Law Offices of Givner & Kaye

Los Angeles Attorney Bruce Givner – Trusts: What is a Trust in California?

admin — Fri, 18 May 2012 11:00:26 +0000

A trust is a written agreement that allows a settlor (the individual establishing the trust) to transfer assets to a trustee (the party who manages the trust) for the benefit of one or more beneficiaries. A trust primarily differs from a will in that an asset must be transferred into a trust in order to avoid probate.

In California, trusts can be used for a variety of situations. Some of the more common trusts in California are:

Living Trusts,
Revocable Trusts,
Irrevocable Trusts,
Testamentary Trusts, and
Generation Skipping Trusts

Other trusts used in California include Pet Trusts, Special needs trusts, and Married A-B Trusts.

Used properly, trusts are an important document in asset protection planning for the wealthy and those of less means. They are extremely flexible. Additionally, an experienced and knowledgeable asset protection plan attorney can use a trust instrument to protect assets and achieve tax savings.

The Los Angeles County firm of Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles County. Call Givner & Kaye at (310) 207-8008 today.

Tax Court: Dissipated Assets, not used for Living Expenses, are includable in Calculating a Taxpayer’s Ability to Pay Outstanding Tax Liabilities

admin — Thu, 17 May 2012 17:27:57 +0000

Mr. and Mrs.Titsworth filed their 2001, 2002, 2005, and 2006 federal income tax returns late, and did not pay the tax due for any of the four years. The Internal Revenue Service (IRS) issued them a Final Notice of Intent to Levy and Notice of Your Right to a Hearing.

Subsequently, the Titsworths submitted to the IRS an IRS Form 12153, Request for a Collection Due Process or Equivalent Hearing. Later they submitted a Form 656, Offer in Compromise (OIC) and Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals. On the OIC, the Titsworths listed the “handshake” mortgages they had obtained on several pieces of real property. After the IRS denied their OIC, the Titsworths appealed the calculation of their RCP (Reasonable Collection Potential) on four grounds. The RCP:

Included properties they did not own or double-counted other properties.
Treated the “handshake” mortgages as dissipated assets includible in their RCP.
Overestimated their future income potential.
Did not take into the special circumstances of their health issues.

The Tax Court found while the Titsworth Form 433-A listed 8 real properties, evidence showed they owned as many as 21 real properties. The Tax Court also found that the Titsworths’ health concerns did not constitute special circumstances. Further, the Tax Court held that the “handshake” mortgages were dissipated assets and includable in the RCP because the Titsworths did not provide any information showing the mortgage funds were spent on living expenses.

The Tax Court agreed with the taxpayers that their future income had been overstated. However, even with the overstatement removed, their RCP showed the taxpayers had sufficient funds to fully pay the tax due. Titsworth V. Commissioner Of Internal Revenue, T.C. Memo. 2012-12.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles County. Call Givner & Kaye at (310) 207-8008 today.

Supreme Court Refuses to Hear Excise Tax Case: Former Corporate Officer Found Liable for Section 6672 Excise Tax Penalties

admin — Wed, 16 May 2012 17:21:46 +0000

When an employer fails to pay over collected excise taxes, the Internal Revenue Service (IRS) can collect a trust fund recovery penalty equal to 100% of the unpaid taxes from a person responsible for the failure to pay. I.R.C. Code Sec. 6672(a). A responsible person includes any individual who is responsible for collecting, accounting for, or paying over the excise tax but then intentionally fails to make the payment(s). An individual acts intentionally if he or she knew the tax was not paid or showed a reckless disregard to the tax being paid.

Michael Conway was the founder, CEO, President, and Board Chair of National Airlines. During its two years of operations, National collected excise tax payments of more than $11 million from its passengers. National sent the IRS a partial payment check but stopped payment when the company filed bankruptcy.

In 2003, the IRS requested payment of the unpaid excise taxes and assessed a trust fund recovery penalty of $8.5 million against Conway. Evidence showed Conway was aware the excise tax had not been paid over, while other creditors were paid and Conway continued to collect his salary.

The Fifth Circuit District Court held the evidence was more than sufficient to show Conway was a responsible party who intentionally failed to pay over the collected excise taxes. The District Court also held that Congress did not intend, under the Air Transportation Safety & System Stabilization Act passed after 9-11, for collected excise taxes to be used as working capital.

The Fifth Circuit Court of Appeals affirmed and the Supreme Court refused to review.
Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles County. Call Givner & Kaye at (310) 207-8008 today.

The Los Angeles Attorneys For Preparer Penalties

admin — Tue, 15 May 2012 16:48:18 +0000

CPA Preparer Penalties? No problem, talk to Givner & Kaye. (310) 207-8008

The IRS has the ability to impose stiff penalties on tax preparers for understating a taxpayer’s liability specifically including Internal Revenue Code Sections 6694 and 6695. Other practices the IRS can penalize include promoting abusive tax shelters, fraud or false statements, or any activity that interferes with the IRS’ ability to do its work. The IRS Office of Professional Responsibility (“OPR”) can also suspend or revoke your license to practice. There are also potential criminal penalties. See Internal Revenue Code Section 7212

When language is unclear, when the standard for acceptability is vague, and when tens of thousands of dollars hang in the balance, that’s when you need to call Bruce Givner and Owen Kaye. The Los Angeles firm of Givner & Kaye routinely counsels tax preparers through the penalty gauntlet. They are the go-to lawyers in California for preparers under fire.

