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Law Offices of Givner & Kaye http://www.givnerkaye.com Thu, 30 Oct 2014 23:33:19 +0000 en-US hourly 1 http://wordpress.org/?v=4.0 US Citizenship Renunciation on the Rise With FATCA – Los Angeles Income Tax Planning & Income Tax Attorney Bruce Givner http://www.givnerkaye.com/us-citizenship-renunciation-on-the-rise-with-fatca-los-angeles-income-tax-planning-income-tax-attorney-bruce-givner/ http://www.givnerkaye.com/us-citizenship-renunciation-on-the-rise-with-fatca-los-angeles-income-tax-planning-income-tax-attorney-bruce-givner/#comments Thu, 30 Oct 2014 14:52:11 +0000 http://www.givnerkaye.com/?p=11598

According to recent data released by the Internal Revenue Service (IRS), the number of Americans renouncing their US citizenship has increased 39% in the first 3 months through September following the establishment and enforcement of new rules meant to make it harder for individuals to hide their assets from American tax authorities overseas.

The Foreign Account Tax Compliance Act (FATCA) first entered into force in 2010 with the aim of compelling foreign governments and financial institutions to hand over data on American account holders in order to identify tax evaders. FATCA instructs US financial institutions to withhold up to 30% on payments made to foreign banks that don’t agree to identify and provide information on US account holders. Essentially, Congress and the Obama administration threatened to cut off banks and other companies from easy access to the US market if they didn’t comply with the new FATCA regulations.

According to the IRS, the number of people giving up their American passports at US embassies around the world has increased to 776 in the third quarter of 2014, up from 560 at the same time last year. So far in 2014, 2,352 Americans have renounced their citizenship, coming close to the all-time high of 2,369 renunciations in the first 9 months of 2013.

The US is the only Organization for Economic Cooperation and Development (OECD) country which taxes its citizens no matter where they reside around the world.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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CA Franchise Tax Board Publishes 500 Top Income Tax Debtors List – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner http://www.givnerkaye.com/ca-franchise-tax-board-publishes-500-top-income-tax-debtors-list-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/ http://www.givnerkaye.com/ca-franchise-tax-board-publishes-500-top-income-tax-debtors-list-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/#comments Tue, 28 Oct 2014 19:53:09 +0000 http://www.givnerkaye.com/?p=11596

On October 16, the California Franchise Tax Board published its biannual list of California’s 500 Top Income Tax Debtors, which included 316 individuals and 72 companies. Of those, the first 378 debtors have tax delinquencies ranging from $144,000 to $4.2 million, making a total of $129 million. The other 122 taxpayers resolved their tax debts after receiving letters in August notifying them of their impending appearance on the list.

The title of top personal income tax debtor was claimed by Burton O. Benson who, in combination with his wife, owes a total of $4.2 million in delinquent California income taxes. Benson is also facing federal criminal and civil charges of fraud, money laundering, and pension plan theft stemming from his role as president of a company that manufactures foam metal for the aerospace, defense, and science industries. The civil case against Benson has been stayed while a criminal case filed in 2012 against Benson and his son, Eric, proceeds.

Seventy two corporations also made it onto the list. Some of them include a pediatric pulmonologist in Buena Park who owes $2.4 million, a Beverly Hills classic car dealership that owes $1.3 million, and an Irvine real estate developer that owes $1 million.

Individuals who make it onto the list face other penalties along with the notoriety. These penalties include a suspension of state-issued licenses within 90 days, a ban from state contracts, and disclosure of professional license information and corporate officer names and titles.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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New IRS Software System to Speed Issuance of Tax Refunds and Notices – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner http://www.givnerkaye.com/new-irs-software-system-to-speed-issuance-of-tax-refunds-and-notices-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/ http://www.givnerkaye.com/new-irs-software-system-to-speed-issuance-of-tax-refunds-and-notices-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/#comments Thu, 23 Oct 2014 15:31:56 +0000 http://www.givnerkaye.com/?p=11585

According to an October 7 news release summarizing the IRS Oversight Board’s quarterly meeting in September, tax refunds and notices will be issued more quickly thanks to progress made by the Internal Revenue Service (IRS) on its new Customer Account Data Engine 2 (CADE 2) program. The program will help validate the quality of over 1 billion taxpayer records when taxpayer accounts are switched from the IRS’s current out-of-date master file system to the new CADE 2.

According to the IRS Oversight Board Chairman, Paul Cherecwich Jr., the transition to the CADE 2 system “ensures that downstream IRS systems receive high quality, mission-critical data in a more timely manner.”

