HOW THE IRS MUST PROVE MAILING OF A NOTICE OF DEFICIENCY

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For income taxes, the IRS generally has only 3 years to assess any additions to tax from the due date or filing date of a taxpayer’s return. Before assessing tax, the IRS must send a notice of deficiency to the taxpayer. This notice extends the 3 year period for 90 days, during which the taxpayer can file in the Tax Court to contest the proposed tax. Code Section 6213(a) provides that no assessment of tax can be made until the notice of deficiency is sent. A recent case addresses how the IRS must prove it mailed the notice of deficiency when the mailing is disputed.

The burden of proof on mailing is on the IRS. The Internal Revenue Service Manual provides a procedure to the IRS that it should follow. It provides that the record of certified and registered mailing should be kept on PS Form 3877 together with the certified/registered mail numbers, which are supplied by the United States Postal Service. Each PS Form 3877 is to be labeled with, “Notices of Deficiency, for the years indicated, have been sent to the following taxpayers.” Certified/registered mail numbers of each individually mailed notice are recorded on the form, along with the name and address of each addressee. Multiple addresses are separately entered. In the “Remarks” column of PS Form 3877, the tax years to which the notice is applicable are entered. At the Post Office, the postal employee will compare the certified/registered mail number of each notice against the number recorded in PS Form 3877, and subsequently sign and date PS Form 3877. If the IRS produces the above items, it is presumptive proof of proper mailing. Note that the actual receipt of the notice by the taxpayer is not required – just proof of mailing to the proper address.

The failure to prove a PS Form 3877 is not fatal to the IRS – the IRS can attempt to prove mailing by other means. In the current case, the court noted that there is no well-defined precedent of what proof is required. The court went through the applicable cases and came up with the following method of review and analysis:

(1) The IRS has the burden of proving proper mailing of a notice of deficiency by competent and persuasive evidence.

(2) When the IRS has (a) established the existence of a notice of deficiency and (b) produced a properly completed PS Form 3877 certified mail log, it is entitled to a presumption of mailing, and the burden shifts to the taxpayer to rebut that presumption by clear and convincing evidence.

(3) In the absence of a properly completed PS Form 3877, when the existence of a notice of deficiency is not in dispute, the IRS must come forward with evidence corroborating an actual timely mailing of the notice of deficiency

(4) When the parties dispute the existence of the notice of deficiency itself, the IRS bears the burden of establishing both the existence of the notice itself, as well as timely mailing of that specific notice.

The court then applied the facts for 2 tax years to the above analysis. For tax year 1992, the IRS had a copy of the notice of deficiency and also had mail return-receipt cards, but it did not have a PS Form 3877. The IRS also provided testimony that the notices of deficiency was sent by certified mail and that the cards they produced would correspond to the only certified mail sent to the IRS in that year. The court held that these facts came within (3) above and were enough to corroborate timely mailing.

For tax year 1995, the facts fell into (4) above since the IRS could not produce a copy of a notice of deficiency. There was no transmittal letter to the taxpayer’s counsel informing them that a notice had been sent to the taxpayer. The IRS did provide 1) testimonial evidence regarding internal IRS procedure for notice preparation at the Manhattan office, 2) Appeals Case Memorandums indicating that a statutory notice was approved, 3) computer control cards suggesting a 1995 notice existed, and 4) two postal return-receipts. The court rejected this proof as being sufficient because the IRS could not cross-reference the postal receipts to any specific items of correspondence.

The foregoing analysis provides a useful algorithm for analyzing timely mailing cases regarding notices of deficiency.

Welch v. U.S., 109 AFTR 2d 2012-xxxx, 05/18/12 (U.S. Court of Appeals for the Federal Circuit)

IRS MAKES IT MORE DIFFICULT TO GET AN ITIN

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Most individuals use their Social Security number as their taxpayer identification number in the U.S. However, the Social Security Administration limits its assignment of SSNs to individuals who are U.S. citizens and alien individuals legally admitted to the U.S. for permanent residence or under other immigration categories that authorize U.S. employment. For nonresidents to acquire a taxpayer identification number, a nonresident must apply for an international taxpayer identification number, or ITIN.

The ITIN application (Form W-7) requires copies of various identity papers. In a new development, the IRS is now requiring that ORIGINAL documentation accompany the application, such as birth certificates and passports. Notarized copies of documents will not be enough, although certified copies of the required identity documents issued by the issuing agency can also be used.

Some applicants aren't impacted by these interim changes, such as spouses and dependents of U.S. military personnel who need ITINs, and nonresident aliens applying for ITINs for the purpose of claiming tax treaty benefits.

IR 2012-62

What the U.S. Chamber Of Commerce Doesn't Want You to Know About Your Workplace Rights

To contact us Click HERE
The National Labor Relations Board says almost all private employers must put up a poster informing you of your workplace rights under the National Labor Relations Act as of April 30,2012. It’s free. Employers can download it online and print it out. So they all put up their posters, or are working on it now, right? Nosiree.

They sued. At least, they got together under the umbrella of the U.S. Chamber of Commerce to sue. They got a temporary injunction in the DC federal courts to stop the rule. They really, really don’t want you to see this poster. It must really be subversive, huh?

Well, see for yourself. Here’s exactly what the U.S. Chamber of Commerce doesn’t want you to know about your workplace rights:

Employee Rights Under the National Labor Relations Act

The National Labor Relations Act (NLRA) guarantees the right of employees to organize and bargain collectively with their employers, and to engage in other protected concerted activity or to refrain from engaging in any of the aboveactivity. Employees covered by the NLRA are protected from certain types of employer and union misconduct. This Notice gives you general information about your rights, and about the obligations of employers and unions under the NLRA.


Contact the National Labor Relations Board (NLRB), the Federal agency that investigates and resolves complaints under the NLRA, using the contact information supplied below, if you have any questions about specific rights that may apply in your particular workplace.