Read the client and professional testimonials on Givner & Kaye to see how our expert tax attorneys, estate planning lawyers and asset protection specialist can help you to save money on taxes, make more money and gain peace of mind over all estate planning, tax planning, tax litigation and asset protection matters.

If You have preparer penalty issues, give us a ring today.

(310) 207-8008

Third Circuit Court of Appeals Uphold Jurisdiction of the Virgin Islands over Virgin Island Income

admin — Mon, 14 May 2012 16:04:23 +0000

The Birdman and Hirschs each formed Virgin Islands corporations, which became limited partners in a Virgin Islands limited liability partnership. In 2006, the Birdmans and the Hirschs filed the required tax returns in the U.S. and the Virgin Islands. However, the couples paid both their island tax due and U.S. tax due to the U.S. The two couples sued in District Court when the U.S. failed to pay over the taxes and the Virgin Islands Bureau of Internal Revenue (VIBIR) failed to obtain the taxes:

Against the VIBIR to determine what was “island income.”
Against the U.S. requesting a refund of the island taxes paid to the U.S.

The District Court of the Virgin Islands (DCVI) dismissed the VIBIR claim because the appellants had not stated a legitimate claim, and if they had, the claim was not ripe for decision. On the U.S. claim, the Virgin Island District Court ruled that the District Court for the Southern District of Florida had proper jurisdiction over the U.S. claim. Before the case was transferred, however, the appellants appealed.

On the VIBIR claim, the Third Circuit Court of Appeals agreed that the appellants had not stated a legitimate claim. The appellants claim was based upon the Court’s power to issue a negative injunction against the VIBIR. That was a remedy, not a cause of action. Further, since the VIBIR had made no formal determination that the island taxes were owed, a claim in regards to determining the source of the alleged island income was not ripe for decision.

On the U.S. claim, the Third Circuit Court of Appeals held the DCVI had “exclusive jurisdiction” over proceedings “with respect to the income tax laws applicable to the Virgin Islands.” Further, because the couples resided in South Florida, the District Court for the Southern District of Florida has jurisdiction of the U.S. claim. Birdman v. Office of the Governor, 3rd Cir., No. 10-4189, 4/12/12.

Top Beverly Hills Tax Attorney Bruce Givner: “Radical Changes to Estate and Gift Tax Laws Could Cost Some Taxpayers Millions”

admin — Fri, 11 May 2012 11:00:50 +0000

When the clock strikes midnight on December 31, 2012, recent changes to existing federal estate and gift tax laws will expire. “And these changes could cost some taxpayers millions,” says Top Beverly Hills Tax Attorney Bruce Givner.

In December 2010, President Obama extended the “Bush Tax Cuts” which included significant new tax savings provisions. Exemptions for estate tax, gift tax, and generation-skipping transfer tax increased to $5 million in 2011 and $5.12 million in 2012 for individual taxpayers.

In essence, for 2012:

Most estates with a net value equal to or less than $5.12 million are exempt from estate tax;
Regardless of the size of the estate, individuals can make lifetime gifts up to $5.12 million without incurring a gift tax; and
Annual gifts of $13 thousand and below are exempt from gift tax.

When these provisions expire, the new exemption and rates will drop back:

Most estates with a net value over $1 million will be subject to estate tax; and
The tax rate on non-exempt generation-skipping transfers increases from 35% to 55%.

“The consequence of these changes is a taxpayer who made a large gift in 2012 may have been exempt from any tax,” continues Givner. “That same gift in 2013 could result in a whopping gift tax liability.”

These estate and gift tax provisions have cost the federal government billions of dollars in lost revenue. However, taxpayers with substantial estates hope the 2012-elected Congress and President enact a further extension.

Avoid making hasty end-of-the-year decisions that could negatively affect one’s tax planning. High net worth individuals should contact Givner & Kaye. Givner & Kaye can save you $100k-$1 million on your income tax liability.

Givner & Kaye can make the estate tax vanish. Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles County. Call Givner & Kaye at (310) 207-8008 today.

Los Angeles Attorney Bruce Givner – Wills: When to Make a Will

admin — Thu, 10 May 2012 11:00:37 +0000

At some point, most people consider making a will. The problem is far too many people put off making a will for various reasons …. “I’m young, I have plenty of time to do a will” … “I’m single, why should I make a will?” … “A will is just a way for someone else to take my property.”

A will is a legal document that identifies the beneficiary or beneficiaries who will receive your real and personal property upon your death. A beneficiary does not have to be a person, like your spouse, child, or friend. A beneficiary can also be a pet, trust, organization, or a charity.

