by Garrett Spangler on September 2, 2010
On Tuesday, an estate planning attorney who drafted a marital agreement for the McCourts’, owners of the Los Angeles Dodgers, testified in the midst of their heated divorce battle. According to reports, the agreement provides for sole ownership of the Dodgers to go to Frank McCourt while Jamie McCourt contends that the document should be thrown out and the assets split evenly under the community property laws of California.
The divorce proceedings continue to fall mostly into the “he said - she said” contentiousness that often accompanies messy divorces. What seems to be clear is that at one time Frank trusted Jamie enough to give her the CEO position in the Dodgers organization, only to later ask her to step down because he no longer seemed to believe that she could run the team.
While this type of battle is unique because of the high profile of the Dodger’s baseball team and the large net worth of the couple involved, the dispute is anything but unusual. It appears that the situation may have come up because while many assets were specifically mentioned in the document, it appears that the Dodgers organization was not, leaving some room for interpretation as what constituted a joint asset.
I hope that others take note of the situation here and make sure that they spell out any marital agreement that they develop in more specific terms to reduce confusion. As a Phillies fan though, I also hope that this aspect of the team continues to dominate the headlines as opposed to a miraculous run to contend for a wild-card playoff spot as we approach the fall classic.
by Madeline Martin on August 23, 2010
Although currently on August Recess, last week the US Senate gave “unanimous consent” for emergency funding to secure the US - Mexican border. They reconvened to vote on language changes that the House of Representatives had made to the bill and to honor the late (former) Alaskan Senator, Ted Stevens. The “unanimous consent” is a procedure by which the Senate can pass a bill (or resolution) by voice vote, rather than a full roll-call vote.
The bill, which is expected to be signed by President Obama today, appropriates some $600 million for the hiring of new border patrol agents, and an upgrade of communication, operation and patrolling technologies and facilities.
The legislation had strong bipartisan and executive branch support. Most major news outlets are focusing on the Southwestern border issues, but what’s also interesting is how these expenditures will be paid for.
$600,000.00 is a serious amount of money to expend when most departments are being ordered to cut spending and having to deal with the prospect of reduced budgets.
But the proponents of the “emergency bill” insist that the bill will “pay for itself” and perhaps even result in a surplus.
The program will be paid for by increased filing fees for certain companies applying for non-immigrant work visas. Such companies are those which have more than 50 or more employees and more than 50% of their workforce holding non-immigrant work visas.
The increase in fees is to be enforced from the date of enactment through September 30, 2011.
In response, the USCIS is in the process of changing the Petition for Nonimmigrant Workers (Form I-129). In the meantime, if you are filing an H-1B, L-1A and L-1B visa petition for a client to which the new fee does not apply, the USCIS requests that you include a statement with your petition(s) with an explanation or evidence. All petitioners are asked to note in BOLD CAPITAL LETTERS at the top of their cover letters whether or not the fee is applicable.
by Garrett Spangler on August 16, 2010
No news isn’t necessarily good news with respect to the estate tax. It is now August and no action has yet been taken by Congress to provide some guidance as to what a new estate tax law may look like, whether the 2009 estate tax may be reinstated, or if the 2001 estate tax changes by the Bush administration will lapse altogether.
While tax professionals like myself are continuing to hold out hope that changes will be made this year on the estate tax front, there are no clear signs that it will happen. Many members of Congress are seeking reelection and the contested issue will likely be one of many talking points that members of both parties will discuss as election day gets closer. While that may be great for politicians, where does that leave the rest of us?
For starters, with an unpredictable future.
As I have discussed in other blog entries, the estate tax could be repealed or reinstated at 2001 levels, both of which are extremes and rather unlikely. That means that it will probably settle in somewhat close to 2009 levels ($3.5 million personal exemption & 45% top tax rate) with possibly a slightly higher exemption or lower top rate.
No matter where the terms end up, it appears there will be an estate tax for the foreseeable future. That just means one thing, as the end of the year gets closer, it is more and more likely that wealthy, feeble Momma (or Grand-Momma as the case may be) better watch her back!
by Garrett Spangler on August 2, 2010
2010 has been an unusual year for estate planning…..and it’s only August. We await word from Congress as to what the new estate tax laws will be next year and attempt to plan for clients while there is presently no estate tax. Unfortunately I am not a soothsayer (I kind of wish I were sometimes, but I digress) and so we will all have to wait and see where the new exemption amount and tax rates will fall.
