Archive for the ‘Thursday Reports’ Category

The Thursday Report – 5.8.2014 – Certs, Time Clocks, No Mr. Spock’s

Posted on: May 8th, 2014

Hesch on Certs – Part 2 of 3

Charitable Donations and Fraudulent Transfers

New Belize Regulations

Time for Tax Revolution – Not Tax Reform

Doctor, Does Your Office Have a Time Clock, and If Not, Why?

Words of Wisdom from Bob Burke

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

This report and other Thursday Reports can be found on our website at www.gassmanlawassociates.com.

Hesch on Certs – Part 2 of 3

Hesch with Words

On April 22 Jerry Hesch spoke at a donor’s luncheon for Ruth Eckerd Hall in Clearwater, Florida and did a great job of showing how taxes can be saved when donors wish to benefit a charity and integrate charitable planning with their family and income tax situations.

Jerry’s discussion of charitable remainder trusts is as follows:

Using Charitable Remainder Trusts

An individual intends to sell aero basis stock in a public company, or an interest in a private company, in the near future for $10,000,000.  Without any income tax planning, the $10,000,000 capital gain will be subject to the 20% capital gains rate and the 3.8% Medicare surcharge, a combined 23.8% effective Federal income tax rate.  If the individual lives in a state with a state income tax rate, there can be an additional income tax, ranging as high as 14.3% in California.  Thus the combined state and Federal income tax rate on the capital gain can be as high as 38.1% in states like California (and New York City with a city income tax).

Assume the individual is a resident of Florida so that there are no state income taxes.

With no tax planning, the individual sells the asset for $10,000,000, pays the $2,380,000 of capital gains tax and is left with $7,620,000 to invest.

Since a charitable remainder trust (a “CRT”) does not have to pay any income taxes on its income (including no tax on the gain realized from the immediate sale of any asset contributed to the CRT), the CRT will have $10,000,000 to invest.

Over one’s life (or a maximum of 20 years if the CRT is for a fixed term), the extra income for the trust term (the income generated by the investment of the $2,380,000 that would have otherwise been paid as capital gains tax) replaces the amount that is given to the charity at the end of the CRT term.  In effect, instead of paying the $2,380,000 of income taxes on the capital gain, that income tax savings, and the income tax savings from the immediate charitable income tax deduction, is used to provide the funds needed to give to the charity at the end of the CRT term.

Financially, one can receive the annual income from $10,000,000 instead of only the income from $7,620,000.

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This illustration shows that the individual is no better off by using the CRT, but is no worse off.  In effect, it does not cost the individual anything to have the CRT distribute $7,500,000 to charity at the end of the CRT term.

The individual can actually be better off if the sale proceeds can produce an investment rate of return greater than the 5.2% rate of return used in the prior illustration.  The next illustration shows that the individual can actually be better off and still give the same amount to charity if the investment rate of return is assumed to be 6.2% over the CRT term.

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The individual can be worse off if the investment rate of return is below expectations.  The next illustration shows that if the investment rate of return is 4.8 %, the individual would have been better off without the CRT.  But, what this shows is that it costs the individual only $838,225 to give the $7,500,000 to a charity at the end of the CRT term.

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  1. Early Termination of Charitable Remainder Trusts

A charitable remainder trust (“CRT”) is a widely-used charitable planning technique that provides the settlor with significant income tax benefits and a source of future payments, followed by the distribution of trust assets to one or more charities at the end of the trust term.  The CRT generates an immediate income tax charitable deduction (equal to the present value of the interest passing to the charitable remainder beneficiary) that can offset ordinary income.[1]  And the CRT can be used to eliminate the income tax on the gain realized from the sale of appreciated assets.  The CRT creates a financial benefit because the person who transfers assets to the CRT receives (or can gift to one or more others) an annuity or unitrust payment for life or for a fixed term.

Exemption inception: Charitable Donations and Fraudulent Transfers

On July 1, 2013, the Florida Legislature added another provision to the fraudulent transfer law that helped to protect nonprofit organizations from having to give back contributions made before bankruptcy. [2] Under bankruptcy law, if a transfer is found to be fraudulent the bankruptcy trustee may avoid it and require the transferee to repay the amount that was transferred. This affected nonprofits as well so, for example, if a person donated $50,000 to a church then filed for bankruptcy (within the statutory period for fraudulent transfers) then the church may be liable for that $50,000. This causes a problem for nonprofits when they have already spent some of the money not expecting this to happen.

Now under 726.109 (7)(a)-(b), there are more protections for nonprofit organizations. The relevant statute is as follows:

(a). The transfer of a charitable contribution that is received in good faith by a qualified religious or charitable entity or organization is not a fraudulent transfer under s. 726.105(1)(b).

(b) However, a charitable contribution from a natural person is a fraudulent transfer if the transfer was received on, or within 2 years before, the earlier of the date of commencement of an action under this chapter, the filing of a petition under the federal Bankruptcy Code, or the commencement of insolvency proceedings by or against the debtor under any state or federal law, including the filing of an assignment for the benefit of creditors or the appointment of a receiver, unless:

1. The transfer was consistent with the practices of the debtor in making the charitable contribution; or

2. The transfer was received in good faith and the amount of the charitable contribution did not exceed 15 percent of the gross annual income of the debtor for the year in which the transfer of the charitable contribution was made.

This statute protects nonprofits that accept the contribution in good faith, as in they were unaware of the person’s intention to file bankruptcy. However, there is an exception under (b). If the contribution was made by a natural person within 2 years before commencement of the action, filing of the petition or commencement of the insolvency proceedings, whichever is earlier, then it was a fraudulent transfer. This exception has 2 exceptions within it which is sort of like the movie Inception except it is in a statute and is less exciting than the movie; we can call it “Inexception.” The exception is for when the transfer was consistent with previous practices of the debtor in regards to making charitable contribution or when the transfer was accepted in good faith and the donation is not more than “15% of the gross annual income of the debtor for the year that the donation was made.”[3] This means that insolvent debtors are able to make limited charitable contributions to nonprofit organizations as long as it falls under the exceptions listed in the statute.

NEW BELIZE REGULATIONS

Many advisors use Belize trusts and sometimes Belize international business companies because of the user friendly and owner protective legislation and trust industry there.

New accounting regulations in Belize took effect on October 12, 2013, which need to be understood and reckoned with.  The regulations stipulate that accounting/financial records for Belize entities must be maintained and be accessible at a designated location.  A copy of the Belize Accounting Records (Maintenance) Act 2013 can be viewed by clicking HERE.

In summary, the Act requires that financial records (further defined as “financial statements; general and subsidiary ledgers; sales slips; contracts and invoices; and records and documents relating to assets and liabilities, all sums of money received and expended and the matters in respect of which the receipt and expenditure take place, all sales and purchase, and all financial transactions”) are kept in one of the following locations:

1.         In Belize, at the office of the entity’s Registered Agent; or

2.         Outside of Belize, at a designated location to be provided to such Registered Agent by written resolution.  Such resolution should include language authorizing such Belize Registered Agent to request up to five (5) years of financial records at any time and that such financial records will be provided to the Registered Agent within one (1) business day of receipt of such request.

Clients with offshore trusts where a Belize company serves as Trustee or Co-Trustee are also required to comply with the new accounting regulations.  We have developed a Written Resolution (click here to view) that can be completed by clients and provided to the Belize Trust, Co-Trustee or Registered Agent allowing the client to maintain financial and accounting records at his or her home, office or CPA’s office.

Failure to satisfy the above requirements will constitute professional misconduct on the part of the Belize Registered Agent, punishable by suspension or revocation of license and/or imposition of a fine.

Clients are strongly encouraged to provide the requested documentation to Belize Registered Agents as soon as possible to ensure the continuation of a favorable professional relationship.

Time for Tax Revolution – Not Tax Reform
by Denis Kleinfeld

Some of our articles are factual and some can be opinion.

Many friends and colleagues share Denis Kleinfeld’s views of the subject of the below article, but if you disagree please consider that this is not the opinion of the Thursday Report.  If you agree then maybe it is.

Seeing what has been happening in Russia and the Ukraine we can only be thankful to have the opportunity to thrive in the largest and most successful democracy in history.

Along with democracy comes our right to help make things better.

Please send us your suggestions and opinions, especially if they are complimentary to the Thursday Report, Kentucky Fried Chicken, and other vitally important national treasures.

Denis’ editorial is as follows:

The Washington Times reports (www.washingtontimes.com/news/2014/apr/19/scalias) on Supreme Court Justice Antonin Scalia’s speech at the University of Tennessee College of Law this past Tuesday.

In response to a question asked by a student about his interpretation of the constitutionality of the income tax he said that the government has the constitutional right to implement a tax, “but if it reaches a certain point, perhaps you should revolt.”

While not going further and defining exactly  what kind of revolution he was musing about, Justice Scalia did go on to tell students that they had every right to express criticism of the government.

This lead me to start thinking about, what is the Constitution exactly?  That is, how can the relationship between the people and the government be described as a matter of law?  What was it supposed to do? And, is the Supreme Court enforcing the agreed to written provisions?

There is a branch of constitutionalists who take the position that the constitution is a living document. In fact many legal academicians and prominent lawyers take this position when they believe that they are achieving a higher and nobler purpose of one kind or another.

Justice Scalia, according to the article, said that “The Constitution is not a living organism for Pete’s sake…It’s a law.  It means what it meant when it was adopted.”

Here’s where Justice Scalia and I part ways.  I think he misunderstands the nature of the Constitution.  It is not a law.  A law is passed by a government and imposed on its citizens.

What the Constitution is is a contract.

It is the agreement by the citizens to give up some of their totality of rights conferred upon them by the Creator to the government.  Thereby, each of the parties to this contract has agreed to the exchange of both rights and duties.

The Constitution was meant as a limitation on the government.  A restriction of power.  Essentially the People agreed that the government would have certain powers but was prohibited from interfering with the rights–Constitutional rights–that the People did not cede and did not intend to cede.

With the 16th Amendment to the Constitution, the People permitted the government to impose an income tax.

But does that mean there is no Constitutional limitation on this taxing power that has been ceded by the People to the government?

Justice Scalia seems to think so.

I don’t. I think that there is fundamental principle upon which the Constitution is founded which is ignored by both the conservative and liberal Justices. They both like to wrap themselves with the cloak of nobility and righteousness when it suits their purpose.   Principle be damned.

The foundation principle of the Constitution is that the government must stay out of the People’s private lives and stay out of their private parts. Whatever taxing power the government has been granted it is a limited power.

Either justices of the Supreme Court do not agree with that, or they just do not have the guts to take responsibility for making a decision.

When there is an issue in doubt, deference should be given to the People and not the government.  The Supreme Court has a long history of deferring to the government in matters  involving tax as well as the most intrusive interference with their privacy and sexuality.

It has been complicit in the creation of the circumstances that Justice Scalia now recognizes as perhaps needing the people to have some sort of revolution. The implementation of the income tax is responsible both for the substantial destruction of the fundamental constitutional rights of the People to be free of government and the means to use tax law to facilitate blatant political corruption.

The income tax incentivizes politicians to do bad things.

This failure of government to live up to its Constitutional contract includes the failure of the Supreme Court.

If a revolution is what it takes for the People to enforce the Constitutional contract, then the United States certainly has its own historical precedence for starting one over taxes.

Doctor, Does Your Office Have a Time Clock, and If Not, Why?

Many small professional practices and businesses have employees track hours on the “honor system” or simply assume that everyone works a 40-hour week.

Wage and Hour Law require that employees who would qualify for overtime payment and in actuality receive that payment, have their hours tracked.

While a time clock is not required for this, it provides the best evidence of the hours that an employee actually works at the office.

Employees who leave an employer and then claim several years of overtime payment entitlement are often in a position to “hold up the practice” unless a time clock has been used to prove that they did not have the overtime hours.

When the employee has to additionally turn in an “hours worked at home and outside of the office” addendum each week, the burden is on them to be accurate, and the employer should make sure that the signed weekly addenda is scanned and also placed in a safe file for future reference.

Here are the 4 reasons that we encourage clients to have time clocks.

1.         Overtime Law compliance as described above.

2.         Morale of the employees who work the actual required hours and resent the employees who do not.

3.         To make sure that the employer gets the agreed number of hours from the employee after taking into account lunches, breaks, and other events.

4.         The time clock is a convenience for the employer and the employees when it comes to keeping track of hours, accuracy, and tracking whether a given employee normally gets to the office on time, leaves on time, or deviates from punctuality.

Words of Wisdom from Bob Burke

(re: Credit Shelter vs Portability)

Burke 

Bob Burke graduated from Florida State University in 1968 and from Stetson University College of Law in January 1974. He was a past trust officer for First Union National Bank, now part of Wells Fargo through merger. Mr. Burke is “Of Counsel” to the Richards, Gilkey, Fite, Slaughter, Pratesi, & Ward, P.A. Law Firm in Clearwater, Florida.

We were very pleased when Bob Burke, Esquire reviewed our article that set forth our strong opinion that the decision as to whether to use portability should be put off until after one spouse dies, and that the most important thing to concentrate on from that standpoint is to permit automatic funding of a credit shelter trust that can be converted into a Clayton QTIP trust or otherwise channeled to a QTIP disposition without the need of an affirmative disclaimer by the surviving spouse.

Bob’s response to this is as follows:

A few thousand years ago, someone said that “the most important thing an attorney can do for his client is to preserve his alternatives.” Why ever depend on portability when there are so many reasons to fund a credit shelter trust at the death of the first spouse to die:

  1. Avoid creditor of the 2nd spouse
  2. Avoid estate tax law changes regarding the 2nd spouse
  3. Increases in value of the asset that was ported to the 2nd spouse
  4. Admin structure and security inside the CST rather than rely on the 2nd spouse
  5. Assurances of the remainderman beneficiaries

As we get older and the value of the estates get larger, the most important person to protect ourselves from is “ourselves.”

Upcoming Seminars and Webinars

WILL TBE APPLY FOR FLORIDA SAME GENDER COUPLES WHOSE MARRIAGES ARE RECOGNIZED IN THE STATE OF CELEBRATION?

Date: Thursday, May 22, 2014 | 7:00 p.m.

Location: Online webinar

Additional Information: To register for the webinar please click here 

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THE JOINT EXEMPT STEP-UP TRUST AND PLANNING WITH COMMERCIAL ANNUITIES

Alan Gassman will be speaking at the annual Ohio Conference on Wealth Transfer on June 4, 2014 on two different topics:

1)     Wealth Transfer on Structuring Joint Exempt Step-Up Trusts (“JESTs”): Maximizing Stepped-Up Basis Planning, Fully Funding Credit Shelter Trusts with Joint Assets and Practical and Technical Aspects Thereof – With Forms

With the increased federal estate tax exclusion, it may be time to reconsider “joint” trusts for married couples.  Alan co-authored two articles in the October and November issues of Estate Planning Magazine about Joint Exempt Step-Up Trusts (JESTs), and will talk about maximizing stepped-up basis planning, fully funding Credit Shelter Trusts with joint assets, and other practical aspects of JESTs with forms.

2)     Planning with Commercial and Charitable Annuities.  Mr. Gassman will also be participating in a panel discussion the evening before hosted by Johnson Investment Counsel and The Ohio State University.

This session will discuss planning with fixed and variable annuities, covering common policy features, misunderstandings about “guaranteed” rates of return, the minimum distribution rules akin to the IRA rules, income taxation of annuities on the death of the owner or annuitant, and trusts as holders of annuity contracts.

Skip Fox will be speaking on the following:

1)     Recent Developments.

This session will include commentary on marital planning, gifts, grantor trusts, asset protection, portability, generation skipping tax and charitable planning.

2)     Must We Trust a Trust That’s Just a Crust That Was a Trust?

What some view as “un-trust-like” notions – protectors, selectors, advisors, appointers, special trustees, directed trusts, secret trusts, virtual representation, in terrorem forfeitures, perpetual trusts and decanting – will be examined with some forms included.

Date: June 4, 2014

Location: Hilton at Easton, Columbus, Ohio

Additional Information:  For more information on the conference and to register for the conference please contact agassman@gassmanpa.com

Online Practice Webinars:

I am speaking on two topics that I have never handled alone, at 50 minutes each so I will be taking practice run on each of these and invite your questions, comments and suggestions.

The variable annuity talk will be live on May 21, 2014 at 12:00 p.m. and the JEST talk will be live on May 28 at 12pm.  Each webinar will last 50 minutes.

These webinars are free of charge and you can register for each of them below.

To register for the variable annuities talk please click here.

To register for the JEST talk please click here.

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VERSION 226.3 OF OUR ESTATEVIEW ESTATE TAX PROJECTION AND ILLUSTRATION SOFTWARE – A FREE WEBINAR

Alan Gassman, Ken Crotty and David Archer will be presenting a free 30 minute webinar on what is new with our EstateView software which will be featured later this year in Jason Havens’ excellent American Bar Association RPTE Probate and Property column.

Speakers: Alan Gassman, Ken Crotty and David Archer

Date: Monday, June 9, 2014 | 12:30 p.m.

Location: Online webinar

Additional Information: To register for the webinar please click here.

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HIRING AND TERMINATING EMPLOYEES; WHAT TO DO, WHAT TO AVOID

Speaker: Alan S. Gassman, Esq., Colleen Flynn, Esq. and Dr. Stephanie Thomason

This is a very practical guide that your office manager is sure to enjoy.  Let us know if you would like to see Alan Gassman’s slides for this presentation.

Date: Wednesday, June 18, 2014 | 2:00 – 3:00 p.m.

Location: Bloomberg BNA Tax & Accounting Online webinar

Additional Information:  To register for the webinar please visit

http://www.bna.com/effectively-hire-terminate-w17179890199/.  To receive a discount code please email agassman@gassmanpa.com

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FICPA SUNCOAST CHAPTER MONTHLY MEETING

Alan S. Gassman will be speaking at the FICPA Suncoast Chapter’s monthly meeting on HOW TO PLAN, STRUCTURE, AND PROTECT WEALTH USING REVOCABLE AND IRREVOCABLE TRUSTS AND TRUST SYSTEMS.  A COMPREHENSIVE OVERVIEW WITH A PRACTICAL PLANNING CHECKLIST AND PRACTITIONER TAX COMPLIANCE GUIDE.

Speaker: Alan S. Gassman

Date: Thursday, June 19, 2014 | 4:00 p.m. (100 minute presentation)

Location: Feather Sound Country Club, Clearwater, Florida

Additional Information:  For more information, to register and a discount code please email agassman@gassmanpa.com

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FICPA ANNUAL ACCOUNTING SHOW 

Alan Gassman will be speaking at the FICPA Annual Accounting Show on Thursday, September 18, 2014 on the topic of ESSENTIAL GUIDE TO BASIC TRUST PLANNING for 50 minutes.

This presentation will introduce basic and intermediate trust planning background and provide attendees with an orderly list of the most commonly used trusts, practical features and traps for the unwary, including revocable, irrevocable and hybrid.  The discussion will include tax, creditor protection and probate and guardian considerations.

Date: Wednesday, September 17 through Friday, September 19, 2014

Location:  Fort Lauderdale, Florida

Additional Information:  For more information about this program please contact Stephanie Thomas at ThomasS@ficpa.org

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NEW JERSEY INSTITUTE FOR CONTINUING LEGAL EDUCATION (ICLE) SPECIAL 3 HOUR SESSION

Alan Gassman will be the sole speaker for this informative 3 hour program entitled WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW

Here is some of what the New Jersey Bar Invitation for this program provides:

New Jersey residents have always had a strong connection to Florida.  We vacation there (it=s our second shore).  Own Florida property (or have favored relatives that do) and have family and friends living there.  Sometimes our wealthiest clients move to Florida and need guidance, and you need background in order to continue representation.

There are real and significant differences between the two states that every lawyer should be cognizant of.  For example, holographic wills are perfectly legitimate in New Jersey and anyone can serve as an executor of an estate, which is not the case in Florida.  Also, Florida=s new rules regarding LLCs are different, and if you are handling estates of New Jersey decedents who owned Florida property, there are Florida law issues that must be addressed.  Asset protection differs significantly in Florida too.

Attendees will receive Mr. Gassman’s book entitled “Florida Law for Tax, Business and Financial Planning Advisors,” which has a retail value of $34.95.

Our informative seminar, presented by Clearwater attorney Alan Gassman, highlights issues New Jersey lawyers should be aware of when handling matters for New Jersey residents who own Florida property, reside there part time, have interest in Florida businesses, or who are considering a move to Florida.  The Florida Bar rules permit out of state lawyers to continue representation of Florida residents under rules that will be discussed.

Gain the knowledge you need to assist your clients with Florida matters, including:

  • Florida specific laws involving businesses, trusts, and estates
  • Florida tax planning
  • Elective share and homestead rules
  • Liability Insulation and Planning
  • Creditor Protection and Strategies
  • Medical Practice Laws
  • Florida Bar Guidelines that allow representation of Florida clients

Comments from past attendees of this program:

  • Excellent seminar and materials!!!
  • This was one of the best ICLE seminars yet!
  • One of the best seminars I have attended.

Date: Saturday, October 4, 2014

Location:  TBD

Additional Information: This is a repeat of the same program that we gave last year, but our book is now updated for the new Florida LLC law and changes in estate and trust law.  Please tell all of your friends, neighbors and enemies in New Jersey to come out to support this important presentation for the New Jersey Bar Association.  We will include discussions of airboats, how to get an alligator off of your driveway, how to peel a navel orange and what collard greens and grits are. For additional information please email agassman@gassmanpa.com

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40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Please send us your questions, comments and suggestions for Alan Gassman’s talk on Planning with Variable Annuities and Analyzing Reverse Mortgages.

This presentation will cover the unique income tax and financial planning characteristics of fixed and variable annuities, and provide estate and tax planners with a number of strategies for understanding and planning with existing and contemplated contracts. With over One Trillion Dollars of US taxpayer money invested in annuity contracts, more and more clients are showing up in their estate planners offices with large annuity contracts and common misunderstandings about “guaranteed income” and “guaranteed rates of return” features.   The presentation will cover common policy features, what is actually happening inside of a policy, illustration techniques, and changes that can be made to defer income tax and reduce overall tax liability.   Minimum distribution rules that apply to variable annuity contracts will also be discussed.

Date:November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

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2nd ANNUAL AVE MARIA SCHOOL OF LAW ESTATE PLANNING CONFERENCE

Alan Gassman will once again be speaking at the Ave Maria School of Law Estate Planning Conference in Naples, Florida, whether he is invited or not!  Hats off to Jonathan Gopman, Karen Grebing, Northern Trust and many others for having hosted one of the most enjoyable conferences in 2014.

Date: Friday, May 1, 2015

Location: Ave Maria School of Law, Naples, Florida

Additional Information: Please contact Karen Grebing at kgrebing@avemarialaw.edu for more information.

NOTABLE SEMINARS BY OTHERS

(WE WERE NOT INVITED, BUT WILL ATTEND AND ARE STILL EXCITED)

49th ANNUAL HECKERLING INSTITUTE ON ESTATE PLANNING

Date: January 12 – 16, 2015

Location: Orlando World Center Marriott 8701 World Center Drive, Orlando, Florida

Additional Information: For more information please visit: https://www.law.miami.edu/heckerling/?op=0

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ALL CHILDREN’S HOSPITAL FOUNDATION

Date: Thursday, February 12, 2015

Location: St. Petersburg, FL

Additional Information: Please contact Lydia Bennett Bailey at Lydia.Bailey@allkids.org for more information.

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2015 FLORIDA TAX INSTITUTE

Date: Wednesday through Friday, April 22 – 24, 2015

Location: TBD

Additional Information: Please contact Bruce Bokor at  bruceb@jpfirm.com for more information.

Applicable Federal Rates

Below we have this month, last month’s, and the preceding month’s Applicable Federal Rates, because for a sale you can use the lowest of the 3.

SHORT TERM AFRs MID TERM AFRs LONG TERM AFRs
May2014 Annual 0.33% Annual 1.93% Annual 3.27%
Semi-Annual 0.33% Semi-Annual 1.92% Semi-Annual 3.24%
Quarterly 0.33% Quarterly 1.92% Quarterly 3.23%
Monthly 0.33% Monthly 1.91% Monthly 3.22%
April 2014 Annual 0.28% Annual 1.81% Annual 3.32%
Semi-Annual 0.28% Semi-Annual 1.80% Semi-Annual 3.29%
Quarterly 0.28% Quarterly 1.80% Quarterly 3.28%
Monthly 0.28% Monthly 1.79% Monthly 3.27%
March 2014 Annual 0.28% Annual 1.84% Annual 3.36%
Semi-Annual 0.28% Semi-Annual 1.83% Semi-Annual 3.33%
Quarterly 0.28% Quarterly 1.83% Quarterly 3.32%
Monthly 0.28% Monthly 1.82% Monthly 3.31%

The 7520 rate for May is 2.4% and for April was 2.2%

 

[1]                   The charitable itemized deduction is not a tax preference item under the alternative minimum tax.

[2]               http://www.nonprofitcpa.com/new-florida-law-provides-protection-for-nonprofits-from-clawbacks-of- charitable-contributions-under-fraudulent-transfer-law/

[3]  Fla. Stat. 726.109 (7)(b)(2).

The Thursday Report – 5.1.2014 – Charitable Planning, Wait to Reinstate?, TBE Life Insurance, Oshins 11

Posted on: May 1st, 2014

Hesch on Charitable Planning and Explaining Charitable Planning to Clients

Wait to Reinstate

Letter Explaining the Use of Life Insurance for a Physician Client as a TBE Substitute in Case the Non-Physician Spouse Dies

Engineering Medical Practice Compliance, an article by Dr. Pariksith Singh

The 5th Annual Domestic Asset Protection Trust State Rankings Chart by Steve Oshins

Taking Piano to Heart – One Lawyer’s Story

Seminar Announcement – Don’t Skip (Fox) and Alan Gassman in Columbus, Ohio – JEST Enjoy It! Best Seminar Since 1492!

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

This report and other Thursday Reports can be found on our website at www.gassmanlawassociates.com.

Hesch on Charitable Planning and Explaining Charitable Planning to Clients

hesch

On April 22 Jerry Hesch spoke at a donor luncheon for Ruth Eckerd Hall in Clearwater, Florida and did a great job of showing how taxes can be saved when donors wish to benefit a charity and integrate charitable planning with their family and income tax situations.

The introduction to Jerry’s outline reads as follows:

Introduction

Charitable supporters face income, estate and gift tax challenges that can be alleviated with the use of charitable tax law coordination and planning.  In many situations the tax savings generated by these techniques will pay for all or a large part of the charitable donation and the donor can still enjoy seeing local charities improve their facilities and services, while giving well deserved thanks to the donor and the donor’s family.

The most important function a tax planning professional must master is how to communicate the tax savings from the different charitable giving techniques in a manner that the potential donor can quickly and easily understand.  The primary focus of this presentation will be how to communicate charitable giving techniques that can save taxes in an efficient and understandable manner.

Today’s presentation is designed to show how the use of brief descriptions and short financial illustrations can accomplish this communication objective.  Specific topics covered will include the following:

How the income tax deduction for charitable gifts can be used to generate a 43.4% tax savings, and also facilitate avoidance of a 23.8% capital gains tax and avoid estate taxes.

Using a lifetime charitable lead annuity trust (“CLAT”) in a low interest rate environment to pass an income producing investment on to the next generation without any gift or estate taxes and actually pass more on to the children than if no planning had been used.

 How a charitable remainder Unitrust (“CRUT”) can create current charitable income tax deductions that can offset up to 50% of adjusted gross income when an individual wants to implement a Roth IRA conversion or has other large amounts of ordinary income that would otherwise be taxable.  How the use of life insurance by the CRUT can further enhance the income tax benefits of the CRUT.

Using Net Income Makeup Charitable Remainder Unitrusts (the “NIMCRUT”) when an individual anticipates selling an appreciated asset at a large gain so that the capital gains tax that would otherwise be paid on the gain from the sale of that asset can instead be given to a charity at the end of the charitable remainder trust term.  How the charitable remainder trust can even be used for the gain from the sale of an operating business by minimizing the amount of unrelated business income allocated to the charitable remainder trust.

How individuals in their late 80s and 90s, and individuals with a short life expectancies can use lifetime charitable lead annuity trusts that make payments to charities for a given number of years to extend the compounding of a this tax-free wealth shifting technique for as many years as needed after their deaths so that there are no gift or estate taxes on the transfer of an income-producing asset to the next generation. Why lifetime CLATs are a more advantageous solution to the testamentary charitable lead annuity trust (the “CLAT”).

How to terminate an existing charitable remainder trust so that the charity can receive funds currently instead of having to wait until the creator of the trust dies and show how the creator of the trust can be better off by receiving a lump sum upon an early termination instead of receiving distributions each year for the rest of the creator’s life.  How to use the early termination of a trust to convert ordinary income into capital gain.

 Communication

Explaining how a technique works, and communicating the wealth shifting concepts incorporated therein is an essential role for the tax and estate planning professional.  Part of the communication process is to explain the technique in a way that the individual can easily understand without the use of technical terms that the individual is often unfamiliar with.  An important aspect of the communication process is to illustrate the potential transfer tax savings without overwhelming the individual with complicated financial data and the use of technical terms.

Most donors realize that the highest tax bracket consists of the 39.6% income bracket and the 3.8% Medicare tax for a combined total annual income tax bracket of 43.4%, and that capital gains are taxed at the 23.8% combined income and Medicare tax brackets. Further, assets in excess of $5,340,000 left on death to non charity and non spouse beneficiaries will be subject to estate tax at the 40% bracket, with the $5,340,000 2014 threshold going up with the Consumer Price Index, but being reduced by gifts exceeding $14,000 per person during the person’s lifetime.

Example John Supporter has a $3,000,000 net worth and pays income taxes at the highest bracket.  He has stock worth $11,000 that cost him $1,000.  He can sell the stock for $11,000 and will pay $2,380 of income tax, and then give the money to his nieces or nephews, or he can give the stock to a charity, pay no capital gains tax, and save $4,340 in income taxes for total tax savings of $6,720, or 61% of the amount gifted, while receiving recognition and the satisfaction of having made a difference for a good cause or charitable activity.

If John was also estate taxable then the estate tax savings would be another 40% (without taking into account future growth, so $4,400 of estate tax savings plus $6,720 of income tax savings amounts to $11,120 of savings on an $11,000 gift!

The tax savings in the example above may be even greater if there are medical expenses, alternative minimum tax or other situations at hand which are further described below.

Besides the above, there are a number of charitable giving mechanisms that planners can use to allow family or self benefits to occur while allowing for present or future dollars or assets to go to charity.

With a Charitable Remainder Trust tax deductions apply on funding, even though payments are received by the donor or family members for a term of years, and capital gains taxes can be avoided.

A simple example is that the donor puts $100,000 of appreciated stock into a trust that pays him $4,000 a year for 20 years.  The donor gets an immediate tax deduction on the donation based on the present value of what the charity is expected to receive, and may pay the capital gains tax on the sale of the asset ratably over time as he or she receives the $4,000 payments, instead of immediately on sale.  This is a way to eat the icing off of your cake, after you have given it away!

With a Charitable Lead Trust assets can be placed in a trust that pays the charity a set dollar amount or percentage of its value for a term of years, and everything left after that may go to the donor’s children or other individual beneficiaries without estate tax.

A simple example is that someone age 72 who will be in the 40% estate tax bracket will put $100,000 into a Charitable Lead Trust that pays a charity $8,200 a year for 12 years, and then is held for the donor’s children. This is not considered to be a gift to the children under the gift tax law.  If the trust is worth $50,000 after the 12th payment, then the donor got income tax deductions based on 43.4% of $100,000 in payments, and thus saved $43,400 in income taxes over the 10 years, and $20,000 of estate or gift tax for total savings of $63,400 on a $100,000 gift.  If a family partnership or LLC is used then the savings can be much greater.

Jerry’s discussion of the use of charitable lead trusts can be viewed by clicking here.

Next week we will feature Jerry’s charitable remainder trust discussion.

Wait to Reinstate

For a Florida LLC, if you file your Annual Report after May 1st, you will incur a $400.00 late fee (in addition to the $138.75 Annual Report fee) at the time of filing for a total amount due of $538.75.

HOWEVER, if you wait until September when the Secretary of State administratively dissolves LLCs that did not file their Annual Reports, the $400.00 late fee will no longer apply.  Instead the LLC will pay a $100.00 reinstatement fee (in addition to the $138.75 Annual Report fee) for a total amount due of $238.75.

This results in a savings of $300.

Further, what is the rush to reinstate?  Reinstatement goes back retroactively, and each year there is no additional penalty, they just add on the $138.75.  Eventually the annual report fees may increase retroactively, but for now the smart client will want to wait to reinstate.

Letter Explaining the Use of Life Insurance for a Physician Client as a TBE Substitute in Case the Non-Physician Spouse Dies

Recently a client asked us the following question:

Alan, Mary and I were doing some planning and were looking at life insurance options.  You and I had discussed getting a new policy to stagger expiration dates for coverage, specifically, to replace a $2 million dollar policy with two $1 million dollar policies, one for 20 years and one for 30 years.

Can you refresh my memory on the asset protection component of doing this?  As I recall, there was an issue with TBE assets becoming exposed if I die and there was a tax issue as well.

Thanks,

John

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Our response to the client is as follows:

Dear John and Mary:

Thank you for your email asking for guidance on the new life insurance.

We favor having multiple policies because once you buy a policy you can never reduce the death benefit.  If you buy two $500,000 policies and decide in later years that you only need half of the coverage then you can drop one policy and keep the other.

It does not cost much more to have two $500,000 policies, as compared to one $1,000,000 policy.

On the death of one spouse the life insurance proceeds can be held for the health, education and maintenance of the surviving spouse without being subject to the federal estate tax on the surviving spouse’s estate.

Also, the life insurance proceeds can be held without creditors having access to them.

For example, if Mary dies you are going to lose your tenancy by the entireties protection, but if she dies leaving life insurance in a trust that benefits you for your lifetime without being subject to federal estate tax or creditor claims, this helps to replace the tenancy by the entireties assets and to supplement your future creditor protection and the protection of your children’s inheritance from a potential future spouse and potential future children.

From an estate tax standpoint if we think that there is a good likelihood that the insured spouse will die during the term of the policy, and that the couple will have a net worth exceeding what passes estate tax free (which is presently $5,340,000 per spouse, increased with inflation under the present system), then we can place the life insurance into an irrevocable life insurance trust.  This helps to protect the actual ownership of the life insurance policy in case the insured spouse were to ever die, and also avoids federal estate tax on the policy proceeds.

Would you like to set up a ten minute call between the three of us to discuss this?

Best personal regards,

Alan

Engineering Compliance
by Dr. Pariksith Singh

We talk about compliance and how important it is for an organization. But what is compliance really? Is it only adherence to certain rules and regulations or is it something more? Is it just documentation and fulfillment of certain policy requirements? To my mind, compliance is the back bone of an organization. It is the true strength of the company. How do we make compliance the part of an organization’s DNA?

These are the things I believe should be done:

1) Compliance needs to be part of the Value System of the company: What is value system? It is the basis on which we judge the appropriateness of all our actions, behaviors, processes and systems. Compliance needs to be the moral and ethical fiber of the company.

2) Compliance is non-negotiable: This is the message that needs to be sent out to the staff constantly. Mere words do not suffice. It is the actions that show staff how seriously the company takes it. To paraphrase my friend Mirza Yawar Baig, “The staff listens with their eyes.”

3) Buy-In from Leadership: Unless the whole leadership team is solidly behind it, compliance will not get ingrained in the fabric of the organization. There will be tests time and again when compromise is the easier way out. But when issues are serious and violations are clear-cut and flagrant, everyone needs to get behind the decision and support it.

4) Constant drilling is needed: Compliance training is not a once-a-year training program or session or testing after some reviews. Compliance is a matter of constant awareness, training and education. We can’t emphasize it enough. E-mails with tips on a weekly basis should be sent and staff feedback is to be welcomed. Mere education too is not enough. We need to engage employees and make them understand why compliance is the life blood of their work.

5) Quiz and Question: We need to be able to quiz our staff on the spot with a compliance issue and test their ability to think on their feet and respond immediately. This should be part of the evaluation of that office. If the answer is right, there should be an immediate reward like a $5 certificate or note of appreciation. In the event of an audit from an agency, such spot quizzes or questioning of employees will happen for sure and if they are not prepped their answers will be usually of a stunned silence or “I do not know’s”.

6) Celebrate Compliance: Compliance or adherence to the law should not be painful. The way it becomes part of the culture is by making it a positive aspect of the company and integrating it with the value system. Rewarding employees who are sticklers in the right way, creating award programs, making it fun and sportive are all part of a good and strong compliance program.

7) Review of Operations: Every process starting with hiring to orientation to training and review and firing or exit interviews should be reviewed for all employees. Also, each process in offices or in various departments should be broken down at a granular level and reviewed and made compliant by retooling and re-processing as needed. A proper Policies and Procedures Manual is a must and must be a part of every employee’s vocabulary and made available for reference at all times.

8) IT Processes: Once operations are made precise and legitimate, the computer software, Enterprise Resource Processes and CRMs need to reflect the steps that need to be taken to accomplish the task. If education and training and employee orientation are the software of compliance, IT and operations are the hardware.

9) Documentation and record-keeping: Documentation is the sine qua non and without documentation the program has no way to be measured. This documentation needs to be shared with the Executive team transparently and compliantly and a proper repository of such records must be kept available as needed to appropriate personnel.

10) Compliance Committee: A team of leaders should be appointed to review the compliance program on a regular basis and should have the ability to tailor the program to the organization’s needs, functions and regulatory status. The members should be willing to study the subject and share the knowledge with the company. Hiring of consultants who are experts in compliance is another way to enhance an organization’s knowledge base and expertise. Special courses in compliance and certification for key people should be encouraged and emphasized.

True compliance leads to quality even though the two departments are separate and should be kept separate. Compliance is a function of humility, willingness to learn and abide by the law, leadership and a fundamental transparency. If focused on with adequate attention, compliance can become a core competency of the organization and its strategic strength in this world of audits and Federal refunds, punishments and disbarments.

Dr. Singh thanks Alan S. Gassman and Kristen O. Sweeney for their assistance in preparing this article for publication.

The 5th Annual Domestic Asset Protection Trust State Rankings Chart
by Steve Oshins

We sincerely thank Steve Oshins for everything that he has done on the Domestic Asset Protection Trust scene to make these a well respected and protective vehicle with many uses well beyond “creditor protection”.  Oshins and Oshins has a great website at www.oshins.com.

The 5th Annual Domestic Asset Protection Trust State Rankings Chart is at http://www.oshins.com/images/DAPT_Rankings.pdf.

Some Highlights:

1.  Mississippi was added to the chart.

2.  Colorado was removed from the chart because of space limitations and because its DAPT law is very questionable.

3.  There is now a “Decanting State Ranking” column reflecting the importance of that added flexibility.

4.  “Reputation” and “Other Adjustments” have been removed in order to reduce subjectivity.  I’m not yet certain whether that helps or hurts.