Under the NLRA, you have the right to:
• Organizea union to negotiate with your employer concerning your wages, hours, and otherterms and conditions of employment.• Form,join or assist a union.•Bargain collectively through representatives of employees’ own choosing for acontract with your employer setting your wages, benefits, hours, and otherworking conditions.•Discuss your wages and benefits and other terms and conditions of employment orunion organizing with your co-workers or a union.• Takeaction with one or more co-workers to improve your working conditions by, amongother means, raising work-related complaints directly with your employer orwith a government agency, and seeking help from a union.•Strike and picket, depending on the purpose or means of the strike or thepicketing.•Choose not to do any of these activities, including joining or remaining amember of a union.
Under the NLRA, it is illegal for youremployer to:
•Prohibit you from talking about or soliciting for a union during non-work time,such as before or after work or during break times; or from distributing unionliterature during non-work time, in non-work areas, such as parking lots orbreak rooms.
Under the NLRA, it is illegal for a union orfor the union that represents you in bargaining with your employer to:
•Threaten or coerce you in order to gain your support for the union.
Wow.That’s it, you say? What’s the BFD? Well, I think it’s mostly these provisionsbig employer doesn’t want you to see:
Discussing wages and benefits with coworkers: The poster says, “Underthe NLRA, you have the right to discussyour wages and benefits and other terms and conditions of employment . . . withyour co-workers or a union.” Yet many employers take desperate measures to makesure you don’t know what coworkers are making and what benefits they have. Someput out written policies or put restrictions in contracts. That’s flat-outillegal. If you have a contract or if your employer has a policy saying you can’tdiscuss wages and benefits with coworkers, you can file a ChargeAgainst Employer with NLRB right now. The other part they don’t want you toknow about here is your right to grouse about working conditions withcoworkers. You can grumble and complain during breaks, on Facebook, in Twitter,as long as you’re doing it with coworkers and they can’t fire or discipline youfor it.
Discussing work-related complaints and workingconditions with coworkers: The poster says, “Under the NLRA, you have the rightto take action with one or more co-workers toimprove your working conditions by, among other means, raising work-related complaintsdirectly with your employer or with a government agency, and seeking help froma union.” If you complain about conditions on your own and on behalf ofyourself, you aren’t protected. But you have the absolute right (assuming youaren’t a supervisor) to complain about working conditions on behalf ofcoworkers, to get together with coworkers to discuss and complain, and to gettogether to try to negotiate better working conditions. That is huge.
Employerslike to crack down on employees who complain. They want to create an atmospherewhere employees shut up and accept things as they are. Most of the time, it’sbest to keep your mouth shut. But sometimes, you have to speak up. If workingconditions are intolerable, if it feels like a prison, if you are being paidunfairly, if there’s a bully in the workplace, sometimes you have to speak up.You probably have the right to do so, as long as you aren’t a supervisor, andas long as you’re not alone.

AN EXECUTOR'S JOB IS NOT ALL FUN AND FEES

To contact us Click HERE

A recent District Court case reminds co-executors that if they do not do their job right, they can incur personal liability for the income taxes of the decedent whose estate they are administering. In the case, the decedent had a substantial unpaid income tax liability at the time of her death. Notwithstanding the liability, the executors, with knowledge of the income tax liability, conveyed real property of the estate to the son of the decedent (who was also one of the executors) for one dollar. The son eventually sold the real property, and later claimed that he lost the proceeds in the stock market.

Presumably because they could not collect against the son or other assets of the estate, the IRS sought to impose liability on the executors for disposing of the real estate without first satisfying the income tax liabilities of the decedent. The District Court found for the IRS and imposed liability for the taxes on the executors.

The executors got caught under the federal priority statute (also known as the federal claims statute) under 31 USC 3713(b). This provision is not under the Internal Revenue Code, but is referenced in Code §6901(a)(1)(B).  This provision is an exception to the normal rule that executors will not have personal liability for the debts and obligations of a decedent. Under the statute, a fiduciary that disposes of assets of an estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government if three elements are met:

(1) the fiduciary distributed assets of the estate;

(2) the distribution rendered the estate insolvent; and

(3) the distribution took place after the fiduciary had actual or constructive knowledge of the liability for unpaid taxes. 

Usually, executors will be protected by (3). Most executors, at least those that are properly represented, will know to first pay obligations of the federal government before using assets needed to pay those obligations to make distributions to beneficiaries. Thus, if the executors do not know of the unpaid tax liability, this third element will protect them from liability in many circumstances.

Surely to the dismay of the executor in this case who was not the son, if there is more than one executor all executors are jointly and severally liable for this liability. This means that if the son has insufficient assets to cover the liability, the executor who did not benefit at all from this transaction may be forced to pay the IRS 100% of the liability.

U.S. v. David A. Tyler and Louis J. Ruch, all 109 AFTR 2d ¶2012-583 (DC PA 03/13/2012) 

What the U.S. Chamber Of Commerce Doesn't Want You to Know About Your Workplace Rights

To contact us Click HERE
The National Labor Relations Board says almost all private employers must put up a poster informing you of your workplace rights under the National Labor Relations Act as of April 30, 2012. It’s free. Employers can download it online and print it out. So they all put up their posters, or are working on it now, right? Nosiree.

They sued. At least, they got together under the umbrella of the U.S. Chamber of Commerce to sue. They got a temporary injunction in the DC federal courts to stop the rule. They really, really don’t want you to see this poster. It must really be subversive, huh?

Well, see for yourself. Here’s exactly what the U.S. Chamber of Commerce doesn’t want you to know about your workplace rights:

Employee Rights Under the National Labor Relations Act

The National Labor Relations Act (NLRA) guarantees the right of employees to organize and bargain collectively with their employers, and to engage in other protected concerted activity or to refrain from engaging in any of the above activity. Employees covered by the NLRA are protected from certain types of employer and union misconduct. This Notice gives you general information about your rights, and about the obligations of employers and unions under the NLRA.


Contact the National Labor Relations Board (NLRB), the Federal agency that investigates and resolves complaints under the NLRA, using the contact information supplied below, if you have any questions about specific rights that may apply in your particular workplace.


Under the NLRA, you have the right to:
• Organize a union to negotiate with your employer concerning your wages, hours, and other terms and conditions of employment. • Form, join or assist a union. • Bargain collectively through representatives of employees’ own choosing for a contract with your employer setting your wages, benefits, hours, and other working conditions. • Discuss your wages and benefits and other terms and conditions of employment or union organizing with your co-workers or a union. • Take action with one or more co-workers to improve your working conditions by, among other means, raising work-related complaints directly with your employer or with a government agency, and seeking help from a union. • Strike and picket, depending on the purpose or means of the strike or the picketing. • Choose not to do any of these activities, including joining or remaining a member of a union.
Under the NLRA, it is illegal for your employer to:
• Prohibit you from talking about or soliciting for a union during non-work time, such as before or after work or during break times; or from distributing union literature during non-work time, in non-work areas, such as parking lots or break rooms.
Under the NLRA, it is illegal for a union or for the union that represents you in bargaining with your employer to:
• Threaten or coerce you in order to gain your support for the union.
Wow. That’s it, you say? What’s the BFD? Well, I think it’s mostly these provisions big employer doesn’t want you to see:
Discussing wages and benefits with coworkers: The poster says, “Under the NLRA, you have the right to discuss your wages and benefits and other terms and conditions of employment . . . with your co-workers or a union.” Yet many employers take desperate measures to make sure you don’t know what coworkers are making and what benefits they have. Some put out written policies or put restrictions in contracts. That’s flat-out illegal. If you have a contract or if your employer has a policy saying you can’t discuss wages and benefits with coworkers, you can file a Charge Against Employer with NLRB right now. The other part they don’t want you to know about here is your right to grouse about working conditions with coworkers. You can grumble and complain during breaks, on Facebook, in Twitter, as long as you’re doing it with coworkers and they can’t fire or discipline you for it.
Discussing work-related complaints and working conditions with coworkers: The poster says, “Under the NLRA, you have the right to take action with one or more co-workers to improve your working conditions by, among other means, raising work-related complaints directly with your employer or with a government agency, and seeking help from a union.” If you complain about conditions on your own and on behalf of yourself, you aren’t protected. But you have the absolute right (assuming you aren’t a supervisor) to complain about working conditions on behalf of coworkers, to get together with coworkers to discuss and complain, and to get together to try to negotiate better working conditions. That is huge.
Employers like to crack down on employees who complain. They want to create an atmosphere where employees shut up and accept things as they are. Most of the time, it’s best to keep your mouth shut. But sometimes, you have to speak up. If working conditions are intolerable, if it feels like a prison, if you are being paid unfairly, if there’s a bully in the workplace, sometimes you have to speak up. You probably have the right to do so, as long as you aren’t a supervisor, and as long as you’re not alone.

