CPA Journal, The

Ponzis and Pyramids

A Ponzi scheme is a special type of illegal pyramid operation. It promises better-than-average returns to current investors -- returns which are paid for by money from new investors. Such schemes are predestined to eventually fail because of pyramidal mathematics and the difficulty of finding enough new investors to cover the returns promised to existing ones. Ponzi schemes do not usually advertise -- they don't need to. The current investors tell new ones and the word spreads like wildfire. ...

The Never-Taxed Estate: Why Rich People Should Consider Trophy Wives and Husbands

Once upon a time in a far away land, there was an old king. Over the many years of his life, this king had accumulated great wealth. Unfortunately for him, he lived in a time where the fairy-tale monarchy had been surpassed by democracy. Therefore, the king could not issue proclamations that would safeguard from taxation his gold and silver, his pearls and diamonds, and everything else he owned, when transferring them to a younger generation at death. He therefore summoned his oldest and wise...

Roth: Still the Right Choice

The Taxpayer Relief Act of 1997 greatly increased the opportunity for individuals to invest in Individual Retirement Accounts (IRAs) by adding a new category of nondeductible IRA. While traditional IRAs had allowed for tax-deferred earnings, the Roth IRA (named after Senator William Roth of Delaware) provided for tax-free earnings. There is general agreement that, for those individua!s who can choose between Roth and deductible IRAs, the major factor is the individuals income tax rate before ...

Serving the Public Interest

One of the basic tenets of the CPA profession is to serve the public interest. Working with the Wenchester County Association and the Business Council of Wenchester, it took weeks for the task force of about 20 CPAs to attend budget hearings and various meetings, well as to pore over the proposed budget. CPAs have much to offer working in concert with local governments. Fiscal responsibility is a shared responsibility among all interested parties -- the public, the business community, the pri...

Inbox: Letter to the Editor

The 2009 Amt Stimulus Patch

The Alternative Minimum Tax (AMT) was enacted because of congressional reaction to the 1969 Economic Report of the US President, which indicated that 155 high-income taxpayers with adjusted gross incomes above $200,000 did not pay any federal income tax. The AMT is a separate and parallel tax system that effectively requires individual taxpayers to compute their regular income tax liability, then recompute their tax liability under the AMT system and pay whichever is greater. The AMT was crea...

A Long and Winding Road

Last year marked the 25th anniversary of the Governmental Accounting Standards Board (GASB). This organization is an operating unit of the Financial Accounting Foundation which also oversees the Financial Accounting Standards Board. Although US state governments have the ultimate authority to prescribe generally accepted accounting principles (GAAP), nearly three-quarters of the states (36) have laws that prescribe the use of governmental GAAP. GASB's influence extends to most of the major go...

A Practical Guide to the New Pcaob Reporting Requirements

The Saranes-Oxley Act of 2002 (SOX) requires that any accounting firm that prepares or issues an audit report with respect to a US public company must register with the Public Company Accounting Oversight Board (PCAOB). As required by SOX section 102(e), all registration applications and annual reports will he made publicly available, subject to PCAOB and SEC rules on the confidentiality of proprietary and personal information. The PCAOB is also authorized to collect an initial registration f...

The Report of the Financial Crisis Advisory Group

The Financial Crisis Advisory Group (FCAG) was a global group of senior executives created to counsel the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on the standards-setting implications of the recent worldwide financial crisis. The result of the FCAG's meetings and deliberations was a 37-page report emphasizing effective financial reporting, limitations of financial reporting, convergence of accounting standards, and standards-setter i...

Irs Guidance for Ponzi Scheme Losses

Ponzi schemes have received much attention lately. In the Madoff scandal alone, investors have lost an estimated $50 billion. The victims of such schemes seek to recoup some, or all, of their losses through insurance, lawsuits, and tax relief. With regard to tax relief, until recently, there were issues regarding whether the losses were deductible as theft losses (IRC section 165(c)), or capital loses (IRC section 1211 and 1212). To resolve these and other issues, the IRS issued Revenue Rulin...

