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

Archive for July, 2011

Brazil – U.S. Legal Education Exchange Program (LEEP)

Posted by William Byrnes on July 30, 2011


Brazil-U.S. Legal Education Exchange Program (LEEP)

http://www.tjsl.edu/news-media/2011/3711

On Thursday, July 28, the 72 Brazilian lawyers who studied at Thomas Jefferson School of Law for the month said “adeus” to the law school and to each other in a closing ceremony in the Earl B. Gilliam Moot Court Room.

“It’s the end of a journey but it’s the beginning of a new journey,” said Carla McEwen, the director of the Brazilian exchange program at TJSL. “

“We are privileged to have been able to accommodate you for the past month,” William Byrnes, Associate Dean for Distance Learning, told the lawyers, who were here to study the U.S. legal system as well as learn something about American culture. “We hope we have created lasting relationships between the United States and Brazil.”

The program is formally called the Brazil – U.S. Legal Education Exchange Program (LEEP), and this was its first year of operation. Next year, Thomas Jefferson students will be going to Brazil to study and more Brazilian lawyers will be coming to San Diego.

“I am very, very glad I participated in the program,” said Barbara Gimenez, one of the participants. “I highly recommend it to my colleagues in Brazil.”

“It was a good overview of the U.S. legal system,” according to Julia Cadete, another participant. “The course fulfilled its goals.”

Luiz Fabricio said it was an enlightening experience for him. “I not only found out about the U.S. legal system, but I got to know the lovely San Diego and its many wonders.”

“We were learning every moment we were here,” said Franciann Araujo, “even when we were not in the classroom. It wasn’t just a legal exchange, but a cultural exchange as well.”

Carla McEwen was happy the students benefitted from the program, adding “we did benefit greatly too.” She is “very sad to see them go,” but has a sense of accomplishment that the exchange program went so well. “We fulfilled our mission.”

Members of the Attorney General Union (AGU), Central Bank, SUSEP (Seguros), and members of the Sao Paolo Bar may contact William Byrnes at wbyrnes@tjsl.edu or Carla McEwen (mcewenc@tjsl.edu) for more information for sessions in November 2011 (Central Bank only), January 2012 (all government) and next July 2012.

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Aggressive IRS Gift Tax Audit Initiative: John Does Summons

Posted by William Byrnes on July 29, 2011


In recent years, the IRS has increased  its search for taxpayers who fail to disclose a gift tax return for reportable transactions. Now, the Justice Department’s Tax Division is getting in on the action, initiating an unprecedented fishing expedition and scouring state government records for information that may lead to taxpayers who have failed to file a gift tax return.

The Justice Department hopes to collect the identities of taxpayers who have gifted real property to relatives without reporting the transaction to the IRS. 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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Plan Clients: Where are the Advisory Margins?

Posted by William Byrnes on July 28, 2011


A significant of number of employee retirement plans don’t use an outside investment advisor, often because of the cost. Demonstrating your firm’s flexibility and splitting fiduciary responsibility for the plan could be the key to securing those underserved plans. Customizing your level of service gives these plans what they need—advice—while allowing you to prune services that aren’t cost effective for your firm.

According to the Retirement Plan Survey 2011, released by Grant Thornton LLP, Drinker Biddle & Reath and Plan Sponsor Advisors, greater than 50% of plans use a limited scope investment advisor and 14% of plans use an outsourced investment advisor. 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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Drama Over the “Drawbacks” of Annuities

Posted by William Byrnes on July 27, 2011


A recent Businessweek article highlighting what it calls the “drawbacks” of annuities is the latest in a long line of articles panning the financial products. But do annuities—especially variable annuities—endure justified scrutiny, or are annuities just an easy target of the mainstream media? And, where annuities are the right choice for your clients, how can you counter the negative press to help them make the right investing decision? 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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New York Holds Carrier Can’t Deny Term Conversion for Settlement

Posted by William Byrnes on July 26, 2011


The New York Department of Insurance, Office of General Counsel, stated on February 25, 2011 that insurance carriers cannot refuse to convert a term policy to a permanent policy on the ground that the policy will be sold on the secondary market. The debated issue was whether the converted policy is a “new” policy that must satisfy the insurable interest requirement. Nevertheless, this ruling will not affect all term policies, since many term life insurance policies are not convertible. 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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Republicans Balk at RIA User Fees