Strippers Have Rights Too

To contact us Click HERE
There have been two recent stories about strippers and discrimination in the news lately.

Sarah Tressler is a journalist who worked her way through journalism school stripping. Her newspaper employer fired her when they found out she was moonlighting as a stripper. She claims gender discrimination. The newspaper says they fired her for failing to disclose it on her application. Her double life was uncovered by a rival paper. It probably didn't help that she was blogging about her exploits.

An Indiana stripper has filed sexual harassment charges against her employer. She alleges severe physical and verbal sexual harassment.

While many sexual harassers (and their employers) seem to think that "she asked for it" is a defense, it's not. Just because a woman takes her clothes off for a living does not mean that she welcomes groping and sexual advances from her employer. Whether she works for Hooters, as a professional sports cheerleader, or as a stripper, women who dress and act sexy for a living can't be sexually harassed. If advances are unwelcome, they are illegal. The employer must create a safe workplace, free from sexual harassment. While being leered at may be part of the job, being groped isn't.

Now, going back to Tressler, I guess it depends on the totality of the facts. If the judge and/or the jury finds that the employer requires disclosure of an employee's full employment history and/or second jobs, and they fire everyone who doesn't disclose, the employer may be able to convince them it had a legitimate reason for the firing. If not, then the question will be whether men have had similar jobs and weren't fired.

For instance, if they say it's her blog they don't like, then if other male bloggers haven't been fired, it could be sex discrimination. If men have worked as waiters wearing skimpy outfits, as dancers for bachelorette parties, or posing for pinup calendars and weren't fired, then the newspaper will have a hard time proving she wasn't singled out due to her gender.

Strippers and other women (and men) who have jobs that require little or no clothing still have rights. Those rights include the right not to be discriminated against and the right not to be sexually harassed. There is no stripper exemption to Title VII.

AN EXECUTOR'S JOB IS NOT ALL FUN AND FEES

To contact us Click HERE

A recent District Court case reminds co-executors that if they do not do their job right, they can incur personal liability for the income taxes of the decedent whose estate they are administering. In the case, the decedent had a substantial unpaid income tax liability at the time of her death. Notwithstanding the liability, the executors, with knowledge of the income tax liability, conveyed real property of the estate to the son of the decedent (who was also one of the executors) for one dollar. The son eventually sold the real property, and later claimed that he lost the proceeds in the stock market.

Presumably because they could not collect against the son or other assets of the estate, the IRS sought to impose liability on the executors for disposing of the real estate without first satisfying the income tax liabilities of the decedent. The District Court found for the IRS and imposed liability for the taxes on the executors.

The executors got caught under the federal priority statute (also known as the federal claims statute) under 31 USC 3713(b). This provision is not under the Internal Revenue Code, but is referenced in Code §6901(a)(1)(B).  This provision is an exception to the normal rule that executors will not have personal liability for the debts and obligations of a decedent. Under the statute, a fiduciary that disposes of assets of an estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government if three elements are met:

(1) the fiduciary distributed assets of the estate;

(2) the distribution rendered the estate insolvent; and

(3) the distribution took place after the fiduciary had actual or constructive knowledge of the liability for unpaid taxes. 

Usually, executors will be protected by (3). Most executors, at least those that are properly represented, will know to first pay obligations of the federal government before using assets needed to pay those obligations to make distributions to beneficiaries. Thus, if the executors do not know of the unpaid tax liability, this third element will protect them from liability in many circumstances.

Surely to the dismay of the executor in this case who was not the son, if there is more than one executor all executors are jointly and severally liable for this liability. This means that if the son has insufficient assets to cover the liability, the executor who did not benefit at all from this transaction may be forced to pay the IRS 100% of the liability.

U.S. v. David A. Tyler and Louis J. Ruch, all 109 AFTR 2d ¶2012-583 (DC PA 03/13/2012) 

What the U.S. Chamber Of Commerce Doesn't Want You to Know About Your Workplace Rights

To contact us Click HERE
The National Labor Relations Board says almost all private employers must put up a poster informing you of your workplace rights under the National Labor Relations Act as of April 30,2012. It’s free. Employers can download it online and print it out. So they all put up their posters, or are working on it now, right? Nosiree.

They sued. At least, they got together under the umbrella of the U.S. Chamber of Commerce to sue. They got a temporary injunction in the DC federal courts to stop the rule. They really, really don’t want you to see this poster. It must really be subversive, huh?

Well, see for yourself. Here’s exactly what the U.S. Chamber of Commerce doesn’t want you to know about your workplace rights:

Employee Rights Under the National Labor Relations Act

The National Labor Relations Act (NLRA) guarantees the right of employees to organize and bargain collectively with their employers, and to engage in other protected concerted activity or to refrain from engaging in any of the aboveactivity. Employees covered by the NLRA are protected from certain types of employer and union misconduct. This Notice gives you general information about your rights, and about the obligations of employers and unions under the NLRA.


Contact the National Labor Relations Board (NLRB), the Federal agency that investigates and resolves complaints under the NLRA, using the contact information supplied below, if you have any questions about specific rights that may apply in your particular workplace.


