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    James P. Witt

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    ESTATES: Succession to the Estate of Charles Manson

    Posted by James P. Witt on Mon, Nov 12, 2018 @ 10:11 AM

    The Lawletter Vol 43 No 6

    Jim Witt—Senior Attorney, National Legal Research Group

                In 1971, Charles Manson (“Manson”), the leader of the Manson Family cult, was convicted of first-degree murder and conspiracy to commit murder for the deaths of nine people in July and August 1969. He was originally sentenced to death, but his sentence was commuted to life with the possibility of parole after the suspension of the death penalty under both California and federal law (California's adoption in 1978 of a death penalty that qualified under federal guidelines and the sentence of life imprisonment with no possibility of parole could not be applied retroactively to Manson). After 46 years of incarceration, Manson died on November 19, 2017 of acute cardiac arrest, respiratory failure, and colon cancer. What has ensued, however, is an estate proceeding that has been complicated by a number of factors:

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    Topics: estates law, Charles Manson, domiciliary at death, rights to assets, conflicting wills

    CONTRACTS:  Obligation to Support Parent Under Taiwanese Law

    Posted by James P. Witt on Mon, Apr 9, 2018 @ 15:04 PM

    The Lawletter Vol. 43 No. 2

    Jim Witt, Senior Attorney, National Legal Research Group

         There is no question that law of a particular country develops in the context of the country's culture, religion, and customs.  A case recently decided by the Supreme Court of Taiwan illustrates this point.  See https://www.taiwannews.com.tw/en/news/3332521.  The plaintiff, identified as Luo (surname), brought a contract action against her second son, Chu, alleging that he owed her nearly US$1 million for raising him and financing his training at dental school (Chu's brother also completed dental training; he settled a similar claim with the plaintiff).  She claimed that she and her husband had run a dental clinic but that, after the couple's divorce, she raised her sons as a single mother.  As she was concerned that her sons would not provide for her in her old age, she had each son, at age 20, sign a written agreement, providing that her sons would pay her 60% of their net profits until the total reached 50 million new Taiwanese dollars (nearly US$1.7 million).  It is implicit in the Confucian tradition of filial piety that children support their aging parents.

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    Topics: breach of contract, Taiwanese customs, children supporting aging parents, financial support agreements, written agreement

    TAX: U.S. Tax Court Quotes Show Business Celebrity

    Posted by James P. Witt on Fri, Oct 20, 2017 @ 13:10 PM

    The Lawletter Vol 42 No 8

    Jim Witt, Senior Attorney, National Legal Research Group

                It is not often, if ever, that the U.S. Tax Court quotes a show business celebrity in its opinions, but it did so in a summary opinion filed on August 16, 2017, in the case of Omoloh v. Commissioner, T.C. Summ. Op. 2017-64, 2017 WL 3530853. The case turned on whether the taxpayer, Wilfred Omoloh, was age 59½ at the time that he took a distribution from his individual retirement account ("IRA"). I.R.C. § 72(t) ("10-percent additional tax on early distributions from qualified retirement plans") provides in subsection that (1) if the taxpayer receives a distribution from a qualified retirement plan such as an IRA, the taxpayer's income tax liability for the year will be increased by an amount equal to 10% of the portion of the distribution includible in gross income. However, under subsection (2), the 10% penalty of subsection (1) shall not apply if the distribution is made on or after the date on which the taxpayer attains age 59½.

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    Topics: tax, IRA account, distribution, tax liability, taxpayer's age

    TAX:  Corporate Income Tax Reform

    Posted by James P. Witt on Fri, May 26, 2017 @ 11:05 AM

    The Lawletter Vol 42 No 4

    Jim Witt, Senior Attorney, National Legal Research Group

                The one area of taxation that is recognized on both sides of the political aisle as badly needing reform is the federal corporate income tax.  One fact that signals the need for reform is that the maximum tax rate for the ordinary income of U.S. corporations is at 35% on taxable income exceeding $10 million (Internal Revenue Code of 1986, § 11(b)(1)(D)), among the highest marginal rates in the world (e.g., Ireland 12.5%; Germany 29.65%). As a result, and as prominently reported in recent months, a number of U.S. corporations (notably Apple and Alphabet (Google)) have shifted the locus of intangible assets and/or corporate headquarters to countries with favorable tax rates (a procedure known as a "corporate inversion"). United States corporations are subject to federal income tax on their global profits, but by not repatriating their profits attributable to a foreign situs, those corporations avoid paying taxes by simply not bringing those profits back to the United States.