Also contained in the news release was a warning to the Oversight Board that the anticipated flat budget allocated for the IRS for fiscal year 2015 would have serious negative consequences on customer service and enforcement. Cherecwich stated, “The IRS cannot be expected to provide quality customer service or run robust enforcement programs to curb tax fraud in the current budgetary environment.”

The news release also mentioned that the board had been briefed on risk management related to implementation of the tax-related portions of the Affordable Care Act, including programming and testing, the publication of new forms and instructions, and IRS readiness for handling ACA-related phone calls during the upcoming filing season.

The board also made a plea to the Senate to fast-track the confirmation of two new board members, as the only two current private-life members “have served well beyond their terms.”

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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IRS Simplifies Reporting For US Citizens With Interests in Canadian Retirement Plans – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner http://www.givnerkaye.com/irs-simplifies-reporting-for-us-citizens-with-interests-in-canadian-retirement-plans-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/ http://www.givnerkaye.com/irs-simplifies-reporting-for-us-citizens-with-interests-in-canadian-retirement-plans-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/#comments Tue, 21 Oct 2014 15:15:18 +0000 http://www.givnerkaye.com/?p=11582

The Internal Revenue Service (IRS) recently announced that it had simplified the reporting requirements for US citizens or residents with interests in Canadian registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs). These taxpayers now automatically qualify for tax deferrals similar to those available for participants in individual retirement accounts and §401(k) plans.

The guidance provides two methods through which a beneficiary may make an election under Article XVIII(7) of the US-Canadian convention related to US income tax deferral for income accrued on a Canadian retirement plan:

  1. An eligible taxpayer can elect to apply Article XVIII(7) of the Convention by reporting on a US federal income tax return income earned through a Canadian retirement plan only upon receiving distributions from the plan.
  2. A taxpayer that has reported undistributed income earned through a Canadian retirement plan on a US federal income tax return must obtain the consent of the IRS Commissioner to make an election to apply Article XVIII(7) of thee conventions.

The two new methods replace the procedures set forth in Rev. Proc. 2002-23, 2002-15 I.R.B 744, and render Form 8891, US Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans, obsolete.

Previously, taxpayers needed to file Form 8891 and choose the “tax treaty benefit” under a treaty between the US and Canada to defer their taxes for those retirement plan contributions and earnings.

The guidance is effective for taxable years beginning on or after January 1, 1996. However, the guidance on reporting rules for a beneficiary or annuitant of a Canadian retirement plan is only effective for tax years beginning on or after January 1, 2003.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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Company Made to Pay Taxes for Workers as Employees, Not Independent Contractors – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner http://www.givnerkaye.com/company-made-to-pay-taxes-for-workers-as-employees-not-independent-contractors-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/ http://www.givnerkaye.com/company-made-to-pay-taxes-for-workers-as-employees-not-independent-contractors-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/#comments Thu, 16 Oct 2014 15:25:38 +0000 http://www.givnerkaye.com/?p=11580

A company which buys, repairs, reconditions, and resells used automobiles was forced to pay taxes in 2007 because its workers met all the requirements necessary to be taxed as employees.

The company in question consists of a President, who is the sole shareholder, Employee 1, who serves as the secretary and treasurer, and Employee 2, who is an automobile driver.  The President and both Employees were treated as independent contractors, and the Company had no contractual agreements of any kind with any of them. The Company didn’t provide the Internal Revenue Service (IRS) or the three men with Forms 1099-MISC, Miscellaneous Income, reporting the compensation they received. As all three were considered independent contractors, the Company also didn’t issue Forms W-2 (Wage and Tax Statement), Forms 941 (Employer’s Quarterly Federal Tax Return), or Forms 940 (Employer’s Annual Federal Unemployment Tax Return). The Company also made no deposits of employment taxes for 2007.

The IRS determined that the three men should be classified as “employees” in a Notice of Determination of Worker Classification. After the IRS assessed additions to tax and penalties, the Company petitioned the Tax Court for redetermination.

The Tax Court upheld the IRS’s finding that the three men were “employees” rather than independent contractors, and that the Company was liable for employment taxes, additions to tax for failing to timely file returns, and a penalty for failing to deposit.

Under §3402, employers are required to pay “employment taxes” and income tax withholding, according to the court. The taxes are imposed by the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA).

The Tax Court found that, due to the services they provided the Company, the permanence of the employer-employee relationship, their opportunity for profit and loss, and the President’s control over both Employees , all three men fit the definition of “employee” as defined by §3121 and §3306 for FICA and FUTA purposes.

