Wealth & Risk Management Blog

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

Archive for November, 2011

Will Germany Let Greece Default?

Posted by William Byrnes on November 30, 2011


Despite  calls for private creditors to absorb some of the cost of another round of Greek bailouts, German Chancellor Angela Merkel has backed down. Merkel met with French President Nicolas Sarkozy in Berlin on June 17, 2011 to discuss the role of private investors in the bailout. Following the meeting, the leaders announced a unified plan to deal with the Greek crisis. Chancellor Merkel is still asking private creditors to voluntarily take part in the bailout.

The Greek debt crisis spans back to early 2010, when a group of European governments—including Greece—faced funding crises that threatened European stability altogether.  At the time, Greece had €300 billion in debt, bigger than its economy.

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 coverage of the U.S. debt crisis in Advisor’s Journal, see Debt Limit Standoff Boils Over (CC 11-115) & Debt Ceiling Approaching: Prepare for Impact (CC 11-100).

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The Psychology of Saving: If We’re Living Longer, Why Are We Saving Less?

Posted by William Byrnes on November 29, 2011


In addition to confirming earlier beliefs, a new academic study about the effects of increase life-spans on savings rates has inspired new intrigue.

The conclusions reached by Optimal Retirement and Saving with Increasing Longevity, by David E. Bloom, David Canning, and Michael Moore are simple enough but need some further discussion: “[A] higher level of wages leads to earlier retirement and increasing savings rates. On the other hand an increase in life expectancy leads to an increase [in] the retirement age, but less than proportionately, while reducing savings rates.”

Consequently, the importance of planning for middle-income families increases. Without a solid plan, many are left working many more years than they hoped or planned.

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 retirement values in Advisor’s Journal, see Appealing to Your Affluent Clients’ Retirement Planning Values (CC-11-42).

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Consumer Financial Protection Bureau: Ready for Launch?

Posted by William Byrnes on November 28, 2011


Despite the best efforts of Congressional Republicans, the ribbon-cutting for the U.S. Consumer Financial Protection Bureau (CFPB) is on schedule for next month. And unlike other Dodd-Frank progeny, this project looks like it’s going to hit the ground running.

The stated mission of the CFPB is to “make markets for consumer financial products and services work for Americans—whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.” After the mortgage debacle of the recent financial crisis and stories about predatory practices in the credit card and pay-day loan industries, who can argue with that mission statement?

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 the fight over Dodd-Frank in Advisor’s Journal, see Is Barney Frank’s Resolve to Implement Dodd-Frank Weakening? (CC 11-95) & Republicans Look to Erode Dodd-Frank (CC 11-75).

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When are policy loans taxable?

Posted by William Byrnes on November 23, 2011


Generally, life insurance policies be withdrawn without income tax consequences. However, there are circumstances where a “loan” is immediately taxable. We have covered situations where a policy is surrendered with a loan outstanding, resulting in taxable income. This article discusses another case where a policy “loan” will be treated as taxable income.

In Frederick D. Todd II et ux. v. Commissioner (T.C. Memo. 2011-123), the Tax Court considered whether a distribution from a welfare benefit fund to a fund participant was a policy loan or a taxable distribution.

For previous coverage of life insurance policies held by welfare benefit funds in Advisor’s Journal, see Deductions for Life Insurance Premium Payments to Welfare Benefit Plan Denied (CC 10-29).

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 in-depth analysis of welfare benefit funds, see Advisor’s Main Library: B—Welfare Benefit Funds.

 

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LexisNexis® Tax Law Community Podcast: The Authors of “Money Laundering, Asset Forfeiture and Recovery, and Compliance–A Global Guide”

Posted by William Byrnes on November 21, 2011


click here for PodCast LexisNexis® Tax Law Community Podcast: The Authors of “Money Laundering, Asset Forfeiture and Recovery, and Compliance–A Global Guide”.