Under the NLRA, you have the right to:
• Organizea union to negotiate with your employer concerning your wages, hours, and otherterms and conditions of employment.• Form,join or assist a union.•Bargain collectively through representatives of employees’ own choosing for acontract with your employer setting your wages, benefits, hours, and otherworking conditions.•Discuss your wages and benefits and other terms and conditions of employment orunion organizing with your co-workers or a union.• Takeaction with one or more co-workers to improve your working conditions by, amongother means, raising work-related complaints directly with your employer orwith a government agency, and seeking help from a union.•Strike and picket, depending on the purpose or means of the strike or thepicketing.•Choose not to do any of these activities, including joining or remaining amember of a union.
Under the NLRA, it is illegal for youremployer to:
•Prohibit you from talking about or soliciting for a union during non-work time,such as before or after work or during break times; or from distributing unionliterature during non-work time, in non-work areas, such as parking lots orbreak rooms.
Under the NLRA, it is illegal for a union orfor the union that represents you in bargaining with your employer to:
•Threaten or coerce you in order to gain your support for the union.
Wow.That’s it, you say? What’s the BFD? Well, I think it’s mostly these provisionsbig employer doesn’t want you to see:
Discussing wages and benefits with coworkers: The poster says, “Underthe NLRA, you have the right to discussyour wages and benefits and other terms and conditions of employment . . . withyour co-workers or a union.” Yet many employers take desperate measures to makesure you don’t know what coworkers are making and what benefits they have. Someput out written policies or put restrictions in contracts. That’s flat-outillegal. If you have a contract or if your employer has a policy saying you can’tdiscuss wages and benefits with coworkers, you can file a ChargeAgainst Employer with NLRB right now. The other part they don’t want you toknow about here is your right to grouse about working conditions withcoworkers. You can grumble and complain during breaks, on Facebook, in Twitter,as long as you’re doing it with coworkers and they can’t fire or discipline youfor it.
Discussing work-related complaints and workingconditions with coworkers: The poster says, “Under the NLRA, you have the rightto take action with one or more co-workers toimprove your working conditions by, among other means, raising work-related complaintsdirectly with your employer or with a government agency, and seeking help froma union.” If you complain about conditions on your own and on behalf ofyourself, you aren’t protected. But you have the absolute right (assuming youaren’t a supervisor) to complain about working conditions on behalf ofcoworkers, to get together with coworkers to discuss and complain, and to gettogether to try to negotiate better working conditions. That is huge.
Employerslike to crack down on employees who complain. They want to create an atmospherewhere employees shut up and accept things as they are. Most of the time, it’sbest to keep your mouth shut. But sometimes, you have to speak up. If workingconditions are intolerable, if it feels like a prison, if you are being paidunfairly, if there’s a bully in the workplace, sometimes you have to speak up.You probably have the right to do so, as long as you aren’t a supervisor, andas long as you’re not alone.

AN EXECUTOR'S JOB IS NOT ALL FUN AND FEES

To contact us Click HERE

A recent District Court case reminds co-executors that if they do not do their job right, they can incur personal liability for the income taxes of the decedent whose estate they are administering. In the case, the decedent had a substantial unpaid income tax liability at the time of her death. Notwithstanding the liability, the executors, with knowledge of the income tax liability, conveyed real property of the estate to the son of the decedent (who was also one of the executors) for one dollar. The son eventually sold the real property, and later claimed that he lost the proceeds in the stock market.

Presumably because they could not collect against the son or other assets of the estate, the IRS sought to impose liability on the executors for disposing of the real estate without first satisfying the income tax liabilities of the decedent. The District Court found for the IRS and imposed liability for the taxes on the executors.

The executors got caught under the federal priority statute (also known as the federal claims statute) under 31 USC 3713(b). This provision is not under the Internal Revenue Code, but is referenced in Code §6901(a)(1)(B).  This provision is an exception to the normal rule that executors will not have personal liability for the debts and obligations of a decedent. Under the statute, a fiduciary that disposes of assets of an estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government if three elements are met:

(1) the fiduciary distributed assets of the estate;

(2) the distribution rendered the estate insolvent; and

(3) the distribution took place after the fiduciary had actual or constructive knowledge of the liability for unpaid taxes. 

Usually, executors will be protected by (3). Most executors, at least those that are properly represented, will know to first pay obligations of the federal government before using assets needed to pay those obligations to make distributions to beneficiaries. Thus, if the executors do not know of the unpaid tax liability, this third element will protect them from liability in many circumstances.

Surely to the dismay of the executor in this case who was not the son, if there is more than one executor all executors are jointly and severally liable for this liability. This means that if the son has insufficient assets to cover the liability, the executor who did not benefit at all from this transaction may be forced to pay the IRS 100% of the liability.

U.S. v. David A. Tyler and Louis J. Ruch, all 109 AFTR 2d ¶2012-583 (DC PA 03/13/2012) 

WINDFALLS ERASED FOR DIVORCING SPOUSES [FLORIDA]

To contact us Click HERE

More often than not, spouses name each other as beneficiaries on various testamentary documents. Through inadvertence,  oversight, or just bad timing (i.e., dying too fast) they often do not get around to removing a former spouse from such designations after divorce but before they die. This raises issues whether such designations will still be given legal effect after divorce. That is, will the surviving former spouse receive a windfall inheritance or benefit that the deceased spouse may not have wanted him or her to receive?

Florida law has provisions that will automatically remove a former spouse as a beneficiary under a Last Will or a revocable trust upon divorce. Effective for decedent’s dying after July 1, 2012, similar removal provisions will now apply to former spouses who are beneficiaries of a decedent’s life insurance, IRA, employee benefit plan, payable-on-death account, transfer-on-death security, or annuity. Effectively, Florida is saying that it believes persons most likely want to remove their former spouse from such items at the termination of the marriage, and it will do it for them unless they take affirmative action under the statute to continue such designations. This new provision arises under new Fla.Stats. §732.703. The foregoing is only a brief summary of the new statute – please read it to see how it applies in any particular situation.

Still not covered by statute are beneficial interests in favor of a former spouse that arise under a nonrevocable trust entered into during marriage.

What the U.S. Chamber Of Commerce Doesn't Want You to Know About Your Workplace Rights

To contact us Click HERE
The National Labor Relations Board says almost all private employers must put up a poster informing you of your workplace rights under the National Labor Relations Act as of April 30,2012. It’s free. Employers can download it online and print it out. So they all put up their posters, or are working on it now, right? Nosiree.

They sued. At least, they got together under the umbrella of the U.S. Chamber of Commerce to sue. They got a temporary injunction in the DC federal courts to stop the rule. They really, really don’t want you to see this poster. It must really be subversive, huh?

Well, see for yourself. Here’s exactly what the U.S. Chamber of Commerce doesn’t want you to know about your workplace rights:

Employee Rights Under the National Labor Relations Act

The National Labor Relations Act (NLRA) guarantees the right of employees to organize and bargain collectively with their employers, and to engage in other protected concerted activity or to refrain from engaging in any of the aboveactivity. Employees covered by the NLRA are protected from certain types of employer and union misconduct. This Notice gives you general information about your rights, and about the obligations of employers and unions under the NLRA.


Contact the National Labor Relations Board (NLRB), the Federal agency that investigates and resolves complaints under the NLRA, using the contact information supplied below, if you have any questions about specific rights that may apply in your particular workplace.