                The central feature of the current proposals for corporate income tax reform is to change the incidence of the tax from one on the corporation's profits to a tax on the corporation's cash flow, regardless of the location of the corporation's headquarters or intangible assets. The tax, characterized as a "destination cash flow tax with border adjustment" or a "border adjustment tax" (“BAT”), would eliminate any benefit now gained by a corporation's parking its profits in a favorable tax jurisdiction (the tax would be imposed in the year of the sale, not in the year of the repatriation of profits). It is the border adjustment feature of the tax that becomes the key. The determining factor becomes where the corporation's products are sold.

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    Topics: tax law, corporate income, tax reform, U.S. high rate on taxable income, location of corporate headquarters

    TAX: IRS v. Facebook

    Posted by James P. Witt on Wed, Oct 5, 2016 @ 17:10 PM

    The Lawletter Vol 41 No 8

    Jim Witt, Senior Attorney, National Legal Research Group

         Over the last 30 years or so, American companies have sought to reduce their U.S. federal income tax liability by employing the tactic known as the "tax inversion." Typically, in an inversion transaction, one or more of the corporation's shareholders transfer stock to a controlled foreign corporate subsidiary in exchange for stock in the subsidiary. The goal is to shift corporate revenue from the United States to the jurisdiction to which the subsidiary is subject, presumably a country with favorable rates of corporate income taxation.

         It has recently come to light that corporate tax avoidance issues can arise in connection with a tax inversion transaction that are in addition to any question as to the validity of the inversion transaction itself. In proceedings involving Facebook's inversion transaction shifting a large portion of its tax base to Ireland, the Internal Revenue Service ("IRS") is seeking the production of books and records from Facebook with the object of determining whether Facebook improperly avoided U.S. income tax on its royalty by undervaluing the assets transferred to its Irish subsidiary as part of its inversion transaction.

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    Topics: tax, James P. Witt, Facebook, income tax liability, tax inversion

    TAX: Inversions—Apple's Complex Web of Subsidiaries

    Posted by James P. Witt on Mon, Apr 18, 2016 @ 13:04 PM

    The Lawletter Vol 41 No 4

    Jim Witt, Senior Attorney, National Legal Research Group

         The most straightforward tactic taken by large American corporations since the 1980s to avoid the full brunt of U.S. federal corporate income tax is known as "tax inversion" (or "corporate inversion"). This strategy has drawn considerable attention lately, with President Obama last summer calling on Congress to pass tax legislation to end the practice. In November 2015, the U.S. drug giant Pfizer announced its merger with Irish-headquartered Allergan, which, in the largest tax inversion to date, would give the merged company a situs in Ireland.

         Inversion transactions usually involve the transfer of stock of a corporation by one or more shareholders to a wholly owned or controlled foreign subsidiary of that corporation in exchange for newly issued shares of the subsidiary's stock. Internal Revenue Code § 7874 (rules relating to expatriated entities and their foreign parents) contains the tax rules related to inversions.

         Apple Inc., based in Cupertino, California, has gone well beyond the standard tax inversion maneuver. According to a study by Citizens for Tax Justice and the U.S. Public Interest Research Group Education Fund, Apple holds $181 billion in profit offshore that has escaped U.S. income tax. A May 20, 2013 report issued by the Senate Homeland Security Permanent Subcommittee on Investigations concluded that Apple's tax arrangements have nothing to do with the U.S. location of all the intellectual property that supports Apple's products. Non-U.S. sales account for 60% of Apple's profits, and these profits are routed through Irish subsidiaries that Apple established four years after its founding and are not taxed by any jurisdiction. The following discussion broadly outlines the rules that Apple, through its web of subsidiaries, takes advantage of to minimize its corporate income tax liability, eliminating U.S. corporate tax liability as long as foreign earnings are not repatriated.

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    Topics: tax, James P. Witt, inversion, Apple Inc., transfer of stock to foreign subsidiary

    TAX: Qualified Tuition Plans (QTPs)

    Posted by James P. Witt on Thu, Jan 7, 2016 @ 12:01 PM

    The Lawletter Vol 40 No 12

    Jim Witt, Senior Attorney, National Legal Research Group

         Given the steep rise in college tuition costs over recent years, the Qualified Tuition Plans ("QTPs") authorized by § 529 of the Internal Revenue Code of 1986 have become increasingly popular. The following summary describes the basic rules governing QTPs, but, as becomes obvious, the restrictions on these plans are formidable, and the rules can vary from state to state.