5.  Because many states have enhanced their statutes over the past few years, many of the states have very close Total Scores.  It is important to note that the amount of weight given to different columns is very uniform, so if you believe that certain columns should be more heavily weighted, then minor adjustments will change the rankings, especially for the states ranked #5 through #11.

Please provide both positive and negative feedback.

The sister charts are at:

*Dynasty Trust State Rankings Chart:  http://www.oshins.com/images/Dynasty_Trust_Rankings.pdf

*Decanting State Rankings Chart:  http://www.oshins.com/images/Decanting_Rankings.pdf

Quotes from Steve:

1.  As the DAPT states have improved their statutes, the competition among the states has gotten fierce.

2.  This year I tried to reduce the subjectivity even more by removing the state’s reputation from the scoring so that the states are now ranked solely on the face of their statutes.

3.  The current chart now includes a column for decanting to reflect its popularity and importance to DAPTs and other types of trusts.

Taking Piano to Heart – One Lawyer’s Story
by Laura Snell

laura snell

Laura Snell is a candidate for Sixth Circuit Judge group 1. She is a native Floridian with ties to Pinellas County that go back to the early 1900’s.  Her great-grandfather, Getty E. Snell and his brother C.Perry Snell, developed the Old Northeast and Snell Isle areas of St. Petersburg.  Laura is an honors graduate of University of Central Florida with a degree in Spanish and a Degree in Political Science: International Relations and Comparative Governments.   She went on to Stetson University College of Law where she earned a Juris Doctor. Ms. Snell began working at the Sixth Circuit Public Defender’s Clearwater Office in the Spring of 2005.  Laura is now the Senior Assistant Public Defender supervising the Juvenile Division.  She is also an Adjunct Professor of Law for Stetson University College of Law managing the Child Advocacy Clinic. Additionally Ms. Snell has worked in private practice at Wagstaff Law Office as an associate in the practice areas of family law and probate.

Laura Snell has been a member of the Clearwater Bar Association for most of her career.  She participates in many committees, Florida Bar Association and serves on several community boards relating to juvenile justice. Laura enjoys an active role at the Pinellas Pace Center for Girls.  She has been on the Board of Directors for several years, and currently serves in the position of President of the Pace Board.  Ms. Snell graduated from Leadership Pinellas in the 2010 class and has remained on their Board of Directors for several years. She is also a graduate of the Largo Citizen’s Academy and served on the Board of Trustees for AMI Kids Pinellas.  Laura is a member of the Delta Gamma Clearwater Alumnae group and belongs to St. Paul United Methodist Church of Largo.

For more information please visit her website: www.SnellForJudge.com

Here is Laura’s article:

Here’s something not many of my colleagues know about me – I play the piano.  I started taking lessons at age four and continued with formal instruction until the tenth grade.  I also played the clarinet in jazz band and in the orchestra in middle and high school.  Music has been a very big part of my life and I firmly believe the skills I gained from playing the piano assisted me academically.

Playing the piano requires the individual to become fluent in the language of music composition which is so much more than simply having the ability to read notes on a page of sheet music, although that in and of itself is an accomplishment.   It is a different form of communication than the spoken or written word that is akin to a foreign language.  Playing the piano also requires keeping the tempo, having a divided attention between tasks of one’s hands/feet/eyes, being fully in the moment while thinking ahead to plan the next move, expressing the emotion and mood of a song to the audience, learning to improvise when mistakes happen, and growing from words of criticism.

A young man named Kwasi Enin made national headlines after being accepted into eight Ivy League schools. On April 30, 2014 he announced his decision to attend Yale in the fall.  In Enin’s college application essay he wrote about his passion for music and how playing the viola impacted his academic pursuits saying:

There are millions of combinations of key signatures, chords, melodies and rhythms in the world of music that wait to become attached to a sheet of staff lines and spaces. As I began to explore a minute fraction of these combinations from the third grade onwards, my mind began to formulate roundabout methods to solve any mathematical problem, address any literature prompt, and discover any exit in an undesirable situation.

I know that playing the piano was my safety net that got me through law school.  This is especially true immediately after graduation from law school during that critical study time while preparing for The Florida Bar exam.   For a three month period my life was dedicated to passing The Florida Bar which meant that 12+ hours of my days were spent secluded in the Stetson Law library.   I would typically leave the library around midnight and retire to the Mann Lounge where the school had a grand piano.  Let me set the scene, there is really nothing about this large room that measures 48 by 85 feet and has 16-foot ceilings that makes me think “lounge”.  Inside this massive room there is a  fireplace which is a slightly modified reproduction of the painter El Greco’s favorite fireplace,  two huge collectable and presumably  very valuable vases made especially for the 1895 Colombian exposition in Chicago, the  paintings on the walls are the work of Peruvian artist Victor Robian from the early 1900s, there are  antique furnishings and one grand piano.   I had never seen anyone play that piano and I wasn’t even sure we were allowed to touch it, but my longing to play prevailed and I figured I would be safe playing during such late hours.

Playing the piano relaxed me and kept me grounded. Music gave balance to my stressful life.  While playing in the Mann Lounge I would take my frustrations and fears out on that grand piano.   I remember one occasion when I was really banging away on the keys and I thought I was in trouble because the security guard came in and stood next to me.  Panic struck throughout my body and I thought to myself, “well the jig is up I’m going to be kicked out and forbidden from touching this piano”!  What I didn’t know was that the security guard had been a fan of my music for weeks. He had been making his rounds to patrol the Mann lounge right around midnight just to listen to me play. As it turned out in my moment of panic he wasn’t asking me to leave, he was requesting some Billy Joel songs.

Playing piano is very personal for me; I am not an entertainer and haven’t played publicly since I was about fifteen, with the exception of my nightly concerts in the Mann lounge.  The piano has always given me an emotional outlet throughout my life – if I’m sad I can play a soulful tune, if I’m happy I can play something light hearted and patriotic, if I’m feeling loved I can play a ballad, and when I want to worship I can play hymns.  In times of frustration I have my favorite classical piece that allows me to transfer that aggravation to the piano keys; and for this I thank you Edvard Grieg for the concerto in A minor.   Many people say that they get their best thinking done when they are in the shower, I can say I have done some of my best thinking while my hands and mind were busy by playing the piano.

The sad truth is that the arts are almost always first on the chopping block in the schools. I believe that music education is completely underrated and undervalued when budgets are being made by decision makers. I started thinking, if music is so undervalued how do we connect with people to impress upon them the importance of music education and playing the piano? People who play music understand what it does for your personal development, I get that and it would appear that young Kwasi Enin does too.   But how do you explain the power of music to someone who does not “get it”?  That’s when I realized for me that playing the piano not only aided my personal and academic development, but also in strengthening my familial relationship . The bond between parent and child or grandparent and child is a universally accepted concept and here’s one example from my life where this bond  applies to playing the piano.

When I was fifteen I found a box in the attic.  In the bottom of that box was a pile of dusty sheet music of tunes from the 1940’s that I had never heard before.  One of those songs was called  “Peg O’ My Heart” by Alfred Bryan and Fred Fisher.  I sat down at the piano and gave it my best shot.

As I was playing this for the first time, my Mom came running into the living room singing the lyrics    “PEG O MY HEART I LOVE YOU” and she was crying.   That box had belonged to Doris Fogle, my great-grandmother who was born in 1900 and died in 1985.  Up until that moment I had no idea that my great-grandmother even played the piano.  After Doris’ death her things were put in storage in our attic.  My Mom told me she was crying because as soon as she heard that song playing she was reminded of her childhood and the times when her grandmother used to play it on the piano.  My Mom said in that moment she could feel her grandmother’s presence. My great-grandmother passed away when I was only as a child but in that moment I felt a bond with her too.

Now that my Mom has passed away, when I play Peg O’My Heart on the piano I feel a connection to her and to my great-grandmother. I laminated this sheet music in the hopes that I can pass it on to my children one day. Playing the piano keeps the memory of these women and their loving spirits alive!

https://www.youtube.com/watch?v=hvditcQRcXM

If you are a piano fan check out the Sara Gassman Foundation’s Mother’s Day article from last year by clicking here.

Seminar Announcement
Don’t Skip (Fox) and Alan Gassman in Columbus, Ohio – JEST Enjoy It! Best Seminar Since 1492! and a Replay of Our Webinar for Physicians on What They Don’t Tell You in Medical School

On June 4th Alan Gassman will be speaking at the Ohio State Bar Association 25th Annual Conference of Wealth Transfer following a June 3 late afternoon/early evening panel discussion hosted by Johnson Investment Counsel and The Ohio State University

The agenda for the conference is as follows:

June 4, 2014

7:45 am            Registration/Continental Breakfast

8:00 am            Welcome/Introductions

William A. Morse, Esq.; Attorney at Law; Worthington (Program Planning Chair)

Nancy Koerner, J.D.; Director of Development, The Ohio State University; Columbus

Joyce A. Waters; Director of Business Development, Private Client Group, Johnson

Investment Counsel; Columbus

8:15 am            Recent Developments

Charles “Skip” Fox, IV, Esq.; McGuire Woods LLP; Charlottesville, Va.

This session will include commentary on marital planning, gifts, grantor trusts, asset protection, portability, generation skipping tax and charitable planning.

9:45 am            Structuring Joint Exempt Step-Up Trusts (JESTs)

Alan S. Gassman, Esq.; Gassman Law Associates, P.A.; Clearwater, Fl.

With the increased federal estate tax exclusion, it may be time to   reconsider “joint” trusts for

married couples.  Alan co-authored two articles in the October and November issues of Estate Planning Magazine about Joint Exempt Step Up Trusts (JESTs), and will talk about maximizing stepped-up basis planning, fully funding Credit  Shelter Trusts with joint assets, and other practical aspects of JESTs  with forms

10:35 am          Break

10:50 am          Must We Trust a Trust That’s Just a Crust That Wast a Trust?

Charles “Skip” Fox, IV, Esq.

What some view as “un-trust-like” notions—protectors, selectors, advisors, appointers, special

trustees, directed trusts, secret trusts, virtual representation, in terrorem forfeitures, perpetual

trusts and  decanting—will be examined with some forms included.

11:40 am          Planning with Commercial Annuities

Alan S. Gassman, Esq.

This session will discuss planning with fixed and variable annuities, covering common policy

features, misunderstanding about “guaranteed” rates of return, the minimum distribution rules akin to the IRA rules, income taxation of annuities on the death of the owner or annuitant, and trusts as holders of annuity contracts.

12:30 pm          Lunch (provided)

1:30 pm            Modern Portfolio Theory (MPT)

Dominic J. Campisi, Esq.; Evans Latham & Campisi; San Francisco, CA.

Dom Campisi, a fiduciary litigation specialist, will discuss why he believes MPT is no longer “Modern,” but is now a crippled theory; the need to “document” the exercise of discretion; and why taking “risks” to increase income is a dangerous position.

2:40 pm            Self-Cancelling Installment Notes (SCINS)

Analysis of the structure and tax advantages of SCINS, contexts for use in planning, recent IRS rulings and their impact on SCINS, interest rates used, using SCINS in combination with other planning techniques and important considerations and risks attendant to SCINS will be discussed.

3:40 pm            Break

3:55 pm            Fiduciary Liability

Dominic J. Campisi, Esq.

Multiple recent fiduciary liability cases will be discussed, including why ignoring the circumstances of the beneficiary can lead to censure and damages – even if your trustee client is only handling investments for a special needs beneficiary; the measure of damages in failure to diversify cases; why conflicts of interest in investments are a major source of surcharge; and the duty to inform the “sprinkle” beneficiary of his/her rights.

5:00 pm            Conference Concludes

For more information on the conference please click here

The New Doctor’s Guide to Wealth Building, Creditor Protection, Trust Planning, and What They Didn’t Tell You in Medical School

On Wednesday, April 30 we held a Part 1 of a webinar for new doctors on What They Didn’t Tell You in Medical School.  If you would like to watch a replay of that webinar please email Janine Gunyan at Janine@gassmanpa.com

Part 2 of the webinar has been scheduled for Tuesday, May 13, 2014 at 7:00 p.m. To register for the webinar please click here and email any questions you have to Alan Gassman at agassman@gassmanpa.com.  We hope to “see” you there.

Upcoming Seminars and Webinars

THE FLORIDA BAR ANNUAL WEALTH PROTECTION SEMINAR (with 2 hours of Ethics CLE credit)

Alan Gassman will be speaking at the Florida Bar Annual Wealth Protection Seminar on How I Structure an Integrated Income, Estate Tax, and Asset Protection Family Plan as well as participating in a panel discussion with Barry Engel, Jerry Hesch and Denis Kleinfeld on What Are the Ethical, Legal and Administrative Liability Exposures in Wealth Protection Planning and How Do We Protect Ourselves.

Date: Thursday, May 8, 2014

Location: Hyatt Regency Downtown, Miami, Florida

Additional Information: For more information and to register please visit  http://floridataxlawyers.org/images/stories/cle_documents/asset%20protection%20brochure%205-8-2014.pdf.

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THE JOINT EXEMPT STEP-UP TRUST AND PLANNING WITH COMMERCIAL ANNUITIES

Alan Gassman will be speaking at the Ohio Conference on two different topics: 1) Wealth Transfer on Structuring Joint Exempt Step-Up Trusts (“JESTs”): Maximizing Stepped-Up Basis Planning, Fully Funding Credit Shelter Trusts with Joint Assets and Practical and Technical Aspects Thereof – With Forms and 2) Planning with Commercial Annuities.  Mr. Gassman will also be participating in a panel discussion the evening before hosted by Johnson Investment Counsel and The Ohio State University.

Date: June 4, 2014

Location: Hilton at Easton, Columbus, Ohio

Additional Information:  For more information on the conference and to register for the conference please contact agassman@gassmanpa.com

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VERSION 226.3 OF OUR ESTATEVIEW ESTATE TAX PROJECTION AND ILLUSTRATION SOFTWARE

Alan Gassman, Ken Crotty and David Archer will be presenting a free 30 minute webinar on what is new with our EstateView software which will be featured later this year in Jason Havens’ American Bar Association RPTE Probate and Property column.

Speakers: Alan Gassman, Ken Crotty and David Archer

Date: Monday, June 9, 2014 | 12:30 p.m.

Location: Online webinar

Additional Information: To register for the webinar please visit https://www2.gotomeeting.com/register/445383090

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HIRING AND TERMINATING EMPLOYEES; WHAT TO DO, WHAT TO AVOID

Speaker: Alan S. Gassman, Esq., Colleen Flynn, Esq. and Dr. Stephanie Thomason

This is a very practical guide that your office manager is sure to enjoy.  Let us know if you would like to see Alan Gassman’s slides for this presentation.

Date: Wednesday, June 18, 2014 | 2:00 – 3:00 p.m.

Location: Bloomberg BNA Tax & Accounting Online webinar

Additional Information:  For more information, to register and a discount code please email agassman@gassmanpa.com

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FICPA SUNCOAST CHAPTER MONTHLY MEETING

Alan S. Gassman will be speaking at the FICPA Suncoast Chapter’s monthly meeting on FLORIDA ESTATE PLANNING AND LAW TECHNIQUES THAT CPAS NEED TO KNOW ABOUT

Speaker: Alan S. Gassman

Date: Thursday, June 19, 2014 | 4:00 p.m. (100 minute presentation)

Location: Feather Sound Country Club, Clearwater, Florida

Additional Information:  For more information, to register and a discount code please email agassman@gassmanpa.com

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FICPA ANNUAL ACCOUNTING SHOW

Alan Gassman will be speaking at the FICPA Annual Accounting Show on Thursday, September 18, 2014 on the topic of ESSENTIAL GUIDE TO BASIC TRUST PLANNING for 50 minutes.

This presentation will introduce basic and intermediate trust planning background and provide attendees with an orderly list of the most commonly used trusts, practical features and traps for the unwary, including revocable, irrevocable and hybrid.  The discussion will include tax, creditor protection and probate and guardian considerations.

Date: Wednesday, September 17 through Friday, September 19, 2014

Location: TBD

Additional Information:  For more information about this program please contact Stephanie Thomas at ThomasS@ficpa.org

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NEW JERSEY INSTITUTE FOR CONTINUING LEGAL EDUCATION (ICLE)_SPECIAL 3 HOUR SESSION

Alan Gassman will be the sole speaker for this informative 3 hour program entitled WHAT NEW JERSEY LAWYERS NEED TO KNOW ABOUT FLORIDA LAW

Date: Saturday, October 4, 2014

Location:  TBD

Additional Information: This is a repeat of the same program that we gave last year, but our book is now updated for the new Florida LLC law and changes in estate and trust law.  Please tell all of your friends, neighbors and enemies in New Jersey to come out to support this important presentation for the New Jersey Bar Association.  We will include discussions of airboats, how to get an alligator off of your driveway, how to peel a navel orange and what collard greens and grits are. For additional information please email agassman@gassmanpa.com

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40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Please send us your questions, comments and suggestions for Alan Gassman’s talk on Planning with Variable Annuities.

This presentation will cover the unique income tax and financial planning characteristics of fixed and variable annuities, and provide estate and tax planners with a number of strategies for understanding and planning with existing and contemplated contracts. With over One Trillion Dollars of US taxpayer money invested in annuity contracts, more and more clients are showing up in their estate planners offices with large annuity contracts and common misunderstandings about “guaranteed income” and “guaranteed rates of return” features.  The presentation will cover common policy features, what is actually happening inside of a policy, illustration techniques, and changes that can be made to defer income tax and reduce overall tax liability.   Minimum distribution rules akin to the IRA and pension Section 409A rules and common carrier practices will also be discussed.

Date:November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

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2nd ANNUAL AVE MARIA SCHOOL OF LAW ESTATE PLANNING CONFERENCE

Alan Gassman will once again be speaking at the Ave Maria School of Law Estate Planning Conference in Naples, Florida, whether he is invited or not!  Hats off to Jonathan Gopman, Karen Grebing and many others for having hosted one of the most enjoyable conferences in 2014.

Date: Friday, May 1, 2015

Location: Ave Maria School of Law, Naples, Florida

Additional Information: Please contact Karen Grebing at kgrebing@avemarialaw.edu for more information.

NOTABLE SEMINARS BY OTHERS

(WE WERE NOT INVITED, BUT ARE STILL EXCITED)

ALL CHILDREN’S HOSPITAL FOUNDATION

Date: Thursday, February 12, 2015

Location: St. Petersburg, FL

Additional Information: Please contact Alan Gassman at agassman@gassmanpa.com for more information.

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2015 FLORIDA TAX INSTITUTE

Date: Wednesday through Friday, April 22 – 24, 2015

Location: TBD

Additional Information: Please contact Alan Gassman at agassman@gassmanpa.com for more information.

Applicable Federal Rates

Below we have this month, last month’s, and the preceding month’s Applicable Federal Rates, because for a sale you can use the lowest of the 3.

SHORT TERM AFRs MID TERM AFRs LONG TERM AFRs
May2014 Annual 0.33% Annual 1.93% Annual 3.27%
Semi-Annual 0.33% Semi-Annual 1.92% Semi-Annual 3.24%
Quarterly 0.33% Quarterly 1.92% Quarterly 3.23%
Monthly 0.33% Monthly 1.91% Monthly 3.22%
April 2014 Annual 0.28% Annual 1.81% Annual 3.32%
Semi-Annual 0.28% Semi-Annual 1.80% Semi-Annual 3.29%
Quarterly 0.28% Quarterly 1.80% Quarterly 3.28%
Monthly 0.28% Monthly 1.79% Monthly 3.27%
March 2014 Annual 0.28% Annual 1.84% Annual 3.36%
Semi-Annual 0.28% Semi-Annual 1.83% Semi-Annual 3.33%
Quarterly 0.28% Quarterly 1.83% Quarterly 3.32%
Monthly 0.28% Monthly 1.82% Monthly 3.31%

The 7520 rate for May is 2.4% and for April was 2.2%

 

The Thursday Report 4.17.2014 – Ohio,

Posted on: April 17th, 2014

Monday’s Ohio U.S. Constitutional Federal Court Decision – Will States Have to Respect Same Gender Marriages?…..Probably!

Non-Residents Can Own Florida Real Estate as Tenants by the Entireties

Calculating IRA Minimum Distributions

Bruce Stone’s Reminiscences of Kiev – A Very Interesting Story – Part 2 of 2

Seminar Announcement – Ohio – Our Second Favorite State – Go There June 4th To See Some Interesting Presentations

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

This report and other Thursday Reports can be found on our website at www.gassmanlawassociates.com.

Monday’s Ohio U.S. Constitutional Federal Court Decision – Will States Have to Respect Same Gender Marriages?…..Probably!

by India Ingram and Alan Gassman

The state of Ohio was ordered by U.S. District Judge Timothy S. Black on Monday to give full recognition to same-gender marriages legally performed in other states. The court found that the state’s refusal to recognize such marriages violates the Due Process, Equal Protection, and Full Faith and Credit Clauses of the US Constitution, and many legal authorities expect that at least one, if not more, of these doctrines will be upheld eventually by the US Supreme Court.

The judge also found that the state is in violation of the Constitution by denying recognition to out-of-state adoption decrees and by refusing to amend the birth certificates of Ohio-born children.

This ruling does not force Ohio to allow same-sex marriages to be performed within the state, but requires full marital recognition, such as property rights, to couples married outside of the state. The order was a result of a lawsuit brought by four same-sex couples who argued that the state’s current allowance of only one partner from a same-sex marriage on a birth certificate is unconstitutional. The state plans to appeal the ruling, arguing that citizens of the state in 2004 overwhelmingly voted to ban same-sex marriage, giving Ohio a sovereign right to refuse recognition of these unions. Black has temporarily stayed his ruling as applied to everyone except for the four couples named in the lawsuit pending the appeal.

Black found that Ohio’s ban on recognizing out-of-state marriages of same-gender  couples was unconstitutional discrimination, and that the state has no justification for such discrimination. ‘When a state effectively terminates the marriage of a same-sex couple married in another jurisdiction by refusing to recognize the marriage, that state unlawfully intrudes into the realm of private marital, family, and intimate relations specifically protected by the Supreme Court,’ he writes in the opinion.

Black also wrote that: ‘Ohio’s refusal to recognize same-sex marriages performed in other jurisdictions violates the substantive due process rights of the parties to those marriages because it deprives them of their rights to marry, to remain married, and to effectively parent their children, absent a sufficient articulated state interest for doing so.’

The following laws were quoted in this well written opinion:

Due Process and Equal Protection Clause under §1 of the 14th Amendment in the US Constitution:

No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

Article IV, Section 1 of the United States Constitution the “Full Faith and Credit Clause”

Full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state. And the Congress may by general laws prescribe the manner in which such acts, records, and proceedings shall be proved, and the effect thereof.           

The full opinion can be viewed by clicking here.

Non-Residents Can Own Florida Real Estate as Tenants by the Entireties

Everyone knows that the creditor of one spouse cannot reach tenancy by the entireties assets unless a fraudulent transfer, super creditor situation, or other exception applies.

If a couple residing outside of Florida owned Florida real estate, can this real estate qualify as a tenancy by the entireties asset where the state of residency does not recognize tenancy by the entireties.  Most advisors do not realize that the answer to this question is yes, as confirmed in the 2007 case of In re Cauley.

EXCERPT FROM GASSMAN & MARKHAM ON FLORIDA AND FEDERAL ASSET PROTECTION LAW

REAL ESTATE OWNED OUTSIDE OF FLORIDA

Does the state of location recognize tenancy by the entireties?  If not, then the ownership of the real property should be converted to an intangible asset so that Florida law will apply.  Most states, including Georgia, Colorado, and Washington, do not recognize tenancy by the entireties.  Conversion can be done by transferring the property to a separate entity in a tenancy by the entireties protective state, such as a limited liability partnership or an LLC, the interests of which will be held as tenants by the entireties between the spouses.      

Some states recognize tenancy by the entireties, but do not provide “full protection” for those assets.  For example, under Alaska law, the creditor of one spouse can sever tenancy by the entireties assets.  Under Tennessee law, the creditor of one spouse can attach the survivorship right that the debtor spouse owns in the share of the non-debtor spouse in the event of the death of the non-debtor spouse, so creditors routinely receive nominal payments in lieu of nothing from a tenancy by the entireties debtor. 

A non-resident of Florida may be able to exempt non-homestead Florida real property, so long as the property is owned by the debtor and his or her spouse as tenants by the entireties. In the case In re Cauley,[1] the court extended tenancy by the entireties protection to nonresidents of Florida. In this case, the court ruled that the debtor’s interest in a Florida property was exempt in bankruptcy, even though the debtor did not live in Florida.  Debtor and his wife purchased a home in Florida, which they lived in for approximately four months. In 2006, the debtor filed for Chapter 7 Bankruptcy in Delaware, claiming that the Florida property was exempt because it was held as tenancy by the entireties. AmSouth Bank objected, arguing that tenancy by the entirety protection was only available if the debtor was a Florida resident.  The court applied Florida law because the property was located in Florida, and the sole determinant of whether Section 522(b)(2)(B) of the Bankruptcy Code protects an asset from the claims of the bankruptcy estate is the asset’s situs. The court noted that “tenancy by the entirety is a creature of Florida common law, not an exemption which is given to a resident of Florida by the Florida constitution or the Florida Statutes.” Thus, the court found that there was no requirement to be a resident of Florida in order to exempt the Florida property under tenancy by the entireties.

Other courts have followed Cauley, allowing non-residents to exempt Florida property held as tenants by the entireties.  In the case of In re Holland,[2] the court allowed an Illinois debtor who owned property in Florida as tenants by the entireties to exempt such property in her bankruptcy.  Citing Cauley, the court noted that there is no requirement for the property owner to be a resident of Florida. The court specifically stated, “[i]t is therefore clear from Florida case law that, at least with respect to creditors who are not joint creditors of the husband and wife, Florida’s common law concept of tenancy in the entireties fits within the exemption provided by 11 U.S.C. § 522(b)(3)(B) [of the Bankruptcy Code].”

It may be significant, however, that both Delaware and Illinois recognize the doctrine of tenants by the entireties; therefore, the courts may have been more willing to apply Florida law since the outcome would be the same under the law of either state. It is unclear whether debtors who file bankruptcy in a state that does not recognize tenants by the entireties, but own property in a state that does recognize tenants by the entireties, will be able to exempt that property in bankruptcy.

Calculating IRA Minimum Distribution

Gregory.Seigel

By: Gregory Seigel, Esq.

 Gregory Seigel is an attorney completing his LL.M. studies in Estate Planning at the University of Miami. He can be contacted at gseigel@law.miami.edu

As April is the season for income taxes, many people have recently made minimum distributions from their IRA or 401(k). Consider this an early review for next tax season.

Calculating required minimum distributions takes more than minimal thought. These calculations are very technical, and the penalties for not meeting these requirements can be onerous. The minimum distribution rules apply to traditional IRA’s, SEP IRA’s, SIMPLE IRA’s, 401(k) plans, 403(b) plans, 457(b) plans, and other defined contribution plans. ROTH IRA’s are not required to make minimum distributions until the death of the ROTH IRA owner.

Under Section 4974(a) of the Internal Revenue Code, a 50% tax is imposed on the amount of required minimum distributions that are not taken in a given year.  However, Section 4974(d) provides relief from this penalty if the taxpayer can show that (1) the shortfall of the required minimum distribution was due to reasonable error and (2) that reasonable steps are made to remedy the shortfall. To obtain this waiver, the IRS requires that the taxpayer file a Form 5329, pay the tax owed, and attach a statement explaining the reasonable error.          

For taxpayers who fail to make minimum distributions for consecutive years, the 50% penalty generally applies only to the failed distribution amount for the particular year. For example, a person who fails to make a $20,000 distribution in 2012 and a $15,000 distribution in 2013 will have a penalty of only $10,000 to be reported on their 2012 tax return. The penalty in 2013 will be $7,500 and there is no further penalty on the failed distribution from 2012.

To begin calculating the required minimum distributions, there must be a starting date. The plan owner or participant’s required beginning date is on April 1st of the year after attaining age 70 ½. For owners of qualified plans that (1) are not retired and (2) own 5% or less of the business sponsoring the plan, the required beginning date will be postponed until the April 1st  following the year the plan owner retires. To ensure this calculation is correct, it is recommended that three dates are calculated: the date plan owner is age 70, the date plan owner is age 70 ½, and the April 1st following age 70 ½.

For the first year’s required minimum distribution, the IRS provides three extra months to make the distribution. All future distributions must be made by December 31st. If the first distribution is made during the three month window between January 1st and April 1st, the plan owner will have to make an additional distribution by the end of that year. To prevent this scenario, the plan owner should make the first distribution by December 31st of the year attaining age 70 ½.

Let’s use an example to illustrate. Arlene and Larry are a married couple that each own an IRA. Larry’s date of birth is 6/30/1944 and Arlene’s date of birth is 7/1/1944. For Larry, he turns age 70 on 6/30/2014 and age 70 ½ on 12/30/2014. Larry’s required beginning date is the April 1st of the following calendar year after attaining age 70 ½, which is April 1, 2015. For Arlene, she turns age 70 on 7/1/2014 and age 70 ½ on 1/1/2015. Arlene’s required beginning date is April 1, 2016, for she does not turn age 70 ½ until January 1st of 2015.

This example illustrates the arbitrary cut-off date drawn for those who receive an extra year to begin taking minimum distributions. Those who are born prior to July 1st will have their required beginning date at age 70, while those born on or after July 1st will have a required beginning date at the age of 71. For persons born on or after July 1st, they will obtain an extra year of tax deferral.

After establishing the plan owner’s required beginning date, there is a fraction used to determine the required minimum distribution. The numerator of the fraction is the value of the plan on December 31st of the previous year. For 2015 minimum distributions, the plan’s value as of 12/31/2014 will serve as the numerator. The denominator of the fraction is based on the Life Expectancy Tables that can be found in Appendix C of IRS Publication 590.

There are three life expectancy tables found in the regulations.  The Uniform Lifetime Table is the table used for all owners of plans requiring minimum distributions. This applies to (1) unmarried owners and (2) married owners with spouses that are not more than 10 years younger than the plan owner. The Uniform Lifetime Table reflects the life expectancy of a plan owner plus an additional beneficiary who is ten years younger.

Let’s go back to the previous example. Larry owns an IRA worth $50,000 on 12/31/2013, and he must begin taking minimum distributions on April 1st, 2015. While Larry has an additional three month window to take his first minimum distribution, his first minimum distribution is for the year 2014. The numerator of the fraction is $50,000, the IRA value on 12/31/2013. The denominator is 27.4, which is the life expectancy for a plan owner age 70 in the Uniform Lifetime Table. Thus, Larry’s first required minimum distribution for year 2014 is $1,824 (50,000 / 27.4). Note that Larry will have until April 1st of 2015 to make this minimum distribution.

For Arlene, her calculations are not identical to those of Larry. If Arlene’s IRA is valued at $50,000 on 12/31/2013, this valuation date is not the pertinent date because her first minimum distributions are taken for year 2015. Thus, the value of the IRA on 12/31/2014 is the pertinent date for Arlene’s 2015 minimum distribution. An additional wrinkle is determining what age to use for Arlene in the Uniform Lifetime Table. Because Arlene is not required to take minimum distributions until age 71, the denominator will use the life expectancy for Arlene at age 71, which is 26.5. Arlene will not use the life expectancy for age 70. Assuming that Arlene’s IRA value remains at $50,000 as of 12/31/2014, her required minimum distribution will be $1,886 (50,000 / 26.5). While Arlene’s minimum distributions are greater than Larry’s, Arlene had the benefit of one additional year to defer the income tax on her distributions.

For plan owners with a spouse that is more than 10 years younger and is the sole beneficiary, the Joint Life Tables are used. The ages of both spouses are necessary to calculate the life expectancy in the Joint Life Table.

If in the previous example Arlene was 15 years younger the Larry, the intersection of age 70 and age 55 on the Joint Life Table would be 31.1 years for their joint life expectancy. The required minimum distribution would be $1,607 (50,000 / 31.1). This joint table provides a more accurate actuarial life expectancy for married plan owners with a spouse more than 10 years younger than the plan owner.

IRS Publication 590 provides a third table for calculating life expectancy, the Single Life Table. This table is used to calculate the life expectancy for beneficiaries of an inherited plan. Beneficiaries can be either a spouse or a non-spouse.

If the beneficiary is a non-spouse, the beneficiary’s life expectancy in the Single Life Table is used. For each subsequent year, the life expectancy decreases by one year. For example, if the non-spouse beneficiary at age 33 has a life expectancy of 50.4 years, then the life expectancy at age 34 will be 49.4 years, and the life expectancy at age 35 will be 48.4 years. When the life expectancy number goes below 1, all remaining assets must be distributed in that final year. These minimum distributions for non-spouse beneficiaries must begin in the year following the plan owner’s death.

For spouses who inherit the IRA, the rule is slightly different. Spouses are allowed to go back to the Single Life Table each year and recalculate his or her life expectancy. This can be beneficial to the spouse because certain ages on the Single Life Table decrease by less than a full year. Additionally, the spouse can wait until the year the plan owner would have attained age 70 ½ to begin taking minimum distributions. The spouse of an inherited plan will not be subject to the 10% early withdrawal penalty if under age 59 ½. A spouse would be advised to use this option if the spouse was older than the plan owner, because the plan owner will have the longer life expectancy, minimizing the required distributions.

Upon the death of a plan owner, the spouse may elect to rollover the qualified plan or IRA into their own account. If the plan owner dies prior to his or her required beginning date, the plan owner will not have any required distributions for that calendar year. Additionally, required minimum distributions are not required until the spouse’s required beginning date. In effect, the spousal rollover postpones the minimum distributions until the spouse attains age 70 ½.  The spousal rollover uses the Uniform Lifetime Table to calculate life expectancy, for all owners of plans utilize this table.

If the plan owner dies on or after the required beginning date, the plan owner will be required to make a minimum distribution in the calendar year of his or her death. However, a spousal rollover will delay subsequent minimum distributions until the spouse attains age 70 ½.

The spousal rollover can be beneficial for younger spouses for multiple reasons. First, a spousal rollover will allow the required minimum date to be deferred until the spouse reaches his or her required beginning date. Second, the spouse can designate beneficiaries, which can elongate the life expectancy for the IRA or other qualified plan. Therefore, three different life expectancies (the original owner, the surviving spouse, and the designated beneficiary of the surviving spouse) are used to “stretch out” the required minimum distributions of the plan. Third, the spouse will be able to use the Uniform Lifetime Table, which provides for additional life expectancy built into the table as compared to the Single Lifetime Table. The major drawback of the spousal rollover is that any withdrawals prior to the spouse attaining age 59 ½ will be subject to a 10% early withdrawal penalty.

This article highlights the framework to use when calculating minimum distributions. This serves as a consolidated basis for understanding the mechanics and calculations for required minimum distributions.

Bruce Stone’s Reminiscences of Kiev – A Very Interesting Story – Part 2 of 2

This is Part 2 of Bruce Stone’s story about his 1974 experience in Ukraine.  Please click here to read Part 1 of this story.

There stood, not a uniformed KGB officer, but the kindly hotel concierge.  He told me that my flight was leaving early, and that I had to get dressed and get down to the car that was waiting to take me to the airport.  I thanked him, closed the door, and nearly collapsed.

I made that flight to Sochi, and I continued on with my travels around the USSR, extending through the southern Muslim areas all the way into Siberia, in a grand circle of thousands of miles.  I met many more people, including Communist Party officials, almost all of whom were friendly and inquisitive about America.  On the day that I left the Soviet Union for my flight back to the US – the very same day that Nobel Prize author Alexsandr Solzhenitsyn was expelled from his home country – I felt relief at leaving such an oppressive culture imposed by a totalitarian government, and with a deep sense of sympathy for those good people who had to live under that system.

And yes, I spent those rubles as I traveled around the Soviet Union, and yes, after I got home, I sent many record albums and a bolt of denim cloth to my young friend in Kiev.  Eventually I lost track of him.  Today, like me, he is forty years older, and I worry for him and his safety.  Will the era of freedom that he and millions of others have encountered come to an end?  What awaits them in these troubled times?  Why do so many different wonderful people have to be in a state of uncertainty and loss of freedom for so many decades?  What can I do to help them?

I hope, of course, that common sense will prevail, and that independence and prosperity will continue for my friend from so many years ago.

Seminar Announcement – Ohio – Our Second Favorite State – Go There June 4th To See Some Amazing Presentations

On Wednesday, June 4, 2014, Alan Gassman will be a speaker at the Ohio State Bar Association’s 25th Annual Estate Planning Conference on Wealth Transfer

A brief description of Alan’s presentations is as follows:

  • Structuring Joint Exempt Step-Up Trusts (“JESTs”): Maximizing Stepped-Up Basis Planning, Fully Funding Credit Shelter Trusts with Joint Assets and Practical and Technical Aspects Thereof – With Forms

The JEST has the capacity to not only cause a step-up in income tax basis of all of a couple’s revocable trust assets on the first death, but also mechanisms to provide for full funding of a credit shelter trust from joint or separate assets, and creditor and family protection features as well.  In order to best use the JEST structure, advisors must be well versed in drafting and planning techniques which are derived from IRS Technical Advice Memorandums, Private Letter Rulings, and academic and practitioner literature.

Attendees will learn how to use the JEST forms and simplified versions thereof that have been developed by the presenter, and will be included in the materials.

  • Planning with Commercial Annuities

This presentation will cover the unique income tax and financial planning characteristics of fixed and variable annuities, and provide estate and tax planners with a number of strategies for understanding and planning with existing and contemplated contracts. With over 1 trillion dollars of US taxpayer money invested in annuity contracts, more and more clients are showing up in their estate planners offices with large annuity contracts and common misunderstandings about “guaranteed income” and “guaranteed rates of return” features.   The presentation will cover common policy features, what is actually happening inside of a policy, illustration techniques, and changes that can be made to defer income tax and reduce overall tax liability.   Minimum distribution rules akin to the IRA and pension Section 409A rules and common carrier practices will also be discussed.

Additionally, Alan will be participating in a panel discussion on Tuesday evening, June 3, 2014 sponsored by Johnson Investment Counsel and The Ohio State University.

For more information on the seminar and to register please click here.

Upcoming Seminars and Webinars

DONOR LUNCHEON AT RUTH ECKERD HALL WITH PROFESSOR JERRY HESCH IN CLEARWATER, FLORIDA

Sponsored by Gassman Law Associates, P.A. Co-sponsors invited.

Professor Jerry Hesch will be speaking at a Donor Luncheon on the topic of CHARITABLE TAX SAVINGS: HOW TO MAKE SURE THAT UNCLE SAM CONTRIBUTES HIS SHARE TO MAXIMIZE RESULTS

Date: Tuesday, April 22, 2014 | TIME TO BE DETERMINED

Location: Ruth Eckerd Hall, Clearwater, Florida

Additional Information: For additional information please contact Suzanne Ruley at sruley@rutheckerd.net or Alan Gassman at agassman@gassmanpa.com

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RUTH ECKERD HALL PLANNED GIVING MEETING

Professor Jerry Hesch will be speaking at the Ruth Eckerd Hall Planned Giving Meeting in Clearwater, Florida on the topic of INNOVATIVE CHARITABLE GIVING TECHNIQUES FOR THE WELL TUNED ESTATE PLANNER

Sponsored by Gassman Law Associates, P.A. Co-sponsors invited.