Tighter Rules for Excluding Gain On Principal Residence Sales

Internal Revenue Code (IRC) section 121 allows individual taxpayers to exclude up to $250,000 of gain realized on the sale or exchange of a principal residence. To qualify for this exclusion, the taxpayer must have owned and used the property as the principal residence for periods aggregating two or more years during the five-year period ending on the date of the sale. Treasury Regulations section 1.121-1(c)(1) provides that ownership and use of the property as a principal residence does not ...

Tax Credits for Private School Scholarships

In an April 2009 decision, the Ninth Circuit Court ruled that taxpayer donations to faith-based scholarship organizations raised serious questions as to whether private school tax credits are constitutional. The ruling by the Ninth Circuit Court refocuses the nation's spotlight on how Arizona's scholarship organizations are using taxpayer money to fund private school scholarships. The Ninth Circuit Court ruling revisited the continuing debate over the separation of church and slate. The court...

Education Expenses: An Analysis of the New American Opportunity Tax Credit

America continues to struggle with the worst recession in decades. Various reports indicate that over 15 million Americans are currently unemployed. To help stimulate the economy, President Obama signed the American Recovery and Reinvestment Act of 2009 (ARRA) on Feb 17, 2009. ARRA includes many tax benefits intended to promote job growth. Existing law contains a number of tax benefits to help defray the soaring costs of higher education. This article focuses on the temporary changes to the H...

Reevaluating State-Specific Muni Bond Funds

CPAs and financial planners have long advised many individuals to invest in municipal muni bond securities -- an investment that generally provides a high degree of principal safety while avoiding taxation. These investments are typically made through the use of municipal bond funds. Nevertheless, when investing in tax-exempt securities, investors are quickly confronted with a host of often conflicting goals. Major tax and investing issues need to be evaluated simultaneously when selecting an...

Help Staff Pass the Cpa Exam

The Uniform CPA Examination is considered by many to be the paramount rite of passage for accounting professional. With more CPAs on staff, firms can improve internal competency and allow partners to devote more time to business development and high-margin services. These factors will bolster a firm's reputation for quality as well as specialization and staff retention. Helping staff pass the CPA exam provides an important stepping stone for a firm to expand its client base. Firms can increas...

Examining Satisfaction in Multiprofessional Engagements

CPAs often work with other professional advisors when needed. Many times, no single advisor has all the technical expertise necessary to produce the best result for every client. For example, a large estate planning case may require the expertise of an attorney, a tax accountant, and a financial planner. This raises the question of how CPAs perceive the performance of other professional advisors in such a working relationship. The authors conducted a survey of CPAs, attorneys, and financial p...

What Is Important to Tax Software Users?

Tax software has become an annual part of many taxpayers' lives. While many professional preparers are required to file their clients' tax returns electronically, individual filers increasingly rely on tax software as well. Despite the popularity of tax programs, perceptions of the software's usefulness and reliability vary. Just recently, Treasury Secretary Timothy Geithner blamed TurboTax software for his failure is pay self-employment taxes for the years he worked at the International Mone...

Website of the Month: Tax Policy Center

The Tax Policy Center (TPC) is a joint venture of the Urban Institute and the Brookings Institution that focuses on providing independent analysis of tax policy for both experts and the public. The frequency of tax law changes presents an opportunity to examine the free materials on TPC's recently redesigned www.taxpolicycenter.org. The Web site's main sections include tax topics, numbers, tax facts, library, events, legislation, press room, The Tax Policy Briefing Book, and the TaxVox blog. ...

Estate Tax Planning 2010

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) temporarily suspended the federal estate tax and generation-skipping transfer (GST) taxes for one year -- 2010. There's a 50/50 chance that lawmakers will take action on this issue. Late last year, the House of Representatives passed a bill that would have extended the estate tax into 2010, but the Senate rejected it. However, even if Congress does nothing to address this year's dilemma, that doesn't mean the last of the d...