Under the NLRA, you have the right to:
• Organizea union to negotiate with your employer concerning your wages, hours, and otherterms and conditions of employment.• Form,join or assist a union.•Bargain collectively through representatives of employees’ own choosing for acontract with your employer setting your wages, benefits, hours, and otherworking conditions.•Discuss your wages and benefits and other terms and conditions of employment orunion organizing with your co-workers or a union.• Takeaction with one or more co-workers to improve your working conditions by, amongother means, raising work-related complaints directly with your employer orwith a government agency, and seeking help from a union.•Strike and picket, depending on the purpose or means of the strike or thepicketing.•Choose not to do any of these activities, including joining or remaining amember of a union.
Under the NLRA, it is illegal for youremployer to:
•Prohibit you from talking about or soliciting for a union during non-work time,such as before or after work or during break times; or from distributing unionliterature during non-work time, in non-work areas, such as parking lots orbreak rooms.
Under the NLRA, it is illegal for a union orfor the union that represents you in bargaining with your employer to:
•Threaten or coerce you in order to gain your support for the union.
Wow.That’s it, you say? What’s the BFD? Well, I think it’s mostly these provisionsbig employer doesn’t want you to see:
Discussing wages and benefits with coworkers: The poster says, “Underthe NLRA, you have the right to discussyour wages and benefits and other terms and conditions of employment . . . withyour co-workers or a union.” Yet many employers take desperate measures to makesure you don’t know what coworkers are making and what benefits they have. Someput out written policies or put restrictions in contracts. That’s flat-outillegal. If you have a contract or if your employer has a policy saying you can’tdiscuss wages and benefits with coworkers, you can file a ChargeAgainst Employer with NLRB right now. The other part they don’t want you toknow about here is your right to grouse about working conditions withcoworkers. You can grumble and complain during breaks, on Facebook, in Twitter,as long as you’re doing it with coworkers and they can’t fire or discipline youfor it.
Discussing work-related complaints and workingconditions with coworkers: The poster says, “Under the NLRA, you have the rightto take action with one or more co-workers toimprove your working conditions by, among other means, raising work-related complaintsdirectly with your employer or with a government agency, and seeking help froma union.” If you complain about conditions on your own and on behalf ofyourself, you aren’t protected. But you have the absolute right (assuming youaren’t a supervisor) to complain about working conditions on behalf ofcoworkers, to get together with coworkers to discuss and complain, and to gettogether to try to negotiate better working conditions. That is huge.
Employerslike to crack down on employees who complain. They want to create an atmospherewhere employees shut up and accept things as they are. Most of the time, it’sbest to keep your mouth shut. But sometimes, you have to speak up. If workingconditions are intolerable, if it feels like a prison, if you are being paidunfairly, if there’s a bully in the workplace, sometimes you have to speak up.You probably have the right to do so, as long as you aren’t a supervisor, andas long as you’re not alone.

AN EXECUTOR'S JOB IS NOT ALL FUN AND FEES

To contact us Click HERE

A recent District Court case reminds co-executors that if they do not do their job right, they can incur personal liability for the income taxes of the decedent whose estate they are administering. In the case, the decedent had a substantial unpaid income tax liability at the time of her death. Notwithstanding the liability, the executors, with knowledge of the income tax liability, conveyed real property of the estate to the son of the decedent (who was also one of the executors) for one dollar. The son eventually sold the real property, and later claimed that he lost the proceeds in the stock market.

Presumably because they could not collect against the son or other assets of the estate, the IRS sought to impose liability on the executors for disposing of the real estate without first satisfying the income tax liabilities of the decedent. The District Court found for the IRS and imposed liability for the taxes on the executors.

The executors got caught under the federal priority statute (also known as the federal claims statute) under 31 USC 3713(b). This provision is not under the Internal Revenue Code, but is referenced in Code §6901(a)(1)(B).  This provision is an exception to the normal rule that executors will not have personal liability for the debts and obligations of a decedent. Under the statute, a fiduciary that disposes of assets of an estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government if three elements are met:

(1) the fiduciary distributed assets of the estate;

(2) the distribution rendered the estate insolvent; and

(3) the distribution took place after the fiduciary had actual or constructive knowledge of the liability for unpaid taxes. 

Usually, executors will be protected by (3). Most executors, at least those that are properly represented, will know to first pay obligations of the federal government before using assets needed to pay those obligations to make distributions to beneficiaries. Thus, if the executors do not know of the unpaid tax liability, this third element will protect them from liability in many circumstances.

Surely to the dismay of the executor in this case who was not the son, if there is more than one executor all executors are jointly and severally liable for this liability. This means that if the son has insufficient assets to cover the liability, the executor who did not benefit at all from this transaction may be forced to pay the IRS 100% of the liability.

U.S. v. David A. Tyler and Louis J. Ruch, all 109 AFTR 2d ¶2012-583 (DC PA 03/13/2012) 

AN EXECUTOR'S JOB IS NOT ALL FUN AND FEES

To contact us Click HERE

A recent District Court case reminds co-executors that if they do not do their job right, they can incur personal liability for the income taxes of the decedent whose estate they are administering. In the case, the decedent had a substantial unpaid income tax liability at the time of her death. Notwithstanding the liability, the executors, with knowledge of the income tax liability, conveyed real property of the estate to the son of the decedent (who was also one of the executors) for one dollar. The son eventually sold the real property, and later claimed that he lost the proceeds in the stock market.

Presumably because they could not collect against the son or other assets of the estate, the IRS sought to impose liability on the executors for disposing of the real estate without first satisfying the income tax liabilities of the decedent. The District Court found for the IRS and imposed liability for the taxes on the executors.

The executors got caught under the federal priority statute (also known as the federal claims statute) under 31 USC 3713(b). This provision is not under the Internal Revenue Code, but is referenced in Code §6901(a)(1)(B).  This provision is an exception to the normal rule that executors will not have personal liability for the debts and obligations of a decedent. Under the statute, a fiduciary that disposes of assets of an estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government if three elements are met:

(1) the fiduciary distributed assets of the estate;

(2) the distribution rendered the estate insolvent; and

(3) the distribution took place after the fiduciary had actual or constructive knowledge of the liability for unpaid taxes. 

Usually, executors will be protected by (3). Most executors, at least those that are properly represented, will know to first pay obligations of the federal government before using assets needed to pay those obligations to make distributions to beneficiaries. Thus, if the executors do not know of the unpaid tax liability, this third element will protect them from liability in many circumstances.

Surely to the dismay of the executor in this case who was not the son, if there is more than one executor all executors are jointly and severally liable for this liability. This means that if the son has insufficient assets to cover the liability, the executor who did not benefit at all from this transaction may be forced to pay the IRS 100% of the liability.

U.S. v. David A. Tyler and Louis J. Ruch, all 109 AFTR 2d ¶2012-583 (DC PA 03/13/2012) 

Donna’s Employment Law Predictions for 2012

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I’m getting out my iPad’s magic 8-ball app and looking into the future. I see a big year for employment law issues in 2012. Here’s where I think we’ll see lots of litigation or legislation:

Military: With loads of returning military members, Congress will scramble to plug any new loopholes that keep military service people from being protected in their jobs. Look for lots of USERRA litigation when employers realize they don’t want to let the person who has been in the position go when Johnny comes marching home. Without a doubt.