Date: Tuesday, April 22, 2014 | 4:00 p.m.

Location: Ruth Eckerd Hall, Clearwater, Florida

Additional Information: This session qualifies for 1 hour of continuing education credit for lawyers and CPA’s.  To attend please email Suzanne Ruley at sruley@rutheckerd.net or Alan Gassman at agassman@gassmanpa.com

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1st ANNUAL ESTATE PLANNER’S DAY AT AVE MARIA SCHOOL OF LAW

Speakers: Speakers will include Professor Jerry Hesch, Jonathan Gopman, Alan Gassman and others.

Alan Gassman will cover Using Estate Planning Techniques to Optimize Family Wealth Preservation.

Date: April 25, 2014

Location: Ave Maria School of Law, Naples, Florida

Sponsors:AveMariaSchool of Law, Collier County Estate Planning Council and more to be announced.

Additional Information: For more information on this event please contact visit http://www.avemarialaw.edu/estateplanning/Index.aspx

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WHAT LAWYERS AND TAX ADVISORS NEED TO KNOW WHEN PLANNING FOR SAME SEX COUPLES – UNUSUAL RULES, STRATEGIES, CHECKLISTS AND TRAPS FOR THE UNWARY

Speakers: Alan S. Gassman, Professors Jason Palmer and Rebecca Morgan from Stetson University, Jessica Lillesand of Wells Fargo and Rob Webster, Esq.

Date: Monday, April 28, 2014 | 12:30 – 2:00 p.m.

Location: Bloomberg BNA Tax & Accounting Online webinar

Additional Information:  To register for the webinar please click here.

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THE FLORIDA BAR ANNUAL WEALTH PROTECTION SEMINAR (with 2 hours of Ethics CLE credit)

Alan Gassman will be speaking at the Florida Bar Annual Wealth Protection seminar on How I Structure an Integrated Income, Estate Tax, and Asset Protection Family Plan as well as participating in a panel discussion with Barry Engel, Jerry Hesch and Denis Kleinfeld on What Are the Ethical, Legal and Administrative Liability Exposures in Wealth Protection Planning and How Do We Protect Ourselves.

Date: Thursday, May 8, 2014

Location: Hyatt Regency Downtown, Miami, Florida

Additional Information: For more information and to register please click here.

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THE JOINT EXEMPT STEP-UP TRUST AND PLANNING WITH COMMERCIAL ANNUITIES

Alan Gassman will be speaking at the Ohio Conference on two different topics: 1) Wealth Transfer on Structuring Joint Exempt Step-Up Trusts (“JESTs”): Maximizing Stepped-Up Basis Planning, Fully Funding Credit Shelter Trusts with Joint Assets and Practical and Technical Aspects Thereof – With Forms and 2) Planning with Commercial Annuities.  Mr. Gassman will also be participating in a panel discussion the evening before hosted by Johnson Investment Counsel and The Ohio State University.

Date: June 4, 2014

Location: Hilton at Easton, Columbus, Ohio

Additional Information:  For more information on the conference and to register for the conference please contact agassman@gassmanpa.com

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VERSION 226.3 OF OUR ESTATEVIEW ESTATE TAX PROJECTION AND ILLUSTRATION SOFTWARE

Alan Gassman, Ken Crotty and David Archer will be presenting a free 30 minute webinar on what is new with our EstateView software.

Speakers: Alan Gassman, Ken Crotty and David Archer

Date: Monday, June 9, 2014 | 12:30 p.m.

Location: Online webinar

Additional Information: To register for the webinar please click here.

HIRING AND TERMINATING EMPLOYEES; WHAT TO DO, WHAT TO AVOID

Speaker: Colleen Flynn, Esq., Dr. Stephanie Thomason and Alan S. Gassman, Esq.

Date: Wednesday, June 18, 2014 | 2:00 – 3:00 p.m.

Location: Bloomberg BNA Tax & Accounting Online webinar

Additional Information:  For more information, to register and a discount code please email agassman@gassmanpa.com

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40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Please send us your questions, comments and suggestions for Alan Gassman’s talk on Planning with Variable Annuities.

This presentation will cover the unique income tax and financial planning characteristics of fixed and variable annuities, and provide estate and tax planners with a number of strategies for understanding and planning with existing and contemplated contracts. With over one trillion dollars of US taxpayer money invested in annuity contracts, more and more clients are showing up in their estate planners offices with large annuity contracts and common misunderstandings about “guaranteed income” and “guaranteed rates of return” features.   The presentation will cover common policy features, what is actually happening inside of a policy, illustration techniques, and changes that can be made to defer income tax and reduce overall tax liability.   Minimum distribution rules akin to the IRA and pension Section 409A rules and common carrier practices will also be discussed.

Date: November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

Applicable Federal Rates

Below we have this month, last month’s, and the preceding month’s Applicable Federal Rates, because for a sale you can use the lowest of the 3.

SHORT TERM AFRs

MID TERM AFRs

LONG TERM AFRs

April

2014

Annual 0.28% Annual 1.81% Annual 3.32%
Semi-Annual 0.28% Semi-Annual 1.80% Semi-Annual 3.29%
Quarterly 0.28% Quarterly 1.80% Quarterly 3.28%
Monthly 0.28% Monthly 1.79% Monthly 3.27%

March

2014

Annual 0.28% Annual 1.84% Annual 3.36%
Semi-Annual 0.28% Semi-Annual 1.83% Semi-Annual 3.33%
Quarterly 0.28% Quarterly 1.83% Quarterly 3.32%
Monthly 0.28% Monthly 1.82% Monthly 3.31%

February 2014

Annual 0.30% Annual 1.97% Annual 3.56%
Semi-Annual 0.30% Semi-Annual 1.96% Semi-Annual 3.53%
Quarterly 0.30% Quarterly 1.96% Quarterly 3.51%
Monthly 0.30% Monthly 1.95% Monthly 3.50%

 The 7520 rate for April is 2.2% and for March was 2.2%



[1]                  374 B.R. 311 (Bankr. M.D. Fla. 2007).

[2]                  2009 WL 2971087 (Bankr. N.D. Ill. 2009).

The Thursday Report 4.10.2014 – Bruce Stone in Kiev, Step-Ups and 2 Pups

Posted on: April 10th, 2014

Ed Morrow, Alan Gassman and Chris Denicolo on Stepped-Up Basis Planning

Running the Numbers on the Portability Mistake

Beware – Your Referral Sources May Not Be Protected, an Article by Darryl Richards, Esq.

What if a Residential Lease Longer Than One Year Does Not Have Two Witnesses?

Bruce Stone’s Reminiscences of Kiev – A Very Interesting Story – Part 1 of 2

The Thursday Report Goes to the Dogs! Scott Kelby’s Happiness Day Website Entry

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

This report and other Thursday Reports can be found on our website at www.gassmanlawassociates.com.

Ed Morrow, Alan Gassman and Chris Denicolo on Stepped-Up Basis Planning

If you are a tax lawyer and have never read Ed Morrow’s articles on stepped-up tax planning do that next!  Cancel your Friday or Saturday night plans so that you have time for this and cuddle up with a bucket of Kentucky Fried Chicken and take a look at what Ed has to say about using Powers of Appointment.

A transcript of a recent live presentation provided by Ed, Alan and Chris is available upon request for Thursday Report readers along with the PowerPoint that we used and special tips on how to get the best value for dollar at Kentucky Fried Chicken.

What if a Residential Lease Longer Than One Year Does Not Have Two Witnesses?

Under Florida Statutes §689.01, any lease with a term of greater than one year must be in writing and signed in the presence of two witnesses.

What becomes of the lease when it is signed without witnesses? In University Square v. Congress Auto Center, 9 Fla L. Weekly Supp. (Palm Beach Circuit Court 2002), the tenant signed the lease through a real estate agent, but the landlord never signed the agreement. The landlord accepted payment and turned the keys over to the new tenant. Shortly thereafter, the landlord attempted to terminate the relationship, claiming that because they never signed the lease this was an oral contract with a month to month tenancy.

The Court looked to Demps v. Hogan, 48 So. 998 (1909), which ruled that an agreement will be enforced regardless of the statute of frauds when a seller puts the buyer in possession and the buyer has performed his obligations. The Court reasoned that applying the statute of frauds in this instance would act as a fraud against the tenant, thus the unsigned lease was found to be enforceable.

Since then, a number of court cases have found that landlords and tenants are “estopped” from invalidating a lease that is not in writing or that does not have two witnesses if the landlord put the tenant in possession.[1]

Typically, when witnesses are not present, the lease will be found to be an oral month to month tenancy. Florida Statute Section 83.03(3) states, “A tenancy at will may be terminated by either party giving notice as follows…Where the tenancy is from month to month, by giving not less than 15 days’ notice prior to the end of any monthly period.”

Essentially, the court has discretion to determine whether or not they wish to apply the statute of limitations when reviewing leases. Should it choose not to hold the lease as a valid agreement, it will default to a month to month tenancy where either party can terminate the relationship by giving appropriate notice.

Running the Numbers on the Portability Mistake

By: Alan S. Gassman, J.D., LL.M., Kenneth J. Crotty, J.D., LL.M. and Christopher J. Denicolo, J.D., LL.M.

Over and over again, we have heard many planners and commentators say that you can sit with a married couple who have a fairly long life expectancy and decide right then and there whether they should work to fund a credit shelter trust on the first death or “simply elect portability.”  These people state that this decision can be made at that time by taking into account the size of the couple’s estate, probable growth in savings, and the desire to avoid capital gains tax on the death of the surviving spouse.

We believe that in most cases this approach is completely wrong, and we feel that the numbers provided in the attached spreadsheet proves us right.

Planners and clients need to understand that the best position to be in after the death of one spouse is to have the flexibility for the surviving spouse, family, and/or advisors to decide how much should pass to a credit shelter trust that can have mechanisms which would allow for a stepped-up basis on the second death and how  much can pass to a GST exempt Q-TIP trust for the surviving spouse so as not to waste the first dying spouse’s generation skipping tax exemption. 

If portability is going to be used then the GST exemption of the first dying spouse can be preserved by allocation to a QTIP marital deduction trust that can pay income to the surviving spouse and will be considered as owned by the surviving spouse for estate tax purposes on the second death.  If an outright marital devise or an income/general power of appointment trust is used then the GST exemption of the first dying spouse will be lost.

Many planners (and commentators also it seems) do not understand or are not keeping in mind that the trustee of a credit shelter trust can disclaim some or all of a disposition to pass to a Q-TIP trust to the extent that portability is determined appropriate.  Alternatively, a credit shelter trust can actually become a Q-TIP trust, in whole or in part, by making a Clayton Q-TIP election, as described below.

This puts the family and their advisors in a great position.  They can look at expected future savings, spending, investment returns, life expectancy of the surviving spouse, and remarriage possibilities when considering credit shelter trust funding options.

For example, is the surviving spouse a wife who is likely to remarry because of her age and outlook?  If so, then the odds are fairly high that her new husband will die before she does.  If this happens her portability allowance may be reduced or lost (if her new husband has used more of his estate tax exemption than her previous husband had available on his death, or the new husband’s fiduciaries do not allow for a portability election).

Does this mean that credit shelter trusts should always be formed if a husband dies first, but not if a wife dies first?  Why would anyone try to foresee any of this?

The opposite approach of allowing for the surviving spouse who receives a devise, or a Q-TIP trust trustee to disclaim  a marital devise into a credit shelter trust will not work most of the time, because of the well known propensity of surviving spouses to be unwilling to disclaim into a credit shelter trust because of financial insecurity, and the desire to not lose the ability to appoint how the credit shelter trust assets will pass on the surviving spouse’s death.

If one spouse dies five years after documents are drafted and the documents provide for a credit shelter trust to be funded with assets of the first dying spouse, then there will be an ability to see what the federal estate tax exemption level is, what the income tax situation is, what the assets are, and who will be around to guide them.

Further, the typical married couple has a fairly short attention span and does not want to authorize lawyers and accountants to spend a few hours running numbers and explaining scenarios with this type of situation.  Isn’t it much better to wait until you know what the exact situation is after the death of one spouse, when the surviving spouse is much more willing to allow numbers to be run and alternatives to be considered?

Why do so many planners resist the idea of the JEST system that can allow the surviving spouse and advisors to permit assets considered as held by or for the surviving spouse to pass to a Credit Shelter Trust B that may facilitate a stepped-up basis in that spouse’s own assets, and avoidance of federal estate tax on the second death?

The private letter rulings and TAM cited in our JEST materials directly support the proposition that credit shelter trust funding is permitted and Credit Shelter Trust B can have features to help to substantially increase the possibility that the stepped up basis can be obtained on the first death.

Trust protectors can have the power to give the surviving spouse the ability to appoint assets to creditors of his or her estate on the second death to the extent that the surviving spouse has extra estate tax exemption available and assets within the credit shelter trusts are best situated to receive a step-up in basis on the second death.

With the above in mind, why would any planner representing a moderately successful family not keep the doors open for the above possibilities?

Within a few years we will know whether the IRS accepts the JEST trust technique, and far more about what our tax system and our clients will be and prefer.

Please do not slam the door shut on your client’s planning opportunity in view of the above.

Please click here for a demonstration on how devastating the use of portability can be.

Beware – Your Referral Sources May Not Be Protected
by Darryl Richards, Esq.

Darryl Richards is an extremely well respected and effective litigation lawyer with the Johnson Pope law firm in Tampa.

Darryl has extensive experience in litigating over the enforceability of non-competition covenants, and has written the following article recently which gets straight to the point in laying out the issues that apply with respect to the enforceability of a non-competition covenant where referral sources are a key component.

Our book Florida Law for Tax, Business and Financial Planning Advisors has extensive discussion on this topic and can be purchased on Amazon.com by clicking here.

We thank Darryl for allowing us to reprint his article, and for all of the excellent work that he has done for dozens of our clients over the years.  We estimate that 90% of Darryl’s work settles well before trial, which is one key track record item that we look for in helping clients to identify an appropriate litigator.   Below is the article Darryl wrote.

In Florida, there is no doubt that non-compete agreements to protect legitimate business interests are enforceable.  Yet, actions to enforce restrictive covenants are hotly contested.  The litigation often centers on the question of whether the restrictive covenant is reasonably necessary to protect a “legitimate business interest.”  While §542.335(1)(b), Florida Statutes, defines the term legitimate business interest, it does so without limitation.  One area which is the subject of great debate and conflicting decisions is whether referral sources are legitimate business interests which may be protected by a restrictive covenant.  Successful doctors and other professionals diligently cultivate referral sources and relationships.  Those relationships are the lifeblood of any professional practice.  Doctors and other professionals immerse themselves in professional, social and civic organizations in part to develop relationships with other professionals, community leaders and civic leaders who are potential referral sources.  To develop strong referral relationships often takes years of time, effort and expense.  Referral sources are important to any professional practice, but are referral sources legitimate business interests that may be protected by a non-compete agreement?  Under Florida law, the answer depends in part on where a professional practices.

In the Florida Keys and South Florida, one trial court found that a non-compete may be used to protect a “patient base, referral doctors, specific prospective and existing patients, and patient goodwill.”  An appellate court agreed and said that the restrictive covenant was reasonably necessary to protect legitimate business interests in a patient base, referral doctors, specific prospective and existing patients, and patient goodwill.  In South Florida, therefore, doctors and other professionals can reasonably expect enforcement of non-compete agreements to protect referral sources.

Not too far to the north in the Orlando area, however, the story is quite different.  There, a new doctor joined an established hematology practice.  That practice introduced the new doctor to patients, referral sources and helped him get privileges at local hospitals.  The practice had taken years to develop its referral sources and patient goodwill.  The new doctor had no contacts in the community and used the practice’s relationships to develop his practice.  After the new doctor established a practice using his employer’s contacts, he left and started a competing practice.  A trial court and appellate court refused to enforce a non-compete to protect referral sources, even though those courts recognized that specialists receive “a significant share of their new patients from referring physicians” and that they spend significant time and money to cultivate referral relationships.

The Florida Supreme Court, however, has decided not to resolve the conflict.  Chief Justice Lewis dissented and argued that “a uniform interpretation of §542.335 is critical not only to medical doctors but to those in all walks of life, because this legislation applies to all types of restrictive covenants.  On a daily basis, economic futures are placed at risk through the use of such covenants and reliance upon such covenants.  It is clear to me that referral professionals are ‘legitimate business interests’ subject to protection in the geographic jurisdiction of Dade and Monroe Counties.  However, those in the geographic jurisdiction of the Fifth District Court of Appeal do not have the same legal rights.”

So, where you work may decide what your rights are.  Do not let your hard work be taken from you.  There are steps you can take to protect your referral sources.  Those steps will be different based on where you are located.  If you wait until your former employee or partner is walking out the door with your referral sources, it may be too late.

Bruce Stone’s Reminiscences of Kiev – A Very Interesting Story, Part 1 of 2

Bruce Stone is more than just a top trust lawyer, author and teacher.  He is also a very well respected man who gives to his family, his community and charitable causes.  Further, he speaks fluent Russian and studied Russian for four years at the University of Florida while pursuing his degree in sociology before going to law school, perhaps hedging his bets since the gold war wasn’t over yet!”

Bruce’s story is below about an experience in the Ukraine in 1974.  It is a great read.  Enjoy it!

The recent events in the Ukraine take my mind back forty years to January 1974.  A recent law school graduate, less than a month out of law school, I was in Kiev, traveling alone around the USSR for six weeks as a tourist.  My knowledge of Russian was workably fluent, and so I was able to walk around the city and engage in conversation with people on the streets.  I stood out as an obvious American BACK THEN -with long hair, dressed in Levi blue jeans and Dingo boots.  People were friendly and unafraid to talk with me – we were in the beginning of Henry Kissinger’s “détente.”  Older men would tell me about their service in World War II, fighting as allies with the Americans.  One man who didn’t speak English told me that he knew only one phrase in English which he remembered from General Douglas MacArthur: “I shall return!”

One day a young man not much older than I came up to me on the street and struck up a conversation.  He wanted to try out his English with me.  He offered to take me around Kiev and show me things that I would not find or see on my own, not even if I had a guide.  He showed me the building where the local KGB headquarters were.  He asked me if I was Christian, and when I said yes, he told me that he was Eastern Orthodox.  He offered to take me to a Christmas service at a church in the city.  Because of the difference in the Eastern and Western calendars, I was able to celebrate Christmas in church twice, as I had left on my trip three days after our Christmas in the US.  The church was packed with worshipers, mostly older people, but there were a few younger people.  This was very special, because religion in the USSR was outlawed for being “the opium of the people” for parts of the twentieth century.

That experience, followed up by a subsequent visit to Russia in 2010, convinced me that decades of Communism were no match for the depth of religiosity among the people of the Ukraine and Russia and are an important reminder of how fortunate we are to have freedom of religion in the U.S. and most of the western world.

The day before my departure from Kiev (to Sochi, of all places), my new friend asked me if I would send him record albums and denim cloth once I got back home, if he gave me rubles to do so.  I was concerned but convinced that the request was sincere.  He gave me a large amount of rubles – not worth so much on the official government controlled exchange rate, but worth perhaps a thousand dollars at the true black market rate.  I would have to spend those rubles over the course of my travels over the remaining weeks of my journey, because I would not be able to show how I had acquired them when I left the country.  So I took the rubles, and when I got back to my hotel for that last night in Kiev, I stuffed the wad of currency into my Dingo boots, and went to sleep.

I was awakened by a telephone call at 6 a.m. the next morning.  My flight to Sochi wasn’t scheduled to leave until noon.  A male voice was telling me in Russian that I had to get up and come down to the station immediately.  I was terrified!  I had been set up in a KGB sting operation!  What should I do?  Would I be jailed for a foreign crime, or worse? My answer: simply ignore the call and pretend it hadn’t happened.  So there I sat in my room, in a nervous state of wreck.  The phone rang again ten minutes later.  The same male voice spoke with the same message, only this time more demanding: I had to go to the station immediately.  Once again I chose to ignore it.

Shortly afterward, there was a knock on my door.  My heart just about stopped beating.  In what was the moment of greatest terror in my life, I opened the door.

This is the end of Part 1 of Bruce’s story.  Part 2 will be published in next week’s Thursday Report.  See you then!

Marcia.dogs

We thank friend and visionary, Scott Kelby, for a beautiful happiness day entry for the Coca Cola website.  His profile on Marcia is below.  For the entire site you can click here.

Scott writes:

Every week for the past four years, Marcia takes her specially-trained certified therapy dogs, Layla and Ringo, to local nursing homes to visit, cuddle, and love the residents.

“I started pet therapy because my dogs bring me a joy that I must share with people who don’t have dogs anymore because they can’t. During these visits with the dogs, you see something resonate inside the residents, and when it does, you see life.”

I thought nothing captured that more than Marcia’s story of visiting a resident who had suffered a stroke, becoming completely unresponsive. But when Marcia placed Layla in the resident’s lap, she smiled. This amazed everyone at the nursing home and also demonstrates how we connect with our pets and how much happiness they can bring.

Scott Kelby is the Editor and publisher of Photoshop User Magazine and President of KelbyOne.com. He is the co-host of the highly acclaimed weekly videocast The Grid, and teaches photography, Lightroom and Photoshop workshops around the world.

Scott is an award-winning author of more than 50 books, including The Digital Photography Books, The Adobe Photoshop Book for Digital Photographers, The Adobe Photoshop Lightroom Book for Digital Photographers, and Light It, Shoot It, Retouch It: Learn Step by Step How to Go from Empty Studio to Finished Image.

Kelby.2

For more on Scott, see his blog at www.scottkelby.com.

Upcoming Seminars and Webinars

LEGAL COMPLIANCE FOR MEDICAL PRACTICES THAT USE NURSE PRACTITIONERS AND PRACTICE EXTENDERS

Date: Today, Thursday, April 10, 2014 | 5:00 p.m. (30 Minutes)

Location: Online webinar

Speakers: Cynthia Mikos, Esq. and Alan S. Gassman, Esq.

Cynthia Mikos is an excellent speaker and healthcare lawyer.  Join her fan club by attending this informative webinar.  Her materials are excellent.

Additional Information: To register for this webinar please click here.

****************************************************

FIND OUT WHAT JERRY HESCH’S LATEST THINKING IS ON SELF-CANCELLING INSTALLMENT NOTES, THE KITE CASE, PRIVATE ANNUITIES, AND TRIUMPH SPIT-FIRES

Date: Monday, April 14, 2014 | 12:30 p.m. (30 Minutes)

Location: Online webinar

Speakers: Jerry Hesch and Alan S. Gassman

Additional Information: To register for this webinar please click here.

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FICPA SUNCOAST CHAPTER MONTHLY MEETING

Alan S. Gassman will be speaking at the FICPA Suncoast Chapter’s monthly meeting on the topic of THE FLORIDA CPA’S GUIDE TO PLANNING WITH PHYSICIANS AND MEDICAL PRACTICES

Date: Thursday, April 17, 2014 | 4:00 p.m.

Location: Tampa, Florida

Additional Information: For more information on this event please email agassman@gassmanpa.com or mary@clawsonasplus.com

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DONOR LUNCHEON AT RUTH ECKERD HALL WITH PROFESSOR JERRY HESCH IN CLEARWATER, FLORIDA

Sponsored by Gassman Law Associates, P.A. Co-sponsors invited.

Professor Jerry Hesch will be speaking at a Donor Luncheon on the topic of CHARITABLE TAX SAVINGS: HOW TO MAKE SURE THAT UNCLE SAM CONTRIBUTES HIS SHARE TO MAXIMIZE RESULTS

Date: Tuesday, April 22, 2014 | 11:30 am

Location: Ruth Eckerd Hall, Clearwater, Florida

Additional Information: For additional information please contact Suzanne Ruley at sruley@rutheckerd.net or Alan Gassman at agassman@gassmanpa.com

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RUTH ECKERD HALL PLANNED GIVING MEETING

Professor Jerry Hesch will be speaking at the Ruth Eckerd Hall Planned Giving Meeting in Clearwater, Florida on the topic of INNOVATIVE CHARITABLE GIVING TECHNIQUES FOR THE WELL TUNED ESTATE PLANNER

Sponsored by Gassman Law Associates, P.A. Co-sponsors invited.

Date: Tuesday, April 22, 2014 | 4:00 p.m.

Location: Ruth Eckerd Hall, Clearwater, Florida

Additional Information: This session qualifies for 1 hour of continuing education credit for lawyers and CPA’s.  To attend please email Suzanne Ruley at sruley@rutheckerd.net or Alan Gassman at agassman@gassmanpa.com

******************************************************

1st ANNUAL ESTATE PLANNER’S DAY AT AVE MARIA SCHOOL OF LAW

Speakers: Speakers will include Professor Jerry Hesch, Jonathan Gopman, Alan Gassman and others.

Alan Gassman will cover Using Estate Planning Techniques to Optimize Family Wealth Preservation.

Date: April 25, 2014

Location: Ave Maria School of Law, Naples, Florida

Sponsors: Ave Maria School of Law, Collier County Estate Planning Council and more to be announced.

Additional Information: For more information on this event please visit http://www.avemarialaw.edu/estateplanning/Index.aspx

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WHAT LAWYERS AND TAX ADVISORS NEED TO KNOW WHEN PLANNING FOR SAME SEX COUPLES – UNUSUAL RULES, STRATEGIES, CHECKLISTS AND TRAPS FOR THE UNWARY

Speakers: Alan S. Gassman, Professors Jason Palmer and Rebecca Morgan from Stetson University, Jessica Lillesand of Wells Fargo and Rob Webster, Esq.

Date: Monday, April 28, 2014 | 12:30 – 2:00 p.m.

Location: Bloomberg BNA Tax & Accounting Online webinar

Additional Information:  To register for the webinar please click here.

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THE FLORIDA BAR ANNUAL WEALTH PROTECTION SEMINAR (with 2 hours of Ethics CLE credit)

Alan Gassman will be speaking at the Florida Bar Annual Wealth Protection seminar on How I Structure an Integrated Income, Estate Tax, and Asset Protection Family Plan as well as participating in a panel discussion with Barry Engel, Jerry Hesch and Denis Kleinfeld on What Are the Ethical, Legal and Administrative Liability Exposures in Wealth Protection Planning and How Do We Protect Ourselves.

Date: Thursday, May 8, 2014

Location: Hyatt Regency Downtown, Miami, Florida

Additional Information: For more information and to register please click here.

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THE JOINT EXEMPT STEP-UP TRUST AND PLANNING WITH COMMERCIAL ANNUITIES

Alan Gassman will be speaking at the Ohio Conference on two different topics: 1) Wealth Transfer on Structuring Joint Exempt Step-Up Trusts (“JESTs”): Maximizing Stepped-Up Basis Planning, Fully Funding Credit Shelter Trusts with Joint Assets and Practical and Technical Aspects Thereof – With Forms and 2) Planning with Commercial Annuities.  Mr. Gassman will also be participating in a panel discussion the evening before hosted by Johnson Investment Counsel and The Ohio State University.

Date: June 4, 2014

Location: Hilton at Easton, Columbus, Ohio

Additional Information:  For more information on the conference and to register for the conference please contact agassman@gassmanpa.com

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HIRING AND TERMINATING EMPLOYEES; WHAT TO DO, WHAT TO AVOID

Speaker: Colleen Flynn, Esq., Dr. Stephanie Thomason and Alan S. Gassman, Esq.

Date: Wednesday, June 18, 2014 | 2:00 – 3:00 p.m.

Location: Bloomberg BNA Tax & Accounting Online webinar

Additional Information:  For more information, to register and a discount code please email agassman@gassmanpa.com

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40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Please send us your questions, comments and suggestions for Alan Gassman’s talk on Planning with Variable Annuities.

This presentation will cover the unique income tax and financial planning characteristics of fixed and variable annuities, and provide estate and tax planners with a number of strategies for understanding and planning with existing and contemplated contracts. With over one trillion dollars of US taxpayer money invested in annuity contracts, more and more clients are showing up in their estate planners offices with large annuity contracts and common misunderstandings about “guaranteed income” and “guaranteed rates of return” features.   The presentation will cover common policy features, what is actually happening inside of a policy, illustration techniques, and changes that can be made to defer income tax and reduce overall tax liability.   Minimum distribution rules akin to the IRA and pension Section 409A rules and common carrier practices will also be discussed.

Date: November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

Applicable Federal Rates

Below we have this month, last month’s, and the preceding month’s Applicable Federal Rates, because for a sale you can use the lowest of the 3.

SHORT TERM AFRs

MID TERM AFRs

LONG TERM AFRs

April

2014

Annual 0.28% Annual 1.81% Annual 3.32%
Semi-Annual 0.28% Semi-Annual 1.80% Semi-Annual 3.29%
Quarterly 0.28% Quarterly 1.80% Quarterly 3.28%
Monthly 0.28% Monthly 1.79% Monthly 3.27%

March

2014

Annual 0.28% Annual 1.84% Annual 3.36%
Semi-Annual 0.28% Semi-Annual 1.83% Semi-Annual 3.33%
Quarterly 0.28% Quarterly 1.83% Quarterly 3.32%
Monthly 0.28% Monthly 1.82% Monthly 3.31%

February 2014

Annual 0.30% Annual 1.97% Annual 3.56%
Semi-Annual 0.30% Semi-Annual 1.96% Semi-Annual 3.53%
Quarterly 0.30% Quarterly 1.96% Quarterly 3.51%
Monthly 0.30% Monthly 1.95% Monthly 3.50%

 The 7520 rate for April is 2.2% and for March was 2.2%


[1]  See: Dixon v. Clayton, 44 So.2d 76 (Fla. 1949) (One party cannot agree to sell his realty to another that he places in possession and accept portions of purchase price  and then avail themselves to the statute of frauds to defeat specific performance);  Cottages, Miami Beach, Inc. v. Wegman, 57 So.2d 439 (Fla. 1951) (Father’s letter with promise to vest 50% interest in a home pursuant to daughter’s moving in to take care of him could not constitute a writing under statute of frauds but can be held as an oral agreement).

The Thursday Report 4.3.2014 – Two New Cases to Know About

Posted on: April 3rd, 2014

Tax Court Clears the Way for Trustee Work to Satisfy the Passive Loss Rules

Everything You Need to Know About IRS Transcripts

University of Florida Dean Search – The Final Four Who Were Not Chosen

Insurance…look again! By Dr. Jack Barrett

Justice Roberts Leads the Supremes to Allow Any Individual to Donate $5,200 per Candidate to as Many Candidates as Desired

Humor!

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

This report and other Thursday Reports can be found on our website at www.gassmanlawassociates.com.

Tax Court Clears the Way for Trustee Work to Satisfy the Passive Loss Rules

The Tax Court made the right decision in the March 27,2014 case of Frank Aragona Trust v. The Commissioner of Internal Revenue.

Here is what others have said about the case:

Tax advisers have moved one step closer to a resolution of what constitutes material participation for trusts and estates with the U.S. Tax Court’s decision in the Frank Aragona Trust case, an opinion practitioners said will give them new ammunition in fighting the net investment income tax under Section 1411 (Frank Aragona Trust v. Commissioner, T.C., No. 15392-11, 142 T.C. No. 9, 2014 BL 85221, 3/27/14).

The Tax Court’s recent decision in Frank Aragona Trust v. Commissioner concludes that a trust can indeed “materially participate” in a real-property trade or business thus qualifying for the exception found in I.R.C. sec. 469(c)(7) to the per se classification of rental real-estate activities as a passive activity under sec. 469(2). Sec. 497(c)(7)(B) tests for both personal service and materiality.

Aragona Trust is likely to result in a flood of comments and articles (the first one noted is in Tax Notes Today, See Madara, Trust Material Participation Decision Will Significantly Affect NII Tax, TNT March 28, 2014) since it will also impact how Section 1411’s tax on passive investment income will apply to the income of trusts and will be helpful for trusts which have trustees who actually work in the businesses owned by the trusts (even through employment of affiliated entities it seems).

“This case offers a number of planning opportunities for trusts to maximize the benefits of business losses and to avoid the new net investment income tax.”

Many farm holdings have now been placed into trust for the benefit of children and grandchildren.  This decision would allow “farming operations” with enough material participation by trustees and employees to fully deduct those losses and not have any income subject to the new 3.8% net investment income tax.  However, for most farmland placed in a trust that is cash rented or crop shared, these losses would most likely still not be deductible and any income would be subject to the new 3.8% tax (once trust income exceeds about $13,000).

Although a victory for the taxpayer, it will primarily apply to those larger trusts with major farming or ranching activities.

Key language from the case is as follows:

This exception is applicable if more than one-half of the personal services performed in trades or businesses by the taxpayer are performed in real-property trades or businesses in which the taxpayer materially participates and if the taxpayer performs more than 750 hours of services during the year in real-property trades or businesses in which the taxpayer materially participates.

A trust is capable of performing personal services within the meaning of I.R.C. sec. 469(c)(7). Services performed by individual trustees on behalf of the trust may be considered personal services performed by the trust.

One of the six trustees was an independent trustee. The other five trustees were Frank Aragona’s five children, including Paul V. Aragona, the executive trustee.

Three of the children-Paul V. Aragona, Frank S. Aragona, and Annette Aragona Moran-worked full time for Holiday Enterprises, LLC, a Michigan limited liability company that is wholly owned by the Trust. Holiday Enterprises, LLC, is a disregarded entity for federal income tax purposes. Holiday Enterprises, LLC, managed most of the Trust’s rental real-estate properties. It employed several people in addition to Paul V. Aragona, Frank S. Aragona, and Annette Aragona Moran . . .

The Trust conducted some of its rental real-estate activities directly, some through wholly owned entities, and the rest through entities in which it owned majority interests and in which Paul V. and Frank S. Aragona owned minority interests. It conducted its real-estate holding and real-estate development operations through entities in which it owned majority or minority interests and in which Paul V. and Frank S. Aragona owned minority interests.

The table below summarizes the activities of the six trustees on behalf of the Trust during 2005 and 2006:

Aragona Trust chart

During the 2005 and 2006 tax years, the Trust incurred losses from its rental real-estate properties. The losses were reported on the Trust’s income-tax returns, Forms 1041, “U.S. Income Tax Return for Estates and Trusts” and on Schedules E, “Supplemental Income and Loss”, and were reflected on line 5.

In the notice of deficiency, the IRS determined that the Trust’s rental real-estate activities were passive activities, a determination that increased the passive-activity losses for 2005 and 2006.

The second test is met if the taxpayer performs more than 750 hours of “services” during the year in real-property trades or businesses in which the taxpayer materially participates. Sec. 469(c)(7)(B)(ii). Both tests must be met.

The requirements of section 469(c)(7)(B) can be met only by a taxpayer who materially participates in a real-property trade or business. This is because the one-half-of-personal-services test, the 750–hour test, and the special rule for closely held C corporations all presuppose that the taxpayer materially participates in real-property trades or businesses. Sec. 469(c)(7)(B)(i) and (ii); see sec. 469(c)(7)(D); see also sec. 1 .469–9(c)(3), Income Tax Regs.

Section 469(h) provides that for the purposes of section 469 a taxpayer is treated as materially participating in an activity only if the taxpayer is involved in the operation of the activity on a basis which is regular, continuous, and substantial.

Thus, a taxpayer is treated as materially participating in real-property trades or businesses if the taxpayer is involved in the operation of real-property trades or businesses on a basis which is regular, continuous, and substantial.

For the section 469(c)(7) exception to apply, there must be “personal services performed * * * by the taxpayer”. Sec. 469(c)(7)(B)(i). Because “[p]ersonal services” are defined by regulation as “work performed by an individual in connection with a trade or business”, the IRS contends that a trust cannot perform personal services. See sec. 1.469–9(b)(4), Income Tax Regs. Therefore, the IRS contends, a trust cannot qualify for the section 469(c)(7) exception.

The IRS argues that a trust is incapable of performing “personal services” because the regulation defines “personal services” to mean “any work performed by an individual in connection with a trade or business”. Sec. 1.469–9(b)(4), Income Tax Regs. We reject the IRS’s argument. A trust is an arrangement whereby trustees manage assets for the trust’s beneficiaries.

Indeed, if Congress had wanted to exclude trusts from the section 469(c)(7) exception, it could have done so explicitly by limiting the exception to “any natural person”. In section 469(i), the Internal Revenue Code does exactly that. Section 469(i) grants a $25,000 allowance to “any natural person” who fulfills certain requirements. That Congress did not use the phrase “natural person” but instead used the word “taxpayer” in section 469(c)(7) suggests that Congress did not intend to exclude trusts from the section 469(c)(7) exception, despite what the IRS argues here.

The IRS’s fallback position is that even if some trusts can qualify for the section 469(c)(7) exception, the trust does not qualify because it did not materially participate in real-property trades or businesses. The IRS concedes that the Trust’s real-estate operations qualify as real property trades or businesses. Therefore the question to be resolved is whether the Trust materially participated in its real-estate operations. We hold that it did so.

Section 469(h) supplies the definition of what it means to materially participate in an activity. By that definition, a taxpayer is treated as materially participating in an activity only if the taxpayer is involved in the operations of the activity on a basis which is regular, continuous, and substantial. Sec. 469(h). Interpreting section 469(h), the Department of the Treasury has promulgated regulations for determining whether taxpayers who are individuals materially participate in an activity. See sec. 1.469–5T(a), (b), (c), and (d), Temporary Income Tax Regs., 53 Fed.Reg. 5725 (Feb. 25, 1988)

The statute does not provide a method for determining how a trust may materially participate in an activity, and no regulations have yet been promulgated for taxpayers that are trusts. See sec. 1.469–5T(g), Temporary Income Tax Regs., 53 Fed.Reg. 5727 (Feb. 25, 1988) (reserving a place for a regulation to be titled “Material participation of trusts and estates”). Therefore, we must make the determination of whether a trust materially participates in an activity in the absence of regulatory guidance.

Considering the activities of all six trustees in their roles as trustees and as employees of Holiday Enterprises, LLC, the Trust materially participated in its real-estate operations. Three of the trustees participated in the Trust’s real-estate operations full time. The Trust’s real-estate operations were substantial. The Trust had practically no other types of operations. The trustees handled practically no other businesses on behalf of the Trust. The IRS argues that because Paul V. Aragona and Frank S. Aragona had minority ownership interests in all of the entities through which the Trust operated real-estate holding and real-estate development projects and because they had minority interests in some of the entities through which the Trust operated its rental real-estate business, some of these two trustees’ efforts in managing the jointly held entities are attributable to their personal portions of the businesses, not the Trust’s portion. Despite two of the trustees’ holding ownership interests, we are convinced that the Trust materially participated in the Trust’s real-estate operations. First, Frank S. and Paul V. Aragona’s combined ownership interest in each entity was not a majority interest-for no entity did their combined ownership interest exceed 50%. Second, Frank S. and Paul V. Aragona’s combined ownership interest in each entity was never greater than the trust’s ownership interest. Third, Frank S. and Paul V. Aragona’s interests as owners were generally compatible with the Trust’s goals—they and the Trust wanted the jointly held enterprises to succeed. Fourth, Frank S. and Paul V. Aragona were involved in managing the day-to-day operations of the Trust’s various real-estate businesses.