If you are doing some estate planning this year however, it is a good idea to discuss the use of a flexible plan that incorporates a disclaimer trust with your tax professional. Trusts come in all shapes and sizes to fit your specific needs. Unlike most trusts which require decisions when drafted however, a disclaimer trust provides an opportunity to make a decision later, when the heirs of an estate will have all the facts about the level of exemption and applicable tax rate.
In a nutshell, the way a disclaimer trust works is each spouse will name the other spouse as the beneficiary of their estate. Then, language will allow the surviving spouse to disclaim some, all, or none of the estate passing to them at the time the first spouse dies. This allows the surviving spouse to maximize their tax benefits and minimize the effects of over- or under-funding a trust.
While there is no one-size-fits-all approach in estate planning, a plan which gives you the flexibility to make a decision in the future when you have all the facts seems to be a good choice.
by Garrett Spangler on July 23, 2010
On Wednesday, the Senate voted down a proposal to make the temporary repeal of the estate tax a permanent part of our tax code. The proposal was made by Republican Senator Jim DeMint from South Carolina and was voted down 39-59 by the senators attending the session.
Meanwhile, many exorbitantly wealthy people who an estate tax would affect have voiced their support for its reinstatement over the past week. A former Treasury Secretary, an heir to the Walt Disney fortune, and others echoed the opinions of uber-rich individuals such as Bill Gates and Warren Buffet that reinstating the estate tax is the right thing to do. New life was given to the debate after billionaire Yankees owner George Steinbrenner passed away last week, passing his tremendous fortune to his heirs tax free.
The estate tax, which actually only taxed less than 1% of the wealthiest individuals who passed away in 2009, had gradually increased its exemption levels over the last decade and was then repealed for 2010. If no changes are made, the estate tax will be reinstated January 1, 2011 with a $1 million exemption. While reinstatement at this level could affect far more people than originally intended, it is likely that the newfound energy surrounding this debate will encourage Congress to enact a new estate tax law before the end of the year.
by Garrett Spangler on July 14, 2010
George Steinbrenner really knows how to pick a winner. While I have never been a big fan of the Yankees (who am I kidding, I root for two teams, the Phillies and whoever is playing the Yankess) I respect the fact that he put together championship caliber teams year after year.
With his passing this week, he once again struck gold by avoiding paying any federal estate tax on his substantial fortune. Worth an estimated $1.1 billion, the Steinbrenner family saved approximately $500 million due to the tax repeal for 2010.
So should we return to the days of taxing people’s estates? I’ll let you decide for yourself but there are a few facts that you should consider.
First, a federal estate tax, or “death tax”, at 2009 levels will affect only the wealthiest 0.3% of estates. Second, if the 2009 $3.5 million individual exemption ($7 million for a couple) returns, even the majority of estates that may owe federal estate tax would only do so on the small portion of assets exceeding these amounts. For example, IRS data shows that the average federally taxable estates are effectively taxed at a rate of 10-20% after accounting for the exemption. Finally, with a little tax planning it is possible to reduce any tax that may be due even further, especially if you have a family owned business or farm.
It remains to be seen how the federal estate tax will shape up. In the mean time, the Steinbrenner family will enjoy the benefits of this winning season no matter how the team does in October.
by Kelly Phillips Erb on July 8, 2010
by Garrett Spangler on July 2, 2010
Like many other Philadelphia area residents, I’m spending this Fourth of July weekend on the Jersey Shore. Heading down on this busy holiday weekend (quick shout-out to Brigantine Beach) I noticed the many tanning salons advertising their summer specials and couldn’t help but feel pity.
That’s right, the new tanning tax is terrible. Why you ask?
Well, I’m not personally concerned about paying more for my tans. I know it will probably surprise you but I don’t consider bronze skin to be one of my greatest attributes the way Snooki may. In fact, if you catch me on the beach I’ll probably just be sporting my nice fluorescent light office glow or farmer’s tan at best. I don’t think it’s terrible to have a tanning tax either. Studies seem pretty clear that tanning contributes to the development of skin cancer so I’m on board with that.
No, I think the new tanning tax is terrible because much like Denise Richards, its complicated.