Sexual harassment: Now that sexual harassment has become a hot-button political issue again, watch for attempts to weaken sexual harassment protections. Also watch the federal courts continue to erode what few protections employees have left. Will the Democrats have the will and the ability to stop sexual harassment from becoming legal? Very doubtful.

Retaliation: Retaliation has been hot, hot, hot, and it will continue to be so. Watch for attempts to weaken whistleblower laws, both legislative and judicial. While the courts have consistently enforced retaliation laws, they’ve been reluctant to rule in favor of employees in any situations where there was doubt about the legislative intent. For instance, the Fair Labor Standards Act doesn’t expressly prohibit employers from discriminating against potential employees who have sued former employers for overtime or unpaid wages. Watch for more courts to hold that the word “employees” doesn’t mean “potential employees.” Will there be a public outcry when potential employers refuse to hire people who demanded they be paid? My sources say no.

Bullying: No state will have the political willpower to pass anti-bullying laws, despite the growing evidence that bullying is more traumatic for employees than sexual harassment. It is decidedly so.

Tax relief: The Civil Rights Tax Relief Act will stall yet again, meaning that employment law settlements will continue to be taxed where personal injury cases aren’t. Try again later.

Unemployed: The unemployed will start to get some rights. More states will pass laws protecting the unemployed against discrimination. Employers will get more creative in denying them jobs by using credit checks and other excuses. Eventually, Congress will have to take action, but gridlock is likely in this election year. Outlook not so good.

Wage theft: As more employers decide the way to save money is to fail to pay employees or former employees, wage theft laws will begin to spread across the country. Maybe seeing a few deadbeat employers hauled off in handcuffs will be good for the economy. As I see it, yes.

Noncompete: Desperate employers trying to prevent employees from skipping to competitors who will treat them better and pay more money are using noncompete agreements as virtual indentured servitude. You’d think that elected officials would look at noncompete abuse and side with their constituents, but instead the trend is to give employers even more right to restrict competition. I predict more states will beef up employers’ ability to enforce noncompetes. The good news is that employees with resources will be using antitrust laws and the lack of legitimate interests to enforce to fight back. Noncompetes will continue to be the weapon of choice to bully former employees. Without a doubt.

Confidentiality and trade secrets: Agreements where employees promise to keep employer confidential and trade secret information confidential will go hand in hand with noncompetes as a weapon against former employees. Employees who never signed noncompetes will be told by former employers that working for a competitor would inevitable result in disclosure of confidential information. Will judges side with employees who resist indentured servitude? Don’t count on it.

Employees strike back: Working people and the unemployed will eventually wake up to what is happening to them. They’ll start standing up for their rights and demanding that their elected representatives work for them to restore their right to quit and work somewhere else, to get paid and not have a potential employer hold that against them, and that they be able to work free from sexual harassment. Will they do it in time for the November election? Ask again later.

Why Repealing Child Labor Laws Is a Truly Stupid Idea

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Did you hear the one where the Republican contender for president said we ought to repeal child labor laws? Sounds like the beginning of a bad joke, but if you weren't paying attention due to all the holiday parties, you might have missed Newt Gingrich's comments on the subject. He said that child labor laws are "truly stupid." He wants poor 10-year-olds to become school janitors.

As the mother of a 10-year-old, Mr. Gingrich's comments have been weighing on me. I had to speak up. Talk like this might get some headlines and votes, but it's shortsighted to even think about abolishing child labor laws.

Anyone who is thinking that this proposal is anything but idiotic needs a little history lesson:

Read more in The Huffington Post.




Thanks again to Gina Misiroglu of Red Room for putting me in touch with the Huffingto Post people!

What the U.S. Chamber Of Commerce Doesn't Want You to Know About Your Workplace Rights

To contact us Click HERE
The National Labor Relations Board says almost all private employers must put up a poster informing you of your workplace rights under the National Labor Relations Act as of April 30,2012. It’s free. Employers can download it online and print it out. So they all put up their posters, or are working on it now, right? Nosiree.

They sued. At least, they got together under the umbrella of the U.S. Chamber of Commerce to sue. They got a temporary injunction in the DC federal courts to stop the rule. They really, really don’t want you to see this poster. It must really be subversive, huh?

Well, see for yourself. Here’s exactly what the U.S. Chamber of Commerce doesn’t want you to know about your workplace rights:

Employee Rights Under the National Labor Relations Act

The National Labor Relations Act (NLRA) guarantees the right of employees to organize and bargain collectively with their employers, and to engage in other protected concerted activity or to refrain from engaging in any of the aboveactivity. Employees covered by the NLRA are protected from certain types of employer and union misconduct. This Notice gives you general information about your rights, and about the obligations of employers and unions under the NLRA.


Contact the National Labor Relations Board (NLRB), the Federal agency that investigates and resolves complaints under the NLRA, using the contact information supplied below, if you have any questions about specific rights that may apply in your particular workplace.


Under the NLRA, you have the right to:
• Organizea union to negotiate with your employer concerning your wages, hours, and otherterms and conditions of employment.• Form,join or assist a union.•Bargain collectively through representatives of employees’ own choosing for acontract with your employer setting your wages, benefits, hours, and otherworking conditions.•Discuss your wages and benefits and other terms and conditions of employment orunion organizing with your co-workers or a union.• Takeaction with one or more co-workers to improve your working conditions by, amongother means, raising work-related complaints directly with your employer orwith a government agency, and seeking help from a union.•Strike and picket, depending on the purpose or means of the strike or thepicketing.•Choose not to do any of these activities, including joining or remaining amember of a union.
Under the NLRA, it is illegal for youremployer to:
•Prohibit you from talking about or soliciting for a union during non-work time,such as before or after work or during break times; or from distributing unionliterature during non-work time, in non-work areas, such as parking lots orbreak rooms.
Under the NLRA, it is illegal for a union orfor the union that represents you in bargaining with your employer to:
•Threaten or coerce you in order to gain your support for the union.
Wow.That’s it, you say? What’s the BFD? Well, I think it’s mostly these provisionsbig employer doesn’t want you to see:
Discussing wages and benefits with coworkers: The poster says, “Underthe NLRA, you have the right to discussyour wages and benefits and other terms and conditions of employment . . . withyour co-workers or a union.” Yet many employers take desperate measures to makesure you don’t know what coworkers are making and what benefits they have. Someput out written policies or put restrictions in contracts. That’s flat-outillegal. If you have a contract or if your employer has a policy saying you can’tdiscuss wages and benefits with coworkers, you can file a ChargeAgainst Employer with NLRB right now. The other part they don’t want you toknow about here is your right to grouse about working conditions withcoworkers. You can grumble and complain during breaks, on Facebook, in Twitter,as long as you’re doing it with coworkers and they can’t fire or discipline youfor it.
Discussing work-related complaints and workingconditions with coworkers: The poster says, “Under the NLRA, you have the rightto take action with one or more co-workers toimprove your working conditions by, among other means, raising work-related complaintsdirectly with your employer or with a government agency, and seeking help froma union.” If you complain about conditions on your own and on behalf ofyourself, you aren’t protected. But you have the absolute right (assuming youaren’t a supervisor) to complain about working conditions on behalf ofcoworkers, to get together with coworkers to discuss and complain, and to gettogether to try to negotiate better working conditions. That is huge.
Employerslike to crack down on employees who complain. They want to create an atmospherewhere employees shut up and accept things as they are. Most of the time, it’sbest to keep your mouth shut. But sometimes, you have to speak up. If workingconditions are intolerable, if it feels like a prison, if you are being paidunfairly, if there’s a bully in the workplace, sometimes you have to speak up.You probably have the right to do so, as long as you aren’t a supervisor, andas long as you’re not alone.