Posted by William Byrnes on July 25, 2011


Republicans on the House Financial Services subcommittee are retracting the issue of Registered Investment Advisor user fees, referencing the cost to small businesses. But the SEC maintains that it cannot conduct adequate RIA examinations without either charging user fees or delegating examination authority to an SRO that will charge user fees. The argument over user fees was prompted by the release, earlier this year, of the Dodd-Frank mandated SEC study on enhancing RIA examinations. 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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The Perils of Top-Hat Plans

Posted by William Byrnes on July 22, 2011


An executive top-hat plan can be a great way to become desirable to highly qualified executives or supplement a business owner’s compensation. However, these plans are accompanied with a significant downside. Because the plans are generally unfunded, major events at the sponsor, like a sale or insolvency, can decimate a plan and leave participants empty handed. The effect on a top-hat plan when a sponsor liquidates its assets is illustrated by a recent Seventh Circuit Court of Appeals case. 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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Tax Court Revives Partnership Self Employment Tax Debate

Posted by William Byrnes on July 21, 2011


The Tax Court has reopened the question of whether status as a limited partner entitles them to an exemption from self-employment taxes—an issue that’s been idle for over 13 years.  The Tax Court recently declared that status as a limited partner does not necessarily exempt a partner from self-employment taxes. Instead, the exemption is derivative on how substantial of a role the partner played in the partnership business. 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 small businesses in Advisor’s Journal, see IRS Announces Lenient Lien Program for Small Business (CC 11-48)

For in-depth analysis of partnership taxation, see Advisor’s Main Library: H–Partnership Taxation

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NCOIL Announces New Annuity Suitability Penalties

Posted by William Byrnes on July 20, 2011


Producers and carriers may soon face more stringent compliance requirements, and increased liability for making unsuitable recommendations, when selling annuities. The regulatory change will happen at the state level as a result of the National Conference of Insurance Legislators (NCOIL) executive committee voting unanimously on March 6 to adopt the National Association of Insurance Commissioners (NAIC) Suitability in Annuity Transactions Model Regulation.  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of life insurance regulations in Advisor’s Journal, see NCOIL Adopts Model Act Requiring Insurers to Inform Consumers of Settlement Options (CC 10-104).

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Are the Mass Affluent Missing from Your Client Profile?

Posted by William Byrnes on July 19, 2011


Individuals in the fastest growing class of investors—the mass affluent—need your advice.  According to a recent report, there is a void in representation by financial professionals this group. As a corollary, they lack confidence in their ability to meet their financial goals, making them desirable candidates for professional services.

The mass affluent are investors occupying the upper tier of the mass market—the biggest group of consumers. But “mass affluent” isn’t just a synonym for “upper middle-class”; it is a subset of the upper middle-class with $50,000 to $250,000 in “investable assets.”

Depending on your career trajectory, the mass affluent can be resourceful in establishing the foundation for a successful practice. A majority (55 percent) of the mass affluent believe they will be wealthy one day. Although only a small number of the mass affluent will move into high-net-worth territory, you can get in on the ground floor of the upward career trajectory of those who will. 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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Subsequent Divorce Decree’s Impact on Beneficiary Designation

Posted by William Byrnes on July 18, 2011


Which prevails when it is time to make a claim, a last in time divorce decree or a beneficiary designation made at the time of the application years ago?  A wife had her estranged husband, sign a separation and property-settlement agreement to release him from any claims to her estate or property.  When the wife passed away, her former husband sought the life insurance proceeds, as did her mother and son.  The answer is provided in a cautionary tale of beneficiary designations told in a recent 4th circuit case.

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 beneficiary designations in Advisor’s Journal, see The Effect of Divorce on Life Insurance Beneficiary Designations (CC 10-39) & Don’t Overlook Beneficiary Designations and Settlement Options (CC 09-28).

For in-depth analysis of beneficiaries and settlement options, see Advisor’s Main Library: D – Problems In Beneficiary Designations.

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Tax-Free Exchange Can Erase Policy’s Tax Benefits

Posted by William Byrnes on July 18, 2011


A recent IRS Revenue Ruling provides an important reminder for us of the rules for deducting interest that’s paid or accrued on a business life insurance policy loans. Knowing how and when policy loan interest is properly deductible can mean the difference between closing the sale in the first instance and an IRS audit down line if these rules are ignored.