We hold that the Trust materially participated in real-property trades or businesses. For a taxpayer who has materially participated in real-property trades or businesses, the next steps in ascertaining whether the taxpayer benefits from the section 469(c)(7) exception are (1) to determine whether more than one-half of the personal services performed in trades or businesses by the taxpayer during the year are performed in real-property trades or businesses, and (2) to determine whether the taxpayer performed more than 750 hours of services during the year in the real-property trades or businesses. As to whether the Trust qualifies for the section 469(c)(7) exception, however, the IRS has limited its arguments to the two arguments discussed above, namely (1) that trusts are categorically barred from qualifying under the section 469(c)(7) exception, and (2) that the Trust did not materially participate in real-property trades or businesses. In the context of the arguments raised in this case, therefore, we hold the Trust meets the section 469(c)(7) exception for the years at issue.

Once it is determined that the Trust qualifies under the section 469(c)(7) exception, and that therefore the Trust’s rental real-estate activities are not per se passive activities, a theoretical next step is to determine whether the Trust materially participated in its rental real-estate activities. If the Trust materially participated in its rental real-estate activities, then its rental real-estate activities are not passive activities. If the Trust did not materially participate in its rental real-estate activities, then its rental real-estate activities are passive activities.17 The IRS argues only that the Trust is not excepted by section 469(c)(7). It does not argue that-in the event that we determine that the Trust is excepted by section 469(c)(7)—the Trust did not materially participate in its rental real-estate activities. We hold that, in the context of the arguments presented in this case, the Trust’s rental real-estate activities are not passive activities.

Everything You Need to Know About IRS Transcripts

It is now relatively easy to get a comprehensive IRS transcript to show past tax payments, taxes due, and historical tax return history.

What is an IRS Transcript?

These can now be used to help assure that there has not been an identity theft or fraudulent tax refund filed for a client, and can also be used to verify the taxpayer’s income and tax filing status for various purposes.  The IRS provides these transcripts free of charge to individuals.

Many individuals may be hesitant to request their tax information due to assuming that it may create a flag on the account and trigger an audit.  We do not believe that there is any correlation between the chances of being audited and whether someone has requested their tax information.  Taxpayers who request their information are probably more likely to be compliant than the average taxpayer.

Different Types of Transcripts

There are 5 different types of transcripts that an individual can obtain.  These are as follows:

1. Tax Return Transcript – Displays the majority of the line items from your originally filed tax returns as well as any accompanying forms and/or schedules, however, this transcript does not show any changes made by the taxpayer or the IRS.

2. Tax Account Transcript – Shows any adjustments made by the taxpayer or the IRS after the tax return was filed.

3. Record of Account Transcript – Combines the information provided in the tax return and tax account transcripts.

4. Wage and Income Transcript – Displays information and data from your returns, including, but not limited to, W-2s, 1099s, 1098s, and other forms that were submitted to the IRS.

5. Verification of Non-Filing Letter – Proof from the IRS that you did not file a return for the requested year; only available after June 15th.

How to Get Your Transcript?

Transcripts can be received by mail or online.  Online is preferred because it allows you to view and print the transcript immediately, and eliminates the chances that someone from the post office or who receives your mail will obtain a copy.

The mail order transcript reportedly arrives between 5 to 7 business days after the IRS receives the request.

A third party or representative can request a transcript on behalf of an individual taxpayer, but in order to do so a Form 4506-T must be filed with the IRS.

When requesting a copy of your transcript online, you may view and print the transcript immediately. The online method allows you to choose among a tax return, tax account, record of account, wage and income transcripts or a Verification of Non-filing letter.

Step-by-Step Instructions for Getting Your IRS Transcript are as follows:

1) Go to www.irs.gov

2) Under Tools, Click “Get Transcript of Your Tax Records

3) Choose whether you want to receive your transcripts via the online method or via mail

4) If you choose the online method, your screen will look as follows. You will need to create an account if this is your first time requesting a transcript online. Proceed to follow the on-screen instructions and enter the proper information.

5) If you choose the mail method, your screen will look as follows and proceed to follow the on-screen instructions and enter the proper information.

University of Florida Dean Search – The Final Four Who Were Not Chosen

Many University of Florida alumni and others are aware of the recent new Law School Dean search, and the resulting appointment of an Interim Dean.  Apparently, none of the final four candidates were acceptable.  Most tax lawyers are very disappointed that Professor Sam Donaldson of George State University, who is a University of Florida LLM graduate and a very well known and respected speaker and author was not chosen.  He would have been a fantastic leader for the law school in our opinion.

If you are reading about what happened here you may find the following summary of the final four candidates to be of interest:

David A. Brennen:

David A. Brennen has been the Dean of the University of Kentucky College of Law since 2009 and a professor of the University since 2006. Brennen has close to 20 years of experience in the classroom and has taught at Florida A&M University, Syracuse University College of Law, the University of Richmond School of law, Mercer University School of Law and University of Georgia. Brennen received his law degree from the University of Florida in 1991 and also received his LL.M. in tax law from there. Brennen has published many books including Race and Equality Across the Law School Curriculum: The Law of Tax Exemption and he has published many articles.[1]

David Huebner:

David Huebner was the former United States Ambassador to New Zealand and Samoa. He was the first openly gay ambassador in the Obama administration. He has been celebrated as a very successful Ambassador. Before his career as Ambassador he was an international lawyer in Los Angeles, Shanghai, and New York. He graduated from Yale law school in 1986. He taught international law at the University of Southern California Gould School of Law from 1999-2007. [2]  His Wikipedia biography is very interesting.

Alex Acosta:

Alex Acosta is the Dean of Florida International University College of Law. He received his law degree from Harvard Law School. He was a member of the National Labor Relations Board as well as the U.S. Attorney for the Southern District of Florida. Acosta has been named one of the 50 most influential Hispanics in the nation by Hispanic Business Magazine twice.[3]  His Wikipedia biography is very interesting.

Sam Donaldson:

Samual A. Donaldson is a law professor at Georgia State University College of Law. He received his law degree from the University of Arizona College of Law in 1993 and has an LL.M. in tax from the University of Florida. He was a professor at the University of Washington and was an associate dean for academic administration from 2010-2012.[4]   He also prepares crossword puzzles for the New York Times and other publications.

When you enjoy the Final Four on Monday night remember that there is not always a winner.

The Gainesville Sun and The Ocala Star Banner have some interesting articles with respect to this.

Insurance…look again!

By Dr. Jack Barrett

 Barrett

Dr. John P. Barrett, a retired but very active Tampa Bay orthopedic surgeon, is an internationally known innovator, investor, philanthropist and serial entrepreneur. Dr. Barrett’s passion for investment management and research inspired him to create Successful Portfolios. Dr. Barrett can be reached via email at jpbmd@aol.com

All of us insure our automobile.  Because it’s the law.  All of us insure our home. The mortgage holder demands it.  And then there is health insurance. You will have to pay a fine in 2014 if you don’t. The federal government is getting serious. Life insurance is currently a hot topic in the Thursday report. Where are you going to buy the insurance?  So there you have it in a nutshell. Auto, home, health and life, the four horsemen of the insurance industry. But wait a minute, there is another asset that needs insuring. Auto, home, health and life alone don’t cover all the bases.  A large part of your financial well being has been left out in the cold without a coat.

You have probably guessed it by now….Your stock portfolio. This discussion is limited to stocks. There are some techniques for bonds but not today…  Looking at the bright side. In 2013, you didn’t wreck your auto, get sick and go to the hospital, your house didn’t burn down and you didn’t die. All of your insurance expired worthless. But you didn’t have to pay any deductibles either. Your out of pocket cost was only $15,000. But you’re so happy, you bought a bucket of Kentucky fried chicken for all your neighbors on New Year’s eve.

Dial back to the bear market of 2008. Your $2,000,000 IRA was cut in half (if it was all in stocks). That wasn’t a good idea anyway. Here is where it really gets interesting. Assume all your stocks were in the S&P 500(America’s largest companies). Your clever advisor alerted you to the head and shoulders top in late 2007 and advised you to buy a PUT option on the SPY. You were too busy writing an estate plan for your favorite client and dillydallied for a month. The market only lost 5% so your portfolio was worth $1,900,000. You call clever advisor and agree to buy the PUT insurance with no deductible. At the end of the bear market in April 2009 your IRA is worth $1,900,000. Four years go by, the bull market roars ahead and your IRA is worth almost $4,000,000. Your friends wish they knew how to insure their portfolios. The example is a bit of a fantasy.

We didn’t cover the specifics of option, PUT options, bonds or other techniques such as stops. The KISS system wins a bucket of Kentucky fried chicken.

Justice Roberts Leads the Supremes to Allow Any Individual to Donate $5,200 per Candidate to as Many Candidates as Desired

The U.S. Supreme Court removed limits on the amount of contributions a single person can give to candidates and party campaigns. The issue was the law that limited someone donating no more than $48,600 to federal candidates, and $74,600 to a committee in a 2 year election cycle.[5]

The 5-4 ruling kept the $5,200 limit for any single candidate but removed the limit on the total amount people can donate to different campaigns in a season. Chief Justice Roberts stated that the total limits on contributions “intrude without justification on a citizen’s ability to exercise the most fundamental First Amendment activities.” Buckley, 424 U. S., at 14.”[6]   There has been support from people in the political arena for the Supreme Court’s holding:

‘What I think this means is that freedom of speech is being upheld,’ said House Speaker John Boehner (R-Ohio). ‘You all have the freedom to write what you want to write, donors ought to have the freedom to give what they want to give.’[7]

‘The Supreme Court has once again reminded Congress that Americans have a Constitutional First Amendment right to speak and associate with political candidates and parties of their choice,’ said Sen. Minority Leader Mitch McConnell.[8]

The dissent felt the majority’s holding “creates huge loopholes in the law; and that undermines, perhaps devastates, what remains of campaign finance reform.”[9]   Supporters of the original cap agreed:

‘The Supreme Court majority continued on its march to destroy the nation’s campaign finance laws, which were enacted to prevent corruption and protect the integrity of our democracy,’ said Democracy 21 president Fred Wertheimer, a longtime advocate for election money reforms. ‘The court re-created the system of legalized bribery today that existed during the Watergate days.’[10]

Republican Sen. John McCain of Arizona, who last decade co-authored a sweeping law that put in place strict campaign finance limits, said ‘I am concerned that today’s ruling may represent the latest step in an effort by a majority of the Court to dismantle entirely the longstanding structure of campaign finance law erected to limit the undue influence of special interests on American politics.’[11]

As a result of the above we will be seeing more television commercials, more billboards, more campaign events and hopefully more information going to the American public in the upcoming elections.

Hats off to all elected officials and those who would like to be elected. 

Humor (Or Lack Thereof!)

LEGAL AFTERMATH OF FAMOUS MOVIES:

“Willy Wonka and the Chocolate Factory”

Occupational Safety and Health shut down the chocolate factory and police arrested the proprietor, Mr. Wonka, for negligence in not preventing fatal bubble gum accidents and bear attacks.  Officials from the Labor Department freed his tiny imprisoned orange workers, however, the so-called “Ooompa Loompas” were unable to assimilate into society.  A few days after their liberation they were found in diabetic comas under a bridge after trying to satisfy their sugar addiction by eating chocolate chip cake and cookies from the delectable dessert menu at a local Kentucky Fried Chicken. Federal authorities who questioned how this operation was allowed to continue for so long eventually indicted the town’s mayor, Winky Wonka, and the police chief, Wimpy Wonka. Both are being held without bail in Hershey, Pennsylvania.

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ATTORNEYS AND CPA’S TRAPPED ON CARNIVAL CRUSIE LINE FOR TAX SEMINAR RECOUNT FASCINATING TALES OF SURVIVAL:

“After the seminar, we discovered we had been drifting for three days and the crew had abandoned ship. The break out meetings on Carried Interest and Mitigation of the Statute of Limitations were so fascinating we never noticed.

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THE BALCONY SCENE IF ROMEO AND JULIET WERE ATTORNEYS

JULIET: Deny thy father, and refuse thy name, and petition in chancery court for a name change, and file before the office of vital statistics.

ROMEO: My name, dear saint, is hateful to myself, because it is an enemy to thee.  I will therefore show that my petition is filed for no ulterior or illegal purpose and granting it will not in any manner invade the property rights of others, according to Title VI, Chapter 68.07 (j).

JULIET: How camest thou hither, tell me, and wherefore? The orchard walls are high and hard to climb, and a person who, without being authorized, licensed or invited, willfully enters upon or remains in any property violates Title XLVI, Chapter 810.09 and the place death, if any of my kinsmen find thee here. Does thou love me? I know thou wilt say ‘Aye’, thou may prove false, at lover’s perjuries, they say, ‘Jove Laughs’.

ROMEO: Lady, by the blessed moon, I swear

JULIET: O, swear not by the moon, the inconstant moon.

ROMEO, Then I call the judge from “Merchant of Venice” and a stenographer.

JUDGE AND STENOGRAPHER: Hello.

ROMEO: Who will now depose me, under rule 1.310 of the rules of civil procedure, recording my oath or affirmation taken or administered before an officer authorized under s. 92.50, knowing that the penalty for perjury, under s775.082, s775.083 or s775.084 may result in imprisonment for up to one year, a fine of $1,000 dollars, or both, since this is not a legal proceeding for a capital felony.

JUDGE: Ready, my lady?

(JULIET HAS FALLEN ASLEEP)

Upcoming Seminars and Webinars

LUNCH TALK – LAW PRACTICE EFFICIENCY TIPS

Learn 30 efficiency techniques in 30 minutes – use any 3 and save hours between now and year end!

Date: Monday, April 7, 2014 | 12:30 p.m. (30 minutes)

Location: Online webinar

Speaker: Alan S. Gassman

Additional Information: To register for this webinar please visit www.clearwaterbar.org

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LEGAL COMPLIANCE FOR MEDICAL PRACTICES THAT USE NURSE PRACTITIONERS AND PRACTICE EXTENDERS

Date: Thursday, April 10, 2014 | 5:00 p.m. (30 Minutes)

Location: Online webinar

Speakers: Cynthia Mikos, Esq. and Alan S. Gassman, Esq.

Cynthia Mikos is an excellent speaker and Tampa healthcare lawyer with a nursing background.  Join her fan club by attending this informative webinar.  Her materials are excellent.

Additional Information: To register for this webinar please click here. [LINK: https://www2.gotomeeting.com/register/869219714]

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FIND OUT WHAT JERRY HESCH’S LATEST THINKING IS ON SELF-CANCELLING INSTALLMENT NOTES, THE KITE CASE, PRIVATE ANNUITIES, AND TRIUMPH SPIT-FIRES

Date: Monday, April 14, 2014 | 12:30 p.m. (30 Minutes)

Location: Online webinar

Speakers: Jerry Hesch and Alan S. Gassman

Additional Information: To register for this webinar please click here. [LINK:  https://www2.gotomeeting.com/register/437023986]

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FICPA SUNCOAST CHAPTER MONTHLY MEETING

Alan S. Gassman will be speaking at the FICPA Suncoast Chapter’s monthly meeting on PLANNING WITH PHYSICIANS AND MEDICAL PRACTICES

Date: Thursday, April 17, 2014 | 4:00 p.m.

Location: Tampa, Florida

Additional Information: For more information on this event please email agassman@gassmanpa.com or mary@clawsonasplus.com

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DONOR LUNCHEON AT RUTH ECKERD HALL WITH PROFESSOR JERRY HESCH IN CLEARWATER, FLORIDA

Sponsored by Gassman Law Associates, P.A.

Professor Jerry Hesch and 29 time nominee and Broadway show producer Zev Buffman will be speaking at a Donor Luncheon on the topic of CHARITABLE TAX SAVINGS: HOW TO MAKE SURE THAT UNCLE SAM CONTRIBUTES HIS SHARE TO MAXIMIZE RESULTS.

Date: Tuesday, April 22, 2014 | 12:00 p.m.

Location: Ruth Eckerd Hall, Clearwater, Florida

Additional Information: For additional information please contact Suzanne Ruley at sruley@rutheckerd.net or Alan Gassman at agassman@gassmanpa.com

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RUTH ECKERD HALL PLANNED GIVING MEETING

Professor Jerry Hesch will be speaking at the Ruth Eckerd Hall Planned Giving Meeting in Clearwater, Florida on the topic of INNOVATIVE CHARITABLE GIVING TECHNIQUES FOR THE WELL TUNED ESTATE PLANNER

Sponsored by Gassman Law Associates, P.A.

Date: Tuesday, April 22, 2014 | 4:00 p.m.

Location: Ruth Eckerd Hall, Clearwater, Florida

Additional Information: This session qualifies for 1 hour of continuing education credit for lawyers and CPA’s.  To attend please email Suzanne Ruley at sruley@rutheckerd.net or Alan Gassman at agassman@gassmanpa.com

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1st ANNUAL ESTATE PLANNER’S DAY AT AVE MARIA SCHOOL OF LAW

Speakers: Speakers will include Professor Jerry Hesch, Jonathan Gopman, Alan Gassman and others.

Alan Gassman will cover Using Estate Planning Techniques to Optimize Family Wealth Preservation.

Date: April 25, 2014

Location: Ave Maria School of Law, Naples, Florida

Sponsors:AveMariaSchool of Law, Collier County Estate Planning Council and more to be announced.

Additional Information: For more information on this event please contact visit http://www.avemarialaw.edu/estateplanning/Index.aspx

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WHAT LAWYERS AND TAX ADVISORS NEED TO KNOW WHEN PLANNING FOR SAME SEX COUPLES – UNUSUAL RULES, STRATEGIES, CHECKLISTS AND TRAPS FOR THE UNWARY

Speakers: Alan S. Gassman, Professors Jason Palmer and Rebecca Morgan from Stetson University, Jessica Lillesand of Wells Fargo and Rob Webster, Esq.

The speakers will present a comprehensive discussion of practical and technical items that need to be considered when representing same gender couples, with rubber meets the road strategies, partner agreement provisions, and discussion by experts of planning techniques and traps for the unwary.  This presentation goes well beyond the common discussion of constitutional rights and social considerations to provide practitioners with what they need to know to represent same gender couples and their families.”

Date: Monday, April 28, 2014 | 12:30 – 2:00 p.m.

Location: Bloomberg BNA Tax & Accounting Online webinar

Additional Information:  To register for the webinar please click here [LINK: http://www.bna.com/lawyers-tax-advisors-w17179889147/]  You can use discount code

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THE FLORIDA BAR ANNUAL WEALTH PROTECTION SEMINAR (with 2 hours of Ethics CLE credit)

I think that we have hit the ball well out of the ballpark for the May 8, 2014 Annual Wealth Protection Seminar.

Please check out the schedule below and come and see us.

We are particularly looking forward to the ethical panel discussion that will include reviewing important components for fee agreements, conflict of interest rules, liability avoidance for professionals, and comprehensive practice checklists.

Date: Thursday, May 8, 2014

Speakers and Agenda:

8:30 a.m. B 9:00 a.m. – How I ask Questions and Obtain the Right Documents and Information to Develop a Client=s Asset Protection Profile. 

Speaker: Denis Kleinfeld, Esq.

9:00 a.m. B 9:40 a.m. – How I Structure an Integrated Income, Estate Tax, and Asset Protection Family Plan. 

Speaker: Alan S. Gassman, Esq.

9:40 a.m. B 10:30 a.m. – The New Designer Entities B How to Use These Cutting Edge Tools to Protect Wealth.

Speaker: Howard Fisher, Esq. and Alex Fisher, Esq.

10:30 a.m. B 10:45 a.m.  Break (Mingle and Exchange Cards)

10:45 a.m. B 11:30 a.m. – What the Last Two Years of Legal Developments and Litigation Tells Us About Protective Planning With Trust and Associated Entities

Speaker: Barry Engel, Esq.

11:30 a.m. B 12:15 p.m. – What The Case Law Tells Me About Charging Orders and Declaratory Judgments.

Speaker: Jay Adkisson, Esq.

12:15 p.m. B 1:00 p.m. Lunch (Box Lunch) – Income and Estate Tax Issues For 2014 B Q & A.

Speaker: Jerry Hesch, Esq.

1:00 p.m. B 2:30 p.m. – What We Think You Need to Know About Asset Protection Litigation and Obtaining A Good Result For the Client.

Speakers: Jay Adkisson, Howard Fisher, Alex Fisher and Denis Kleinfeld.

2:30 p.m. B 2:45 p.m.  Break

2:45 p.m. B 4:15 p.m. – What are the Ethical, Legal and Administrative Liability Exposures in Wealth Protection Planning and How Do We Protect Ourselves.

Speakers: Barry Engel, Alan Gassman, Jerry Hesch, and Denis Kleinfeld.

4:15 p.m. B 5:00 p.m. – Open Forum Q & A

Speakers: Barry Engel, Jay Adkisson, Howard Fisher, Jerry Hesch, Alan Gassman and Denis Kleinfeld.

Location: Hyatt Regency Downtown, Miami, Florida

Additional Information: For more information please contact agassman@gassmanpa.com

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THE JOINT EXEMPT STEP-UP TRUST and ANOTHER TOPIC TO BE DETERMINED

Alan Gassman will be speaking at the Ohio Conference on Wealth Transfer on The Joint Exempt Step-Up Trust as well as participating in a panel discussion the evening before in Columbus, Ohio.

Date: June 4, 2014

Location: Hilton at Easton, Columbus, Ohio

Additional Information:  For more information on the conference and to register for the conference please contact agassman@gassmanpa.com

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HIRING AND TERMINATING EMPLOYEES; WHAT TO DO, WHAT TO AVOID

Speaker: Colleen Flynn, Esq., Dr. Stephanie Thomason and Alan S. Gassman, Esq.

Date: Wednesday, June 18, 2014 | 2:00 – 3:00 p.m.

Location: Bloomberg BNA Tax & Accounting Online webinar

Additional Information:  For more information, to register and a discount code please email agassman@gassmanpa.com

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40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Please send us your questions, comments and suggestions for Alan Gassman’s talk on Planning with Variable Annuities.  He will also discuss how to spreadsheet and illustrate mutual fund characteristics, variable life insurance policies, whole life policies, and how other products work in the taxable and non-taxable world, and how to evaluate whether real savings occur from tax deferral.

Date: November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

Applicable Federal Rates

Below we have this month, last month’s, and the preceding month’s Applicable Federal Rates, because for a sale you can use the lowest of the 3.

SHORT TERM AFRs

MID TERM AFRs

LONG TERM AFRs

April

2014

Annual 0.28% Annual 1.81% Annual 3.32%
Semi-Annual 0.28% Semi-Annual 1.80% Semi-Annual 3.29%
Quarterly 0.28% Quarterly 1.80% Quarterly 3.28%
Monthly 0.28% Monthly 1.79% Monthly 3.27%

March

2014

Annual 0.28% Annual 1.84% Annual 3.36%
Semi-Annual 0.28% Semi-Annual 1.83% Semi-Annual 3.33%
Quarterly 0.28% Quarterly 1.83% Quarterly 3.32%
Monthly 0.28% Monthly 1.82% Monthly 3.31%

February 2014

Annual 0.30% Annual 1.97% Annual 3.56%
Semi-Annual 0.30% Semi-Annual 1.96% Semi-Annual 3.53%
Quarterly 0.30% Quarterly 1.96% Quarterly 3.51%
Monthly 0.30% Monthly 1.95% Monthly 3.50%

The 7520 rate for April is 2.2% and for March was 2.2%

****************************************************

1http://www.law.uky.edu/index.php?hid=87&parentpid=47&sectiontitle=Faculty

2http://en.wikipedia.org/wiki/David_Huebner

3http://en.wikipedia.org/wiki/R._Alexander_Acosta

4http://www.law.ufl.edu/flalaw/2014/02/four-selected-as-final-dean-candidates/

5 Justices strike down political donor limits http://politicalticker.blogs.cnn.com /2014/04/02/justices-strike-down-political- donor-limits/

6 McCutcheon v. FEC, 572 U. S. 40 (2014).

7 Justices strike down political donor limits http://politicalticker.blogs.cnn.com /2014/04/02/justices-strike-down-political- donor-limits/

8Id.

572 U. S. 30 (2014).

10 Justices strike down political donor limits http://politicalticker.blogs.cnn.com /2014/04/02/justices-strike-down-political- donor-limits/

11 Justices strike down political donor limits http://politicalticker.blogs.cnn.com /2014/04/02/justices-strike-down-political- donor-limits/

The Thursday Report 3.27.14 – Humor, Referrals, and IPAs

Posted on: March 27th, 2014

New Corporate Filing Forms in Florida for 2014

Florida Supremes: Baby. Baby. Where Did Our Cap Go?

Free R-Rated Meet and Greet Cocktail Hour on April 7 – Secrets of the Megastars – With National Treasure Zev Buffman – Producer of 40 Broadway Shows

The Balanced Scorecard of an IPA

The Other IPA – A Balanced Beverage History

Jerry Hesch’s Triple Play

Attorney Humor!

Free Phone call to Improve Your Estate Planning and/or Tax Practice – For Lawyers Only

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

This report and other Thursday Reports can be found on our website at www.gassmanlawassociates.com

New Corporate Filing Forms in Florida for 2014

 The Florida Department of State, Division of Corporations has updated the corporate filing forms for 2014.  For LLCs, the new forms comply with Chapter 605, Florida Statutes and the Department of State is no longer accepting the “old” forms.  Articles of Organization and Articles of Amendment for Florida LLCs using the “old” form will be rejected by the Department of State and it will be necessary to re-submit the filing using the new 2014 form to receive a filing acknowledgment.

 All of the new corporate filing forms are available on the Division of Corporations website (www.sunbiz.org).  From the home page, simply click on “Forms” from the top right tool bar and choose the entity type to pull up all available forms in PDF format.

Florida Supremes – Baby, Baby, Where Did Our Cap Go?

In a decision that has surprised and disappointed many of us, the Florida Supreme Court found that the 2003 medical-malpractice law $500,000 cap on pain and suffering damages violates the Equal Protection Clause of the Florida Constitution.

 The Court also found that the rationale for the Legislation in 2003 was based upon faulty conclusions by the Legislature when it determined that there was a shortage of doctors in Florida resulting from the malpractice crisis.

 Much has already been written about this case, which was released on March 13 (everybody’s lucky day!).

 The following excerpts from the Court’s decision should be of interest to those who have not read it:

 Estate of Michelle Evette McCall, et al., Petitioners,
                                   vs.
United States Of America, Respondent

 Lewis, J. – This case is before the Court to answer four questions of Florida law certified by the United States Court of Appeals for the Eleventh Circuit that are determinative of a cause pending in that court and for which there appears to be no controlling precedent.

 Because this case involves a wrongful death, we rephrase the first certified question as follows:

 DOES THE STATUTORY CAP ON WRONGFUL DEATH NONECONOMIC DAMAGES, FLA. STAT. § 766.118, VIOLATE THE RIGHT TO EQUAL PROTECTION UNDER ARTICLE I, SECTION 2 OF THE FLORIDA CONSTITUTION?

 As explained below, we answer the first rephrased certified question in the affirmative and hold that the cap on wrongful death noneconomic damages provided in section 766.118, Florida Statutes, violates the Equal Protection Clause of the Florida Constitution.

 In this case, the district court limited the Petitioners’ recovery of wrongful death noneconomic damages to $1 million upon application of section 766.118(2), Florida Statutes (2005), Florida’s statutory cap on wrongful death noneconomic damages based on medical malpractice claims.  Id.¹  The district court denied a motion filed by the Petitioners that challenged the constitutionality of Florida’s wrongful death statutory cap under both the Florida and United States Constitution.  Id.  The district court also denied the Petitioners’ motion to alter or amend the judgment.  Id. at 947-48.

On appeal to the Eleventh Circuit, the Petitioners challenged the district court’s rulings with regard to both the application and the constitutionality of the cap mandated by Florida law on wrongful death noneconomic damages for medical malpractice claims.  Id. at 948.

The Eleventh Circuit affirmed the application of the statutory cap on noneconomic damages and held that the statute does not constitute a taking in violation of article X, section 6, of the Florida Constitution.  Id. at 953.  The federal appellate court also held that the cap does not violate either the Equal Protection Clause or the Takings Clause of the United States Constitution.  Id.  However, the Eleventh Circuit granted a motion filed by the Petitioners to certify four questions to this Court regarding the remaining challenges to the statutory cap under the Florida Constitution.  Id. 

EQUAL PROTECTION

All natural persons, female and male alike, are equal before the law.  Art. I, § 2, Fla. Const.  This Court has stated “[t]he constitutional right of equal protection of the laws means that everyone is entitled to stand before the law on equal terms with, to enjoy the same rights as belong to, and to bear the same burden as are imposed upon others in a like situation.”  Caldwell v. Mann, 26 So. 2d 788, 790 (Fla. 1946).

Unless a suspect class or fundamental right protected by the Florida Constitution is implicated by the challenged provision, the rational basis test will apply to evaluate an equal protection challenge.

Having carefully considered the arguments of both parties and the amici, we conclude that section 766.118 violates the Equal Protection Clause of the Florida Constitution under the rational basis test.  The statutory cap on wrongful death noneconomic damages fails because it imposes unfair and illogical burdens on injured parties when an act of medical negligence gives rise to multiple claimants.  In such circumstances, medical malpractice claimants do not receive the same rights to full compensation because of arbitrarily diminished compensation for legally cognizable claims.  Further, the statutory cap on wrongful death noneconomic damages does not bear a rational relationship to the stated purpose that the cap is purported to address, the alleged medical malpractice insurance crisis in Florida.

The Alleged Medical Malpractice Crisis

In addition to arbitrary and invidious discrimination between medical malpractice claimants, the cap on noneconomic damages also violates the Equal Protection Clause of the Florida Constitution because it bears no rational relationship to a legitimate state objective, thereby failing the rational basis test.  See Fla. Nurses Ass’n, 508 So. 2d at 319.

The Florida Legislature attempted to justify the cap on noneconomic damages by claiming that “Florida is in the midst of a medical malpractice insurance crisis of unprecedented magnitude.”

In enacting the statutory cap on noneconomic damages, the Legislature relied heavily on a report prepared by the Governor’s Select Task Force on Heathcare Professional Liability Insurance (Task Force), which concluded that “actual and potential jury awards of noneconomic damages (such as pain and suffering) are a key factor (perhaps the most important factor) behind the unavailability and un-affordability of medical malpractice insurance in Florida.”  Report of Governor’s Select Task Force on Healthcare Professional Liability Insurance (Task Force Report) (Jan. 29, 2003), at xvii.

To evaluate the constitutionality of the cap on noneconomic damages imposed by section 766.118, we are not required to accept the findings of the Legislature or the Task Force at face value.

Our consideration of the factors and circumstances involved demonstrates that the conclusions reached by the Florida Legislature as to the existence of a medical malpractice crisis are not fully supported by available data.  Instead, the alleged interest of health care being unavailable is completely undermined by authoritative government reports.  Those government reports have indicated that the numbers of physicians in both metropolitan and non-metropolitan areas have increased.  For example, in a 2003 report, the United States General Accounting Office found that from 1991 to 2001, Florida’s physician supply per 100,000 people grew from 214 to 237 in metropolitan areas and from 98 to 117 in nonmetropolitan areas, or percentage increases of 10.7 and 19, respectively.  Physician Workforce: Physician Supply Increased In Metropolitan and Nonmetropolitan Areas but Geograpic Disparities Persisted, No. GAO-04-124, (October 31, 2003), at 23, available at http://www.gao.gov/new.items/d04124.pdf.  Thus, during this purported crisis, the numbers of physicians in Florida were actually increasing, not decreasing.

 Additionally, an analysis of claim activity certainly does not provide a rational basis for the clear discrimination presented by the legislation.  Although assertions of a malpractice insurance crisis are often accompanied by images of runaway juries entering verdicts in exorbitant amounts of nonecomonic damages, see, e.g., Task Force Report at xvii, one study revealed that in Florida cases which resulted in payments of $1 million or more over a fourteen-year-period, only 7.5 percent involved a jury trial verdict.

 Such statistics led the authors of the study to conclude that jury trials constitute only a very small portion of medical malpractice payments.  Id. At 1345.  The authors also concluded that “tort reform efforts focused on jury verdicts are misdirected, at least with respect to $1 million verdicts in Florida.  Not only do jury trials constitute only a small portion of $1 million payments, [but] the settlements following verdicts tend to be substantially less than the jury awards.”  Id. at 1381 (emphasis is supplied).6   Thus, available data indicates the Task Force’s finding that noneconomic damage awards by juries are a primary cause of the purported medical malpractice crisis in Florida is most questionable.

 The Task Force stated that it “believes” the alleged crisis “could get worse in the coming years…Medical malpractice insurance premiums may become unaffordable, and/or coverage may become unavailable at any price to many physicians and hospitals.”  See Task Force Report, at 211-12 (emphasis supplied).  Further, despite blaming “actual and potential jury awards of noneconomic damages” for this ominous prediction, Task Force Report at xvii, the Task Force recognized that there are other explanations for the dramatic rise in medical malpractice insurance premiums.

 For example, the Task Force Report notes that in the opinion of Joanne Doroshow, Executive Director of the Center for Justice and Democracy:

 [T]his so-called “crisis” is nothing more than the underwriting cycle of the insurance industry, and driven by the same factors that caused the “crises” in the 1970s and 1980s.  According to…Doroshow, with each crisis, there has been a severe drop in the investment income for insurers, which has been compounded by sever [sic] under-pricing of insurance premiums in the prior years… [D]uring years of high interest rates or excellent insurer profits that are invested for maximum return, the insurance companies engage in fierce competition for premium dollars by selling under-priced premiums and insuring very poor risks.  Then…when investment income drops, either due to increases in interest rates or the stock market, or due to low income resulting from unbearably low premiums, the insurance industry responds by sharply increasing premiums and reducing coverage.

 …The tort reform changes in the 1980s had nothing to do with the flattening of rates.  The flattening was caused instead by modulations in the insurance cycle throughout the country.

 Also, the deputy director of the Florida Office of Insurance Regulation testified he had found no evidence to suggest that there had been a large increase in the number of frivolous lawsuits filed in Florida, nor was there any evidence of excessive jury verdicts in the prior three years.  Testimony of Steve Roddenberry, Senate Judiciary Committee Meeting, July 14, 2003, at 3, 10.

 During the subsequent floor debate, the following dialogue occurred between a senator and the Chairman of the Senate Judiciary Committee:

SENATOR: Were you able to determine whether or not there is an access to health care crisis in terms of the number of doctors licensed to practice medicine, the number of hospital closures or the number of emergency rooms closed?

CHAIRMAN: [T]his is not what I found.  What the testimony was from both the Department of Health, the Agency for Health Care Administration and various other people…was that there, in fact, are more doctors licensed to practice today in the State of Florida than there were five years ago.

 Applications to the medical schools in the State of Florida are up and have been up consistently for the past, for the past number of years.

 And also that emergency rooms have not been closing as a result of medical malpractice.

 As a matter of fact, the Department of Health and the Agency for Health Care Administration both testified under oath that they could not cite any incidents where because of a medical malpractice crisis patients were denied some type of care or directed someplace else.

 Based upon these statements and reports, although medical malpractice premiums in Florida were undoubtedly high in 2003, we conclude the Legislature’s determination that “the increase in medical malpractice liability insurance rates is forcing physicians to practice medicine without professional liability insurance, to leave Florida, to not perform high-risk procedures, or to retire early from the practice of medicine” is unsupported.

 The Impact of Damage Caps on the Alleged Crisis

 Even if these conclusions by the Legislature are assumed to be true, and Florida was facing a dangerous risk of physician shortage due to malpractice premiums, we conclude that section 766.118 still violates Florida’s Equal Protection Clause because the available evidence fails to establish a rational relationship between a cap on noneconomic damages and alleviation of the purported crisis.

 Thus, even if there had been a medical malpractice crisis in Florida at the turn of the century, the current data reflects that it has subsided.  No rational basis currently exists (if it ever existed) between the cap imposed by section 766.118 and any legitimate state purpose.  See generally Fla. Nurses Ass’n, 508 So. 2d at 319.  At the present time, the cap on noneconomic damages serves no purpose other than to arbitrarily punish the most grievously injured or their surviving family members.  Moreover, it has never been demonstrated that there was a proper predicate for imposing the burden of supporting the Florida legislative scheme upon the shoulders of the persons and families who have been most severely injured and died as a result of medical negligence.  Health care policy that relies upon discrimination against Florida families is not rational or reasonable when it attempts to utilize aggregate caps to create unreasonable classifications.  Accordingly, and for each of these reasons, the cap on wrongful death noneconomic damages in medical malpractice actions does not pass constitutional muster.

 CONCLUSION

 Based on the foregoing, we answer the first rephrased certified question in the affirmative and hold that the cap on wrongful death noneconomic damages in section 766.118, Florida Statutes, violates the Equal Protection Clause of the Florida Constitution.

 A full copy of the decision can be viewed by clicking here.

 The good news is that as a practical matter we had caps for over 11 years, and to some extent the malpractice insurance industry actuaries have already taken the possibility of the cap being lifted into account in setting rates.

 Nevertheless, this will clearly cause significant gyrations in the next Legislative session and elections process as the trial lawyers and the medical profession gear up again to raise monies and spend political capital on a situation that is certainly not helping the practice of medicine or medical professionals.

 Whether public sentiment will be sufficient to enable those who support positions to have a Florida Constitutional Amendment to override the Equal Protection Clause remains to be seen.

Buffman

The Balanced Scorecard of an IPA
By Pariksith Singh, MD

How does one evaluate an IPA (Independent Physicians’ Association)? This is an important question not only in assessing its value for sale or acquisition but also to measure its success, review the implementation of strategy and identify its key functions and metrics. We have seen the sale of several IPAs in the recent past in Tampa Bay and an interest among physician entrepreneurs in creating IPAs and attempt to make a fast buck.  In this endeavor, they seem to look only at the financial balance sheet or returns of the organization and forget the other measurements that are key in the appraisal of an IPA.

The Balanced Scorecard (BSC) is a concept first articulated in a 1992 Harvard Business Review article by Robert S Kaplan and David Norton.  It comprises of four perspectives which are necessary to have a composite snapshot of the state of health of a business. These perspectives are:

    1. The Financial Perspective
    2. The Customer Perspective
    3. The Business Process Perspective
    4. The Learning and Growth Perspective

In the book ‘The Balanced Scorecard: You Can’t Drive a Car Solely Relying on a Rearview Mirror’, Kaplan later expanded on this approach. It is ‘estimated that at least 40% of the Fortune 1000 companies use this methodology. ‘

 In my opinion, a BSC is the best way in which one can measure the pulse of an IPA, although given the specific nature of an IPA, certain new perspectives must be added. These additional perspectives should be:

    1. The Regulatory Perspective
    2. The Legal Perspective
    3. The Brand Perspective

If an IPA deals with Medicare lives and federally-funded dollars, the regulatory aspect of its functioning assumes an even more critical metric for any violation can threaten its very existence. Such a perspective should include compliance with HIPAA, OSHA, Stark laws, anti-kickback statutes, fee-splitting, Balanced Budget Amendments, the Affordable Care Act, etc. In light of some IPAs losing their contracts with HMOs recently, such a tally becomes immediate and significant.