One of the first questions most people ask, however, is when and why should I make a will? Some of the situations which should prompt one to make a will are:

Marriage.
Birth of a Child.
Purchase of real property.
Significant accumulation of assets.

The most important reason for making a will, however, is to ensure that, after your death, your assets and possession go to and whom you want. Without a will, the laws of the state where you reside will determine who receives your assets.

Givner & Kaye are dedicated to preserving the dignity of all people. Their Los Angeles County law firm focuses on sophisticated income tax planning and compliance, tax litigation and procedure, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles County. Call Givner & Kaye at (310) 207-8008 today.

Payable-on-Death Accounts (Totten Trusts) Are Reachable by Creditors

admin — Wed, 09 May 2012 11:00:31 +0000

A payable-on-death bank account – often called a `Totten Trust’ – is an easy way to gift money and have the gift avoid probate. Under a payable-on-death bank account or Totten Trust, the balance in an account at the time an individual dies is paid over to the designated beneficiary(ies). The bank account can be a checking, savings, or certificate of deposit.

However, while a payable-on-death bank account or Totten Trust is a great way to keep one’s money out of the hands of someone unwanted, it will not keep one’s money out of the hands of creditors.

With a payable on death account, the beneficiary has no right to the balance until the creator of the account (“settlor”) dies. That is because the settlor is the only one with access to the account during the settlor’s lifetime. The settlor can choose a new beneficiary or close the account. Most important, a settlor can dispose of the account balance to a new beneficiary via a will.

Since the settlor is in total control of the payable-on-death bank account or Totten Trust, courts have held that the assets in this type of account are reachable by creditors.

Asset protection planning can involve complicated financial instruments. Obtain the services of an experienced asset protection planning attorney to properly protect your assets from creditor claims.

Los Angeles Attorney Bruce Givner – Taxes: What To Do If You Can’t Pay Your Income Tax Bill

admin — Tue, 08 May 2012 11:00:47 +0000

After your federal income tax return was prepared, you discovered you owed the Internal Revenue Service (IRS). However, you did not have the funds to pay the tax due. You do not have enough available balance on a credit card. Furthermore, you cannot get a loan.

File on Time or NOW!

For every month that your federal tax return is late, the IRS is assessing a late filing return penalty of 5% of the tax due. This penalty will max out at 25%. However, if you did not request an extension to file your tax return, avoid accumulating further penalty and interest by filing your tax return NOW!

Request an Installment Plan from the IRS

If you haven’t filed your return, when you do, attach a completed IRS Form 9465, Installment Agreement Request. On the IRS Form 9465 you will indicate your tax due and any payment you are making with your return. You will also indicate how much you can pay on your tax due each month and the date you want to make your payment each month. If you have already filed your return, Form 9465 can be filed separately with the IRS. You can also apply online for a payment agreement with the IRS.

Request an Offer in Compromise

If your financial situation is such that you do not believe you can pay your tax due now or in the foreseeable future, try to negotiate a reduction in your tax due bill. Submit a completed Form 656, Offer in Compromise, and Form 433A, Collection information Statement to the IRS. An Offer in Compromise must be accompanied by a $150 application fee.

“Closed-Out” Partner Liable for Taxable Share of Partnership Distribution

admin — Mon, 07 May 2012 11:00:25 +0000

Jose Martignon and Alejandro Vargas opened the Café Savannah restaurant in 2003. The business was formed as a limited liability company. The two men elected to treat the company as a partnership, and not a corporation. Treas. Reg. §§ 301.7701-1 to -3.

In early 2008, the partnership deteriorated. Vargas shut Martignon out of the business, changed the locks, and gave Martignon no access to the partnership’s business records. However, in spring 2008, Martignon received a Schedule K-1 showing he had “received” a $22 thousand distribution from Café Savannah’s 2007 income. Martignon’s accountant reported his 40% interest in Café Savannah on Martignon’s 2007 Schedule E, Supplemental Income and Loss, attached to Martignon’s Form 1040, U.S. Individual Income Tax Return. However, the $22 thousand distribution was not reported on Schedule E or taken into account in calculating Martignon’s 2007 tax liability.

The Tax Court recognized that the partners, not the partnership, are liable for income tax. I.R.C. Sec. 702(a)(8). The partnership agreement determines each partner’s distributive share of income, gain, loss, deduction, or credit. I.R.C

Sec. 704(a). Further, each partner “is required to take into account separately in his return his distributive share, whether or not distributed.” I.R.C. Section 1.702-1(a).

That Martignon did not receive any distribution from the partnership because of Vargas’ alleged wrongdoing does not change the general rule of taxability. The Tax Court held that Martignon was liable for the additional tax deficiency calculated when the $22 thousand distribution was included in his income. Martignon v. Commissioner of Internal Revenue, T.C. Summary Opinion 2012-18. “This demonstrates the potential disadvantage of owning a non-controlling interest in an LLC, partnership of `S’ corporation: you can be taxable on `pass-through’ income without receiving a distribution. This also shows why LLCs and limited partnerships are such powerful tools in asset protection planning.”