In general, interest paid on a life insurance policy loan is not deductible for income tax purposes; but there are some exceptions for life insurance purchased for business purposes. The deductibility of policy loan interest has changed significantly over the past 20 years, so an intimate knowledge of the specifics is imperative when selling or transacting on a policy that’s issued to a business.  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 Advisor’s Journal coverage of the exception to the pro rata limitation on interest deduction, see Obama Budget Would Undercut Utility of Life Insurance in Small Business Planning (CC-11-41).

For in-depth analysis of corporate-owned life insurance, see Advisor’s Main Library: D—Deductibility Of Business Insurance Premiums, E—Premiums As Taxable Income To The Insured & F—Taxability Of Corporate Owned Life Insurance Proceeds At Death.

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Historical Performance of Underlying Cash Value of Life Insurance

Posted by William Byrnes on July 17, 2011


Last month, Advanced Market expert Barry Flagg talked about the relevance of policy cash values to the overall suitability of a permanent life insurance policy. This month, he expanded on the cash value topic by addressing how cash value is generally a product of the number of cash value investment options, the historical performance of such cash value investment options, and the cost-effectiveness of the various cash value allocation options.

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 valuation in Advisor’s Journal, see Life Insurance Valuation (CC 10-09).

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SEC Moves to Require Full of Disclosure of Incentive-Based Compensation

Posted by William Byrnes on July 15, 2011


Investment advisors and broker-dealers may be required to disclose their incentive-based compensation programs under proposed rules approved by the Securities and Exchange Commission (SEC) on March 2. The proposed rule is the latest in a series of advisor and broker-dealer reporting rules issued under the mandate of the Dodd-Frank Wall Street Reform Act.

The rapidly increasing compliance obligations for advisory firms and B-Ds has the capability to drastically modify business practices at affected firms. Many will be forced to reconfigure their entire compensation program to comply with the new rules.

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 reporting requirements in Advisor’s Journal, see Advisors Hit with Another Round of SEC Reporting Rules (CC 11-30).

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Congress Set to Nix Tax Strategies Patents

Posted by William Byrnes on July 14, 2011


Want to minimize a high-net-worth client’s transfer tax liability using a GRAT that is at least partly funded with nonqualified stock options? Although the strategy could save your client hundreds of thousands in gift and estate tax liability, recommending it could cost you and your client hundreds of thousands in legal fees.

Why? Recommending that your client use a GRAT funded with nonqualified stock options would violate the SOGRAT patent, U.S. Patent 6,567,790.

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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Obama Administration Targets S Corps in Corporate Tax Reform War

Posted by William Byrnes on July 13, 2011


Treasury Secretary Timothy Geithner sparked outrage when he suggested at a recent House Ways and Means subcommittee meeting that “Congress has to revisit this basic question about whether it makes sense for us as a country to allow certain businesses to choose whether they’re treated as corporations for tax purposes or not.” Geithner’s comments about pass-through entities evoked a sweeping gasp from millions of small business owners who could become virtually non-competitive if subject to a double tax regime.   Behind client referrals, professional referrals were the second biggest producer.  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 Advisor’s Journal coverage of the Obama administration’s budget and tax proposals, see Obama Budget Would Undercut Utility of Life Insurance in Small Business Planning (CC-11-41) & Obama Tax Compromise Provides 100 Percent Bonus Depreciation of Business Assets Through 2011 (CC 11-01).

For in-depth analysis of S corporation taxation, see Advisor’s Main Library: B—Corporation’s Election Under Subchapter S.

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Advisors’ Stairsteps of Influence

Posted by William Byrnes on July 12, 2011


Advisors understand that referrals from existing clients are their best source for new business, but what else is working, and how effective are other methods being used by advisors to generate new business? A recently released survey provides us with a laundry list of approaches used by advisors to solicit new clients and gauges the productiveness of their marketing efforts.  The survey, which polled 262 financial advisors in November and December of 2010, found that client referrals are still the top way advisors generated new business. Behind client referrals, professional referrals were the second biggest producer.  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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IRS Announces Lenient Lien Program for Small Businesses

Posted by William Byrnes on July 11, 2011


If you have small business clients who are struggling with back taxes and/or tax liens, you can tell them help is on the way. The IRS is offering assistance for both individuals and small businesses that are struggling to “meet their tax obligations, without adding unnecessary burden to [the] taxpayers.”  The new program includes a number of features discussed in today’s Advanced Markets Journal.   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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