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Monday, June 29, 2009


If an individual exercises undue influence in regard to the creation of a trust, the trust can be voided. Interestingly, if an individual exercises undue influence to convince a grantor to revoke his or her revocable trust, no challenge to the revocation is allowable.

Both situations involve improper influence that results in a change in a grantor’s estate planning disposition. Nonetheless, Florida’s 4th District Court of Appeals recently asserted that one type of influence is subject to challenge, while the other is not.

This unusual state of affairs was premised by the appeals court by the Florida Supreme Court case of Florida National Bank of Palm Beach County v. Genova, 460 So.2d 895 (Fla.1984). Genova provided that a grantor’s right to revoke his or her revocable trust should not be subject to challenge on undue influence grounds. Many believed that this case could be limited to situations when the grantor was still alive – that is, no challenge on undue influence grounds would lie while the grantor was living. However, the 4th DCA rejected the argument that Genova was so limited, and instead also applied its rule to reject an undue influence challenge to a revocable trust revocation after the grantor was deceased.

MacIntyre, ex rel. Wedrall Trust v. Wedell, --- So.3d ----, 2009 WL 1393375, Fla.App. 4 Dist., 2009.

Wednesday, June 24, 2009


NOTE: The following discussion relates to a narrow area of tax law relating to the transfer of a U.S. corporation or its business to a foreign corporation, so it may be of interest only to a small segment of readers.

Section 7874 was enacted to foreclose many tax benefits from the transfer of a U.S. corporate business to a foreign corporation or the insertion of a foreign holding company as owner of U.S. corporations. The rules also apply to similar partnership transfers. Two different sets of rules apply, depending on the percentage ownership in the foreign entity that is acquired by former owners of the U.S. entity. The IRS has now issued additional regulations regarding the application of these rules, which regulations apply to acquisitions completed after June 9, 2009.

The following is a summary of the items covered in the new regulations:

1. The use of two or more entities to acquire the U.S. entity as a method of avoiding the anti-inversion rules is prohibited;

2. Guidance on how the rules apply when the foreign corporation is acquiring more than one U.S. entity is provided;

3. Publicly-traded foreign partnerships may be treated as a foreign corporation under the rules, even if public trading does not being in the two-year period after the acquisition;

4. Treating interests in entities as equity interests under the rules if they are economically equivalent to equity;

5. Clarification of how the rules apply when the acquisition is not of a U.S. entity, but of  a foreign entity that owns a U.S. entity;

6. Guidance as to when interests of creditors may be treated as equity interests under the rules;

7. The taking away of a safe harbor and guidance as to what constitutes substantial business activities for purposes of the exception to the rules where the foreign corporation has substantial business activities in its home country; and

8. Expansion of when stock of the foreign entity is treated as acquired “by reason of” holding interests in the domestic entity (for purposes of determining whether Section 7874 will apply), to include taxable and nontaxable distributions and other transactions.

Thursday, June 18, 2009


Numerous employers provide cell phones to their employees for business use. Unsurprisingly, such phones are often used by employees for both business and personal use.

Code Section 132 provides that an employee may exclude from gross income the value of the cell phone use allocable to business use. However, personal use by the employee is a taxable fringe benefit. Further, since such phones are listed property under Code Section 280F, strict substantiation requirements are required to determine what portion of use relates to business use.

Such rules are a nuisance and an accounting nightmare. Recognizing this, Treasury Secretary Geithner previously called upon Congress to remove any tax consequences from personal use of employer provided cell phones. In a statement issued by the IRS Commissioner, he is also joining in the request. Hopefully, Congress is listening.

Wednesday, June 10, 2009


We previously wrote about how the instructions to Form TD F 90-22-1 (Report of Foreign Bank and Financial Accounts) (commonly referred to as the “FBAR”) were recently revised to include some non-U.S. persons in the reporting net. Likely due to public concerns that requiring non-U.S. persons to report their foreign accounts to the U.S. government would adversely affect foreign investment in the U.S., the IRS is now backpedaling. In a recent announcement, it is indicating that in regard to FBAR forms due on June 30, 2009, the OLD definition of a reporting person will continue to apply – the old definition does not include foreign persons or entities.

The announcement indicates that this limitation only applies for the June 30, 2009 filings. Therefore, a wait-and-see approach is needed to determine if this revision will be made permanent.

Announcement 2009-51


In October 2008, presumably to avoid a run on the banks as the credit crisis threatened a financial panic, the FDIC expanded its $100,000 insurance coverage on FDIC-insured institutions  to $250,000. This enhanced coverage was set to expire on December 31, 2009. However, the FDIC has now extended the enhanced coverage to December 31, 2013.

The following summary table of coverages is taken from the FDIC’s website fact sheet:


FDIC Fact Sheet

Sunday, June 07, 2009


In many cities, season tickets to sports franchises are unavailable for immediate purchase for newcomers. Instead, potential buyers are placed on waiting lists – sometimes for many years – until an existing season ticket holder fails to renew. As many will attest, for the diehard fan season ticket rights can be a precious asset.

Therefore, the question whether the IRS can seize and sell a taxpayer’s rights of renewal for unpaid taxes is a question of interest for many taxpayers. In a recent Legal Memorandum, the IRS analyzed that issue.

In the case at issue, the renewal rights were not transferable by the season ticket owner. Instead, if the season ticket owner does not renew his tickets, the renewal rights lapse and the next person on the waiting list can take over the seats.

Having noticed a dearth of authority of tax cases addressing the issue, and thus basing its analysis on cases in the bankruptcy arena, the IRS acknowledged that it had power to seize and sell only “property or rights to property” and that the renewal rights are not property or rights to property but only a revocable license issued by the team.  Therefore, it could not seize and resell the renewal rights.

The IRS indicated that renewal rights might give rise to a property right that can be seized and sold in other circumstances, such as if the taxpayer had the right, by contract or by nonenforcement of restrictions on transfer by the team, to transfer the renewal rights to others.

So this far into the analysis, it looks like the taxpayer will be able to keep his tickets. However, the IRS continued on to find that while the IRS could not reach the taxpayer’s renewal rights, the taxpayer’s deposit for the tickets and current seat license was something that the IRS could levy against.  The IRS analysis intimated that it could seize the current license and deposit, and thus effectively cause a forfeiture of the seat license. Due to such a failure to renew in the current season, the taxpayer’s seats would not be eligible for renewal in following years. Thus, while the IRS cannot directly seize and sell the renewal rights, it can indirectly cause a forfeiture of such rights for the season ticket holder. Indeed, this result is probably worse for the taxpayer than a seizure and sale of renewal rights, since if the IRS could seize and sell, any amounts realized would be applied to pay down the taxpayer’s tax liability. With the result from the IRS’ analysis, the renewal rights simply disappear and no such sale proceeds would arise (although the deposit amount would be credited towards the outstanding tax liability).