An IPA is nothing if not relationships and contracts. If contracts do not exist, the IPA has no foundation and its entire structure collapses. Thus, strong and compliant contracts that are transparent and clear with powerful disincentives for breach would be essential. Without such contracts in place with coherent and ethical legal counsel to back it up, an IPA would founder and be unable to grow. Whatever growth and profits are accomplished are tenuous and expose it to further danger and vulnerability. It is my recommendation that all fees including administrative and re-insurance expenses be properly disclosed and attested by affiliates at the time of induction to the IPA. It is also my belief that the liabilities to the business be considered as one of the most critical sections of the BSC, i.e., the number of lawsuits against the organization, the potential damages from such lawsuits, the confidentiality of its data and reports or their loss, the nature of competition and poaching of its affiliates, conflicts in its relationships with the HMOs and potential OIG (Office of Inspector General) investigations of its practices.

The Brand of an IPA is the ‘X’ factor, its mystique and inevitability, uniqueness and desirability, customer loyalty and credibility of the organization and its officers. It is the factor that gives it its ‘oomph’ and saleability, and without the power of the Brand, an IPA becomes an also-ran.

Thus, the valuation of an IPA cannot be done solely on a fiscal basis. All the perspectives mentioned above must be calculated and counted. While the financials remain an important aspect of any valuation, they certainly are not the most important, or even, the largest component of a BSC for an IPA. At best, the fiscal status of an IPA can be used only if the organization scores a 100 on all other measures on its scorecard. At worst, the financials have to be completely discarded if the basics of business are not in place. We have seen that recently when a Fortune 500 corporation refused to take ownership or invest in an IPA solely because there were lawsuits against it for reasons of compliance.

The fundamentals of an IPA still remain the state of its compliance, the strength of its relationships and services, its feedback systems, employees, data and processes. Without these in place and sealed protectively, all one shall find is a house of cards. And the big problem with a house of cards is that the bigger it gets, the more vulnerable it becomes to sudden collapse. An IPA has to be based on an extremely strong foundation even though it needs to be nimble and flexible as regulations change and payment methodologies vary as we have seen with CMS in recent years.

When we measure the Business Process Perspective, we should measure the MRA, HEDIS, HOS, CAHPS and care management analyses, along with length of stays, continuity of care, ER visits, close follow-ups on nursing homes and hospitals, and post-acute care and post discharge care. The Operational metrics would also study the infra-structure, the state of IT, web services, reporting and sharing of information among the executives and owners.

The Customer Perspective should pay close attention to physician and employee satisfaction and retention, response rates and reputation. When practices are not wholly owned, this becomes an even more serious concern for any IPA. Also, the strength and managed care savvy of affiliates and risk of losses due to poor utilization by them cannot be ignored. If the IPA does not see itself as a fiscal intermediary and does not have adequate protections against a downturn and that it is in a risk business where the Pareto rule can get easily skewed from 20-80 to 1-99 and if the reserves are not strong or re-insurance is weak, all the juggling of numbers is of scarce significance.

An IPA is not any stronger by randomly signing up affiliates without interest, aptitude or drive to master managed care; in fact, the very opposite is true. Without proper infra-structure in place, an IPA should not attempt to grow. The continuous education and training of its employees is a sine qua non with any growth and a culture of compliance, quality and excellence should be a part of its DNA. The best IPA is a Learning Organization and a Knowledge-Creating Organization.

The concept of a Poison Pill in the valuation of any IPA is of much use. If the risk to the IPA due to significant legal or regulatory liability is high, it completely negates any financial valuation of the IPA almost like a junk bond and, in fact, may give it a negative status. We see this frequently in the market place when we see how the credit agencies appraise a company or a nation. Recently, we have seen how Universal Health Care, Inc, a Medicare Advantage plan, was taken over by a receiver thereby reducing its value to zero and with significant legal and financial liability to its executives and owners, when the Office of Insurance Regulations (OIR) decided that the plan was out of compliance. An IPA may come under the purview of the OIR too in a similar fashion.

Eventually, one must remember that any metric is only a reflection of an overall strategy, vision and mission, and the core competence of an IPA. If the IPA loses sight of these, no amount of tactical quantification would suffice in making it healthy and sustainable. Strategy must be integrated completely with the processes and the core strength of the entity should never be compromised.  For if the core is forsaken, all is forsaken and the vitality of the organization may be irretrievably lost.

The Other IPA – A Balanced Beverage History

India Pale Ale or IPA is a hoppy beer style within the broader category of pale ale. It was first brewed in England in the 19th century. IPA was born out of necessity.  When the British were colonizing India, the beers they sent down to their troops kept spoiling during the long sea voyage. Before refrigeration and pasteurization, the brewer’s only weapons against spoilage were alcohol and hops.  Alcohol and hops provide an unfriendly environment for microbes, preventing the growth of the bacteria that causes sourness. With an extra healthy dose of hops and alcohol, both having great preservative value, their problems were solved, and the world had another distinctive beer style.

Among the first brewers known to export beer to India was George Hodgson of the Bow Brewery. Ships transported Hodgson’s beers to India, among them his October beer, which benefitted exceptionally from conditions of the voyage and was highly regarded among its consumers in India. Demand for the export style of pale ale, which had become known as India pale ale, developed in England around 1840 and India pale ale became a popular product in England.

The IPA style of beer has a whole lot going for it. First and foremost is taste, which some could argue is an acquired one. The flavor of IPA beer highlights the complex and varied results that can be achieved through hops and other beer ingredient staples. The pronounced and unique flavor profile of IPA allows for a better understanding of brewing beer in general as hops and malts are often identified individually. Today, American craft brewers do more than emulate the style. They continue to push the envelope with strength and bitterness. Curiously, it’s much harder to find a true IPA from England these days.

p>2)            The Legal Perspective

3)            The Brand Perspective

If an IPA deals with Medicare lives and federally-funded dollars, the regulatory aspect of its functioning assumes an even more critical metric for any violation can threaten its very existence. Such a perspective should include compliance with HIPAA, OSHA, Stark laws, anti-kickback statutes, fee-splitting, Balanced Budget Amendments, the Affordable Care Act, etc. In light of some IPAs losing their contracts with HMOs recently, such a tally becomes immediate and significant.

An IPA is nothing if not relationships and contracts. If contracts do not exist, the IPA has no foundation and its entire structure collapses. Thus, strong and compliant contracts that are transparent and clear with powerful disincentives for breach would be essential. Without such contracts in place with coherent and ethical legal counsel to back it up, an IPA would founder and be unable to grow. Whatever growth and profits are accomplished are tenuous and expose it to further danger and vulnerability. It is my recommendation that all fees including administrative and re-insurance expenses be properly disclosed and attested by affiliates at the time of induction to the IPA. It is also my belief that the liabilities to the business be considered as one of the most critical sections of the BSC, i.e., the number of lawsuits against the organization, the potential damages from such lawsuits, the confidentiality of its data and reports or their loss, the nature of competition and poaching of its affiliates, conflicts in its relationships with the HMOs and potential OIG (Office of Inspector General) investigations of its practices.

The Brand of an IPA is the ‘X’ factor, its mystique and inevitability, uniqueness and desirability, customer loyalty and credibility of the organization and its officers. It is the factor that gives it its ‘oomph’ and saleability, and without the power of the Brand, an IPA becomes an also-ran.

Thus, the valuation of an IPA cannot be done solely on a fiscal basis. All the perspectives mentioned above must be calculated and counted. While the financials remain an important aspect of any valuation, they certainly are not the most important, or even, the largest component of a BSC for an IPA. At best, the fiscal status of an IPA can be used only if the organization scores a 100 on all other measures on its scorecard. At worst, the financials have to be completely discarded if the basics of business are not in place. We have seen that recently when a Fortune 500 corporation refused to take ownership or invest in an IPA solely because there were lawsuits against it for reasons of compliance.

The fundamentals of an IPA still remain the state of its compliance, the strength of its relationships and services, its feedback systems, employees, data and processes. Without these in place and sealed protectively, all one shall find is a house of cards. And the big problem with a house of cards is that the bigger it gets, the more vulnerable it becomes to sudden collapse. An IPA has to be based on an extremely strong foundation even though it needs to be nimble and flexible as regulations change and payment methodologies vary as we have seen with CMS in recent years.

When we measure the Business Process Perspective, we should measure the MRA, HEDIS, HOS, CAHPS and care management analyses, along with length of stays, continuity of care, ER visits, close follow-ups on nursing homes and hospitals, and post-acute care and post discharge care. The Operational metrics would also study the infra-structure, the state of IT, web services, reporting and sharing of information among the executives and owners.

The Customer Perspective should pay close attention to physician and employee satisfaction and retention, response rates and reputation. When practices are not wholly owned, this becomes an even more serious concern for any IPA. Also, the strength and managed care savvy of affiliates and risk of losses due to poor utilization by them cannot be ignored. If the IPA does not see itself as a fiscal intermediary and does not have adequate protections against a downturn and that it is in a risk business where the Pareto rule can get easily skewed from 20-80 to 1-99 and if the reserves are not strong or re-insurance is weak, all the juggling of numbers is of scarce significance.

An IPA is not any stronger by randomly signing up affiliates without interest, aptitude or drive to master managed care; in fact, the very opposite is true. Without proper infra-structure in place, an IPA should not attempt to grow. The continuous education and training of its employees is a sine qua non with any growth and a culture of compliance, quality and excellence should be a part of its DNA. The best IPA is a Learning Organization and a Knowledge-Creating Organization.

The concept of a Poison Pill in the valuation of any IPA is of much use. If the risk to the IPA due to significant legal or regulatory liability is high, it completely negates any financial valuation of the IPA almost like a junk bond and, in fact, may give it a negative status. We see this frequently in the market place when we see how the credit agencies appraise a company or a nation. Recently, we have seen how Universal Health Care, Inc, a Medicare Advantage plan, was taken over by a receiver thereby reducing its value to zero and with significant legal and financial liability to its executives and owners, when the Office of Insurance Regulations (OIR) decided that the plan was out of compliance. An IPA may come under the purview of the OIR too in a similar fashion.

Eventually, one must remember that any metric is only a reflection of an overall strategy, vision and mission, and the core competence of an IPA. If the IPA loses sight of these, no amount of tactical quantification would suffice in making it healthy and sustainable. Strategy must be integrated completely with the processes and the core strength of the entity should never be compromised.  For if the core is forsaken, all is forsaken and the vitality of the organization may be irretrievably lost.

Jerry Hesch’s Triple Play

Jerry HeschJerry HeschJerry Hesch

Jerry Hesch is an attorney at Berger Singerman in its Miami, Florida office and is Special Tax Counsel to Oshins & Associates in Las Vegas Nevada. He is the Director of the Notre Dame Tax and Estate Planning Institute, on the Tax Management Advisory Board, a Fellow of ACTEC, has published numerous articles, Tax Management Portfolios, and co-authored a law school casebook on Federal Income Taxation, now in its fourth edition. Jerry has been kind enough to schedule the following 3 interesting events with us:

 1.   On Monday, April 14, 2014 at 12:30 pm, Jerry will join Alan Gassman to lead a discussion on his latest thinking on self-cancelling installment notes, the Kite case, private annuities, and the ins and outs of triumph spit fires.

 Join Jerry, Alan, and Jerry’s triumph spit fire for an interesting conversation.  There is no charge for this webinar and participants will receive a picture of Jerry’s car.  CPAs will receive continuing education credit.

 2.   On Thursday April 17, 2014, Jerry will speak at a donor luncheon at Ruth Eckerd Hall in Clearwater, Florida on capitalized charitable tax savings: How to make sure that Uncle Sam contributes his share to maximize results.

 Financial advisors are welcome.  The lunch will cost less than $20.  Bring a friend or even someone who you do not like.

 3.   At 4:00 p.m., Jerry will be giving a free presentation at Ruth Eckerd Hall on capitalized innovative charitable giving techniques for the well tuned estate planner, and an outline will be provided.  This session is free and qualifies for 1 hour of continuing education credit.

Please also do not forget that on April 25, 2014, Jerry will be speaking at the Ave Maria Law School Estate Planners Day on the topic of Succession Planning for the Closely Held Business Upon Retirement or Death of the Principal.

Jerry also will be speaking at the Florida Bar Annual Wealth Protection Seminar on Capitalized Income and Estate Tax Issues for 2014 – Questions and Answers at the lunch presentation from 12:15 pm to 1:00 pm.

Following that Jerry will appear at the Sands Hotel in Law Vegas, Nevada to deliver his comedy routine on Timing Income Tax Deductions and Mother-In-Law Relationships.

Free Phone Call to Improve Your Estate Planning and/or Tax Practice
For Lawyers Only
On Thursday, April 3, 2014 at 3:00pm

Business coach Rick Solomon will be teaming up with Alan Gassman and Craig Hersch to establish a small group of estate planning and tax lawyers who will meet periodically to talk about improving our practices.

If you are interested in attending a short call on the afternoon of April 3, 2014 with Rick and a few other interested lawyers, please let us know.

From Rick:

There is a very special event coming up that could potentially have a significant impact on the growth and success of your practice. It is the launch of a special Masters Program for estate planning and tax attorneys that goes far beyond basic business and office development. It goes deeply into personal development and how to address limiting beliefs and issues that all successful professionals have. This can have a significant impact on our practices.

The program is headed by me, who has created and facilitated a special Masters Programs for CPAs. I am working with Alan Gassman and Craig Hesch to develop a Masters Program for estate planning and tax lawyers. Previously I have worked extensively with the organization that evolved into Wealth Counsel many years ago, and therefore has a good feel for situations specific to a law practice.

We are only interested in working with open-minded professionals who are willing to help one another and have or wish to have a great passion for what we do, more time off, and enhanced income.

Upcoming Seminars and Webinars

COMPOUNDING THE PROBLEMS AND OPPORTUNITIES FOR COMPOUNDING PHARMACIES

Date:  Tuesday, April 1, 2014 at 5:00 p.m.

Location: Online webinar

Speakers: Lester Perling and Alan Gassman

Additional Information: Please click here to register for the webinar.

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LUNCH TALK – LAW PRACTICE EFFICIENCY TIPS

Date: Monday, April 7, 2014 | 12:30 p.m.

Location: Online webinar

Speaker: Alan S. Gassman

Additional Information: To register for this webinar please visit www.clearwaterbar.org

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LEGAL COMPLIANCE FOR MEDICAL PRACTICES THAT USE NURSE PRACTITIONERS AND PRACTICE EXTENDERS

Date: Thursday, April 10, 2014 | 5:00 p.m. (30 Minutes)

Location: Online webinar

Speakers: Cynthia Mikos, Esq. and Alan S. Gassman, Esq.

Cynthia Mikos is an excellent speaker and healthcare lawyer.  Join her fan club by attending this informative webinar.  Her materials are excellent.

Additional Information: To register for this webinar please click here.

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JERRY HESCH’S LATEST THINKING IS ON SELF-CANCELLING INSTALLMENT NOTES, THE KITE CASE, PRIVATE ANNUITIES, AND TRIUMPH SPIT-FIRES

Date: Monday, April 14, 2014 | 12:30 p.m. (30 Minutes)

Location: Online webinar

Speakers: Jerry Hesch and Alan S. Gassman

Additional Information: To register for this webinar please click here.

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FICPA SUNCOAST CHAPTER MONTHLY MEETING

Alan S. Gassman will be speaking at the FICPA Suncoast Chapter’s monthly meeting on the topic of THE FLORIDA CPA’S GUIDE TO PLANNING WITH PHYSICIANS AND MEDICAL PRACTICES

Date: Thursday, April 17, 2014 | 4:00 p.m.

Location: Tampa, Florida

Additional Information: For more information on this event please email agassman@gassmanpa.com or mary@clawsonasplus.com

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DONOR LUNCHEON AT RUTH ECKERD HALL WITH PROFESSOR JERRY HESCH IN CLEARWATER, FLORIDA

Sponsored by Gassman Law Associates, P.A. Co-sponsors invited.

Professor Jerry Hesch will be speaking at a Donor Luncheon on the topic of CHARITABLE TAX SAVINGS: HOW TO MAKE SURE THAT UNCLE SAM CONTRIBUTES HIS SHARE TO MAXIMIZE RESULTS

Date: Tuesday, April 22, 2014 | TIME TO BE DETERMINED

Location: Ruth Eckerd Hall, Clearwater, Florida

Additional Information: For additional information please contact Suzanne Ruley at sruley@rutheckerd.net or Alan Gassman at agassman@gassmanpa.com

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RUTH ECKERD HALL PLANNED GIVING MEETING

Professor Jerry Hesch will be speaking at the Ruth Eckerd Hall Planned Giving Meeting in Clearwater, Florida on the topic of INNOVATIVE CHARITABLE GIVING TECHNIQUES FOR THE WELL TUNED ESTATE PLANNER

Sponsored by Gassman Law Associates, P.A. Co-sponsors invited.

Date: Tuesday, April 22, 2014 | 4:00 p.m.

Location: Ruth Eckerd Hall, Clearwater, Florida

Additional Information: This session qualifies for 1 hour of continuing education credit for lawyers and CPA’s.  To attend please email Suzanne Ruley at sruley@rutheckerd.net or Alan Gassman at agassman@gassmanpa.com

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1st ANNUAL ESTATE PLANNER’S DAY AT AVE MARIA SCHOOL OF LAW

Speakers: Speakers will include Professor Jerry Hesch, Jonathan Gopman, Alan Gassman and others.

Alan Gassman will cover Using Estate Planning Techniques to Optimize Family Wealth Preservation.

Date: April 25, 2014

Location: Ave Maria School of Law, Naples, Florida

Sponsors: AveMariaSchool of Law, Collier County Estate Planning Council and more to be announced.

Additional Information: For more information on this event please contact visit http://www.avemarialaw.edu/estateplanning/Index.aspx

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WHAT LAWYERS AND TAX ADVISORS NEED TO KNOW WHEN PLANNING FOR SAME SEX COUPLES – UNUSUAL RULES, STRATEGIES, CHECKLISTS AND TRAPS FOR THE UNWARY

Speaker: Alan S. Gassman

Date: Monday, April 28, 2014 | 12:30 – 2:00 p.m.

Location: Bloomberg BNA Tax & Accounting Online webinar

Additional Information:  For more information, to register and a discount code please email agassman@gassmanpa.com

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THE FLORIDA BAR ANNUAL WEALTH PROTECTION SEMINAR (with 2 hours of Ethics CLE credit)

I think that we have hit the ball well out of the ballpark for the May 8, 2014 Annual Wealth Protection Seminar.

Please check out the schedule below and come and see us.

We are particularly looking forward to the ethical panel discussion that will include reviewing important components for fee agreements, conflict of interest rules, liability avoidance for professionals, and comprehensive practice checklists.

Date: Thursday, May 8, 2014

Speakers and Agenda:

8:30 a.m. B 9:00 a.m. – How I ask Questions and Obtain the Right Documents and Information to Develop a Clients Asset Protection Profile.

 Speaker: Denis Kleinfeld, Esq.

 9:00 a.m. B 9:40 a.m. – How I Structure an Integrated Income, Estate Tax, and Asset Protection Family Plan.

 Speaker: Alan S. Gassman, Esq.

 9:40 a.m. B 10:30 a.m. – The New Designer Entities B How to Use These Cutting Edge Tools to Protect Wealth.

 Speaker: Howard Fisher, Esq. and Alex Fisher, Esq.

 10:30 a.m. B 10:45 a.m.  Break (Mingle and Exchange Cards)

10:45 a.m. B 11:30 a.m. – What the Last Two Years of Legal Developments and Litigation Tells Us About Protective Planning With Trust and Associated Entities

 Speaker: Barry Engel, Esq.

 11:30 a.m. B 12:15 p.m. – What The Case Law Tells Me About Charging Orders and Declaratory Judgments.

 Speaker: Jay Adkisson, Esq.

12:15 p.m. B 1:00 p.m. Lunch (Box Lunch) – Income and Estate Tax Issues For 2014 B Q & A.

 Speaker: Jerry Hesch, Esq.

 1:00 p.m. B 2:30 p.m. – What We Think You Need to Know About Asset Protection Litigation and Obtaining A Good Result For the Client.

 Speakers: Jay Adkisson, Howard Fisher, Alex Fisher and Denis Kleinfeld.

 2:30 p.m. B 2:45 p.m.  Break

2:45 p.m. B 4:15 p.m. – What are the Ethical, Legal and Administrative Liability Exposures in Wealth Protection Planning and How Do We Protect Ourselves.

 Speakers: Barry Engel, Alan Gassman, Jerry Hesch, and Denis Kleinfeld.

 4:15 p.m. B 5:00 p.m. – Open Forum Q & A

 Speakers: Barry Engel, Jay Adkisson, Howard Fisher, Jerry Hesch, Alan Gassman and Denis Kleinfeld.

Location: Hyatt Regency Downtown, Miami, Florida

Additional Information: For more information please contact agassman@gassmanpa.com

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THE JOINT EXEMPT STEP-UP TRUST

Alan Gassman will be speaking at the Ohio Conference on Wealth Transfer on The Joint Exempt Step-Up Trust as well as participating in a panel discussion the evening before.

Date: June 4, 2014

Location: Hilton at Easton, Columbus, Ohio

Additional Information:  For more information on the conference and to register for the conference please contact agassman@gassmanpa.com

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HIRING AND TERMINATING EMPLOYEES; WHAT TO DO, WHAT TO AVOID

Speaker: Colleen Flynn, Esq., Dr. Stephanie Thomason and Alan S. Gassman, Esq.

Date: Wednesday, June 18, 2014 | 2:00 – 3:00 p.m.

Location: Bloomberg BNA Tax & Accounting Online webinar

Additional Information:  For more information, to register and a discount code please email agassman@gassmanpa.com

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40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Please send us your questions, comments and suggestions for Alan Gassman’s talk on Planning with Variable Annuities.  He will also discuss how to spreadsheet and illustrate how life insurance policies and mutual funds work in the taxable and non-taxable world, and how to evaluate whether real savings occur from tax deferral.

Date: November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

Past Seminar and Webinar Transcripts Available

For a transcript of Mr. Gassman’s remarks for the following, please email agassman@gassmanpa.com.

  • The Florida Bar Leadership Academy: March 2014 Regional Meeting

Alan Gassman joined Judge Claudia Rickert Isom and Hillsborough County Bar Association President Susan E. Johnson-Valez for a panel discussion on the Benefits of Serving as a Community Leader.

Applicable Federal Rates

Below we have this month, last month’s, and the preceding month’s Applicable Federal Rates, because for a sale you can use the lowest of the 3.

APR

The Thursday Report 3.6.2014 – BP 5th Circuit Dec. and Much More

Posted on: March 6th, 2014

BP Claims Process – Appeals Fuel Delay in Payments and Confusion for Claimants

Please No More Tax Reform, an article by Denis Kleinfeld

Seminar and Webinar Announcements: Ave Maria Speaker Bruce Stone

Lawyer Tagged in Bankruptcy Court for $500,000 Transfer Through His Trust Account

Attorney Humor! – A Contradiction of Terms?

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

This report and other Thursday Reports can be found on our website at www.gassmanlawassociates.com.

BP Claims Process – Appeals Fuel Delay in Payments and Confusion for Claimants

By: John Goldsmith and Alan Gassman

Although Significantly Delayed by the Fifth Circuit Appeals, Recent Rulings May Allow Claims to be Processed Again.

BP, apparently no longer concerned enough with its reputation to act as a good citizen, is instead acting as an ardent litigator attempting to renounce the settlement it negotiated and urged the Court to approve. The result has been an injunction which had the effect of preventing the BP Claims Administrator from adjudicating or paying any claims for almost five months while the Fifth Circuit resolved BP’s attempt to get out of the settlement.  Two recent rulings by the Fifth Circuit, rejecting BP’s attempt to reject the settlement, may lead to resumption of the BP Claims Administrator adjudicating and paying claims.  BP did, however, win one important legal battle which may have a significant effect on the computation of certain claims.

The recent decisions of the federal District Court and the federal Fifth Circuit Court of Appeals are summarized as follows:

  1. A three Judge panel of the Fifth Circuit, Court of Appeals has instructed the BP claims administrator from paying any BP claims, or making final determinations, until the Fifth Circuit resolves the issues discussed below. This injunction has slowed the processing of claims as well.
  2. The Courts recently required the BP Claims Administrator to develop new criteria to “match revenue with expenses”. It is not clear what that means, and BP and the BP plaintiffs’ steering committee have submitted competing guidelines to the claims administrator. The BP claims administrator issued draft guidelines two weeks ago but those guidelines have not yet been made public.  Given BP’s recent history it will likely challenge any proposed guidelines in the federal District Court, and then appeal any decision to the Fifth Circuit.
  3. The Fifth Circuit, in two recent rulings by different three Judge panels, ruled that claimants are NOT required to prove that their losses were caused by theoil spill. Rather, in conformity with the BP settlement agreement and with BPs original interpretations of the settlement, if the BP claimant has the required drop in revenue during the applicable period in 2010 in comparison to the same time period in prior years, and the required increase in revenue during the same time period in 2011, it is conclusively determined that any losses of a BP claimant were caused by the BP oil spill.
  4. A three Judge panel of the Fifth Circuit recently affirmed the Federal District Court’s December 2012 order approving the BP settlement agreement.  In an unprecedented move, BP joined the parties appealing the approval of the settlement agreement, thereby objecting to the same settlement agreement BP negotiated, agreed to, and actively sought approval from the Federal District Court. The Fifth Circuit specifically ruled that the U.S. Constitution and federal law do not require that each BP claimant make an individual claim showing that the claimant’s losses were caused by the BP Deepwater Horizon oil spill. This is an important victory for BP claimants and in keeping with the BP settlement agreement. BP asked the entire Fifth Circuit (referred to as “en banc”) to review this decision. 
  5. Based on these recent rulings, the Fifth Circuit ruled that the injunction preventing adjudication and payment of claims will be lifted as soon as the Fifth Circuit resolves whether it will review these decisions en banc. 

There is no deadline for a final decision on any of these issues. Our best guess is that no BP claims will be paid until June 2014, while these issues are hopefully sorted out. However, it could take much longer, perhaps more than a year. The only certainty is that there is a significant delay in the claims administrator making final determinations and payments on all BP claims.

Please No More Tax Reform
by Denis Kleinfeld

Kleinfeld

Congressman Dave Camp, Chairman of the House Ways and Means Committee, has proposed the Tax Reform Act of 2014 (TRA) 2014.

The press release proudly proclaims that this piece of legislation is a means to fix the broken tax code by lowering rates while making the code simpler and fairer for families and job creators.

This will spur stronger economic growth, greater job creation, and puts more money in the hands of hardworking taxpayers.

It does all this without raising the deficit. Of course, it doesn’t reduce the deficit either.

No prior tax law has fixed the tax code, made compliance simpler, enabled job creation, spurred economic growth or let hardworking taxpayers keep more of their money.

Not ever.

Chairman Camp wants the American taxpayer to believe that this time it is going to be different.

We are expected to swallow this since the legislation has been analyzed by the “non-partisan Joint Committee on Tax (JCT).”

For those poor souls who are unfamiliar with that tower of credibility the JVCT, it is a congressional committee composed of equal numbers of Democrats and Republicans. Every congressperson appointed to the JCT is there precisely because they are fiercely political and fervently partisan.

There is no argument by either Democrats or Republicans that the income tax is a broken system.

The draft legislation as proposed by Chairman Camp is a 900 page monstrosity that raises $600 billion dollars in additional taxes.

It is widely praised by every form of lobbying organization. Anyone who makes a living of off the government thinks the TRA 2014 to be a godsend.  Tax professionals are just giddy over the prospect of another tax reform law.

To put congressional tax reform legislation in perspective, the Tax Reform Act of 1969 was passed just as I was starting my tax career. That was followed by tax legislation, as best as I can recall,  in 1970, ’71, ’72, ’74, ’76,’78, ’80, ’81, ’82, ’84, ’86, ’88, —-almost every year right up to the now proposed TRA of 2014.

Nobody running for congress has ever read the Internal Revenue Code, but does promise most sincerely during each election cycle that if elected they will reform it and create more jobs to boot.

This is a political scam going into its 101st year.  Politicians know and rely on the fact that taxpayers have little to no understanding of the income tax law.

Then again, it is questionable whether tax professionals or the IRS is much better off.

Chairman Camp says the TRA 2014 will tackle waste, fraud and abuse at the IRS. It is an old story and a good con to pull especially around election time. Congress told this tale in the IRS Restructuring and Reform Act of 1998.  Congress assured us then that the abuse of taxpayers would end.

It did not.

The Internal Revenue Code is already some 75,000 pages long. It has been “reformed” one way or another by congress nearly every year since 1969.

Do you think that the income tax as imposed on you will get better or worse if congress monkeys yet again with the tax law?

I think that this time we should tell congress, “Please, no more tax reform.”

Ave Maria Law School 1st Annual Estate Planning Conference

Speaker Profile: Bruce Stone

BruceStone

Bruce Stone will be speaking on “A Dozen of My Top Favorite Planning Ideas That I’m Willing to Talk About.” at the 1st Annual Ave Maria Estate Planning Conference on Friday, April 25, 2014 at Ave Maria School of Law in Naples, Florida.  For information about the conference please click here.

Bruce’s talk will focus on a wide variety of issues and problems in estate planning and administration, with an emphasis on practical solutions.  The problems will be presented through specific real life examples commonly encountered in estate planning and administration.  The legal issues involved in each discussion will be discussed, and specific solutions (including model form for us in will and trust drafting) will be offered.

Bruce is a shareholder of Goldman Felcoski & Stone P.A.  His practice consists primarily of estate planning for both domestic and foreign clients. A significant portion of his practice involves disputed or complex problem situations in which he is retained to find creative planning solutions or to serve as expert witness, mediator or arbitrator. Bruce is admitted to practice in Florida. He is a lifelong resident of Florida. He graduated from the University of Florida with high honors in 1971 and was elected to Phi Beta Kappa. He graduated from the Florida State University College of Law with highest honors in 1973, where he was first in his class and editor in chief of the law review.

Bruce is a Fellow and current Vice President of the American College of Trust and Estate Counsel, and serves on its Executive Committee and Board of Regents. He is a past chair of the Real Property, Probate and Trust Law Section of The Florida Bar. Bruce is a member of the Joint Editorial Board for Uniform Trust and Estate Acts, which monitors and recommends updates to the Uniform Probate Code, the Uniform Trust Code, and all other trust and estate related uniform laws on a nationwide basis. He is a member of the Advisory Committee of the Heckerling Institute on Estate Planning. He is an Academician in the International Academy of Estate and Trust Law. He has been named as one of the top 10 or top 100 Florida attorneys in all issues of Florida Superlawyers since its publication, as one of the 45 best trusts and estates attorneys in the United States in the August 1998 issue of Town and Country magazine, and as one of the most influential people in Miami in the December 2012 issue of Poder Hispanic magazine. He is rated AV Preeminent by Martindale-Hubbell, has been listed in every edition of Best Lawyers of America since 1987, and is rated by Chambers USA in Band 1 for Tax: Estate Planning. In 2001 he received the first ever Friend of the Trust Industry award from the Florida Bankers Association. He was the principal drafter of Florida’s legislation in 2000 authorizing dynasty trusts and allowing modification and reformation of irrevocable trusts, and a 2010 statute governing planning for homestead property through the use of irrevocable inter vivos trusts. He has been extensively involved in the drafting of Florida legislation concerning elective share rights of surviving spouses and the administration of trusts.

In addition to his practice, Bruce is an adjunct professor at the University of Miami School of Law, where he teaches in the graduate master’s program in estate planning. He is a frequent lecturer for organizations such as the American College of Trust and Estate Counsel, the American Bar Association, ALI-CLE, the Heckerling Institute on Estate Planning, and the Florida Bar. 

Lawyer Tagged in Bankruptcy Court for $500,000 Transfer Through His Trust Account

By: Travis Arango and Alan S. Gassman

MichaelWilliamson

Judge Michael G. Williamson is the Chief Judge for the Middle District Bankruptcy Court in Tampa, Florida. He graduated from Duke University in 1973 and from Georgetown University Law Center in 1976.  He practiced for many years in Orlando with the law firm of McGuire, Voorhis & Wells, which became Holland & Knight.  He was appointed to serve as a Judge in the Bankruptcy Court in 2000.  Judge Williamson recently ruled on whether a lawyer who allows money to pass through his trust account in a fraudulent transfer situation can be found personally liable to the creditor pursuant to Bankruptcy Code Section 550(a)(1).  Information on this decision should be of great interest to lawyers who represent individuals who have eminent creditor situations and is discussed below.

New case law may have you thinking twice about listening to your client’s request to disburse funds in certain ways. This may seem counter-intuitive to lawyers who have always been taught to be loyal and zealous advocates for their clients.

Harwell establishes that a lawyer may be held liable for disbursing funds in the way a client wishes, if they are being disbursed with the intent to defraud creditors. The facts are pretty straightforward. The attorney in question was representing his client in two separate matters, a shareholder dispute and a judgment entered in Colorado. The first matter resulted in the client receiving a substantial settlement from a shareholder dispute action that was to be deposited into an escrow account held by the attorney’s firm. The second matter was a judgment entered against the client for over one million dollars. Neither the client nor the attorney revealed to the party which held the million dollar judgment that the client was receiving settlement payments.

Instead of satisfying the existing million dollar judgment, the client instructed the lawyer to disburse the funds to third parties which included the client’s wife, father, and other various people. The attorney followed the client’s instructions with the knowledge that there was this substantial judgment in place. The attorney was eventually served with a writ of garnishment which he in turn had quashed. After the writ was quashed, the attorney obtained and distributed cashier’s checks payable to his client and other third parties. A month later, the client filed for bankruptcy in Colorado. The trustee of the bankruptcy estate filed a claim against the attorney under 11 U.S.C. § 550(a)(1) to recover the funds that were disbursed by the “initial transferee.” Section 550(a)(1) states:

(a) Except as otherwise provided in this section, to the extent that a transfer is avoided under section 544, 545, 547, 548, 549, 553(b), or 724(a) of this title, the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from–

(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made;

The procedural history of this case is like a roller coaster:

This case began in Colorado but was then moved to the Bankruptcy Court in the Middle District of Florida before Judge Williamson, who is a very experienced jurist. The issue before the Bankruptcy Court on summary judgment was whether or not the lawyer, Mr. Hutton, or his firm, was the initial transferee. Based on the facts presented, Judge Williamson entered summary judgment in favor of Mr. Hutton, concluding that he was not an initial transferee, but only a “conduit” for the transfers. Judge Williamson’s analysis centered around the fact that the money was never actually paid to Mr. Hutton but was instead put in an escrow account. Because of this, he was found to have not been the initial transferee, and the court’s analysis went no further.

On appeal to the Federal District Court in Tampa, Judge James S. Moody, Jr. affirmed Judge Williamson’s decision and concluded that Mr. Hutton and his law firm received the funds in question on behalf of his client. Thus, he was acting in a fiduciary capacity and obligated to disburse the funds in accordance with instructions from his client. The District Court’s reasoning was based on the fact that the funds in the trust belonged to the client, and not to Mr. Hutton and the firm.

The case was then appealed to the 11th Circuit Court of Appeals, which concluded that the Bankruptcy Court and the District Court did not employ the required two-part test of 11 U.S.C. Section 550(a)(1), which reads as follows:

Initial recipients of the debtor’s fraudulently transferred funds who seek to take advantage of the equitable exceptions to § 550(a)(1)’s statutory language must establish (1) that they did not have control over the assets received, i.e., that they merely served as a conduit for the assets that were under the actual control of the debtor-transferor and (2) that they acted in good faith and as an innocent participant in the fraudulent transfer

It would therefore have to be shown that both of the following elements were satisfied:  1. that the defendant did not have control over the assets received and 2. that the defendant acted in good faith and was innocent in the fraudulent transfer. The 11th Circuit concluded that Mr. Hutton was in fact an initial transferee under 11 U.S.C. § 550 (a)(1).

The case eventually made its way back to the Bankruptcy Court where the attorney and the trustee could offer evidence and arguments on whether he had control over the funds and acted in good faith. After listening to both parties’ oral arguments, Judge Williamson delivered a humble and solid opinion, which included the following statement:

I thought the law was that if it’s a conduit, you don’t even get to good faith or knowledge because the attorney never controlled it . . . you have to be a conduit in the sense it has to be a trust account situation like this one. And you have to take in good faith, and be an innocent participant in the transfers in and out of a trust account. So under these circumstances… I find that the transfers made back to Mr. Harwell were not made in good faith, and there were still part of the same set of transactions that were meant to get the money away from the prevailing party in the judgment against Mr. Harwell. Under the Eleventh Circuit ruling in this case, Mr. Hutton cannot claim conduit status even for those transfers.

Judge Williamson observed that there are no excuses for a lawyer who initiates and personally effectuates a fraudulent transfer for the purpose of hiding assets from a creditor when they do not act in good faith. That is to say, when the attorney gains knowledge that the transaction may be fraudulent, they must “immediately cease participating and take actions to return the money being held to the client and cease participating and assisting the client in the steps that the client is undertaking to fraudulently transfer assets out of the reach of the creditor.”

This decision may have put attorneys between a rock (the duty to your client) and a hard place (knowing when to deny your client’s request). First, a lawyer may still be the initial transferee even when the money goes directly into escrow. Second, as an attorney your loyalty is to your client; however, if you know or should know your client is attempting to make a fraudulent transfer using your services you cannot actively assist them. The court gave a couple of ways to handle this situation: 1. refuse to receive the funds or 2. do not distribute the funds in a fraudulent way and instead just give them to the client directly. Hopefully this decision does not make attorneys fearful of their clients and concerned about any transfer. The court stated there will be times when lawyers will transfer funds in the ordinary course of business with no warning that they are actually helping a client with a fraudulent transfer. In this situation, good faith will protect the lawyer. Just do not be oblivious to serious red flags, such as your client having a judgment against them and quickly wanting to move funds to friends and family.

But, what happens when the attorney thinks the transfer is fraudulent but is mistaken? The attorney may lose a client and/or have a bar complaint filed against him or her.

If you have enjoyed this roller coaster ride and are thirsty for more, take a look at In re Cargo Transportation Services, Inc., 502 B.R. 875, 880 (Bankr. MD. Fla. 2013). This is a case with somewhat similar circumstances to In re Harwell, but in this case Judge Williamson ruled in favor of the law firm, stating that they were a mere conduit and acted in good faith. In Cargo, the law firm handled funds from a settlement and transferred the funds pursuant to what the court found to be as follows:

[T]he processes by which the Law Firm received and handled the settlement funds—including the payment of its fees from the funds transferred to its client—were entirely subject to federal court orders, federal law, and rules of professional responsibility. The Law Firm followed these proscriptions to the letter, and the money flowed through as it was required to do pursuant to various court orders entered by the bankruptcy court presiding over the case in which the settlement was approved.

When the trustee of the bankruptcy estate pursued the firm under section 550(a)(1), the court held that it never had control of the funds, and that it acted in good faith, thus meeting the two prong “control” test discussed above. The court also cited other cases with similar factual patterns.