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More States Moving to Estate Tax Repeal

Posted by William Byrnes on November 18, 2011


In recent times, federal estate tax is receiving most of the attention. Nevertheless, most of the death tax activity affecting Americans occurs at the state level.

The reality is, fewer states (twenty-two plus D.C) currently have a “death tax”—referring collectively to estate and inheritance taxes. Recently,  a number of those states  increased their exemption amount to exclude a large majority of their residents from the tax. One state—Ohio—is on the verge of repealing its estate tax altogether.

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 Obama’s tax agreement, including its estate tax provisions, in Advisor’s Journal, see Obama Tax Agreement Faces Stiff Resistance in Congress (CC 10-112) and Obama Tax Agreement Passed by House (CC 10-117).

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Annuities: They Get No Respect

Posted by William Byrnes on November 17, 2011


We are all aware that annuities have a bad reputation in the media: High fees, high-pressure sales, and unsuitability are the predominating themes.

A recent Securities Litigation & Consulting Group white paper summarizes  the sentiments of the anti-annuity press, commenting that, “[a]nnuities stand out as the investment are most likely to be unsuitable since in virtually every instance, the investor would have been better served by mutual fund or a portfolio of individual stocks.”

Annuities are neither inherently “good” nor “bad.” It follows that rational evaluation of annuities can’t be conducted in a bubble—it must focus on their application.  Herein lays their value and the coup de grâce the industry and individual producers have been awaiting.

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 annuities in Advisor’s Journal, see How Much to Allocate to Annuities: A Critical Analysis (CC 11-109).

For in-depth analysis of the income taxation of annuities, see Advisor’s Main Library: Section 19.2 Income Taxation of Annuities.

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IRS Provides FBAR Answers

Posted by William Byrnes on November 11, 2011


Failure to file an FBAR (Report of Foreign Bank and Financial Accounts) can result in harsh consequences. The report is that fines of up to $500,000 and 10 years imprisonment can be rendered. Therefore, the need to for you and your clients with foreign financial accounts (FFAs) to familiarize yourselves with the Treasury’s escalating FBAR rules. Unfortunately, understanding the FBAR rules has not always been a straightforward proposition.

Until recently, the FBAR requirements were shrouded in mystery; but with the release of  the last FBAR regulations earlier this year, the rules are finally clear. Furthermore, important clarifications  were made by the IRS at a June 1 webcast.

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 FBAR in Advisor’s Journal, see Do Your Clients’ International Assets Create Criminal Tax Exposure? (CC 11-73).

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Posted by William Byrnes on November 10, 2011


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Are Indexed Annuities Securities?

Posted by William Byrnes on November 8, 2011


Last year Congress finally concluded about whether indexed annuities are securities. As a security, indexed annuities were  subject to regulation by the SEC by including a provision in the in the Dodd-Frank Wall Street Reform Act that defines indexed annuities as insurance products outside the agency’s jurisdiction.

This year, some states are refusing to take Congress’s “NO” for an answer. In the latest action on the issue, Illinois Secretary of State Jesse White issued an order on May 24 indirectly concluding that indexed annuities are securities under Illinois law.

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 indexed annuities in Advisor’s Journal, see Indexed Annuities: Still Insurance (CC 10 42).

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SEC Warns Investors about Principal Protected Notes

Posted by William Byrnes on November 3, 2011


In a low-interest rate world, high-yield investments offering principal protection are enticing to investors. But the complexity of some high-end investment products has the Financial Industry Regulatory Authority (FINRA) and Securities and Exchange Commission’s (SEC) warning investors to look before they leap.

In an alert titled Structured Notes with Principal Protection: Note the Terms of Your Investment, the regulators warn investors that these structured products may not be what they seem. Although they are marketed under a variety of names with a “principal protection” component—e.g. “absolute return” and “minimum return”—the true extent of their safety is never obvious . Investors need to read the fine print to decide whether they are suitable for their investing needs and risk tolerance.

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).

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