DIVORCE

ANOTHER CHARGE OF THE LIGHT BRIGADE?

March 21, 2009

Media baron Rupert Murdoch was quoted recently: “We are in the midst of a phase of history in which nations will be redefined and their futures fundamentally altered.”

A far less notorious Russian First Deputy of Staff, Vladislav Surkov, was also recently quoted: “The crisis won’t be overcome if we fight it with troops of sluggish number-crunchers. We need new creative solutions, not a scientific basis for doing nothing, lying n the stove and waiting for the restoration of the American economy.”

The Charge of the Light Brigade, immortalized in Tennyson’s poem, exemplifies how stupidity, miscommunication, incompetent leadership combined with unimaginable bravery to bring about a military disaster for the British against the Russians in the Crimean War. Many are alarmed that President Obama’s Stimulus plan together with his energy, education and health care proposals will inevitably cause an economic calamity for this country. No one can adequately predict the futu...

CLIMATE CHANGE FOR OFFSHORE BANK ACCOUNTS

COME IN FROM THE COLD

The IRS has announced a revised voluntary disclosure policy for those with un-reported foreign bank accounts who want to come in from the cold.

CLIMATE CHANGE FOR OFFSHORE BANK ACCOUNTS

Offshore or foreign bank accounts have always been perfectly legal and U.S. citizens or residents can own them for legitimate reasons such as higher investment yields, creditor protection or to facilitate business dealings abroad. The owner of a foreign bank account will have no problem with the U.S. government so long as the account is reported to the Treasury on TD 90-22.1 (Foreign Bank Account Report or FBAR) by June 30 of each year and the interest income from the account reported to IRS in a timely filed Form 1040.

Many U.S. persons, however, hiding behind bank secrecy laws of countries like Switzerland and Liechtenstein, have failed to report the account and income earned on the account. Bank secrecy laws for years frustrated IRS efforts to capture this unrepor...

MADOFF AND OTHER PONZI SCHEMES PRSENT TRICKY TAX ISSUES

This issue summarizes in general terms some of the tax issues involved in attempting to claim a tax loss due to a Ponzi scheme fraud. The article is written mostly in lay terms and should not be viewed as exhausting all of the tricky tax issues concerning theft losses.

DEDUCTING THEFT LOSS IS PROBLEMATIC

Obtaining a tax deduction for a Ponzi scheme loss requires answering many questions of fact and law, including:

1. Whether the loss is an investment loss or a theft loss

2. The proper year for claiming the loss.

3. The amount of the loss

4. Whether the loss is deductible fully or only to the extent it exceeds 10% (as for personal casualty losses) of adjusted gross income for the loss year.

5. The character of the loss, that is, capital loss or ordinary loss.

6. Whether the loss is from a trade or business or non-business activity.

7. Whether a net operating loss created by the allowed loss deduction may be carried back to earlier tax years.

8. To which earlier tax years may...

MORE ON MORTGAGE DEBT CANCELLATION TAX ISSUES

Effects of the sub-prime mortgage debacle are no doubt being felt by all. Especially desperate are those who purchased dream castles during 2005, 2006 and 2007 and are now among the largest group upside down to their mortgage debt and facing foreclosure or abandonment. This issue updates and expands on my previous discussion of mortgage forgiveness of a personal residence appearing in the May 8, 2008 issue. The relief granted by Congress to distressed homeowners who are released from part or all of mortgage debt obligations presents complex and tricky tax law issues that are best handled with the assistance of a lawyer experienced in tax matters.

The Mortgage Forgiveness Debt Relief Act of 2007 (Act) provides tax relief to defaulting homeowners who might otherwise owe income tax on qualifying mortgage obligations forgiven in 2007 through 2009. The Emergency Economic Stabilization act of 2008 extended that relief through 2012.

A lender that is paid less than the full principal owed...

RECOVERY JITTERS

The stock market has been a see-saw ridden on one end by the desire for returns and on the other by fear. Glimmers of recovery squeezed from dubious statistical measures ramp up investor appetite for risk and buoy stock prices until hopes are dashed by another dour economic report or event re-igniting fear and dousing market enthusiasm. While the market has recovered from its nadir, slow rebounding corporate profits will drag stock performance down as companies adjust business models to a new environment of tighter credit, stingy consumer spending and closer regulatory scrutiny.

Investors in today’s market would do well to keep mindful the lyric from the song “Cool” by Stephen Sondheim (music by Leonard Bernstein) in the legendary Broadway show ‘West Side Story: “Boy, boy crazy boy / Get cool boy / Got a rocket in your pocket/ Keep coolie cool boy.” Patience, calm and caution are the watchwords of the day.

The economy is at a crossroads and may take a number of directions accor...