The Tax Court further concluded that because the Company failed to file timely returns and to pay or deposit the required employment taxes into any federal depository as required by §6651(a) and §6656(a) and §6656(b), the Company was subject to tax additions and penalties. Although it is possible for a taxpayer to avoid additions to the tax if the taxpayer can establish that the failure to file or deposit was due to reasonable cause and not willful neglect, the Tax Court held that the Company failed to meet the burden of proof in that regard.

Frankly, it is shocking to read that employers are silly enough to both (i) have fact situations like this and (ii) litigate them in Tax Court where they are certain losers.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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Fugitive Found Through Facebook Sentenced for Tax Fraud – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner http://www.givnerkaye.com/fugitive-found-through-facebook-sentenced-for-tax-fraud-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/ http://www.givnerkaye.com/fugitive-found-through-facebook-sentenced-for-tax-fraud-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/#comments Tue, 14 Oct 2014 15:06:15 +0000 http://www.givnerkaye.com/?p=11577

After 21 years on the run, fugitive Francisco R. Legaspi was sentenced to 21 months for aiding and assisting in the preparation and presentation of false tax returns and for failing to appear for sentencing on tax charges.

According to a Department of Justice news release, Judge William H. Orrick of the US District Court for the Northern District of California issued his ruling on October 2. Legaspi will also face a one-year period of supervised release.

In August 1992, Legaspi was indicted on 3 counts of aiding and assisting in the preparation and presentation of false tax returns. After pleading guilty in November 1992, Legaspi was released from custody on the condition he appear in court for all of his hearings. However, Legaspi avoided his sentencing scheduled for January 28, 1993 by fleeing to Mexico.

In 2012, the State Department Bureau of Diplomatic Security used information found on Legaspi’s Facebook page to track him down to Canada, where he was eventually apprehended (see our previous blog post).

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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Scam Artists Try to Steal FATCA Account Info from Foreign Institutions – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner http://www.givnerkaye.com/scam-artists-try-to-steal-fatca-account-info-from-foreign-institutions-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/ http://www.givnerkaye.com/scam-artists-try-to-steal-fatca-account-info-from-foreign-institutions-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/#comments Tue, 07 Oct 2014 15:00:07 +0000 http://www.givnerkaye.com/?p=11555

In a September 24 news release  the Internal Revenue Service (IRS) stated that it has received reports from “multiple countries and continents” that scam artists posing as the IRS have tried  to get foreign financial institutions to hand over sensitive account information related to the Foreign Account Tax Compliance Act (FATCA).

FATCA, in effect since July 1, requires foreign financial institutions to report their US-owned accounts to the IRS or face, in some cases, a 30% withholding tax on their US-sourced income. Scam artists have apparently tried  to take advantage of these banks’ efforts to comply with FATCA by posing as IRS agents seeking such information.

In response, the IRS emphasized that it does not solicit FATCA registration passwords or similar confidential account access info, and that it does not require banks to provide any specific information over the phone, by fax, or by email. IRS Commissioner John Koskinen said, in the news release, “Tax scams using the IRS name can take many forms and they are not limited by national borders.” He added, “People should always be cautious before sending sensitive information to anyone.”

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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IRS Clarifies Procedures When Taxpayer Asks for Representation – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner http://www.givnerkaye.com/irs-clarifies-procedures-when-taxpayer-asks-for-representation-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/ http://www.givnerkaye.com/irs-clarifies-procedures-when-taxpayer-asks-for-representation-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/#comments Thu, 02 Oct 2014 15:29:06 +0000 http://www.givnerkaye.com/?p=11553

On September 16, the Treasury Inspector General for Tax Administration (TIGTA) conducted an audit of the Internal Revenue Service’s (IRS’s) Small Business/Self-Employed Division and discovered a conflict between procedures relating to what actions IRS examiners are allowed to take in the 10 business days after a taxpayer’s request to consult with a representative.

In response, the IRS said it agreed with the TIGTA report’s findings and that it would modify its procedures  to make them consistent.

According to the TIGTA report, “the direct contact provisions of §7521 generally require IRS personnel to stop a taxpayer interview whenever a taxpayer requests to consult with a representative.” Most significantly, the report added that, should IRS personnel violate this rule, the taxpayer may seek monetary damages.

In response to the report, Karen Schiller, commissioner of the Small Business/Self-Employed Division, said, “Our procedures require examiners to check appropriate internal records to determine if a valid power of attorney is on file for the years under examination before making initial contact with the taxpayer.”

The IRS has said it will implement the new changes by March 15, 2016.  Why will it take 18 months to do that?