In the end, use your legal expertise and common sense to know when something is fishy. Always be a zealous advocate for your client but know when to protect yourself and catch red flags so that you do not participate in a fraudulent transfer. Much like the Colonel’s secret recipe, you may never know the exact formula to follow to avoid being on the losing side of one of these cases, but you can avoid conduct that has gotten others in trouble in the past.

Attorney Humor! – A Contradiction of Terms?
by Ronald Ross 

How to coax an attorney out from under his desk after he’s read a John Grisham novel:

“Honestly, there is no conspiracy to kill our clients in order to win control over their estates, and we’re not trying to kill you so you don’t find out about the alleged conspiracy……………Yes, you’re a valuable member of this firm, and I promise if there was an exciting conspiracy, we would include you………Okay, if there was a conspiracy you can choose the actor who plays you in the movie……Bradley Cooper? I don’t think he would fit under your desk.”

Applicable Federal Rates

Below we have this month, last month’s, and the preceding month’s Applicable Federal Rates, because for a sale you can use the lowest of the 3.

SHORT TERM AFRs

MID TERM AFRs

LONG TERM AFRs

March 2014 Annual 0.28% Annual 1.84% Annual 3.36%
Semi-Annual 0.28% Semi-Annual 1.83% Semi-Annual 3.33%
Quarterly 0.28% Quarterly 1.83% Quarterly 3.32%
Monthly 0.28% Monthly 1.82% Monthly 3.31%
February 2014 Annual 0.30% Annual 1.97% Annual 3.56%
Semi-Annual 0.30% Semi-Annual 1.96% Semi-Annual 3.53%
Quarterly 0.30% Quarterly 1.96% Quarterly 3.51%
Monthly 0.30% Monthly 1.95% Monthly 3.50%
January 2014 Annual 0.25% Annual 1.75% Annual 3.49%
Semi-Annual 0.25% Semi-Annual 1.65% Semi-Annual 3.46%
Quarterly 0.25% Quarterly 1.73% Quarterly 3.45%
Monthly 0.25% Monthly 1.93% Monthly 3.44%

The 7520 rate for March is 2.2% and for February was 2.4%

Seminars and Webinars

FLORIDA BAR HEALTH LAW REVIEW 2014

Alan Gassman will be speaking on What Healthcare Lawyers Need to Know About Tax Law and Business Entities at this excellent annual Florida Bar conference that is attended not only by those who are taking the Board Certification exam but also healthcare lawyers and other advisors.

Other speakers will include Lester Perling who is the co-author of A Practical Guide to Kickback and Self-Referral Laws for Florida Physicians and a number of other books and publications, and Mickey Mouse, Donald Duck and the “dwarf planet” formerly known as Pluto!

Date:    March 7 – 8, 2014

Location: Hyatt, Orlando, Florida

Additional Information: We thank Jodi Laurence and Sandra Greenblatt for all of their hard work in making this conference as successful as it is.  For more information please contact Jodi at jl@flhealthlaw.com or Sandra at sg@flhealthlawyer.com.

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TAX AND ASSET PROTECTION BASICS FOR THOSE WHO REPRESENT PHYSICIANS AND MEDICAL PRACTICES

Alan Gassman and Christopher Denicolo will be speaking at the Hillsborough County Bar Association’s Health Law Section Luncheon on the topic of Tax and Asset Protection Basics for Those Who Represent Physicians and Medical Practices.

Date:    March 12, 2014

Location:  Chester H. Ferguson Law Center in Tampa, FL

Additional Information: For additional information please contact Co-Chairs Sara Younger (sara.younger@baycare.org) or Thomas Ferrante (tferrante@carltonfields.com).

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THE FLORIDA BAR LEADERSHIP ACADEMY: MARCH 2014 REGIONAL MEETING

On Saturday, March 15, 2014, Alan Gassman will join Judge Claudia Rickert Isom and Hillsborough County Bar Association President Susan E. Johnson-Valez for a panel discussion on the Benefits of Serving as a Community Leader.  We welcome any and all questions, comments and suggestions for this presentation. We are developing a criteria worksheet that professionals can use to decide what the costs and benefits are of the many different non-billable activities and causes that we all have the opportunity to support.

Date: Saturday, March 15, 2014

Location: Marriott Tampa Airport

Additional Information: To register for the program please email agassman@gassmanpa.com

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STRUCTURING JOINT EXEMPT STEP-UP TRUSTS: EMERGING TOOL TO MAXIMIZE STEP-UP IN BASIS

Date: Tuesday, March 18, 2014 | 1:00 – 2:30 p.m.

Location: Online webinar sponsored by Strafford Publications, Inc.

Speakers: Alan S. Gassman, Christopher Denicolo and Edwin P. Morrow, III, Esq.

Additional Information: To register for the webinar please visit https://www.straffordpub.com/products/structuring-joint-exempt-step-up-trusts-emerging-tool-to-maximize-step-up-in-basis-2014-03-18 or email agassman@gassmanpa.com

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COMPOUNDING THE PROBLEMS AND OPPORTUNITIES FOR COMPOUNDING PHARMACIES

Date: Wednesday, March 19, 2014 at 12:30 p.m. or Tuesday, April 1, 2014 at 5:00 p.m.

Location: Online webinar

Speakers: Lester Perling and Alan Gassman

Additional Information: To register for the March 19, 2014 webinar please click here.  To register for the April 1, 2014 webinar please click here.

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COUNSELING SAME-S** COUPLES IN 2014

Alan Gassman will be speaking at the Wealth Council Florida Forum on Counseling Same-S** Couples in 2014

Date: Friday, March 21, 2014 | 10:30 – 12:00 p.m.

Location: Holiday Inn at the Orlando Airport

Additional Information: For more information and to register for the program please email agassman@gassmanpa.com

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LUNCH TALK – LAW PRACTICE EFFICIENCY TIPS

Date: Monday, April 7, 2014 | 12:30 p.m.

Location: Online webinar

Speaker: Alan S. Gassman

Additional Information: To register for this webinar please visit www.clearwaterbar.org

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FICPA SUNCOAST CHAPTER MONTHLY MEETING

Alan S. Gassman will be speaking at the FICPA Suncoast Chapter’s monthly meeting on the topic of THE FLORIDA CPA’S GUIDE TO PLANNING WITH PHYSICIANS AND MEDICAL PRACTICES

Date: Thursday, April 17, 2014 | 4:00 p.m.

Location: Tampa, Florida

Additional Information: For more information on this event please email agassman@gassmanpa.com or mary@clawsonasplus.com

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DONOR LUNCHEON AT RUTH ECKERD HALL WITH PROFESSOR JERRY HESCH IN CLEARWATER, FLORIDA

Sponsored by Gassman Law Associates, P.A. Co-sponsors invited.

Professor Jerry Hesch will be speaking at a Donor Luncheon on the topic of CHARITABLE TAX SAVINGS: HOW TO MAKE SURE THAT UNCLE SAM CONTRIBUTES HIS SHARE TO MAXIMIZE RESULTS

Date: Tuesday, April 22, 2014 | TIME TO BE DETERMINED

Location: Ruth Eckerd Hall, Clearwater, Florida

Additional Information: For additional information please contact Suzanne Ruley at sruley@rutheckerd.net or Alan Gassman at agassman@gassmanpa.com

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RUTH ECKERD HALL PLANNED GIVING MEETING

Professor Jerry Hesch will be speaking at the Ruth Eckerd Hall Planned Giving Meeting in Clearwater, Florida on the topic of INNOVATIVE CHARITABLE GIVING TECHNIQUES FOR THE WELL TUNED ESTATE PLANNER

Sponsored by Gassman Law Associates, P.A. Co-sponsors invited.

Date: Tuesday, April 22, 2014 | 4:00 p.m.

Location: Ruth Eckerd Hall, Clearwater, Florida

Additional Information: This session qualifies for 1 hour of continuing education credit for lawyers and CPA’s.  To attend please email Suzanne Ruley at sruley@rutheckerd.net or Alan Gassman at agassman@gassmanpa.com

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1st ANNUAL ESTATE PLANNER’S DAY AT AVE MARIA SCHOOL OF LAW

Speakers: Speakers will include Professor Jerry Hesch, Jonathan Gopman, Alan Gassman and others.

Alan Gassman will cover Using Estate Planning Techniques to Optimize Family Wealth Preservation.

Date: April 25, 2014

Location: Ave Maria School of Law, Naples, Florida

Sponsors:AveMariaSchool of Law, Collier County Estate Planning Council and more to be announced.

Additional Information: For more information on this event please contact visit http://www.avemarialaw.edu/estateplanning/Index.aspx

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THE FLORIDA BAR ANNUAL WEALTH PROTECTION SEMINAR

Date: Thursday, May 8, 2014

Speakers and Agenda:

8:30 a.m. – 9:00 a.m. – How I ask Questions and Obtain the Right Documents and Information to Develop a Client’s Asset Protection Profile.

Speaker: Denis Kleinfeld, Esq.

9:00 a.m. – 9:40 a.m. – How I Structure an Integrated Income, Estate Tax, and Asset Protection Family Plan.

Speaker: Alan S. Gassman, Esq.

9:40 a.m. – 10:30 a.m. – The New Designer Entities B How to Use These Cutting Edge Tools to Protect Wealth.

Speaker: Howard Fisher, Esq. and Alex Fisher, Esq.

10:30 a.m. – 10:45 a.m.  Break (Mingle and Exchange Cards)

10:45 a.m. – 11:30 a.m. – How I Decide Whether To Use Domestic or Foreign or A Mix of Both in Creating a Protective Plan.

Speaker: Barry Engel, Esq.

11:30 a.m. – 12:15 p.m. – What The Case Law Tells Me About Charging Orders and Declaratory Judgments.

Speaker: Jay Adkisson, Esq.

12:15 p.m. – 1:00 p.m. Lunch (Box Lunch) – Income and Estate Tax Issues For 2014 B Q & A.

Speaker: Jerry Hesch, Esq.

1:00 p.m. – 2:30 p.m. – What We Think You Need to Know About Asset Protection Litigation and Obtaining A Good Result For the Client.

Speakers: Jay Adkisson, Howard Fisher, Alex Fisher and Denis Kleinfeld.

2:30 p.m. – 2:45 p.m.  Break

2:45 p.m. – 4:15 p.m. – What are the Ethical, Legal and Administrative Liability Exposures in Wealth Protection Planning and How Do We Protect Ourselves.

Speakers: Barry Engel, Alan Gassman, Jerry Hesch, and Denis Kleinfeld.

4:15 p.m. – 5:00 p.m. – Open Forum Q & A

Speakers: Barry Engel, Jay Adkisson, Howard Fisher, Jerry Hesch, Alan Gassman and Denis Kleinfeld.

Location: Hyatt Regency Downtown, Miami, Florida

Additional Information: For more information please contact agassman@gassmanpa.com

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THE JOINT EXEMPT STEP-UP TRUST

Alan Gassman will be speaking at the Ohio Conference on Wealth Transfer on The Joint Exempt Step-Up Trust as well as participating in a panel discussion the evening before.

Date: June 4, 2014

Location: Hilton at Easton, Columbus, Ohio

Additional Information:  For more information on the conference and to register for the conference please contact agassman@gassmanpa.com

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40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Date: November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

The Thursday Report 2.27.2014 – Giraffe Beers, Couple Agmts and Seminars

Posted on: February 27th, 2014

Whammed and Spammed

Economic Relationship Agreements for Same-S*x Couples

SCIN, SCRAM, ANNUITY or SCGRAT – Don’t Leave Your Clients with Short Life Expectancies Flat

Seminar and Webinar Announcements: Ave Maria School of Law Estate Planning Conference and Strafford JEST Webinar

The Balanced Scorecard of an IPA, an article by Dr. Pariksith Singh

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

This report and other Thursday Reports can be found on our website at www.gassmanlawassociates.com.

Special thanks to Anne Sunne Freeman for her testimonial for the Thursday Report:

Good morning Alan,
I just wanted to thank you for the tax update in your newsletter this week. I am not a tax attorney and I found it very informative. You are awesome!
Take care,
Anne Sunne Freeman

Why are we saying S*X? Because when we say the other word we get:
Whammed and Spammed!!

Has your Thursday Report been in internet computer land?

Our series of information on planning for unmarried (same-s*x) couples caused a great many of our subscribers computers to automatically spam the Thursday Report because of the word that has the letter “X” in it.

You may therefore have unread Thursday Reports in your spam folder. SPAM goes great with Kentucky Fried Chicken, but the shelf-life of SPAM is longer, so please take a look at the Thursday Reports you have not gotten to, or send them to your mother-in-law for her birthday.

If you have been spammed and would like to keep receiving the Thursday Report please click here to send an email to Janine Gunyan at Janine@gassmanpa.com indicating that you would still like to receive the report.

Economic Relationship Agreements for Same S*x Couples
By: Alan S. Gassman, Esq. and Danielle Creech, Esq.

The following is a continuation of our sharing sections from the book we are writing entitled The Florida Advisors Guide to Counseling Same S*x Couples in 2014. Alan Gassman will be presenting these materials at the Wealth Council Florida Forum on Friday, March 21, 2014 in Orlando, Florida. More details regarding that seminar appear below, and all suggestions are welcome.

DIVORCE AND DOMESTIC PARTNERSHIP AGREEMENTS

Divorce is still very uncharted territory with respect to same-s*x marriages. Because many states do not recognize same s*x marriages, couples who got married in a state that was not their state of residence may find that their state of residence will not grant them a divorce. Thus, if the partners have a disagreement on how to split up the marital assets the court system will have no available remedy. Although states such as California and Massachusetts, which have done large numbers of same s*x marriages for couples across the country, do not have residency requirements for marriage, they do have residency requirements for divorce.1

The divorce prohibition in certain states could change in the not too distant future, and, if so, alimony and property settlement rights might date back to when the couple was originally married, as opposed to dating back to when the state legislature and governor might sign such legislation into existence.

When a same s*x couple lives in a state that does not recognize same s*x marriage, but is validly married in another state, they can consider a Domestic Partnership Agreement. A Domestic Partnership Agreement, in a way, works like a prenuptial agreement, for it is a contract between partners that provides the court a way to divide up the marital assets and even create support rights between partners.2 While there is no guarantee that a court in a non-recognition state will uphold same s*x domestic partnership agreements, it does not hurt to draft one to show a couple’s intent.

One Florida appellate court has upheld domestic partnership or cohabitation agreements between unmarried same s*x couples.3 The Fourth District Court of Appeals, in the case of Posik v. Layton in 1997, found that even though Florida prohibited same s*x marriages, it did not prevent a domestic partnership agreement from being legally enforceable.4 A copy of the decision can be found in the Appendix, and includes the following statement:

“By prohibiting same-s*x marriages, the state has merely denied homos*xuals the rights granted to married partners that flow naturally . . . But the State has not denied these individuals their rights to either will their property as they see fit nor to privately commit by contract to spend their money as they choose.”5

Thus, while we are unsure if premarital agreements will be upheld in Florida, privately contracted agreements, such as a Domestic Partnership Agreement, will most likely be upheld if properly drafted and implemented.

Example

Assume that things do not work out between Sam and George, and after four years of marriage they decide to get a divorce. They have a prenuptial agreement, and they were married in Massachusetts. Neither George nor Sam ever resided in Massachusetts, and to get married, they were not required to do so.

They go to the Florida courts to request a divorce, but they are denied. The judge determines that because they were married in a union that the state of Florida does not recognize, the state of Florida cannot grant their divorce.

Unfortunately, Massachusetts does have residency requirements for divorce. If the grounds for divorce occurred outside of the state (in this case, they occurred in Florida), then one spouse must be a Massachusetts resident for one year before the state will move forward with divorce proceedings.

As neither George nor Sam have any ties to Massachusetts, neither of them want to reside there in order to get the divorce. They may choose to separate without the legal divorce, but this has repercussions as well. If either of them remarries, it may technically be considered bigamy, though it is unclear as to whether this would apply in a state that does not recognize the marriage in the first place. Many states are currently facing lawsuits on this issue, and the legal community should keep an ear to the ground with respect to this issue.

Many attorneys for same s*x marriage are recommending prenuptial agreements for same s*x couples. This is particularly important as many couples who plan to or have recently married are older and more established, and therefore have more of their own independent wealth to protect in the event of divorce. On the other hand, if a couple lives in a jurisdiction that does not recognize same s*x marriage, they may not be entitled to a marital division of assets in the event of a split and the prenuptial agreement may not be valid.

Thus, a domestic partnership agreement is the most secure way of determining how a couple will divide assets in the event of separation in a non-recognition state.

The Domestic Partnership Agreement can contain many terms, and there are many considerations associated therewith.

Some important factors are as follows:

1. Summarize the economic reasons for the agreement, particularly if one partner is making career sacrifices to raise a child or children, or to concentrate on homemaking.

2. Follow the standards that apply to Florida postnuptial agreements with respect to the following:

a) Full and complete disclosure.

b) Strongly urging each party to have separate independent legal counsel.

c) Making sure that there is no duress or appearance of duress- sign before wedding invitations or any similar situation occurs.

3. If the parties are not married, consider the tax impact of pseudo-alimony payments and property settlement transfers that might occur. Would it be against public policy for the agreement to require that the parties become married upon the request of either spouse, in order to have the tax advantages that would apply in the event of a divorce?

4. Consider a geographic living limitation requirement if and when the parties have a common child or children.

5. Beyond simply agreeing that Florida law should apply as if the parties were married from a date agreed to, consider the following alterations to Florida law:

A. Binding private arbitration in lieu of public litigation, to the extent legally enforceable.

B. Allow either party to request bifurcation of arbitration proceedings, so that issues such as the enforceability of the agreement and specific provisions thereof can be determined by the arbitrator before going to the next step of adding discovery and arbitration hearings on legal rights that may not apply if the agreement is upheld or denied.

6. Consider attorney fee provisions in lieu of simply having the spouse more able to pay be responsible for all fees.

7. Consider requiring initial representation by collaborative lawyers to the extent legally enforceable.

FLORIDA LITIGATION – WILL THE TIDE TURN HERE?

Six couples in Miami, Florida have filed a lawsuit demanding that they be allowed to marry their same s*x partners.1 The suit was filed on January 21, 2014. A copy of the complaint filed by these couples can be found in the Appendix and includes a number of compelling arguments that may be successful to require Florida law to recognize and respect same s*x marriages. This could apply retroactively to same s*x couples who have been married in jurisdictions outside of Florida that recognize same s*x couple marriages.

The Complaint filed in this matter contains the following statements:

9. In the not so distant past, the majority of states, including Florida, had laws prohibiting marriage between people of different races. Until 1967, the Constitution and laws of Florida barred marriages between white and black persons. See former Art. 16, § 24, Fla. Const.; former Fla. Stat. § 741.11 (repealed by Fla. Laws 1969, ch. 69-195, § 1). The Supreme Court of the United States held such exclusions from marriage to be unconstitutional in Loving v. Virginia, 388 U.S. 1, 12 (1967), declaring: “The freedom to marry has long been recognized as one of the vital personal rights essential to the orderly pursuit of happiness by free men.” See also Van Hook v. Blanton, 206 So.2d 210 (Fla. 1968) (granting writ of mandamus declaring Florida anti-miscegenation laws invalid in light of Loving).

11. Marriage contributes to the happiness, security and peace of mind of countless couples and their families, and to the stability and well being of society. Florida, like other states, encourages and regulates marriage through hundreds of laws that provide benefits to, and impose obligations on, married couples. Florida in turn enjoys the well-established benefits that marriage brings: stable, supportive families that contribute to both the social and economic well-being of Florida. “There can be no doubt that the institution of marriage is the foundation of the familial and social structure of our Nation. . . .” Posner v. Posner, 233 So. 2d 381, 384 (Fla. 1970). Marriage means many things, including “cohabitation, the founding of a home, affections, and companionship,” and is premised on the reality that “we depend on each other during the changing vicissitudes of life.” Orr v. State, 176 So. 510, 514 (Fla. 1937).

12. When Florida withholds a marriage license from a same-s*x couple, Florida circumscribes individuals’ basic life choices, classifies persons in a manner that denies them the public recognition and myriad benefits of marriage, prevents couples from making a legally binding commitment to one another and from being treated by the government and by others as a family rather than as unrelated individuals, and harms society by burdening committed families and preventing couples from being able to fully protect and assume responsibility for one another and their children.

13. Florida’s exclusion of same-s*x couples from marriage violates the Due Process Clause and the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. Florida’s exclusion deprives same-s*x couples of their fundamental right to marry; infringes upon their constitutionally protected interests in liberty, dignity, privacy, autonomy, family integrity, and intimate association; and deprives them of equal protection of the laws.

The Complaint goes on to explain that each of the plaintiffs satisfy all requirements that would apply under Florida law to become married if they were opposite s*x couples, and then explains the history of Florida laws barring same-s*x couples, as follows:

27. In 1977, the Florida legislature amended Fla. Stat. § 741.04 to expressly limit the issuance of marriage licenses to opposite-s*x couples. Section 741.04 states in relevant part:

No county court judge or clerk of the circuit court in this state shall issue a license for the marriage of any person unless there shall be first presented and filed with him or her an affidavit in writing, signed by both parties to the marriage, providing the social security numbers or any other available identification numbers of each party, made and subscribed before some person authorized by law to administer an oath, reciting the true and correct ages of such parties; unless both such parties shall be over the age of 18 years, except as provided in s. 7410405; and unless one party is a male and the other party is a female. (Emphasis added.)

28. In 1997, in response to the possibility that some states might permit same-s*x couples to marry, the Florida legislature enacted Fla. Stat. § 741.212 to again prohibit marriages between same-s*x couples. That statute provides:

(1) Marriages between persons of the same s*x entered into in any jurisdiction, whether within or outside the State of Florida, the United States, or any other jurisdiction, either domestic or foreign, or any other place or location, or relationships between persons of the same s*x which are treated as marriages in any jurisdiction, whether within or outside the State of Florida, the United States, or any other jurisdiction, either domestic or foreign, or any other place or location, are not recognized for any purpose in this state.

(2) The state, its agencies, and its political subdivisions may not give effect to any public act, record, or judicial proceeding of any state, territory, possession, or tribe of the United States or of any other jurisdiction, either domestic or foreign, or any other place or location respecting either a marriage or relationship not recognized under subsection (1) or a claim arising from such a marriage or relationship.

(3) For purposes of interpreting any state statute or rule, the term “marriage” means only a legal union between one man and one woman as husband and wife, and the term “spouse” applies only to a member of such a union.

29. In 2008, Florida amended its Constitution to include a provision excluding same-s*x couples from marriage. Article I, Section 27 of the Florida Constitution provides:

Insomuch as marriage is the legal union of only one man and one woman as husband and wife, no other legal union that is treated as marriage or the substantial equivalent thereof shall be valid or recognized.

The counts in this Complaint are as follows:

Count One
Violation of the Due Process Clause of the Fourteenth Amendment to the United States Constitution (brought pursuant to 42 U.S.C. § 1983)

Count Two
Violations of the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution (brought pursuant to 42 U.S.C. § 1983)

A. Discrimination Based on S*xual Orientation

B. Discrimination Based on S*x

C. Discrimination with Respect to Fundamental Rights and Liberty Interests Secured by the Due Process Clause

D. Entitlement to Declaratory Relief

Legal counsel for the plaintiffs included Nancy J. Faggianelli, Sylvia H. Walbolt, Luis Prats, Jeffrey Michael Cohen, Cristina Alonso of the Carlton Fields Jorden Burt, P.A. law firm in Tampa and Miami.

SCIN, SCRAM, ANNUITY, or SCGRAT

Don’t Leave Your Clients with Short Life Expectancies Flat
Planning for Clients with Short Life Expectancies After Davidson and CCA 2013-30-033

By: Alan S. Gassman and Kenneth J. Crotty

The following, or an improved version thereof, will soon be published with Leimberg Information Services.

Primary Implications of the Limited Choices That Planners Have to Assist Taxpayers – the Good News Is That the Choices and Solutions Are Understandable and Easily Implemented.

EXECUTIVE SUMMARY:

Since the Tax Court decision of Estate of Moss v. Comm’r in 1980 and the issuance of Treasury Regulation § 1.1275-1(j) in 1998, estate tax planners have used self-cancelling installment notes (SCINs) to save millions of dollars of estate taxes for taxpayers whose life expectancy may be shorter than that assumed under the 2000CM Mortality Table promulgated by the Treasury Department under Publication 1457. In the recent CCA 2013-30-033, the IRS has taken the position in the Davidson case that clients with shorter than average life expectancies may not rely on the 2000CM Mortality Table to determine their life expectancy for the purpose of valuing the SCIN and may make taxable gifts when the sale occurs if they do rely on the 200CM Mortality Table. To reduce the possible gift tax exposure for clients, practitioners using SCIN with clients who have reduced life expectancies may want to use the SCGRAT technique described below.

FACTS:

The industry practice for most well versed practitioners has been that the 2000CM Mortality Table can be used when the taxpayer has a better than 50% chance of living at least one year at the time that the SCIN or private annuity arrangement is entered into.

In order to avoid incurring income tax on the sale of assets for a SCIN or private annuity, most arrangements have entailed having an irrevocable trust established to be separate and apart from the taxpayer for federal estate tax purposes, while being disregarded for income tax purposes so that there is no income on the sale and no interest or Internal Code Revenue § 72 income recognized by the taxpayer as payments are received by the taxpayer from the trust during the taxpayer’s lifetime.

Treasury Regulation § 25.7250-3(b)(2)(i) was enacted to implement the “probability of exhaustion test” which generally provides that if the entity purchasing assets for a private annuity is not capitalized with sufficient assets to enable the trust to make the scheduled private annuity payments until the Grantor reaches age 115, assuming a market rate equal to what is known as the 7520 rate which is equal to 120% of the Federal midterm rate in effect under § 1274(d)(1) for the month when the transaction is entered into, rounded up to the nearest 2/10ths of 1%.

Because of the difficulty of satisfying the probability of exhaustion test, especially in periods of low interest rates, most estate tax planners have recommended the use of SCINs, which are not subject to that test. A commonly used planning industry rule of thumb has been that a trust purchasing assets from a Grantor in exchange for a SCIN should have a positive net worth equal to 10% or more of the value of the assets purchased in order to be considered a separate and viable entity for estate tax planning purposes.

When trusts do not have sufficient assets to pass the probability of exhaustion test or the “10% rule of thumb” described above then it is common to have beneficiaries or affiliated entities guarantee the note or the private annuity in order to meet the applicable test, the 10% test for a SCIN or the probability of exhaustion test for a private annuity.

Treasury Regulation § 25.7520-3(b)(3)(I), which states that the 2000CM Mortality Table can be used when the person whose life controls the document has better than a 50% chance of living at least one year, applies explicitly to private annuities.

Many leading commentators, including Howard Zaritsky and Ronald D. Aucutt, have concluded that most likely this regulation applies to SCINs, because in form and content a SCIN constitutes a series of payments over time that can in substance be exactly the same as a private annuity contract.

The Service has strongly disagreed with this approach, but has waited over 18 years since the enactment of the above-referenced Treasury Regulation and notwithstanding annual and continuing industry and leading treatise literature to the contrary, on the occasion of the death and estate tax return audit of William M. Davidson to challenge this approach, whereby over $1,000,000,000 of estate tax is being assessed by the Service (constituting over 25% of the total estate taxes that the U.S. government would receive for a given calendar year) as the result of Mr. Davidson having sold a large percentage ownership in the Detroit Pistons basketball team and other assets in exchange for multiple SCINs when Mr. Davidson is said to have been in failing health.

The Service further threw the gauntlet down in front of the estate tax planning industry by publishing CCA 2013-30-033 on August 5, 2013, as an IRS Chief Counsel Advice which concludes that a SCIN will be worth substantially less than its face amount if a willing buyer would pay a willing seller less than the face amount if there was open market negotiation for the note.

In other words, if Mr. Davidson sold $1,000,000,000 worth of assets for a $1,000,000,000 SCIN then the trust that sold the note would only be able to receive $300,000,000 pursuant to an auction of the note at an event where every willing buyer received notice of the auction. Mr. Davidson would then have made a $700,000,000 gift and he would be subject to $280,000,000 worth of estate tax, enough to purchase two F-35 fighter jets.

What is a planner to do now when a wealthy client has a short life expectancy – SCRAM, go flat or SCGRAT?

COMMENTS:

Door Number 1

A private annuity arrangement could be entered into with family members, such as occurred in the 2012 Estate of Kite v. Commissioner case. If a private annuity is entered into where the parent sells assets to children, the children’s basis in the assets will be equal to the annuity payments made by the children. If the parent dies before receiving any annuity payments, such as what happened in the Kite case, the children would have a zero basis in the assets received and would face a 23.8% capital gains tax on the full value of the assets when they were sold.

Alternatively, the planner must face the probability of exhaustion test if a grantor trust is used that would quite possibly allow a stepped up basis for the assets.

The probability of exhaustion test may not apply, as discussed in the University of Miami Heckerling presentation by Lawrence Katzenstein , but there is a significant risk that the probability of exhaustion test will apply.

Door Number 2

Go with a SCIN, but understand the risk posed by CCA 2013-30-033 and the Davidson case that the Grantor could be making a significant taxable gift at the time the transaction was entered into.

Door Number 3

Do nothing, but accelerate planning with charitable donations, discounting, and other methods.

Door Number 4

The box where Carol Merrill is now standing.

Door number 4 is the bread slicer – or at least what we think is better than sliced bread – a SCIN arrangement that would allow any gift element to not be subject to gift tax and to instead be repayable to the Grantor by use of a grantor retained annuity trust arrangement.

Instead of selling the assets to a typical irrevocable grantor trust the taxpayer first establishes a limited liability company owned 100% by the Grantor and places the assets that are being “sold” into the LLC and also receives a SCIN from the LLC while verifying that the taxpayer has a better than a 50% chance of living at least one year.

The taxpayer also executes a grantor retained annuity trust agreement (GRAT) which provides that a percentage of the value of the Day 1 GRAT assets will be paid back to the Grantor each year for two years on the anniversary date of the GRAT being established.

The Grantor then transfers ownership of the LLC to the GRAT and hires a valuation firm to determine the value of the assets owned by the LLC.

If the valuation firm opines that the assets in the LLC are worth less than the face amount of the SCIN, then the LLC will be considered to have a negligible value, and the payments owed back to the Grantor will be very small. There should be some positive value even if the assets in the LLC are worth less than the SCIN because the owner of the LLC has no downside and at least some limited upside potential that the assets will grow in value and yield a net return exceeding the amount owed on the SCIN.

If the assets have a value exceeding the value amount of the SCIN then assuming the 7520 rate is 2.4%, then the excess amount multiplied by approximately 51.8% will be the amount of the annual payment that the GRAT will make to the Grantor, which may be in cash that the LLC can distribute to the GRAT or in the form of assets equal in value to such amounts that the LLC may distribute to the GRAT each year.

After the second annual payment, the LLC will be owned by the GRAT or an irrevocable “remainder trust” that the GRAT pours into after the second year.

The SCIN will typically be an interest only SCIN with a balloon payment at the end of the term of the note which will normally be just before the standard life expectancy of the individual on whose life the note is based as determined under 2000CM Mortality Table or the mortality table under Treasury Regulation § 1.72-9, Table V.

The 2000 CM Mortality Table will typically have a shorter life expectancy and it is therefore safer to use it. For example, for a 78 year old the life expectancy under the 200CM Mortality Table is 9.44 and the life expectancy under Treasury Regulation § 1.72-9, Table V is 10.63.

To determine the value of the SCIN, either the interest rate of the SCIN will be increased, the face amount of the SCIN will be increased, or the interest rate and the face amount of the SCIN can both be increased to the extent appropriate to satisfy actuarial assumptions which make the note equal in value to the assets sold so that the seller is compensated to take into account that the note will vanish on death. This can be determined based upon standard life expectancies under actuarial tables using software programs like Leimberg’s Number Cruncher and Larry Katzenstein Tiger Tables. The links to obtain these programs are as follows.

http://www.leimberg.com/products/software/numberCruncher.html
http://www.tigertables.com/

The need to value the assets held under the LLC is a substantial reason to use the GRAT when assets are hard to value or discounts will be applicable.

A GRAT must be funded in a single transfer and there is no authority for the ability to sell assets to a GRAT in exchange for a note at the time of funding.

This is why well respected commentators have suggested that an LLC that is disregarded for income tax purposes will first be funded by the Grantor and that the Grantor can receive a note back from the LLC in order to provide appropriate financial leverage for the arrangement.

Many taxpayers will want to have their remaining assets be under the amount that would require an estate tax return to be filed in order to reduce the paperwork, expenses, and delay in estate administration that results from having to file a federal estate tax return. A SCIN will not be considered to be an asset owned at the time of death for estate tax return threshold filing purposes.

However, in Estate of Moss v. Comm’r, 74 T.C. 1239 (1980) , the Tax Court held in favor of the estate….***See: Cain v. Comm’r, 37 T.C. 185 (1961)

Where a marital deduction devise or charitable disposition may facilitate avoidance of federal estate tax on the death of the Grantor when used in conjunction with the SGRAT, it can still be advisable to have GRAT assets pass to fund a marital devise or trust and/or a charitable devise as remainder beneficiaries of the GRAT so that a federal estate tax return using it is more clear that the assets passing to fund a marital devise will receive a stepped up basis if held by the taxpayer on death, but the advantage of not having to file a federal estate tax return may outweigh the risk of not receiving a stepped up basis on assets passing to fund a marital or charitable devise.

Another consideration is whether to maximize the use of the taxpayer’s generation skipping tax exemption makes the filing of a federal estate tax return worthwhile. Generation skipping tax exemption can clearly be allocated to a marital deduction trust that is funded from the Grantor’s estate or revocable trust that receives the payments from the GRAT.

Many clients will prefer to zero out the GRAT in order to avoid the need to file a federal gift tax return for the year that the SCGRAT is implemented. It may therefore be important to be sure that there are no gifts exceeding $14,000 per donee or any gifts that do not qualify for the annual gift tax exclusion for the year in which a gift tax return would be filed, although even if a gift tax return needs to be filed it seems likely that a zeroed out GRAT would not be considered to be a gift that would need to be reported on a gift tax return.

Sample charts demonstrating this SCRAT technique are attached.

CONCLUSION:

Utilizing a SCGRAT may be the best choice for practitioners who would like to use SCINs with a client who has a reduced life expectancy. If the Service successfully challenges the transaction and reduces the face value of the note by applying the willing buyer willing seller standard, by using the SCGRAT the value of the GRAT formed by the client should be increased. If the value of the GRAT is increased, then the payments from the GRAT to the client will be increased. As a result, there should not be any additional gift tax liability for the client.
Seminar and Webinar Announcements

Ave Maria is Closer Than Korea

Ever wanted to go to Korea? This is not a good time to go to North Korea, but consider Naples. Not Naples, Italy, of course, but Naples, Florida.

You can attend the Ave Maria School of Law Estate Planning Conference (don’t miss breakfast because we are a breakfast sponsor) on Friday, April 25, 2014 and have your pick from over 10 sessions (many run concurrently). Please pick our session on Using Estate Planning Techniques to Optimize Family Wealth Preservation. We will be counting the people!

Not only that but you can then stay at the Ritz Carlton on Friday night and Saturday night for only $338 per room, and the courtesy van will take you to the Kentucky Fried Chicken located at 12225 Collier Blvd.,which is only 9 minutes from the Ritz Carlton.

Have buckets of fun in Naples, both for our session, and also choose from the following fantastic presentations and speakers:

7:30 am Registration Opens

8:00 am Breakfast (Co-Sponsored by Gassman Law Associates, P.A. – sorry no Kentucky Fried Chicken, mashed potatoes or gravy.)

8:15 – 8:30 am Welcome and Opening Remarks

Eugene R. Milhizer, Ave Maria School of Law President and Dean Jonathan Gopman, Office Managing Partners at Akerman LLP

8:30 – 9:30 am General Session: Income Taxation of Trusts and Estates

Speaker: William A. Snyder

9:30 am – 9:45 am Networking Break

9:45 am –10:45 am Concurrent Sessions:

Session 1: International Tax Planning and Asset Protection

Speakers: Jonathan Gopman and Kevin Carmichael

Session 2: Homestead Portability: Pitfalls, Opportunities, and Traps

Speaker: Barry A. Nelson

10:45 am – 11:00 am Networking Break

11:00 am – 12:00 pm Concurrent Sessions:

Session 1: Succession Planning for the Closely Held Business Upon Retirement or Death of the Principal

Speaker: Jerome M. Hesch

Session 2: Using Estate Planning Techniques to Optimize Family Wealth Preservation

Speaker: Alan S. Gassman

12:00 pm – 1:15 pm Lunch Presentation: Estate Planning Ethics

Speaker: Gregory T. Holtz

1:15 pm – 2:15 pm Concurrent Sessions:

Session 1: A Baker’s Dozen of My Top Favorite Planning Ideas That I’m Willing to Talk About

Speaker: Bruce Stone

Session 2: Pitfalls for Estate Planners

Speaker: Laird A. Lile

2:15 pm – 2:30 pm Networking Break

2:30 pm – 3:30 pm Featured Session: Domestic Asset Protection Trust Planning

Speaker: Al W. King, III

3:30 pm – 4:30 pm Estate Planning Power Panel Discussion and Cocktail Reception

Panelists: Al W. King, III, Bruce Stone, Barry A. Nelson, Alan S. Gassman and Jerome M. Hesch

Moderator: Christopher P. Bray

For additional information on the Ave Maria School of Law Estate Planning Conference please contact Karen Grebing at kgrebing@avemarialaw.edu or 239-687-5404.

Strafford JEST Trust Webinar Notice

Stafford Publications, Inc. has just put Alan Gassman and Christopher Denicolo together with noted author and tax thinker Edwin Morrow to speak on Tuesday, March 18 from 1:00pm-2:30pm EDT on JEST planning.

More about this webinar can be found in our Seminars and Webinars section below.

If you would like to register for this webinar with Strafford (they keep all of the money of course!) you can register by visiting: https://www.straffordpub.com/products/structuring-joint-exempt-step-up-trusts-emerging-tool-to-maximize-step-up-in-basis-2014-03-18 or call 1-800-926-7926 ext. 10  Ask for Joint Exempt Step-Up Trust on 3/18/2014 and mention code: ZDFCT.

The Balanced Scorecard of an IPA (Independent Practice Association)
By: Pariksith Singh, M.D.

Singh

How does one evaluate an IPA (Independent Physicians’ Association)? This is an important question not only in assessing its value for sale or acquisition but also to measure its success, review the implementation of strategy and identify its key functions and metrics. We have seen the sale of several IPAs in the recent past in Tampa Bay and an interest among physician entrepreneurs in creating IPAs and attempt to make a fast buck. In this endeavor, they seem to look only at the financial balance sheet or returns of the organization and forget the other measurements that are key in the appraisal of an IPA.

The Balanced Scorecard (BSC) is a concept first articulated in a 1992 Harvard Business Review article by Robert S Kaplan and David Norton. It comprises of four perspectives which are necessary to have a composite snapshot of the state of health of a business. These perspectives are :

1) The Financial Perspective

2) The Customer Perspective

3) The Business Process Perspective

4) The Learning and Growth Perspective

In the book ‘The Balanced Scorecard: You Can’t Drive a Car Solely Relying on a Rearview Mirror’, Kaplan later expanded on this approach. It is ‘estimated that at least 40% of the Fortune 1000 companies use this methodology’.

