, Professor William H. Byrnes, Esq., LL.M, CWM and Robert Bloink, Esq., LL.M., noted, “While most media attention has focused on the Act’s retention of existing tax rates on the highest-earning Americans, tax, insurance and investment advisors are finding that the most important changes, from their perspective, are likely to be found in insurance, estate and gift tax provisions that will drive client decisions on investment strategy and wealth management priorities in 2011 and beyond.”

Rick Kravitz, Vice President & Managing Director of Summit Business Media’s Reference Division, said, “This proprietary analysis — compiled by leading experts in the field — demonstrates National Underwriter’s commitment to bringing timely and critical updates to advisors and financial planners so that they can successfully build their practices and better serve their clients.”

Prof. Byrnes, a former Coopers & Lybrand associate director in international tax and now Dean of the wealth management graduate program at Thomas Jefferson School of Law, noted that the 64-page analysis has answers to more than 100 important questions in these areas:   

  • Income Tax
  • Estate and Gift Tax
  • Generation Skipping Transfer Tax
  • Deduction for State and Local Sales Taxes
  • Alternative Minimum Tax
  • Tax Credits
  • Payroll Tax Holiday
  • Wage Credit for Employees Who Are Active Duty Members of the Military
  • Charitable Distributions from Retirement Accounts
  • Bonus Depreciation and Section 179 Expensing
  • Basis Reporting Requirements for Brokers and Mutual Funds
  • Regulated Investment Company Modernization Act of 2010
  • Health Care Act
  • Form 1099 Reporting Requirement for Businesses
  • American Jobs and Closing Tax Loopholes Act of 2010
  • Requirements for Tax Return Preparers  

“This is the only guide available on the market today that gives financial planners and producers issue-specific, time-critical information in Q&A format that addresses their most important technical questions with content that can also be used directly in client presentations,” Prof. Byrnes added.  “The unique combination of The National Underwriter Company’s editorial staff and the resources and professional experience of the wealth management faculty at Thomas Jefferson School of Law provides assurance that these are answers that can be counted on.”

About The National Underwriter Company

For over 110 years, The National Underwriter Company has been the first in line with the targeted tax, insurance, and financial planning information you need to make critical business decisions.  With respected resources available in print, on CD, and online, National Underwriter remains at the forefront of the evolving insurance industry, delivering the thorough and easy-to-use resources you rely on for success.  National Underwriter is a Summit Business Media company.

About Summit Business Media

Summit Business Media is the leading B2B media and information company serving the insurance, investment advisory, professional services and mining investment markets through a variety of channels, including print, online and live events.  Summit provides breaking news and analysis, in-depth practice management strategies, business-building techniques and actionable data to the markets it serves. Through its Media and Reference Divisions, Summit publishes 16 magazines, 20 websites and 150 reference titles. Summit’s Event Division hosts a dozen conferences across the spectrum of markets the company services.  Summit’s Data Division is the leading data provider of financial, marketing and benefits information on corporations, insurance companies and life, benefits and property-casualty agents.

Summit employs nearly 400 employees in ten offices across the United States.  For more information, please visit summitbusinessmedia.com.

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Broker Bonus Arbitration Bottleneck Forces FINRA to Reconsider Arbitrator Qualification Standards

Posted by William Byrnes on February 7, 2011


Brokerages are increasingly looking to claw back signing bonuses from bonus baby brokers who leave for another firm. Signing bonuses at the big broker-dealers saw a big jump in 2008, just as the economy took a dive. Signing bonuses of up to $3 million were being offered to brokers who generated $1 million in commissions and fees in the prior year. And a few bonuses paid at Wall Street firms were reported to have been as high as $10 million. But because many of the bonuses were based on the prior year’s inflated numbers, brokerage firms ended up paying too much for too little performance during an economic slowdown.

Now a bottleneck is developing in arbitration cases dealing with brokers’ signing bonuses, forcing FINRA to reduce the qualifications for persons serving as arbitrators in order to expand its rolls and push the cases through the system. About 1,100 bonus cases have been filed by brokerages as of December 12, compared to just 415 cases in 2008. About 17 percent of 2010 FINRA arbitration cases were bonus-related cases.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of broker and securities arbitration in Advisor’s Journal, see FINRA Proposes Eliminating Industry Insiders from Arbitration Panels (CC 10-80) and Mandatory Securities Arbitration Clauses on the Chopping Block (CC 10-48).

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Tax Season Starting Late for Some Taxpayers

Posted by William Byrnes on February 5, 2011


Some taxpayers are going to have to wait until mid-to-late February to file their 2010 income tax returns, delaying much needed refunds and potentially clogging up the system for other taxpayers. The IRS is blaming the filing delay on Congress waiting until the end of December to pass the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, H.R. 4853 (Tax Relief Act), which includes a bevy of tax provision extensions, a new two-year estate tax, and a one-year, 2 percent Social Security tax holiday.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the Tax Relief Act of 2010 in Advisor’s Journal, see Obama Tax Compromise Provides 100 Percent Bonus Depreciation of Business Assets Through 2011 (CC 11-01), Obama’s Social Security Tax Holiday: Penny Wise and Pound Foolish? (CC 10-119), Does the New Estate Tax Make the Bypass Trust Obsolete? (CC-10-122), and 2010 Estates: To Elect or Not to Elect (CC 10-124).