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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Renouncing US Citizenship Just Became a Whole Lot More Expensive – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner http://www.givnerkaye.com/renouncing-us-citizenship-just-became-a-whole-lot-more-expensive-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/ http://www.givnerkaye.com/renouncing-us-citizenship-just-became-a-whole-lot-more-expensive-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/#comments Tue, 30 Sep 2014 15:36:07 +0000 http://www.givnerkaye.com/?p=11551

Over the past two years, the number of US citizens who have chosen to renounce their US citizenship has gone up tremendously, from a total of 932 individuals in all of 2012 to 2,999 in 2013 and now 1,577 in the just the first quarter of 2014. As a result, on August 29, 2014 the Department of State (DOS) published an interim final rule in the Federal Register raising the processing fee for individuals renouncing their US citizenship from $450 to $2,350, a staggering 522.22% increase.

The cause for the increasing citizenship renunciations is largely attributable to much more aggressive global tax reporting obligations imposed by US laws such as the Foreign Account Tax Compliance Act (FATCA). The objective of FATCA is to identify US citizens evading their tax obligations by using financial accounts held outside of the US. The law requires foreign financial institutions and US withholding agents to implement new procedures for tax reporting and withholding, account identification, and documentation.

Those individuals seeking to renounce their US citizenship need to be aware of two things. First, due to the backlog of renunciation appointments, especially in US consular offices in Canada, it is now nearly impossible to schedule a renunciation appointment until at least the beginning of 2015. Second, and more significantly, any individual who renounces his/her US citizenship for the purposes of avoiding US taxation on or after September 30, 1996 will be considered inadmissible to the US. Resulting from 1996 amendments to the Immigration and Nationality Act, this provision is not aggressively enforced at the moment, but may be in the near future. For this reason, individuals considering renouncing their US citizenship must be careful to properly document their reasons for renunciation.

In some cases, it is possible for individuals to argue that they have already lost their citizenship by operation of law, thereby avoiding the potential grounds for inadmissibility. If an individual can successfully argue this position, DOS will issue him/her a Certificate of Loss of Nationality retroactive to the date of prior loss which would serve to reduce or eliminate any potential US tax obligations. Therefore, if you believe you may have lost your US citizenship but do not have a Certificate of Loss of Nationality, consult a qualified US immigration lawyer. Even if you are confident you lost citizenship due to a prior expatriating event, you should apply for the Certificate anyway in order to properly document this fact.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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Nevada Supreme Court Rules CA FTB Immune from Punitive Damages | Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner http://www.givnerkaye.com/nevada-supreme-court-rules-ca-ftb-immune-from-punitive-damages-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/ http://www.givnerkaye.com/nevada-supreme-court-rules-ca-ftb-immune-from-punitive-damages-los-angeles-income-tax-planning-income-tax-litigation-attorney-bruce-givner/#comments Thu, 25 Sep 2014 15:11:49 +0000 http://www.givnerkaye.com/?p=11503

On September 18, the Supreme Court of Nevada ruled that the California Franchise Tax Board (FTB) is immune from punitive damages under Nevada law for intentional torts and bad-faith conduct. These damages had been imposed as a result of an audit of the state tax returns of Gilbert Hyatt, inventor of the microprocessor.

After learning of Hyatt’s substantial earnings from a computer chip patent in a newspaper article published in 1993, the FTB began an audit of Hyatt’s 1991 and 1992 tax returns. Although Hyatt claimed to have moved from California to Nevada in September of 1991, the FTB held that the move occurred in April of 1992, and that Hyatt therefore owed California income taxes for 1991 and 1992.

Hyatt filed a lawsuit in a Nevada court in 2008 claiming that the FTB had committed several torts against him during its audit and while pursuing a case against him. These torts included invasion of privacy, outrageous conduct, abuse of process, fraud, and negligent misrepresentation. After being presented with evidence that the FTB had sent information demands about Hyatt’s case, which included personal information such as his Social Security number and home address, to third parties, the Nevada jury awarded Hyatt $250 million in punitive damages and $139 million in compensatory damages and attorneys’ fees for the agency’s conduct during the audit.

In Franchise Tax Bd. Of Calif. V. Hyatt, the Nevada Supreme Court reversed the lower court’s decision, stating that the FTB is immune from punitive damages based on comity, as such damages wouldn’t be available against a Nevada government entity. Furthermore, the Court reversed the 2008 jury verdict finding regarding invasion of privacy, breach of confidential relationship, and abuse of process.

Nevertheless, the Court affirmed the jury’s findings of fraud and intentional infliction of emotional distress. The court held that Nevada’s exception to immunity for intentional torts and bad-faith survived the adoption of the federal discretionary-function immunity test as such conduct isn’t based on public policy.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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