In my opinion, a BSC is the best way in which one can measure the pulse of an IPA, although given the specific nature of an IPA, certain new perspectives must be added. These additional perspectives should be:

1) The Regulatory Perspective

2) The Legal Perspective

3) The Brand Perspective

If an IPA deals with Medicare lives and federally-funded dollars, the regulatory aspect of its functioning assumes an even more critical metric for any violation can threaten its very existence. Such a perspective should include compliance with HIPAA, OSHA, Stark laws, anti-kickback statutes, fee-splitting, Balanced Budget Amendments, the Affordable Care Act, etc. In light of some IPAs losing their contracts with HMOs recently, such a tally becomes immediate and significant.

An IPA is nothing if not relationships and contracts. If contracts do not exist, the IPA has no foundation and its entire structure collapses. Thus, strong and compliant contracts that are transparent and clear with powerful disincentives for breach would be essential. Without such contracts in place with coherent and ethical legal counsel to back it up, an IPA would founder and be unable to grow. Whatever growth and profits are accomplished are tenuous and expose it to further danger and vulnerability. It is my recommendation that all fee including administrative and re-insurance expenses be properly disclosed and attested by affiliates at the time of induction to the IPA. It is also my belief that the liabilities to the business be considered as one of the most critical sections of the BSC, i.e., the number of lawsuits against the organization, the potential damages from such lawsuits, the confidentiality of its data and reports or their loss, the nature of competition and poaching of its affiliates, conflicts in its relationships with the HMOs and potential OIG (Office of Inspector General) investigations of its practices.

The Brand of an IPA is the ‘X’ factor, its mystique and inevitability, uniqueness and desirability, customer loyalty and credibility of the organization and its officers. It is the factor that gives it its ‘oomph’ and saleability, and without the power of the Brand, an IPA becomes an also-ran.

Thus, the valuation of an IPA cannot be done solely on a fiscal basis. All the perspectives mentioned above must be calculated and counted. While the financials remain an important aspect of any valuation, they certainly are not the most important, or even, the largest component of a BSC for an IPA. At best, the fiscal status of an IPA can be used only if the organization scores a 100 on all other measures on its scorecard. At worst, the financials have to be completely discarded if the basics of business are not in place. We have seen that recently when a Fortune 500 corporation refused to take ownership or invest in an IPA solely because there were lawsuits against it for reasons of compliance.

The fundamentals of an IPA still remain the state of its compliance, the strength of its relationships and services, its feedback systems, employees, data and processes. Without these in place and sealed protectively, all one shall find is a house of cards. And the big problem with a house of cards is that the bigger it gets, the more vulnerable it becomes to sudden collapse. An IPA has to be based on an extremely strong foundation even though it needs to be nimble and flexible as regulations change and payment methodologies vary as we have seen with CMS in recent years.

When we measure the Business Process Perspective, we should measure the MRA, HEDIS, HOS, CAHPS and care management analyses, along with length of stays, continuity of care, ER visits, close follow-ups on nursing homes and hospitals, and post-acute care and post discharge care. The Operational metrics would also study the infra-structure, the state of IT, web services, reporting and sharing of information among the executives and owners.

The Customer Perspective should pay close attention to physician and employee satisfaction and retention, response rates and reputation. When practices are not wholly owned, this becomes an even more serious concern for any IPA. Also, the strength and managed care savvy of affiliates and risk of losses due to poor utilization by them cannot be ignored. If the IPA does not see itself as a fiscal intermediary and does not have adequate protections against a downturn and that it is in a risk business where the Pareto rule can get easily skewed from 20-80 to 1-99 and if the reserves are not strong or re-insurance is weak, all the juggling of numbers is of scarce significance.

An IPA is not any stronger by randomly signing up affiliates without interest, aptitude or drive to master managed care; in fact, the very opposite is true. Without proper infra-structure in place, an IPA should not attempt to grow. The continuous education and training of its employees is a sine qua non with any growth and a culture of compliance, quality and excellence should be a part of its DNA. The best IPA is a Learning Organization and a Knowledge-Creating Organization.

The concept of a Poison Pill in the valuation of any IPA is of much use. If the risk to the IPA due to significant legal or regulatory liability is high, it completely negates any financial valuation of the IPA almost like a junk bond and, in fact, may give it a negative status. We see this frequently in the market place when we see how the credit agencies appraise a company or a nation. Recently, we have seen how Universal Health Care, Inc, a Medicare Advantage plan, was taken over by a receiver thereby reducing its value to zero and with significant legal and financial liability to its executives and owners, when the Office of Insurance Regulations (OIR) decided that the plan was out of compliance. An IPA may come under the purview of the OIR too in a similar fashion.

Eventually, one must remember that any metric is only a reflection of an overall strategy, vision and mission, and the core competence of an IPA. If the IPA loses sight of these, no amount of tactical quantification would suffice in making it healthy and sustainable. Strategy must be integrated completely with the processes and the core strength of the entity should never be compromised. For if the core is forsaken, all is forsaken and the vitality of the organization may be irretrievably lost.

A poem by Dr. Singh:

The Sky

The sky covers my eyes
With white flares of zinc.
All desires are dissolved
In its trackless mind.
The sky fills my brain
With vast stretches
Of sun-lit spaces,
Clouds that float in silence
With wistful thoughts,
And stars that intuit
In brilliant scintillations
Of insight and wit,
Spread out in shapes
As varied as constellations,
Filled with the inner glow
Of presence as an amethyst
That fills within
With waves of trapped light.
The sky is a brain
That replaces my own.

DO NOT MISS OUR MARCH 19, 12:30 pm or APRIL 1, 5pm FREE 30 MINUTE WEBINAR ON Compounding Pharmacy Law.

For many medical practices this will be the best thing that has happened for them in years. Find out why and how during this informative webinar.  Click here to register for the March 19 webinar.  Click here to register for the April 1 webinar.

Perling Picture

Applicable Federal Rates

Below we have this month, last month’s, and the preceding month’s Applicable Federal Rates, because for a sale you can use the lowest of the 3.

Applicable Federal Rates.February 2014

Seminars and Webinars

THE CLEARWATER BAR ASSOCIATION 444 SHOW – ASSET PROTECTION, ESTATE PLANNING AND LLC LAW UPDATE

Date: Thursday, February 27, 2014 | 4:00 p.m.

Location: Online webinar.

Speaker: Alan Gassman, Christopher Denicolo and Kenneth Crotty

Additional Information: To register for the webinar please visit www.clearwaterbar.org

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THE JEST, THE SCGRAT AND THE E STREET SOFTWARE

Please join Alan Gassman, Ken Crotty and Chris Denicolo for a 30 minute webinar describing 2 new planning techniques and also free beta testing of the EstateView software that was developed by Gassman Law Associates, P.A.

Date: Tuesday, March 4, 2014 | 5:00 p.m.

Location: Online webinar

Additional Information: To register for the webinar please visit https://www2.gotomeeting.com/register/625212018.

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FLORIDA BAR HEALTH LAW REVIEW 2014

Alan Gassman will be speaking on What Healthcare Lawyers Need to Know About Tax Law and Business Entities at this excellent annual Florida Bar conference that is attended not only by those who are taking the Board Certification exam but also healthcare lawyers and other advisors.

Other speakers will include Lester Perling who is the co-author of A Practical Guide to Kickback and Self-Referral Laws for Florida Physicians and a number of other books and publications, and Mickey Mouse, Donald Duck and the “dwarf planet” formerly known as Pluto!

Date: March 7 – 8, 2014

Location: Hyatt, Orlando, Florida

Additional Information: We thank Jodi Laurence and Sandra Greenblatt for all of their hard work in making this conference as successful as it is. For more information please contact Jodi at jl@flhealthlaw.com or Sandra at sg@flhealthlawyer.com.

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TAX AND ASSET PROTECTION BASICS FOR THOSE WHO REPRESENT PHYSICIANS AND MEDICAL PRACTICES

Alan Gassman and Christopher Denicolo will be speaking at the Hillsborough County Bar Association’s Health Law Section Luncheon on the topic of Tax and Asset Protection Basics for Those Who Represent Physicians and Medical Practices.

Date: March 12, 2014

Location: Chester H. Ferguson Law Center in Tampa, FL

Additional Information: For additional information please contact Co-Chairs Sara Younger (sara.younger@baycare.org) or Thomas Ferrante (tferrante@carltonfields.com).

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THE FLORIDA BAR LEADERSHIP ACADEMY: MARCH 2014 REGIONAL MEETING

On Saturday, March 15, 2014, Alan Gassman will join Judge Claudia Rickert Isom and Hillsborough County Bar Association President Susan E. Johnson-Valez for a panel discussion on the Benefits of Serving as a Community Leader. We welcome any and all questions, comments and suggestions for this presentation. We are developing a criteria worksheet that professionals can use to decide what the costs and benefits are of the many different non-billable activities and causes that we all have the opportunity to support.

Date: Saturday, March 15, 2014

Location: Marriott Tampa Airport

Additional Information: To register for the program please email agassman@gassmanpa.com

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STRUCTURING JOINT EXEMPT STEP-UP TRUSTS: EMERGING TOOL TO MAXIMIZE STEP-UP IN BASIS

Date: Tuesday, March 18, 2014 | 1:00 – 2:30 p.m.

Location: Online webinar sponsored by Stafford Publications, Inc.

Speakers: Alan S. Gassman, Christopher Denicolo and Edwin P. Morrow, III, Esq.

Additional Information: To register for the webinar please visit https://www.straffordpub.com/products/structuring-joint-exempt-step-up-trusts-emerging-tool-to-maximize-step-up-in-basis-2014-03-18 or email agassman@gassmanpa.com

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COMPOUNDING THE PROBLEMS AND OPPORTUNITIES FOR COMPOUNDING PHARMACIES

Date: Wednesday, March 19, 2014 at 12:30 p.m. or Tuesday, April 1, 2014 at 5:00 p.m.

Location: Online webinar

Speakers: Lester Perling and Alan Gassman

Additional Information: To register for the March 19, 2014 webinar please click here.  To register for the April 1, 2014 webinar please click here.

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COUNSELING SAME S*X COUPLES IN 2014

Alan Gassman will be speaking at the Wealth Council Florida Forum on Counseling Same S*x Couples in 2014

Date: Friday, March 21, 2014 | 10:30 – 12:00 p.m.

Location: Holiday Inn at the Orlando Airport

Additional Information: For more information and to register for the program please email agassman@gassmanpa.com

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LUNCH TALK – LAW PRACTICE EFFICIENCY TIPS

Date: Monday, April 7, 2014 | 12:30 p.m.

Location: Online webinar

Speaker: Alan S. Gassman

Additional Information: To register for this webinar please visit www.clearwaterbar.org

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FICPA SUNCOAST CHAPTER MONTHLY MEETING

Alan S. Gassman will be speaking at the FICPA Suncoast Chapter’s monthly meeting on the topic of THE FLORIDA CPA’S GUIDE TO PLANNING WITH PHYSICIANS AND MEDICAL PRACTICES

Date: Thursday, April 17, 2014 | 4:00 p.m.

Location: Tampa, Florida

Additional Information: For more information on this event please email agassman@gassmanpa.com or mary@clawsonasplus.com

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DONOR LUNCHEON AT RUTH ECKERD HALL WITH PROFESSOR JERRY HESCH IN CLEARWATER, FLORIDA

Sponsored by Gassman Law Associates, P.A. Co-sponsors invited.

Professor Jerry Hesch will be speaking at a Donor Luncheon on the topic of CHARITABLE TAX SAVINGS: HOW TO MAKE SURE THAT UNCLE SAM CONTRIBUTES HIS SHARE TO MAXIMIZE RESULTS

Date: Tuesday, April 22, 2014 | TIME TO BE DETERMINED

Location: Ruth Eckerd Hall, Clearwater, Florida

Additional Information: For additional information please contact Suzanne Ruley at sruley@rutheckerd.net or Alan Gassman at agassman@gassmanpa.com

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RUTH ECKERD HALL PLANNED GIVING MEETING

Professor Jerry Hesch will be speaking at the Ruth Eckerd Hall Planned Giving Meeting in Clearwater, Florida on the topic of INNOVATIVE CHARITABLE GIVING TECHNIQUES FOR THE WELL TUNED ESTATE PLANNER

Sponsored by Gassman Law Associates, P.A. Co-sponsors invited.

Date: Tuesday, April 22, 2014 | 4:00 p.m.

Location: Ruth Eckerd Hall, Clearwater, Florida

Additional Information: This session qualifies for 1 hour of continuing education credit for lawyers and CPA’s. To attend please email Suzanne Ruley at sruley@rutheckerd.net or Alan Gassman at agassman@gassmanpa.com

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1st ANNUAL ESTATE PLANNER’S DAY AT AVE MARIA SCHOOL OF LAW

Speakers: Speakers will include Professor Jerry Hesch, Jonathan Gopman, Alan Gassman and others.

Alan Gassman will cover speak on Using Estate Planning Techniques to Optimize Family Wealth Preservation.

Date: April 25, 2014

Location: Ave Maria School of Law, Naples, Florida

Sponsors: Ave Maria School of Law, Collier County Estate Planning Council and more to be announced.

Additional Information: For more information on this event please contact agassman@gassmanpa.com.

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THE FLORIDA BAR ANNUAL WEALTH PROTECTION SEMINAR

Date: Thursday, May 8, 2014

Speakers: Speakers will include Barry Engel on Offshore Trust Planning and Developments Over the Past 2 Years in Asset Protection, Howard Fisher and Alex Fisher on “Designer Entities – The Cutting Edge in Asset Protection”, Denis Kleinfeld on The Roadmap to Wealth Protection Planning and Alan Gassman on Structuring Business and Investment Assets and Entities – Wealth Protection 401 for the Dedicated Planner.

Location: Hyatt Regency Downtown, Miami, Florida

Additional Information: For more information please contact agassman@gassmanpa.com

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40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Date: November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.” As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future. Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have. For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams. As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death. The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

The Thursday Report – 02.20.14 – 2014 What is April 22, 2015?

Posted on: February 20th, 2014

2014 FLORIDA TAX INSTITUTE EDITION

Quotes from the 2014 Florida Tax Institute

The Jack Freeland Experience

Remembering Michael Keane

Federal Estate Tax Planning for Same Sex Couples – Part 3

Physician Tax Update Series – Sales Tax Applicable to Leasehold Improvements by Michael O’Leary

W. George Allen – A University of Florida and National Hero Who Overcame Racial Obstacles to Succeed in Practicing Law and Helping Others.

What Debtor Creditor Lawyers Need to Know About Student Loans

Seminar and Webinar Announcement – The JEST, the SCGRAT, and the E-Street Software

We welcome contributions for future Thursday Report topics. If you are interested in making a contribution as a guest writer, please email Janine Gunyan at Janine@gassmanpa.com.

This report and other Thursday Reports can be found on our website at www.gassmanlawassociates.com.

Calfee, Leimberg, and Gassman

Professor Dennis Calfee, Steve Leimberg, and Alan Gassman reflect upon what a great event the Florida Tax Conference is and what a wonderful thing an open bar can be! What a great day for UF!

Detzel, Gassman, and Phillips

Conference Chair Lauren Detzel, Alan Gassman, and Professor and Practitioner A. Brian Phillips who practices in Orlando, Florida discuss the Thursday Report and the mitigation of the statute of limitations near the Gassman Law Associates table.

Mark your calendar for Wednesday through Friday, April 22 through April 24, 2015 for the 2nd Annual Florida Tax Institute.

Quotes from the 2014 Florida Tax Institute

It is a unique opportunity when you can hear tax specialists in academia along with practitioners in the business.  Getting the different perspectives is invaluable and keeps you current as to not only prevailing law but also planning strategies that others are utilizing.”

- Steve Rosenbloom, Sheldrick, McGehee and Kohler, LLC, Jacksonville, FL

“This is a well planned, organized and executed conference!”

            - Tim Bronza, Business Valuation Analysts, LLC, Maitland, FL

“It is extremely motivating to continue practicing tax law at the highest professional standard.”

            - Robert Middleton, Nisen & Elliot, LLC, Chicago, IL

Josh Proper gave us his favorite quote from Professor Calfee:

“Put on your ice skates because then you’ll be ready when hell freezes over!”

“I went to prep school, undergraduate, law school and LL.M. at Florida and Florida is the only place I send a check.”

“Everyone is innocent until proven indigent.”

- A. Brian Phillips, A. Brian Phillips, P.A., Orlando, Florida, Class of 1990 and Professor of Criminal Tax Law

SPECIAL THANKS TO PROSKAUER ROSE, LLP AND DAVID PRATT

David Pratt

The Florida Tax Institute has been a great success.  It was estimated that 20 students from the LL.M. program would sign up.  In reality 70 signed up. David Pratt and his firm, Proskauer Rose, were kind enough to donate an additional $10,000 to fund the attendance of the extra students so hats off to Proskauer Rose for their very generous donation!

The Jack Freeland Experience

 Jack Freeland was a well loved and extremely talented and somewhat eccentric tax law professor at the University of Florida who many believe led the program to the preeminence that it still enjoys.

What follows is Tom Ellwanger’s and Bruce Bokor’s description of the Jack Freeland experience:

Tom Ellwanger’s Story:

For nearly 40 years, taking a tax law course in Gainesville gave you pretty good odds on encountering James J. “Jack” Freeland.  If that happened, the odds were even better than you’d consider becoming a tax lawyer, even if such a thought had never previously crossed your mind.

He was the scion of a well-known Miami family.  Jackson Memorial Hospital is named after his grandfather; his father owned Byron’s Department Stores, which later became JByron.  Jack did everything possible to neutralize his early advantages.  As a young man, he led a life which was sufficiently dissolute that his Puritanical father cut his inheritance to $100.  His response, he would say, was to dishonor his father’s memory by spending the entire $100 in “one night of riotous living”-this at a time when $100 would buy plenty of riotous living.

He graduated from Duke in 1950, graduated second in his class from the University of Florida College of Law in 1954, and became a graduate fellow at Yale.  He then joined the Miami law firm of Hugh F. Culverhouse as a federal tax lawyer.

His career there was short but productive.  After a year he was chosen to manage the firm, but by 1957 he had returned to Gainesville to teach tax law.  He turned that experience into nearly 40 years of entertaining war stories, with the best ones always told on himself.

He would recount how he got pretty good at tax litigation, to the point where the local IRS District Counsel wasn’t much of a match.  One Monday morning, however, he walked into court and found the District Counsel, unaccountably smiling at him.  Suddenly the courtroom doors flew open and there entered “two men in bowties carrying briefcases-lawyers sent down from the Chief Counsel’s Office in Washington,” who proceeded to kick Jack around the courtroom, leaving him dazed while they calmly repacked their briefcases and left for the airport.

Ah, yes.

As a tax professor, he defied expectations by being exceptionally entertaining and delightfully unstructured.  He disliked teaching from formal notes or an outline.  He disliked standing in one place.  He strove for spontaneity and achieved it while still making the most abstruse points clear.

He spoke a language all his own.  That hated element of trust income tax law, the throwback rule, became “the throwup rule.”  And, dollars saved by good tax planning became “real dollars”-real because they aren’t reduced by income tax.

His mentor, good friend, and writing partner was Professor Richard B. Stephens.  Professor Stephens was as brilliant and respected as Jack, although two men could hardly differ more.  One was dry, orderly, and dignified.  The other one wasn’t.  The pair collaborated on Fundamentals of Federal Income Taxation, the most widely used textbook, and, with Professor Carr Ferguson of NYU, on Federal Income Taxation of Estates and Beneficiaries, a ground-breaking explanation of one of the more arcane areas of tax law written, so clearly that an English major could understand it.

The two men also collaborated on establishing a graduate tax program at Florida in 1974.  The program has produced many of the outstanding tax lawyers in the country.  After the retirement of Professor Stephens, Jack was director of that program from 1977 through 1982.

Unfortunately, the creation of the program meant fewer chances for undergraduate law students to experience Jack.  Before that, he was recognized as the Outstanding Law Professor at Florida five times.  When in 1982 the Florida Bar Tax Section began to recognize an Outstanding Tax Attorney in the State of Florida, Jack was the first recipient.  That same year he was named a University of Florida Distinguished Service Professor, thus achieving the highest faculty rank at the school.

He had at least three wives-his private life was somewhat confusing to outsiders, if not to him-but this simply burnished his legend.

Probably the only complaint his students could have is this-through his brilliance, his enthusiasm, and his teaching skill, Jack gave us all the impression that tax law was clear, comprehensive, and above all, fun.  I for one feel somewhat misled.   But, I consider that was cheap price to pay for a chance to experience a great guy.

Bruce Bokor’s Story:

About 8 of us had Jack for a seminar course, Advanced Corporate Taxation, before there was an LL.M. program.

This course was by invite only for us “tax nerds with good grades in tax”. Jack loved the course and the students, and I think he gave us a final exam, but he told us we were all getting A’s.

He liked us so much that he had a party for us at his home the night all law school finals were over.

When we arrived, Jack was outside in shorts and a T shirt  smoking his cigarette with lots of clothes and other personal items laying on the ground next to him. Jack told us there would be no party because his wife had thrown him out of the house, and she was going to file for a divorce on Monday. I do not know which number wife this was, but Jack had no problem finding other wives or women.

Remembering Michael Keane

Michael keane

We are very sad to note the passing of St. Petersburg litigator, Michael J. Keane.  Michael was a great friend of almost every client he represented, and had magical powers both in the conference room and the court room.

Michael was always very sympathetic to clients having business, family, and emotional challenges.  Michael settled his matters whenever he could, but also would not hesitate to go to court to fight for his clients rights.

Perhaps one in one-hundred or three hundred lawyers has the passion, total dedication and amazing raw talent that Mike Keane had and so freely shared.

Mike had so many close friends in the community including from the time he spent as a great father, a baseball coach and a friend and confidant for many.  Almost everyone who practices in St. Petersburg and many of us who practice in the Tampa Bay area have a couple of great stories about Mike.  It is time to tell them!

Mike’s amazing partners Shirin Vesely, Brandon Vesely and Charles Gerdes and associates, R. Garrison Mason and Nicole M. Ziegler, along with their wonderful staff will carry the torch to help a great many people in the upcoming years.  Let’s wish them and Michael’s family the very best, and remember how privileged we are to carry our own torches to help others in need while serving as platforms to uphold and improve the integrity of our legal, tax and judicial systems.

We welcome any comments and suggestions for further observance of Michael Keane and express our most sincere condolences to his family and friends.

Federal Estate Tax Planning for Same Sex Couples

By: Alan S. Gassman, Esq. and Danielle Creech, Esq.

The following is a continuation of our sharing sections from the book we are writing entitled The Florida Advisors Guide to Counseling Same Sex Couples in 2014.  Alan Gassman will be presenting these materials at the Wealth Council Florida Forum on Friday, March 21, 2014 in Orlando, Florida.  More details regarding that seminar appear below.

Any questions, comments, and suggestions on these materials would be greatly appreciated:

CATEGORIES OF SAME SEX MARRIAGE RECOGNITION RULES

There are two basic categories of same sex couple recognition rules. The “state of celebration” and the “state or residence.”

1. “State of Celebration”

For some purposes, such as with the IRS and federal income estate and gift tax rules, a same sex couple will be considered as married, as long as their marriage is recognized in the jurisdiction where the ceremony and licensing took place, notwithstanding that the couple may live in a state that does not recognize their marriage, such as Florida.

2. “State of Residence”

For many purposes, however, a same sex married couple will not be considered as eligible to receive married couple rights if they reside in a state that does not recognize their marriage. An example of this is Medicaid eligibility.  Presently the Medicaid statutes do not require the states that administer the Medicaid program to recognize a same sex marriage.  The same applies for social security and the Family and Medical Leave Act.

DOMESTIC PARTNERSHIPS

Many Florida counties and cities have adopted domestic partnership registration ordinances, which permit same-sex couples to register as a Domestic Partnership to be provided with some or all of the following legal rights:

1.         The ability to visit one another and receive confidential healthcare information from facilities and providers.

2.         The ability to make healthcare decisions for one another.

3.         The ability to receive information from schools and other educational entities with respect to the education of each other’s children.

4.         The ability to have priority to serve as one another’s guardian if ever need be.

5.         The ability to make funeral and burial decisions.

In order to register as a Domestic Partnership, each partner must normally be at least eighteen (18) years old, and not be married or in another Domestic Partnership relationship and not related by blood.  The parties must normally reside together in a mutual residence.

Typically each party must agree to be jointly responsible for each other’s basic food and shelter and for the maintenance and support of the Domestic Partnership.  Each partner typically agrees to immediately notify the clerk of court for the county where they reside if the terms of the Domestic Partnership arrangement are no longer applicable.

The registration papers are typically required to be signed by both partners in front of two (2) witnesses and a notary.

The counties that offer this designation will typically issue a Certificate of Domestic Partnership to confirm the registration of the arrangement.

The county ordinances will typically provide for reciprocity so that domestic partners from other counties with similar statutes will bestow the same rights on visiting domestic partners.

The following Florida cities and counties have adopted a Domestic Partnership Registry.

Florida Counties:

Broward County

Leon County

Miami-Dade County

Monroe County

Orange County

Palm Beach County

Pinellas County

Sarasota County

Volusia County

Florida Cities:

Clearwater

Gainesville

Key West

Kissimmee

Miami

Miami Beach

Pensacola

Punta Gorda

Sarasota

South Miami

St. Cloud

St. Petersburg

Tampa

Tavares

West Palm Beach

The Pinellas County Domestic Partnership Registration Information and Summary of Rights and Legal Effects can be obtained by emailing agassman@gassmanpa.com

CONFLICT OF INTEREST RULES

      Advisors will have to be very careful to not violate ethical and practical rules with respect to conflicts of interest. It is important to educate clients so that they understand that information provided to a lawyer or other advisor under joint representation will be accessible to both clients, and that in the event of a conflict, the common lawyer would not be able to advise either client with respect to general subject matter without mutual consent.

Florida Bar’s Professional Responsibility Rule 4-1.7 provides the following language for regulation of conflict of interests between current clients.

RULE 4-1.7 CONFLICT OF INTEREST; CURRENT CLIENTS

(a) Representing Adverse Interests. Except as provided in subdivision (b), a lawyer shall not represent a client if:

(1) the representation of one client will be directly adverse to another client; or

(2) there is a substantial risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

(b) Notwithstanding the existence of a conflict of interest under subdivision (a), a lawyer may represent a client if:

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent                                                   representation to each affected client;

(2) the representation is not prohibited by law;

(3) the representation does not involve the assertion of a position adverse to another client when the                                           lawyer represents both clients in the same proceeding before a tribunal; and RRTFB – May 1,                                                 2013;

(4) each affected client gives informed consent, confirmed in writing or clearly stated on the record at                                        a hearing.

(c) Explanation to Clients. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.

(d) Lawyers Related by Blood or Marriage. A lawyer related to another lawyer as parent, child, sibling, or spouse shall not represent a client in a representation directly adverse to a person who the lawyer knows is represented by the other lawyer except upon consent by the client after consultation regarding the relationship.

(e) Representation of Insureds. Upon undertaking the representation of an insured client at the expense of the insurer, a lawyer has a duty to ascertain whether the lawyer will be representing both the insurer and the insured as clients, or only the insured, and to inform both the insured and the insurer regarding the scope of the representation. All other Rules Regulating The Florida Bar related to conflicts of interest apply to the representation as they would in any other situation.

The Mike O’Leary Physician Tax Update Series – Sales Tax Applicable to Leasehold Improvements

O'Leary

 

Attorney Michael O’Leary of the Trenam Kemker firm in Tampa, Florida recently lectured on hot tax topics for physicians and physician practices.  The following is his section on sales tax applicable to leasehold improvements.  His contact information is as follows:

D. Michael O’Leary
Trenam Kemker
101 E. Kennedy Blvd, Suite 2700
Tampa, FL 33602
813-227-7454
moleary@trenam.com

A. Overview. Sales tax is imposed on the periodic payment of commercial rent, even though the lessor and the lessee are related parties.

B. Current DOR Position. Based on Seminole Clubs, Inc., 745 So. 2d 473 (Fla 5th DCA 1999), the Florida Department of Revenue has asserted that the construction of leasehold improvements by commercial tenants is also subject to the Florida sales and use tax if (i) the leasehold improvements are a condition of occupancy so that a failure to construct the leasehold improvements would result in a default under the lease and (ii) the improvements become the property of the landlord either during the term of the lease or at the end of the lease.

C. Seminole Clubs. In Seminole Clubs, the City of Sanford, the landlord, gave Seminole Clubs, Inc, the lessee, the option of expending five percent of gross revenues on capital improvements, in lieu of paying cash “rent,” in order to retain possession of premises. The court held that the Lessee’s capital improvements to the golf course premises represented “rent in kind” subject to sales tax.

D. Ruehl. In Ruehl, Case No. 2009-CA-1503, the landlord required the lessee, a retail mail tenant, to completely refurbish the interior of the store. There was no requirement that the tenant spend a particular amount of money on the improvements. The tenant challenged the position of the Florida Department of Revenue that the leasehold improvements were taxable as “rent in kind.” The Circuit Court of the Second Judicial Circuit in Leon County held that amounts spent by the tenant were not subject to sales tax. The factors cited by the court were as follows:

1. There was no record evidence to suggest that the amount the lessee spent on the improvements for refurbishing of the interior of the leased premises was in lieu of rent;

2. There was no requirement that a particular minimum amount of funds be expended;

3. There was no provision for the lessee to be credited against rental payment for such costs;

4. There was no evidence of record that the amount of rent to be paid was somehow manipulated by this provision. Rather, the court concluded, it was simply an expense which the tenant had to incur to get the premises in a condition that would be suitable for its intended purposes.

E. On January 3, 2012, the First District Court of Appeals affirmed the trial court’s holding that leasehold improvements constructed under two commercial leases were not subject to sales and use tax. Florida Department of Revenue v. Ruehl No. 925, LLC, 76 So.3d 389 (Jan. 3, 2012). The appeals court held that the parties to each of the leases did not “intend for the costs of the leasehold improvements to be part of the total rent charged” and therefore the “costs of the leasehold improvements were not part of the total rent and therefore not subject to tax under section 212.031, Florida Statutes.” The Department did not appeal the decision to the Florida Supreme Court.

F. After hearings DOR issued new proposed rules. The rules were never finalized, and new proposed rules are expected in the next few months. There is a bill to phase out the commercial rentals tax, but probably not much chance of passing due to the amount of revenue from the tax which is well over a billion in revenue raised annually.

 W. George Allen – A University of Florida and National Hero Who Overcame Racial Obstacles to Succeed in Practicing Law and Helping Others

By: Alan S. Gassman, Esq. and Dena Daniels

Born on March 3, 1936 in a totally segregated Sanford, Florida, Attorney W. George Allen was the first African-American to receive his J.D. from the University of Florida Law School. Allen grew up working in the celery fields of Sanford, Florida where the county closed down the black schools in the winter and forced every able-bodied black person to work in the fields.  Blacks were arrested for not working.   Mr. Allen never saw a toilet flush until he was four years old. He grew up in a small house on a dirt road and attended elementary school, middle school, and high school in all black programs.

After graduating with the highest grade point average from his high school, Crooms Academy, in 1954, Allen attended college at Florida A&M University in Tallahassee, FL. While he was a student there, Allen was a high level seeker. He mentions in his book, “Where the Bus Stops,”  “I sought out the hardest, most demanding teachers because I learned more from teachers who were demanding and who challenged students to achieve at their highest level.” Allen was extremely active on campus. He became a member of the Alpha Phi Alpha fraternity in 1955.  Allen became vice president and was elected president during his senior year of Beta Nu Chapter of Alpha Phi Alpha. He was also a member of the ROTC.  While in college, Allen suffered financial hardship, “Also, in my freshman year I did not have funds to buy the required texts, so I borrowed my books, principally from athletes who were mostly uninterested in studying and reading the books. I would read the entire book and go to class to take notes.” Because Allen did not have enough money to afford his books, he had two jobs during his junior year. Without being affected by his hardship, Allen gained popularity at FAMU, “I was popular, smoked a pipe, wore bowties, and engaged in my share of extracurricular activities. I made many trips to Hoffman Restaurant and Bar, which was near the campus and where most of the popular students met to drink Spearman Beer.”

Upon graduation in 1958, he was commissioned as a 2nd Lt. in Army Intelligence. In 1960 Allen applied to four law schools: the University of Florida, Florida A&M University, Harvard, and the University of California at Berkeley. Being accepted to the three of the four schools (he never heard from Florida A&M Law School), he decided to attend the University of Florida after George Starke (a Sanford native and the first black to be admitted to the University of Florida Law School) and Regina Langston (one of the first blacks to attend the University of Florida Medical School) withdrew from these University of Florida graduate schools due to unbearable racial discrimination.

Mr. Allen faced significant racial mistreatment from fellow students, but he had some support from the administration. In his book, “Where the Bus Stops”, Mr. Allen shares one of the many tensed racial moments that he experienced at the University of Florida School of Law. During his second semester of law school, Mr. Allen was standing in line for over 30 minutes to register for courses; the courses were assigned on a first-come, first-served basis. Mr. Allen details in his book:

“When it was my turn to choose courses, Ralph Paul Douglas, whom I did not know, stepped in front of me and said, ‘boy I’m next’. I became incensed about being called boy and his attempt to move in front of me, so I hit him with a right cross on the chin and knocked him out. I stepped over Ralph, spread my list of courses in front of Professor Weyrauch, and said, ‘Sir, I would like to register for these courses.’ The professor signed me up, I turned, stepped over Ralph and left the library with many students whispering about my violent behavior.”

Much to his surprise, years later, Mr. Allen appeared in West Palm Beach, FL for a hearing and the presiding judge was none other than the receiver of his deadly cross, Ralph Paul Douglas. Automatically realizing who each other was, the judge asked Mr. Allen, “Should I duck?” and his response was, “Only if I am insulted.” The two laughed as they both reflected on the once tensed situation, but regardless of their past, Judge Douglas was fair and justice was served.

Throughout his law school career Mr. Allen experienced an insurmountable amount of threats and discrimination. Allen and his wife attended a wedding in Tampa in 1958, and to celebrate they went to the famous Columbia Restaurant. They were not permitted to eat there because of their color. He mentions: “That treatment buttressed my desire to attend law school and fight to end discrimination in public accommodations in all institutions in Florida.” He even got into a few physical altercations. In an interview he stated, “I made it known that I don’t believe in non-violence like Martin Luther King. You bother me, I’m violent.” His no nonsense attitude shaped him to be the perfect individual to successfully handle the rigor of being black in a southern institution of higher learning. Allen graduated from the University of Florida Law School in 1963. He has run a successful practice in Ft. Lauderdale, FL for forty-two years, and he has helped to liberate many minority organizations and individuals from being mistreated.  Mr. Allen indicates that there is still a significant amount of discrimination and societal resistance to equal treatment, but he is proud of what he and other black lawyers have accomplished in the past five decades.

Please be sure to read W. George Allen’s autobiography, entitled “Where the Bus Stops.”  You will not want to stop until you are completely done with this book.

Dena Daniels is from the small town of Jasper, FL and is the first individual from both sides of her family to receive a bachelor’s degree.  Dena Daniels is a second-year law student at Stetson University College of Law. She was amongst the first group of students from Hamilton County High School to complete the dual-enrollment program at North Florida Community College; she graduated high school with 62 college credit hours. Dena graduated with her B.S. in Business Administration from the University of South Florida and her Masters of Business Administration from Valdosta State University. Dena is seeking a concentration in Social Justice Advocacy and is a law clerk at Gassman Law Associates.

What Debtor Creditor Lawyers Need to Know About Student Loans

By: Scott Cornwell

Scott Cornwell is currently a third year law student at Stetson University College of Law and a Law Clerk for Gassman Law Associates, P.A. He expects to graduate in May of 2014 with his J.D. and M.B.A.

Student loan debt has recently reached $1.2 trillion and currently accounts for roughly 6% of the national debt.1 With an influx of students seeking higher education, it is unlikely that this cumbersome debt will abate any time soon. Therefore, practitioners must ensure they remain up to date with the current law governing student debts.

Discharge of Student Loan Debt in Bankruptcy Proceedings

            Although many of Americans are encumbered by student loan debt, the bankruptcy courts are not inclined to provide much relief. To get a student loan dismissed, one would need to show “undue hardship”2, a very high standard that is commonly associated with a debilitating illness. Although undue hardship normally involves a debilitating illness, being diagnosed does not guarantee a successful claim. When adjudicating on a claim of undue hardship, the court must use a totality of the circumstances test.3  Essentially, the court looks at every aspect of a debtor’s situation and assesses it on a case-by-case basis.

            For instance, In re Hicks, involves a debtor with Multiple Sclerosis, an incurable and  degenerative  neurological disorder.4  The debtor worked part-time while her husband earned the majority of the family income. The Court looked at the income of both the debtor and her husband when deciding whether or not the debt rose to the level of an undue hardship. The Court asked the question, “Can the debtor now, and in the foreseeable future, maintain a reasonable, minimal standard of living for the debtor and the debtor’s dependents and still afford to make payments on the debtor’s student loans?” In answering the question, the court held that because her husband could work and was likely to maintain his current pay, there would be no undue hardship against the debtor, despite her illness.

            More often than not, a client’s situation will not rise to the level of an undue hardship. When making a claim for undue hardship, practitioners will be responsible for ensuring their clients have realistic expectations regarding the claim.

Where the Loan Came From Definitely Matters

            Student loans come in two forms, one is backed by the federal government and the other  is provided by private lending institutions. The provider of the loan makes a huge difference in regards to collections on delinquent accounts. The largest differences are found in the statutes of  limitation, how the creditor can collect the debt, and judgment renewal.

Federal Student Loans

Pursuant to  20 U.S.C.A. § 1091a(a), loans backed by the federal government have no statute of limitations with regards to collections. Furthermore, 20 U.S.C.A. §1091a(b) provides that “… no limitation shall terminate the period within which suit may be filed, a judgment may be enforced, or an offset, garnishment, or other action…” may be taken. The federal government reserves many powers to ensure it can collect on student loan debt.

In the unfortunate circumstance that a student loan enters default, the government can look to withholding money from your wages, withholding money from your tax refund or other federal payments (also known as a treasury offset), or pursue a judgment against your delinquent debt.

A judgment against a debtor sought by the government is governed by  20 U.S.C.A. §3201a. Going further, 20 U.S.C.A. §3201c establishes that the governments lien survives for 20 years and is subject to one renewal of 20 more years.

Private Student Loans

Unlike the federal government, private loan servicers have a statute of limitations to bring a cause of action against a debtor. The statute of limitations depends on the state, but in Florida it is governed by Florida Statutes §95.11 and any actions must be brought within five years. It is important to note that this is five years of non-payment, if a debtor stops payment for a year and then makes a random payment, the term begins all over again.

Private loan servicers cannot affect federal benefits in the same manner as the government, but they can seek to garnish wages, lien property, and pursue other remedies associated with obtaining a judgment in the state of the client’s loan origination.