People often complain about the complexity of the tax code and the new tanning tax is a glowing example which justifies such concerns. Let’s take a look at the tax, shall we?
Ultraviolet tanning in a bed is taxable. Spray tanning is not taxable. Free tanning at a spa, video rental store, or other location may be taxable. Use of ultraviolet tanning devices by physicians for skin related conditions are not taxable. Tanning salons offering both spray and ultraviolet tans as part of membership packages have to tax the use of ultraviolet tans only, so it must be tracked and prorated by individual usage. Free tanning in a bed at a health club is not taxable. Tanning salons adding a couple treadmills or an exercise class will still remain taxable.
Great, clear as mud.
While the details of laws need to be fleshed out, they are frequently overcomplicated. As much as I like the idea of taxing things that are harmful to your health, a law like this needs to be simple to implement and enforce. I can’t help but think the IRS and tanning salon owners are going to have quite The Situation on their hands trying to sort this one out.
by Chris Erb on June 29, 2010
The Supreme Court has finally issued the long-awaited opinion in the Bilski v Kappos patent infringement case, which many pundits suggested would change the landscape of patent law dramatically, particularly as it applies to software.
The verdict?
The decision can pretty much be summarized as “we’re not happy with the Bilski decision or the patent, but we can’t really come up with anything better so you’re on your own.”
I’ll leave it to wiser folk than me to glean more out of the opinion than that, but seems to me the Supreme Court missed a huge opportunity to clarify the law and restore credibility to the US patent regime.
by Erica Intzekostas on June 29, 2010
In the June 17th ruling in the case of City of Ontario, California v. Quon et. al., the Supreme Court held that the City had not violated its employees’ Fourth Amendment rights in reviewing personal text messages sent during working hours using an employer-issued pager. The employees in this case were police officers. The policy with respect to these pagers was that there was a certain monthly character allotment and if employees exceeded it, they would have to pay for any overage charges. In establishing the allotment, the employer was estimating that the allotment was ample to cover all work-related text messages and that any excess would, in all likelihood, be personal. After several employees were regularly exceeding the allotment, the City conducted a survey to determine how many texts sent during working hours were work-related and how many were personal in an effort to figure out whether it needed to adjust its allotment policy. Of course, to determine whether a message was personal or work-related, the messages had to be read. Many of Quon’s personal text messages were sexually explicit, some with his wife, and some with his mistress.
The Supreme Court considered whether the employees had a reasonable expectation of privacy in their text messages sent during working hours. The employer had a “Computer Usage, Internet and E-Mail Policy” by which it reserved the right to monitor all network activity including email and Internet use. There was some question as to whether this policy included pagers and text messaging, since it was not explicitly included in the written policy. The employer alleged that that employees were informed that such text messages would be considered emails and thus included. Quon contended that he believed that he had a reasonable expectation of policy, in part based on the fact that he and other employees had to (and did) pay for exceeding their monthly character allotments.
The Court also considered whether the employer had a legitimate reason for reviewing the messages and exercised reasonable non-excessive measures in doing so. The purpose of the search, according to the employer, was to determine whether employees were regularly exceeding their character allotments in sending work-related emails (in which case the allotment should be increased so that employees were not being made to pay for work-related emails) or whether the allotment was too high resulting in the employer paying for employees’ personal use of the pagers. The employer did not review any text messages sent during non-working hours, as those were presumed to be personal in nature.
The Court ultimately held in favor of the employer.
What does this ruling mean for employers? Although the Fourth Amendment does not apply to private employers and employees, a private employee could still have an invasion of privacy claim against his employer in a similar type of case. An employer’s best protection against such claims is to have a clear and well-drafted policy in place that includes all employer-provided electronic communication devices and makes it clear that employees should have no expectation of privacy when using such devices. Additionally, if a search is to be conducted, the employer should carefully document its reasons for the search, why it is legitimate in relation to the employer’s business, and the methods it chose to implement it.
What does this ruling mean for employees? At he risk of stating the obvious, an employee would be wise to assume that nothing said or conducted at work or using work-issued property is private. Although the employee may ultimately have a legitimate claim, does he really want his employer (and possibly the public) knowing his private business? Even if the Supreme Court had ruled against the City, I’m not sure Mr. Quon (or his wife or his mistress) would have felt much of a victory.