         There are two basic types of QTPs, a "prepaid qualified tuition program" and a "qualified tuition program savings plan" (informally known as a "college savings plan"). Under a prepaid qualified tuition program, a person may purchase tuition credits or certificates on behalf of a designated beneficiary (the student) that cover future tuition charges and fees, and, in some cases, a room and board option may be purchased. There is generally a premium charged over the current price of tuition, intended to account for inflation. The benefit of this type of QTP is that it locks in tuition costs to the extent of the credits purchased. Many state-sponsored prepaid tuition programs are guaranteed by the state (this is not true for college savings plans). Most state-sponsored plans require either the owner or the beneficiary of the plan to be a resident of the state (college savings plans have no residency requirement). Prepaid tuition plans have a limited enrollment period (there is no limited enrollment period for college savings plans).

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    Topics: tax, James P. Witt, The Lawletter Vol 40 No 12, QTPs, tax-advantaged strategies

    TAX: Carly Fiorina, Multistate Income Taxation, and the Dormant Commerce Clause

    Posted by James P. Witt on Tue, Sep 22, 2015 @ 13:09 PM

    The Lawletter Vol 40 No 8

    Jim Witt—Senior Attorney, National Legal Research Group

         A feature of recent U.S. presidential campaigns has been the interest of the press and the public (not to mention the requirements of the law) regarding the finances of those competing for the nomination and, ultimately, for the office itself. A key element of those finances has, of course, been the income tax returns of the various candidates. In this connection, one of the present candidates for the Republican nomination, Carly Fiorina, recently offered reporters who came in person to her campaign headquarters in Virginia the opportunity to review her state income tax returns.

         Ms. Fiorina and her husband had already put their federal income tax returns for 2012 and 2013 online, but it is her state income tax returns that are of special interest. She and her husband were required to file such returns in no fewer than 17 states in 2013, with the couple's connection with some of those states so insubstantial that their tax liability in 11 of the states was less than $250.

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    Topics: tax law, James P. Witt, dormant Commerce Clause, The Lawletter Vol 40 No 8

    TRUSTS: Dean Smith Payments to Players—NCAA Violation

    Posted by James P. Witt on Tue, Jun 9, 2015 @ 16:06 PM

    The Lawletter Vol 40 No 4

    Jim Witt, Senior Attorney, National Legal Research Group

         Dean Smith, the head coach of the University of North Carolina ("UNC") men's basketball team from 1961 to 1997, died on February 7, 2015, at age 83. Aside from the tributes paid to the man and his career that captured a good deal of media attention, a specific aspect of Coach Smith's estate plan also stirred up some interest. Following the modern trend, Smith's estate planners made a revocable living trust an important part, if not the centerpiece, of his plan for disposing of his assets at his death. Presumably, Smith transferred the bulk of his estate to the trust and, by doing so, realized a number of advantages for both himself and his estate: (1) privacy—the details of the trust, unlike information concerning an individual's assets that pass by will, do not become part of the public record; (2) because the transfer or transfers of assets to the trust are made during the individual's life, the assets are not subject to probate administration, and the expenses of such procedure are avoided (although the expenses of setting up the trust and having it administered must be considered); (3) the assets of the trust are not frozen, as can happen under a probate proceeding, thereby improving access to the assets for the estate and the heirs; (4) because the trust is revocable, the individual maintains control over the disposition of his or her assets transferred to the trust, because he or she can withdraw particular assets from the trust or dissolve the entire arrangement, which is also essentially true under a will in that a will has no effect until the individual's death.

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    Topics: legal research, trusts, Jim Witt, The Lawletter Vol 40, No 4, trust advantages, NCAA violation

    TAX: Assessed Value Dispute—Robert De Niro's Hudson Valley Compound

    Posted by James P. Witt on Wed, Mar 4, 2015 @ 10:03 AM

    The Lawletter Vol 39 No 12

    Jim Witt, Senior Attorney, National Legal Research Group

         A real property tax assessment dispute involving a large parcel of land in Ulster County, New York, 75 miles north of Manhattan in the Hudson Valley, has recently been settled. The case is of interest for two reasons: (1) It brings into focus the issue of assessed value as based on the uniqueness of the property versus assessed value based on comparable properties in the area; and (2) the property is owned by a Trust on behalf of the actor Robert De Niro and his family.

         The property, well over 50 acres, is located in the town of Gardiner, New York, and has frontage on the Wallkill River (a tributary of the Hudson). The property was acquired in 1997 for $1.5 million, when its main structure was an 18th-century farmhouse, supplemented later by barns. Under De Niro's ownership, the house was renovated to include six bedrooms and seven bathrooms; one barn was converted into a 14,000-square-foot recreation center, containing a game room, gym, basketball court, swimming pool, boxing ring, and small film studio. Another barn was converted into a workshop and another into an office. Also there were $1 million in landscaping expenses to block any view of the property from the road.

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    Topics: tax law, assessment value, property tax

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