Every state will be different regarding judgments and the length of time in which they expire. In Florida, judgments are governed by Florida Statutes §55.081 and expire after a term of twenty years. Although the §55.081 provides for only twenty years, Petersen v. Whitson, established that judgments can be extended by filing another suit and, essentially, renewing the judgment.5

Going forward, it is safe to assume that student debt is not going anywhere soon. A wise practitioner will be well versed in the laws governing student debts because many of their clients, current and future, will be encumbered  and have as assortment of questions when their education bill comes due.


1 Chris Denhart, How the $1.2 Trillion College Debt Crisis is Crippling Students, Parents and the Economy, Forbes (August 07, 2013, 12:30PM), http://www.forbes.com/sites/specialfeatures/2013/08/07/how-the-college-debt-is-crippling-students-parents-and-the-economy/
2 In re Hicks, 331 B.R. 18 (Bankr. D.Mass. 2005)
3 Id.
4 Id.
5Petersen v. Whitson, 14 So.3d 300 (Fla. 2d DCA 2009)

Seminar and Webinar Announcements

webinar ad

To register for this webinar, please click here.

Applicable Federal Rates

Below we have this month’s, last month’s, and the preceding month’s Applicable Federal Rates because for a sale, you can use the lowest of the 3.

Applicable Federal Rates.February 2014

Seminars and Webinars

THE CLEARWATER BAR ASSOCIATION 444 SHOW – ASSET PROTECTION, ESTATE PLANNING AND LLC LAW UPDATE

Date: Thursday, February 27, 2014 | 4:00 p.m.

Location: Online webinar.

Speaker: Alan Gassman, Christopher Denicolo and Kenneth Crotty

Additional Information:  To register for the webinar please visit www.clearwaterbar.org

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THE JEST, THE SCGRAT AND THE E STREET SOFTWARE

Please join Alan Gassman, Ken Crotty and Chris Denicolo for a 30 minute webinar describing 2 new planning techniques and also free beta testing of the EstateView software that was developed by Gassman Law Associates, P.A.

Date: Tuesday, March 4, 2014 | 5:00 p.m.

Location: Online webinar

Additional Information: To register for the webinar please visit https://www2.gotomeeting.com/register/625212018.

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FLORIDA BAR HEALTH LAW REVIEW 2014

Alan Gassman will be speaking on What Healthcare Lawyers Need to Know About Tax Law and Business Entities at this excellent annual Florida Bar conference that is attended not only by those who are taking the Board Certification exam but also healthcare lawyers and other advisors.

Other speakers will include Lester Perling who is the co-author of A Practical Guide to Kickback and Self-Referral Laws for Florida Physicians and a number of other books and publications, and Mickey Mouse, Donald Duck and the “dwarf planet” formerly known as Pluto!

Date:    March 7 – 8, 2014

Location: Hyatt, Orlando, Florida

Additional Information: We thank Jodi Laurence and Sandra Greenblatt for all of their hard work in making this conference as successful as it is.  For more information please contact Jodi at jl@flhealthlaw.com or Sandra at sg@flhealthlawyer.com.

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TAX AND ASSET PROTECTION BASICS FOR THOSE WHO REPRESENT PHYSICIANS AND MEDICAL PRACTICES

Alan Gassman and Christopher Denicolo will be speaking at the Hillsborough County Bar Association’s Health Law Section Luncheon on the topic of Tax and Asset Protection Basics for Those Who Represent Physicians and Medical Practices.

Date:    March 12, 2014

Location:  Chester H. Ferguson Law Center in Tampa, FL

Additional Information: For additional information please contact Co-Chairs Sara Younger (sara.younger@baycare.org) or Thomas Ferrante (tferrante@carltonfields.com).

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STRUCTURING JOINT EXEMPT STEP-UP TRUSTS: EMERGING TOOL TO MAXIMIZE STEP-UP IN BASIS

Date: Tuesday, March 18, 2014 | 1:00 – 2:30 p.m.

Location: Online webinar sponsored by Stafford Publications, Inc.

Speakers: Alan S. Gassman, Christopher Denicolo and Edwin P. Morrow, III, Esq.

Additional Information: To register for the webinar please visit https://www.straffordpub.com/products/structuring-joint-exempt-step-up-trusts-emerging-tool-to-maximize-step-up-in-basis-2014-03-18 or email agassman@gassmanpa.com

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COMPOUNDING THE PROBLEMS AND OPPORTUNITIES FOR COMPOUNDING PHARMACIES

Date: Wednesday, March 19, 2014 at 12:30 p.m. or Tuesday, April 1, 2014 at 5:00 p.m.

Location: Online webinar

Speakers: Lester Perling and Alan Gassman

Additional Information: To register for the March 19, 2014 webinar please click here. To register for the April 1, 2014 webinar please click here.

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COUNSELING SAME SEX COUPLES IN 2014

Date: Friday, March 21, 2014 | 10:30 – 12:00

Location: Holiday Inn at the Orlando Airport

Additional Information: For more information and to register for the program please email agassman@gassmanpa.com

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LUNCH TALK – LAW PRACTICE EFFICIENCY TIPS

Date: Monday, April 7, 2014 | 12:30 p.m.

Location: Online webinar

Speaker: Alan S. Gassman

Additional Information: To register for this webinar please visit www.clearwaterbar.org

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FICPA SUNCOAST CHAPTER MONTHLY MEETING

Alan S. Gassman will be speaking at the FICPA Suncoast Chapter’s monthly meeting on the topic of THE FLORIDA CPA’S GUIDE TO PLANNING WITH PHYSICIANS AND MEDICAL PRACTICES

Date: Thursday, April 17, 2014 | 4:00 p.m.

Location: Tampa, Florida

Additional Information: For more information on this event please email agassman@gassmanpa.com or mary@clawsonasplus.com

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DONOR LUNCHEON AT RUTH ECKERD HALL WITH PROFESSOR JERRY HESCH IN CLEARWATER, FLORIDA

Professor Jerry Hesch will be speaking at a Donor Luncheon on the topic of CHARITABLE TAX SAVINGS: HOW TO MAKE SURE THAT UNCLE SAM CONTRIBUTES HIS SHARE TO MAXIMIZE RESULTS

Sponsored by Gassman Law Associates, P.A. Co-sponsors invited.

Date: Tuesday, April 22, 2014 | TIME TO BE DETERMINED

Location: Ruth Eckerd Hall, Clearwater, Florida

Additional Information: For additional information please contact Suzanne Ruley at sruley@rutheckerd.net or Alan Gassman at agassman@gassmanpa.com

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RUTH ECKERD HALL PLANNED GIVING MEETING

Professor Jerry Hesch will be speaking at the Ruth Eckerd Hall Planned Giving Meeting in Clearwater, Florida on the topic of INNOVATIVE CHARITABLE GIVING TECHNIQUES FOR THE WELL TUNED ESTATE PLANNER

Sponsored by Gassman Law Associates, P.A. Co-sponsors invited.

Date: Tuesday, April 22, 2014 | 4:00 p.m.

Location: Ruth Eckerd Hall, Clearwater, Florida

Additional Information: This session qualifies for 1 hour of continuing education credit for lawyers and CPA’s.  To attend please email Suzanne Ruley at sruley@rutheckerd.net or Alan Gassman at agassman@gassmanpa.com

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1st ANNUAL ESTATE PLANNER’S DAY AT AVE MARIA SCHOOL OF LAW

Speakers: Speakers will include Professor Jerry Hesch, Jonathan Gopman, Alan Gassman and others.

Jerry Hesch and Alan Gassman will cover Buy-Sell Agreements and associated planning.

Date: April 25, 2014

Location: Ave Maria School of Law, Naples, Florida

Sponsors:AveMariaSchool of Law, Collier County Estate Planning Council and more to be announced.

Additional Information: For more information on this event please contact agassman@gassmanpa.com.

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THE FLORIDA BAR ANNUAL WEALTH PROTECTION SEMINAR

Date: Thursday, May 8, 2014

Speakers: Speakers will include Barry Engel on Offshore Trust Planning and Developments Over the Past 2 Years in Asset Protection, Howard Fisher and Alex Fisher on “Designer Entities – The Cutting Edge in Asset Protection”, Denis Kleinfeld on The Roadmap to Wealth Protection Planning and Alan Gassman on Structuring Business and Investment Assets and Entities – Wealth Protection 401 for the Dedicated Planner.

Location: Hyatt Regency Downtown, Miami, Florida

Additional Information: For more information please contact agassman@gassmanpa.com

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40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Date: November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

We welcome questions, comments and suggestions on variable annuities, which will be Alan Gassman’s topic for this conference.

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

The Thursday Report – 02.13.14 – Beatles, Same Sex, and Landlord Liens

Posted on: February 13th, 2014

Intro without firm name

 

Article Titles Correct

Our musical production Being for the Benefit of Mr. Kite has reached number one on the list of Youtube musical tax videos of all time, as documented by the Thursday Report Self-Serving Documentation Team (TRSSDT). TRSSDT thanks New York Actress and Singer Megan Crain for adding a special twist to an already twisted court decision.  You can see this talented artist sing the song and if you like we can send you a continuing education certificate for 3 minutes.  Just click here

O'Leary with quotes CORRECT

Attorney Michael O’Leary of the Trenam Kemker firm in Tampa, Florida recently lectured on hot tax topics for physicians and physician practices.  The following is his section on the IRS program that offers tax relief from misclassification of workers.  His contact information is as follows:

D. Michael O’Leary
Trenam Kemker
101 E. Kennedy Blvd, Suite 2700
Tampa, FL 33602
813-227-7454
moleary@trenam.com

            A. Overview. Whether or not a worker is performing services as an employee or an – independent contractor is generally dependent on whether or not the service recipient has the right to control and direct the services provided by the worker.

            Misclassifying a worker as an independent contractor instead of an employee can result in severe consequences for the employer, including a failure to pay required payroll taxes on compensation paid to the worker. Trying to fix a misclassification on a prospective basis has, in the past, often presented the issue of whether to also address this retroactively and/or a heightened exposure to the IRS seeking a retroactive reclassification and the associated liability for taxes, interest and penalties. As a result, employers have tended to just stay the course and live with the misclassification risk.

            B.        Voluntary Classification Settlement Program – Worker Misclassification Tax Relief. In September, 2011, the IRS launched a new voluntary correction program, known as the Voluntary Classification Settlement Program or “VCSP,” that allows employers to voluntarily reclassify workers from independent contractors to employees at a greatly reduced retroactive payroll tax cost. The program was revised in December, 2012 (Announcement 2012-45).

            C. Eligibility for VCSP. To be eligible for the VCSP, the employer:

            1. Must consistently have treated the workers in the past as nonemployees;

            2. Must have filed all required Forms 1099 for the workers for the previous three calendar years before the date of the application;

            3. Cannot be currently under employment tax audit by the IRS, the Department of Labor (“DOL”) or a state agency concerning the classification of these workers (can be under an income tax audit and still qualify); and

            4. Must have complied with results of a prior examination if the employer was previously audited by the IRS or DOL for the classification of workers.

            To participate in the VCSP, the employer must file Form 8952, Application for Voluntary Classification Program. Form 8952 can be filed at any time, but should be filed at least 60 days before the date the employer wants to begin treating the class or classes of workers as employees.

            D. Relief Provided by VCSP.

            Employers that are eligible and participate in the VCSP will receive the following relief:

            1. The employer will only be required to pay an amount equal to 10% of the employment tax liability that may have been due on compensation paid to the reclassified workers for the most recent tax year (which is approximately 1 % of the compensation paid to the reclassified workers for the most recent year) (the “VCSP Payment”);

            2. No penalties or interest will be due on the VCSP Payment; and

            3. The employer will not be subject to an employment tax audit regarding worker classification for prior years.

            E.         Other Consequences to be Considered: Although the VCSP provides relief from unpaid payroll taxes, employers must be aware of other consequences arising from the reclassification of employees. The areas in which the VCSP provides no relief include:

            1. The impact of the failure in the past to make any required pension contributions to a qualified plan with respect to the reclassified workers;

            2. The impact of the failure in the past to provide health and welfare benefits to the reclassified workers; and

            3. The impact of the failure to comply with wage and hour laws applicable to the reclassified workers.

            F. Summary. For many employers, the VCSP provides an excellent opportunity to begin the proper classification of workers as employees at a modest tax cost. However, proceeding under the VCSP program can open up a Pandora’s box that heightens the exposure to other costs and consequences. Thus, all implications arising from the reclassification of workers should be considered and evaluated before deciding to seek relief under the VCSP.

            Quality Stores/Severance Payments ­

            On October 1, 2013, the United States Supreme Court granted a writ of certiorari in U.S. v Oualitv Stores, Inc. (In re Quality Stores, Inc.), cert. granted No. 12-1408. Accordingly, the case will be considered by the Court during the 2013-2014 term.

            Normally, FICA tax must be paid on severance pay. However, in Quality Stores, 693 F.3d 605 (6th Cir. 2012), the Sixth Circuit held that there is no FICA tax due on severance pay that qualifies as supplemental unemployment benefits (“SUB payments”). The opinion of the Federal Circuit’s in CSX Corp. v United States, 518 F.3d 1328 (Fed. Cir. 2008) reached the opposite conclusion, that employers and employees both must pay FICA tax on severance payments. As a result of the split of authority between the Circuits, and because of the size of the potential FICA tax refund obligations, the Internal Revenue Service requested certiorari of the Quality Stores case.

       If Quality Stores is affirmed, billions of dollars of FICA taxes collected from employers and their former employees for tax years during which severance payments were made and for which protective FICA tax refund claims were filed would be refunded. If Quality Store is reversed severance pay that qualifies as SUB payments will continue to be subject to FICA for both employers and employees.

            Summary of Quality Stores case. Quality Stores closed all of its stores and distribution centers, and made lump sum severance payments to its employees pursuant to a plan. The severance payments were not linked to the receipt of state unemployment benefits, nor were they attributable to the provision of any particular services. Quality Stores paid FICA tax on the severance payments and filed a claim for a refund.

            SUB payments are a type of severance payment defined by IRC Section 3402(0 )(2)(A) as (1) an amount paid to an employee; (2) pursuant to an employer’s plan; (3) because of an employee’s involuntary separation from employment, whether temporary or permanent; (4) resulting directly from a reduction in force, the discontinuance of a plant or operation, or other similar conditions; and (5) included in the employee’s gross income.

            Under Revenue Ruling 90-72, the IRS takes the position that, for severance pay to be exempt from wages subject to federal income tax withholding and FICA, severance payments must be linked to the receipt of state unemployment compensation and cannot be paid in a lump sum.

            In arriving at its conclusion, the Sixth Circuit analyzed the legislative history of the definition of wages for FICA and federal income tax withholding purposes. The Sixth Circuit concluded that SUB payments were considered wages only for federal income tax withholding, and not FICA.

            At this time, all employers who have had involuntary employee terminations during the years currently open under the statute of limitations should consider filing protective FICA tax refund claims.

This is the second part of our series on advising same sex couples:

The chart below describes a number of issues that are discussed in our outline, from the standpoint of whether it is advantageous for a same sex couple to go to a state that permits marriage, and to be married there and reside in Florida, or in any other state in the United States.

            POSSIBLE ADVANTAGES OF SAME SEX MARITAL STATUS

POSSIBLE DISADVANTAGESOF SAME SEX MARITAL STATUS

GOOD FOR ONE SPOUSE, BAD FOR THE OTHER?

Public recognition of an important relationship and commitment. Possible social, professional, business, and family  discrimination for being in a public same sex relationship. Whether marital law can apply.
Presents and a great party. Loss of separate Social Security benefits on death of spouse. Pension inheritance rights- a spouse must consent in writing to not being the sole beneficiary of a federal pension plan.
Government or employer-provided health insurance and tax advantage of employer paying health insurance. For one spouse to receive Medicaid benefits, the other spouse (the community spouse) may need to spend down considerable assets. Alimony is taxable to receiving spouse, but deductible by the paying spouse if requirements are met.
Immigration rights. The marital tax penalty will often apply- higher tax brackets.
Ability to roll over an IRA on the death of one spouse to defer taxable withdrawals. Combined income can cause increase in 3.8% Medicare surtax threshold is $200,000 for a single person, and only $250,000 for a married couple.
Federal estate tax marital deduction for persons who are U.S. citizens having otherwise taxable estates (exceeding $5,340,000 for 2014 decedents). Joint income can cause taxability of Social Security benefits- an individual can earn up to $25,000 without being subject to tax on Social Security benefits.  A married couple can only earn up to  $34,000 without becoming subject to tax on  Social Security benefits.
Portability- the ability of the surviving spouse to make use of whatever part of the $5,340,000 exemption has not been used by the first dying spouse. Potential divorce scenarios, and uncertainty as to what marital law would apply.
The wealthier partner who is a U.S. citizen can make use of the $14,000 per year gifting allowance and the $5,340,000 exemption credit of the less wealthy spouse.
Tax-free transfers in the event of a divorce.
Deductibility of alimony to equalize estate income tax brackets in the event of a divorce.
Possible survivor benefits under governmental and employer pension plans.
Possible Social Security survivor benefits.
Possible creditor protection for tenancy by the entireties property in bankruptcy- discussion.
“Being Married” – Dr. Phil “Being Married” – Rodney Dangerfield

COMMUNICATIONS ETIQUETTE

Socially Acceptable Terminology For Same Sex Couple Conversations

NOT Socially Acceptable Terminology for Same Sex Couple Conversations

“Partner”1

“Husband” or “Wife”

“Equal Protection/Rights”

“Special Rights”

“Gay” or “Lesbian”

“Homosexual”

“Relationship” or “Couple”

“Homosexual Couple”

“Sexual Orientation”

“Sexual Preference”

“Significant Other”

“Domestic Partner”

 


1 Steven Petrow, Is it Gay Husband? Lesbian Wife? Or What?, New York Times (November 27, 2012).

With the prospect of more same sex couples, advisors will also want to be wary of proper etiquette.  According to the GLAAD Media Reference Guide which advises journalists on using appropriate terms, preferred terms include “gay,” “gay man,” “lesbian,” or “gay person/people” rather than “homosexual.”  In addition, “sexual orientation” or “orientation” is preferred, while “sexual preference” is considered offensive.

 Steven Petrow, a New York Times contributor addressing questions on gay and straight etiquette, suggests that the most practical approach is to listen to how a couple introduces themselves or refers to each other, since this will vary from couple to couple. This is an important matter to consider, and advisors should be careful to avoid “downgrading” a couple’s status.  As Petrow explains, “[w]ith all the work that it took for [same sex couples] to make their relationship legal in New York, my pal was not about to settle for ‘friend’ to describe the man he’s been partnered with for nearly three decades.”  When in doubt, Petrow advises that you should not be shy to ask the couple directly how they would like to be referred to.  “It’s not a nosy question–it’s a respectful one,” he says. A copy of Mr. Petrow’s article can be obtained by emailing agassman@gassmanpa.com.

 In an ever changing society, it is best to ask your client if they prefer to be referred to as gay, lesbian, partner, friend, spouse, or some other term.

WHERE TO LIVE- SO MANY DIFFERENT CHOICES

The following chart shows selected US states and some of the characteristics that planners can review with same sex couple clients who are considering where to live.  Other charts in this outline provide further information.  It is unknown whether states that do not recognize same sex marriages would let such couples enter into “Pre-Nuptial” or “Post-Nuptial” agreements or equivalent contracts from a public policy standpoint.

Recognizes Same Sex Marriage

Recognizes Same Sex Marriages From Other States

Same Sex

Prenuptial Agreements Upheld

Tenancy by the Entirety Allowed for Same Sex Couples

Prohibits Workplace Discrimination due to Sexual Orientation

Spouse Has Rights to Homestead

Permits Joint Adoption

California

Yes

Yes

Yes

No

Yes

Yes

Yes

Florida

No

No

Unknown

No

No

No

No2

Nevada

No

No

Unknown

No

Yes

Yes3

Yes

North Carolina

No

No

Unknown

No

No

No

No

Texas

No

No

No

No

No

No

No

New Jersey

Yes

Yes

Yes

Yes

Yes

Yes

Yes

New York

Yes

Yes

Yes

Yes

No

Yes

Yes

 


2 Florida’s Third District Court of Appeals ruled that a statute from 1997 which prohibited “homosexuals” from adopting was unconstitutional. Florida Dept. of Children and Families v. Adoption of X.X.G., 45 So. 3d 79 (Fla. 3d Dist. App. 2010).

3 Same sex couples will receive rights to homestead if registered with the state as domestic partners.

Same sex couples must become educated as to the various considerations that apply to them if they are married versus if they stay unmarried, and also other questions, such as the following:

    • Where to live.
    • Whether to have pre and postnuptial agreements.
    • Whether to have domestic partnership agreements in place and whether the law will allow it to be enforceable.
    •  How to handle beneficiary designations.
    • Survivor and employee spouses benefits and choices.
    • Whether they should file joint tax returns or separate returns, if married.

 YOU CAN MARRY YOUR COUSIN BUT NOT YOUR SAME SEX PARTNER

Many of the states that ban same sex couples from marrying allow 16 year old first cousins to tie the knot. Below is a chart showing the states that allow first cousins to marry and whether those states allow for same sex marriage (only 5 out of 16 do).  Thus, 11 U.S. states allow cousins to marry but do not allow same sex marriages, notwithstanding that the birth defect rate of children produced out of these marriages is between 4-6%.

Legal to Marry First Cousin Legal to Marry Same Sex Partner Minimum Age Minor Can Marry With Consent
Alabama Yes No 16
Alaska Yes No 16
California Yes Yes No Age Limit
Colorado Yes No 16
District of Columbia Yes Yes No Age Limit
Florida Yes No 16
Georgia Yes No 16
Hawaii Yes Yes 16
Maryland Yes Yes 16
Massachusetts Yes Yes Male: 14; Female: 12
New Jersey Yes Yes 16
New Mexico Yes No 16
New York Yes Yes 16
North Carolina Yes No 16
Rhode Island Yes No Male: 18; Female: 16
South Carolina Yes No 16
Tennessee Yes No 16
Vermont Yes Yes 16
Virginia Yes No 16

Please consider attending Wealth Council’s March 21st one day conference for estate planners in Orlando, Florida.  Alan Gassman will speak on counseling same-sex couples.  For more information please contact agassman@gassmanpa.com.

When dealing with personal property and liens, the question of whose lien is superior is one that is somewhat hazy to all parties involved. Both banks and landlords can have liens on an individual’s personal property, but only one has priority.

Perfecting a Lien

Concerning a landlord lien, the landlord is not required to file or record a lien or any other instrument in the public records in order to perfect his lien. The landlord’s lien is established and  perfected when personal property belonging to the tenant is brought onto the leased premises1.

When dealing with a bank lien, in order to perfect a lien against personal property, a UCC Form 1 must be executed and filed.2 Without the filing of this form the lien is not perfected and therefore has no standing.

Which Lien Has Priority

Without giving it much thought, the majority of people would automatically assume that the bank lien undoubtedly trumps the landlord lien. WRONG. According to Florida Statute §83.08 (2) the landlord lien “shall be superior to any lien acquired subsequent to the bringing of the property on the premises leased3. This means that the landlord lien trumps all proceeding liens brought against the personal property. A lien may have priority over landlord lien only if there was a perfected lien in existence before the individual signed a lease and brought his/her property onto the rented premises.

How to Seize Property

Once a landlord has determined that their lien is in fact superior (no prior existing perfected liens), they may enforce the lien when the lessee has failed to pay rent.

When attempting to enforce a lien, a landlord must obtain a Distress for Rent Writ. According to Florida Statute §83.11 “Any person to whom any rent is due may file an action in the court in the county where the land lies having jurisdiction of the amount claimed, and the court shall have jurisdiction to order the relief provided in this part. The complaint shall be verified (under oath) and shall allege the name and relationship of the defendant to the plaintiff, how the obligation for rent arose, the amount or quality and value of the rent due for such land, or the advances, and whether payable in money, an agricultural product, or any other thing of value.”4

When obtaining a distress writ, the landlord, based on Florida Statute §83.12, must pay a cash bond for double the amount of rent that is claimed to be due.5 Once the bond is paid (and approved by the clerk) and the writ is properly executed, the complaint can then be filed with the court requesting that the court issues a Distress for Rent Writ. Once the writ is issued by the court, the Sheriff then serves the complaint to the tenant. The purpose of the Distress for Rent Writ is to prevent the tenant from “disposing, moving or in any way secreting any of its personal property except on the premises”6 This writ informs the tenant that the property is currently under the control of court orders and is the most effective way for a landlord to collect the past due rent.

Hopefully, it is now clear as to whose lien is superior when more than one lien exists on personal property. We all like to think that banks run the show, but based on law, it is apparent that landlords are the underdog and come out on top in the end.

“Hey, I wanted you to know I wish you were mine”. Who knew that the lyrics to this hit song by the legendary rock band, Boston, would now be in relation to the rights of their many hit songs. 

The amendments to the copyright laws in 1976 granted artists who signed over their rights with little to no bargaining power in the early years of their career to finally reap the benefits of the rights to the music by terminating a copyright grant. The amendments to the copyright laws grant artists the opportunity to terminate a copyright grant 35 years after its first publishing.

Releasing their first album in 1976, Boston has reached the 35 year requirement set forth in the copyright amendment and are now on the hunt for the rights, but like Elmer Fudd hunting Bugs Bunny, this would not be an easy catch. In January of this year, lead guitarist and songwriter, Tom Scholz, filed a termination notice in an effort to reclaim rights from the band’s first two albums. His termination notice was rebutted with a lawsuit against him brought by the band’s original co-manager, Paul Ahern and Next Decade Entertainment. The suit claims that Scholz was employed on a exclusive basis as a songwriter and that Scholz, in 1975, “assigned to Ahern all musical works written by him prior to that date as well as those composed, created or conceived in whole or in part by him for a period of five years from that date of agreement.”

The lawsuit claims that there was a modification to the original agreement in 1978, but it had no effect on the 1975 “songwriter agreement”. Scholz claims that his copyright terms are governed by the 1978 modification, therefore, the grant would be eligible for termination in 2015.

There has been no progress in the case, but only time will tell if Boston will be able to have “More than a Feeling” from their music and finally get some rights. 

1 Jursinski, Kevin.Commercial Lease Newsletters. “Distress for Rent”. June 2007.  http://www.kfjlaw.com/kevinjursinski-122012/inc/Newsletter-June-2007.pdf
http://www.wbsonline.com/resources/filing-the-ucc1-form-for-personal-property-liens/
3  Fla. Stat. §83.08 (2)      
4 Fla. Stat. §83.11
5 Fla. Stat. §83.12
6http://www.kfjlaw.com/kevinjursinski-122012/inc/Newsletter-June-2007.pdf

Ever wonder how you can find out what a company’s website said in the past? The past is here, and this is a great discovery tool.

 You can simply go to the website www.archive.org and use the WayBack Machine. To utilize this world wide web online library, type in the company’s  website address and the WayBack Machine presents a calender in which you can view the website as it was on a specific day in the past.

 For example, click here to see he Colonel’s website from 2003!

 Fun Fact: The name Wayback Machine was chosen as a reference to a plot device used in The Rocky and Bullwinkle Show. The plot device, the “WABAC machine” (pronounced “Wayback”),was used by Mr. Peabody and Sherman to travel back in time to visit–and sometimes alter–important events in history.

 Our favorite quotes from the Rocky & Bullwinkle show:

 1. “Military intelligence, sounds like a contradiction of terms.” – Bullwinkle

 2. Bullwinkle: “You just leave it to my pal Rock.  He’s the brains of the outfit.”

General: “And what does that make you?”

Bullwinkle: “What else? The executive.”

 3.[Rocky and Bullwinkle have been flattened by a truck]

Bullwinkle: This movie’s getting kinda… 

Rocky: Don’t say it! 

Bullwinkle: Two-dimensional. 

Beatles will exist without us.” - George Harrison

“I didn’t leave the Beatles. The Beatles have left the Beatles‑‑but no one wants to be the one to say the party’s over.” ‑John Lennon

“Explaining the motives behind the breakup of the Beatles: “Personal differences, musical differences, business differences, but most of all because I have a better time with my family.” ‑ Paul McCartney

On December 31st, 1970, Paul McCartney filed a lawsuit in London=s High Court against the other three Beatles and Apple Corps to dissolve The Beatles’ partnership. He requested that the partnership be dissolved, that a receiver look over Apple throughout the duration of the case, and that Allan Klein, their business manager, be formally charged with mismanagement of The Beatles funds.

 The three reasons cited in favor of dissolution were: (1) The Beatles no longer performed together, and thus, the purpose of the partnership no longer existed, (2) the other Beatles breached their partnership agreement by appointing Allen Klein as exclusive business manager, even after objections from McCartney, and (3) McCartney had not been given audited accounts during the partnership.

 The suit was not settled for years, and The Beatles did not officially dissolve until 1975. Even though McCartney was correct that Klein had severely mismanaged their funds, Klein was not charged and, in fact, received approximately four million dollars of The Beatles’ legacy.

APR

Below we have this month, last month’s, and the preceding month’s Applicable Federal Rates, because for a sale you can use the lowest of the 3.

SHORT TERM AFRs

MID TERM AFRs

LONG TERM AFRs

February 2014 Annual 0.30% Annual 1.97% Annual 3.56%
Semi-Annual 0.30% Semi-Annual 1.96% Semi-Annual 3.53%
Quarterly 0.30% Quarterly 1.96% Quarterly 3.51%
Monthly 0.30% Monthly 1.95% Monthly 3.50%
January 2014 Annual 0.25% Annual 1.75% Annual 3.49%
Semi-Annual 0.25% Semi-Annual 1.65% Semi-Annual 3.46%
Quarterly 0.25% Quarterly 1.73% Quarterly 3.45%
Monthly 0.25% Monthly 1.93% Monthly 3.44%
December 2013 Annual 0.25% Annual 1.65% Annual 3.32%
Semi-Annual 0.25% Semi-Annual 1.64% Semi-Annual 3.29%
Quarterly 0.25% Quarterly 1.64% Quarterly 3.28%
Monthly 0.25% Monthly 1.63% Monthly 3.27%

S&W

INDIVIDUAL AND GROUP MEDICAL PRACTICES BLOOMBERG BNA WEBINAR

Health care attorney Lester Perling, Pension Actuary Jim Feutz and Alan Gassman will be presenting a 90 minute webinar for Bloomberg BNA Tax and Accounting on Individual and Group Medical Practices.

Date: February 13, 2014 | 12:00 – 1:30 p.m. (90 Minutes)

Location: Online webinar

Additional Information:  Please contact agassman@gassmanpa.com for more information.

THE JEST, THE SCGRAT AND THE E STREET SOFTWARE

Please join Alan Gassman, Ken Crotty and Chris Denicolo for a 30 minute webinar describing 2 new planning techniques and also free beta testing of the EstateView software that was developed by Gassman Law Associates, P.A.

Date: Tuesday, February 18, 2014 | 5:00 p.m.

Location: Online webinar

Additional Information: To register for the webinar please visit https://www2.gotomeeting.com/register/625212018.

THE 444 SHOW – CREDITOR PROTECTION UPDATE

Date: Thursday, February 27, 2014 | 4:00 p.m.

Location: Online webinar.

Speaker: Alan Gassman

Additional Information:  To register for the webinar please visit www.clearwaterbar.org

LUNCH TALK – LAWYER REFERRAL SERVICE

Date: Monday, March 3, 2014 | 12:30 p.m.

Location: Online webinar

Speaker: David Robert Ellis, Esq.

Additional Information:To register for the webinar please visit www.clearwaterbar.org

FLORIDA BAR HEALTH LAW REVIEW 2014

Alan Gassman will be speaking on What Healthcare Lawyers Need to Know About Tax Law and Business Entities at this excellent annual Florida Bar conference that is attended not only by those who are taking the Board Certification exam but also healthcare lawyers and other advisors.

Other speakers will include Lester Perling who is the co-author of A Practical Guide to Kickback and Self-Referral Laws for Florida Physicians and a number of other books and publications, and Mickey Mouse, Donald Duck and the “dwarf planet” formerly known as Pluto!

Date:    March 7 – 8, 2014

Location: Hyatt, Orlando, Florida

Additional Information: We thank Jodi Laurence and Sandra Greenblatt for all of their hard work in making this conference as successful as it is.  For more information please contact Jodi at jl@flhealthlaw.com or Sandra at sg@flhealthlawyer.com.

HILLSBOROUGH COUNTY BAR ASSOCIATION HEALTH LAW SECTION LUNCHEON

Alan Gassman and Christopher Denicolo will be speaking at the Hillsborough County Bar Association’s Health Law Section Luncheon on the topic of Tax and Asset Protection Basics for Those Who Represent Physicians and Medical Practices.

Date:    March 12, 2014

Location:  Chester H. Ferguson Law Center in Tampa, FL

Additional Information: For additional information please contact Co-Chairs Sara Younger (sara.younger@baycare.org) or Thomas Ferrante (tferrante@carltonfields.com).

COUNSELING SAME SEX COUPLES

Alan Gassman is speaking to the WealthCounsel Florida Forum on the topic of Counseling Same Sex Couples

Date: March 21, 2014 | Time to be determined

Location: To be determined.

Additional Information:  To register for the forum please contact Alan Gassman at agassman@gassmanpa.com.

LUNCH TALK – LAW PRACTICE EFFICIENCY TIPS

Date: Monday, April 7, 2014 | 12:30 p.m.

Location: Online webinar

Speaker: Alan S. Gassman

Additional Information: To register for this webinar please visit www.clearwaterbar.org

FICPA SUNCOAST CHAPTER MONTHLY MEETING

Alan S. Gassman will be speaking at the FICPA Suncoast Chapter’s monthly meeting on the topic of THE FLORIDA CPA’S GUIDE TO PLANNING WITH PHYSICIANS AND MEDICAL PRACTICES

Date: Thursday, April 17, 2014 | 4:00 p.m.

Location: Tampa, Florida

Additional Information: For more information on this event please email agassman@gassmanpa.com or mary@clawsonasplus.com

DONOR LUNCHEON AT RUTH ECKERD HALL WITH PROFESSOR JERRY HESCH IN CLEARWATER, FLORIDA

Professor Jerry Hesch will be speaking at a Donor Luncheon on the topic of CHARITABLE TAX SAVINGS: HOW TO MAKE SURE THAT UNCLE SAM CONTRIBUTES HIS SHARE TO MAXIMIZE RESULTS

Date: Tuesday, April 22, 2014 | TIME TO BE DETERMINED

Location: Ruth Eckerd Hall, Clearwater, Florida

Additional Information: For additional information please contact Suzanne Ruley at sruley@rutheckerd.net or Alan Gassman at agassman@gassmanpa.com

RUTH ECKERD HALL PLANNED GIVING MEETING

Professor Jerry Hesch will be speaking at the Ruth Eckerd Hall Planned Giving Meeting in Clearwater, Florida on the topic of INNOVATIVE CHARITABLE GIVING TECHNIQUES FOR THE WELL TUNED ESTATE PLANNER

Date: Tuesday, April 22, 2014 | 4:00 p.m.

Location: Ruth Eckerd Hall, Clearwater, Florida

Additional Information: This session qualifies for 1 hour of continuing education credit for lawyers and CPA’s.  To attend please email Suzanne Ruley at sruley@rutheckerd.net or Alan Gassman at agassman@gassmanpa.com

1st ANNUAL ESTATE PLANNER’S DAY AT AVE MARIA SCHOOL OF LAW

Speakers: Speakers will include Professor Jerry Hesch, Jonathan Gopman, Alan Gassman and others.

Date: April 25, 2014

Location: Ave Maria School of Law, Naples, Florida

Sponsors:AveMariaSchool of Law, Collier County Estate Planning Council and more to be announced.

Additional Information: For more information on this event please contact agassman@gassmanpa.com.

THE FLORIDA BAR ANNUAL WEALTH PROTECTION SEMINAR

Date: Thursday, May 8, 2014

Speakers: Speakers will include Barry Engel on Offshore Trust Planning and Developments Over the Past 2 Years in Asset Protection, Howard Fisher and Alex Fisher on “Designer Entities – The Cutting Edge in Asset Protection”, Denis Kleinfeld on The Roadmap to Wealth Protection Planning and Alan Gassman on Structuring Business and Investment Assets and Entities – Wealth Protection 401 for the Dedicated Planner.

Location: Hyatt Regency Downtown, Miami, Florida

Additional Information: For more information please contact agassman@gassmanpa.com

40th ANNUAL NOTRE DAME TAX & ESTATE PLANNING INSTITUTE

Date: November 13 and 14, 2014

Location: Century Center, South Bend, Indiana

Additional Information: The focus of this year’s institute will be on “Business Succession Planning: An Income Tax, Estate Tax and Financial Analysis.”  As in past years, several sessions are designed to evaluate certain financial products and tax planning techniques so that the audience can better understand and evaluate these proposals in determining not only the tax and financial advantages they offer, but also evaluate limitations and problems they may cause in the future.  Given that fewer clients will need high-end estate tax planning with the $5 million exemptions, other sessions will address concerns that all clients have.  For example, a session will describe scams that target elderly individuals and how to protect the elderly from these scams.  As part of the objective on refreshing or introducing the audience to areas that can expand their practice, other sessions will review the income tax consequences of debt cancellation, foreclosures, short sales, the special concerns that arise in bankruptcy and various planning available to eliminate the cancellation of debt income or at least defer it with a possible step-up basis at death.  The Institute will also continue to have sessions devoted to income tax planning techniques that clients can use immediately instead of waiting to save estate taxes far in the future.

Notable Seminars

THE UNIVERSITY OF FLORIDA TAX INSTITUTE

Date: February 19 – 21, 2014

Location: Grand Hyatt, Tampa, Florida

Presenters:       Martin McMahon, Jr., C. Wells Hall, III, Abraham N.M. Shashy, Karen L. Hawkins, Lawrence Lokken, Stephen F. Gertzman, James B. Sowell, John J. Rooney, Louis Weller, Ronald Aucutt, Karen Gilbreath Sowell, Herbert N. Beller, Peter J. Genz, Stephan R. Leimberg, John J. Scroggin, Lauren Y. Detzel, David Pratt and Samuel A. Donaldson

Sponsor:  UF Law alumni and UF Graduate Tax Program

Additional Information:  For more information and to register for the program please visit www.floridataxinstitute.org.  There will be cocktail parties at the Grand Hyatt as part of the programs on Wednesday, February 19 at 5:00 p.m. and then again on Thursday, February 20 at 5:00 p.m. Please plan to attend these receptions.  See how your classmates are doing and say hello to your favorite professors. (If they didn’t teach at Florida then you can call them on your cell phone during the cocktail hour). Help us strengthen and improve a UF LLM community, the school, and the synergism that results from these types of activities.  Students will be in attendance and will greatly value conversations with any advice from alumni.  Do you remember how you felt when you were in the LL.M. program and were able to interact with successful lawyers who gave you valuable feedback?  There is also a reception for all attendees and the guests on February 19, 2014 at 5:00 p.m. for attendees and their spouses along with a reception on February 20, 2014 at 5:00 p.m. to thank the supporters of the University of Florida, the law school and the LL.M. program.

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