 

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How To File for a Non-Profit Status

Posted by William Byrnes on February 4, 2011


What are the tax procedures for requesting exempt status recognition?

Generally, an organization seeking recognition of an exempt status is required to submit the appropriate application.  Specifically, an organization seeking recognition of exemption under § 501(c)(3) \ must submit a completed Form 1023.

What fees are required by those requesting an exempt status?

Generally, an application for exemption under § 501(c)(3) includes a $400 fee for organizations that have had annual gross receipts averaging not more than $10,000 during the preceding four years, or new organizations that anticipate gross receipts averaging not more than $10,000 during the first four years.

Application for exemption under § 501(c)(3) includes an $850 fee for organizations whose actual or anticipated gross receipts exceed $10,000 averaged annually.  For those seeking the $400 fee, the Service also requires the organization to sign a certification with their application that the receipts are or will be not more than the indicated amounts.

Read the full analysis and on similar issues – http://www.advisorfyi.com

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Carriers Targeted by Suit Over Losses on Madoff Investments

Posted by William Byrnes on February 3, 2011


New York Life Insurance Co. and Massachusetts Mutual Life Insurance Co. are caught in the Madoff crossfire. The carriers are being sued by Cummins Inc., which alleges that premiums paid by Cummins to the two carriers were partially invested with Bernard Madoff Investment Securities, LLC (BMIS). Cummins lost roughly $27 million as a result of the investments.

How exposed are MassMutual and New York Life variable products to Madoff investments?

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of advisor scams in Advisor’ Journal, see Three Advisors Sentenced to Prison for Faith-Based Scam (CC 10-126) and Advisor Fakes Death to Avoid Fraud Charges (CC 10-83).

 

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2011 Tax Rates, Credits, and Deduction Amounts

Posted by William Byrnes on February 2, 2011


Child Tax Credit—for taxable years beginning in 2011, the value used in 24(d)(1)(B)(i) to determine the amount of credit under § 24 that may be refundable is $3,000.

Hope Scholarship, American Opportunity, and Lifetime Learning Credits—for taxable years beginning in 2011, the Hope Scholarship Credit under § 25A(b)(1), as increased under § 25A(i) (the American Opportunity Tax Credit), is an amount equal to 100 percent of qualified tuition and related expenses not in excess of $2,000 plus 25 percent of those expenses in excess of $2,000, but not in excess of $4,000. Accordingly, the maximum Hope Scholarship Credit allowable under § 25A(b)(1) for taxable years beginning in 2011 is $2,500.

In addition, for taxable years beginning in 2011, a taxpayer’s modified adjusted gross income in excess of $80,000 ($160,000 for a joint return) is used to determine the reduction under § 25A(d)(2) in the amount of the Hope Scholarship Credit otherwise allowable under § 25A(a)(1). For taxable years beginning in 2011, a taxpayer’s modified adjusted gross income in excess of $51,000 ($102,000 for a joint return) is used to determine the reduction under § 25A(d)(2) in the amount of the Lifetime Learning Credit otherwise allowable under § 25A(a)(2).

Standard Deduction—In general, for taxable years beginning in 2011, the standard deduction amounts under § 63(c)(2) are as follows:  To read this article excerpted above, please access AdvisorFYI

 

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A Drunk, Two Insurance Policies, and One Court’s Interpretation

Posted by William Byrnes on February 1, 2011


Robert Fier was employed as a gaming machine operator in Las Vegas, Nevada.  He worked his way up through the company to be promoted to a managerial position.  During this time, Fier enrolled in an insurance program offered by the company to managers.  The enrollment entitled Fier to two insurance policies, a Long Term Disability Policy and a Group Life and Accidental Death and Dismemberment Insurance Policy.

The long term disability plan stated, in essence, Fier was entitled to payments upon the occurrence of disability if he earned less than 80% of what he had before the accident.  Also, the policy payments terminated if he starting making over 80% of what he had before the accident.  The group life and accidental death and dismemberment policy will be discussed in more detail below.

After five years with the company, Mr. Fier was shot in the throat during a hunting accident.  The individual who shot Fier on that hunting trip (in the great state of Utah) was evidently intoxicated.  The accident left Fier a quadriplegic for life.

Mr. Fier was then offered a position at the same company that was designed specifically to fit his new disability.  The company continued to pay Fier the same amount as it had before the accident.  However, after four more years, the company assigned Fier to a new position and lowered his salary by $20,000 annually.  Mr. Fier then filed a claim under his long term disability policy.  To read this article excerpted above, please access AdvisorFYI

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