Will I Be Taxed on My Employment Law Settlement?

To contact us Click HERE
There’s nothing certain in life but death and taxes. So what made you think you wouldn’t be taxed on your employment law settlement? I ask people this all the time when they express absolute shock that taxes were withheld from their severance check and that they’ll get hit with a tax bill in April on their emotional distress damages.
            It’s not for lack of trying. Employment lawyers and advocacy groups on both sides of the aisle have been trying for years to get the Civil Rights Tax Relief Act passed, and 2011 was no exception. It was reintroduced in the Senate on November 2, 2011 to match the House version that was introduced in October.

            Right now, the law says that, if you are injured in a car accident or have another personal injury, your settlement or judgment isn’t taxable at all. However, if you’re the victim of discrimination and suffer emotional distress, you are taxed. You also can’t average the income, so you can be taxed at a very high rate. 

            Here are the types of recovery you might receive in your employment case, and how IRS looks at it.

            Back pay: You will be taxed. Payroll taxes must be withheld. You are taxed at a “supplemental wage rate.” It’s reported on a W-2. If the Civil Rights Tax Relief Act passes, multi-year back pay could be averaged over several years for tax purposes, lessening the tax hit.

            Front pay/future lost wages: You will be taxed. Payroll taxes must be withheld. You are taxed at a “supplemental wage rate.” It’s reported on a W-2. If the Civil Rights Tax Relief Act passes, multi-year front pay or future lost wage payments could be averaged over several years for tax purposes, lessening the tax hit.

            Severance: You will be taxed. Payroll taxes must be withheld. You are taxed at a “supplemental wage rate.” It’s reported on a W-2. If the Civil Rights Tax Relief Act passes, multi-year severance payments could be averaged over several years for tax purposes, lessening the tax hit.

            Emotional distress: Even if there are physical symptoms, you will be taxed. However, you don’t have payroll taxes withheld. The danger here is you’ll get hit with a big tax bill in April and, if you don’t put a big chunk of money aside to pay, you’ll be in trouble with the IRS. The employer has to report this payment to IRS, so you will definitely have to pay. It’s reported on a 1099-MISC. If the Civil Rights Tax Relief Act passes, emotional distress damages would no longer be taxable or reported as income to IRS. They would be treated similarly to physical injuries..

            Physical injuries: If you’re actually attacked, such as in a sexual harassment case with a rape, then money received for your physical injuries is not taxable income. However, if you mischaracterize emotional distress injuries as physical injuries, you could run into trouble in an audit. It is not reported to IRS.

            Liquidated damages: You will be taxed, but they are not wages. They will be reported to IRS on form 1099-MISC.

            Attorney’s fees: Attorney’s fees paid in your settlement are income to you, but are not wages. These will be reported as income to your attorney and you. However, under an earlier iteration of the Civil Rights Tax Relief Act where Congress only passed the portion addressing attorney’s fees, the fees are an above-the-line deduction for you in most employment law cases. In other words, you have to report them, but you won’t be taxed on them. This is something you need to discuss with whoever is preparing your tax return and make sure they understand it.

            Costs: Taxable but not wages. These are reported to IRS on 1099-MISC. You will be taxed on them, although they may be deductible.

            Interest: Taxable but not wages. This is reported to IRS on 1099-INT. Interest is taxable.

            Punitive damages: This is taxable but not wages. It will be reported on 1099-MISC.

            Overtime: Overtime payments will be taxed as wages. That means payroll taxes will be withheld and it will be reported to IRS on a W-2. If the Civil Rights Tax Relief Act passes, multi-year overtime payments could be averaged over several years for tax purposes, lessening the tax hit.

            Taxes: One solution that lawyers have negotiated in some large settlements involving back pay that represents years of income is to have the employer pay part of the employee’s tax hit that results from a lump sum payment. But the payment towards taxes is considered taxable wages. It will be reported on a W-2. This would no longer be necessary if the Civil Rights Tax Relief Act passes.

            Because the Civil Rights Tax Relief Act has been attempted and failed so many times, I’m not optimistic that it will pass anytime soon. Yet both employee-side organizations and business organizations support it. Both sides agree that it will make cases easier to settle, which means that litigation costs will go down. The courts will be less clogged. It will be good for just about everyone. 

            Maybe sometime before I retire this sensible bill will pass. If you think it’s a good idea, contact your Senator and Congressional representative and ask them to support the Civil Rights Tax Relief Act.

What the U.S. Chamber Of Commerce Doesn't Want You to Know About Your Workplace Rights

To contact us Click HERE
The National Labor Relations Board says almost all private employers must put up a poster informing you of your workplace rights under the National Labor Relations Act as of April 30, 2012. It’s free. Employers can download it online and print it out. So they all put up their posters, or are working on it now, right? Nosiree.

They sued. At least, they got together under the umbrella of the U.S. Chamber of Commerce to sue. They got a temporary injunction in the DC federal courts to stop the rule. They really, really don’t want you to see this poster. It must really be subversive, huh?

Well, see for yourself. Here’s exactly what the U.S. Chamber of Commerce doesn’t want you to know about your workplace rights:

Employee Rights Under the National Labor Relations Act

The National Labor Relations Act (NLRA) guarantees the right of employees to organize and bargain collectively with their employers, and to engage in other protected concerted activity or to refrain from engaging in any of the above activity. Employees covered by the NLRA are protected from certain types of employer and union misconduct. This Notice gives you general information about your rights, and about the obligations of employers and unions under the NLRA.


Contact the National Labor Relations Board (NLRB), the Federal agency that investigates and resolves complaints under the NLRA, using the contact information supplied below, if you have any questions about specific rights that may apply in your particular workplace.


Under the NLRA, you have the right to:
• Organize a union to negotiate with your employer concerning your wages, hours, and other terms and conditions of employment. • Form, join or assist a union. • Bargain collectively through representatives of employees’ own choosing for a contract with your employer setting your wages, benefits, hours, and other working conditions. • Discuss your wages and benefits and other terms and conditions of employment or union organizing with your co-workers or a union. • Take action with one or more co-workers to improve your working conditions by, among other means, raising work-related complaints directly with your employer or with a government agency, and seeking help from a union. • Strike and picket, depending on the purpose or means of the strike or the picketing. • Choose not to do any of these activities, including joining or remaining a member of a union.
Under the NLRA, it is illegal for your employer to:
• Prohibit you from talking about or soliciting for a union during non-work time, such as before or after work or during break times; or from distributing union literature during non-work time, in non-work areas, such as parking lots or break rooms.
Under the NLRA, it is illegal for a union or for the union that represents you in bargaining with your employer to:
• Threaten or coerce you in order to gain your support for the union.
Wow. That’s it, you say? What’s the BFD? Well, I think it’s mostly these provisions big employer doesn’t want you to see:
Discussing wages and benefits with coworkers: The poster says, “Under the NLRA, you have the right to discuss your wages and benefits and other terms and conditions of employment . . . with your co-workers or a union.” Yet many employers take desperate measures to make sure you don’t know what coworkers are making and what benefits they have. Some put out written policies or put restrictions in contracts. That’s flat-out illegal. If you have a contract or if your employer has a policy saying you can’t discuss wages and benefits with coworkers, you can file a Charge Against Employer with NLRB right now. The other part they don’t want you to know about here is your right to grouse about working conditions with coworkers. You can grumble and complain during breaks, on Facebook, in Twitter, as long as you’re doing it with coworkers and they can’t fire or discipline you for it.
Discussing work-related complaints and working conditions with coworkers: The poster says, “Under the NLRA, you have the right to take action with one or more co-workers to improve your working conditions by, among other means, raising work-related complaints directly with your employer or with a government agency, and seeking help from a union.” If you complain about conditions on your own and on behalf of yourself, you aren’t protected. But you have the absolute right (assuming you aren’t a supervisor) to complain about working conditions on behalf of coworkers, to get together with coworkers to discuss and complain, and to get together to try to negotiate better working conditions. That is huge.
Employers like to crack down on employees who complain. They want to create an atmosphere where employees shut up and accept things as they are. Most of the time, it’s best to keep your mouth shut. But sometimes, you have to speak up. If working conditions are intolerable, if it feels like a prison, if you are being paid unfairly, if there’s a bully in the workplace, sometimes you have to speak up. You probably have the right to do so, as long as you aren’t a supervisor, and as long as you’re not alone.

AN EXECUTOR'S JOB IS NOT ALL FUN AND FEES

To contact us Click HERE

A recent District Court case reminds co-executors that if they do not do their job right, they can incur personal liability for the income taxes of the decedent whose estate they are administering. In the case, the decedent had a substantial unpaid income tax liability at the time of her death. Notwithstanding the liability, the executors, with knowledge of the income tax liability, conveyed real property of the estate to the son of the decedent (who was also one of the executors) for one dollar. The son eventually sold the real property, and later claimed that he lost the proceeds in the stock market.

Presumably because they could not collect against the son or other assets of the estate, the IRS sought to impose liability on the executors for disposing of the real estate without first satisfying the income tax liabilities of the decedent. The District Court found for the IRS and imposed liability for the taxes on the executors.

The executors got caught under the federal priority statute (also known as the federal claims statute) under 31 USC 3713(b). This provision is not under the Internal Revenue Code, but is referenced in Code §6901(a)(1)(B).  This provision is an exception to the normal rule that executors will not have personal liability for the debts and obligations of a decedent. Under the statute, a fiduciary that disposes of assets of an estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government if three elements are met:

(1) the fiduciary distributed assets of the estate;

(2) the distribution rendered the estate insolvent; and

(3) the distribution took place after the fiduciary had actual or constructive knowledge of the liability for unpaid taxes. 

Usually, executors will be protected by (3). Most executors, at least those that are properly represented, will know to first pay obligations of the federal government before using assets needed to pay those obligations to make distributions to beneficiaries. Thus, if the executors do not know of the unpaid tax liability, this third element will protect them from liability in many circumstances.

Surely to the dismay of the executor in this case who was not the son, if there is more than one executor all executors are jointly and severally liable for this liability. This means that if the son has insufficient assets to cover the liability, the executor who did not benefit at all from this transaction may be forced to pay the IRS 100% of the liability.

U.S. v. David A. Tyler and Louis J. Ruch, all 109 AFTR 2d ¶2012-583 (DC PA 03/13/2012) 

ESTATE TAX MARITAL DEDUCTION ALLOWED FOR SAME-SEX COUPLE

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EXECUTIVE SUMMARY: The U.S. District Court for the Southern District of New York has ruled that same-sex couples can take advantage of the estate tax marital deduction provisions of the Internal Revenue Code. This ruling has far-reaching federal tax implications beyond federal estate taxes.
FACTS: Edie Windsor and Thea Spyer registered as domestic partners in New York City in 1993. In 2007, they married in Canada, as permitted under Canada law. Spyer died in 2009, and her assets were left to Windsor. After paying applicable federal estate taxes, Spyer’s estate sought a refund of $363,053, asserting the use of the federal estate tax marital deduction for amounts passing to Windsor.
Spyer’s claim was that the provisions of Section 3 of the Defense of Marriage Act (DOMA) violated the equal protection clause of the U.S. Constitution. That DOMA provision defines “marriage” under federal law as a legal union between one man and one woman as husband and wife. Thus, such definition would apply under the Internal Revenue Code and its marital deduction provisions. Equal protection clause jurisprudence imports higher judicial scrutiny to laws that disadvantage a suspect class or impinge a fundamental right. Spyer’s estate sought the application of such higher scrutiny, charactrizing homosexuals as a suspect class. The court declined to classify homosexuals as a suspect class. Nonetheless, it still found the DOMA provisions unconstitutional under the lower “rational basis” standard which requires only that a law have a rational basis for its classifications to withstand an equal protection clause challenge. The court determined that the purposed bases of protection of the institution of marriage, protection of childrearing and procreation, consistentcy and uniformity of federal benefits, and conserving the public fisc were not rationally served by the DOMA provisions. The court thus ordered that the refund be paid.
COMMENTS.
Broad Implications. An appeal of the case is likely. If upheld (and absent contrary rulings in other Circuits or ultimate reversal by the U.S. Supreme Court), then the estate tax marital deduction will be allowed to same-sex persons who are married under applicable law. Of course, not all jurisdictions allow for such marriages, but determined couples can jurisdiction shop to become married if they desire.
There are numerous other federal tax provisions that provide benefits to married persons. Presumably, most, if not all of them, will likewise become available to same-sex married couples if the DOMA provision is invalid. These include (a) the federal gift tax marital deduction, (b) joint tax return filing rates and permissions, (c) favorable “stretch” and rollover provisions for IRA’s and other qualified retirement plan distributions to a surviving spouse, and (d) portability of unified credit amounts between spouses. Other federal law provisions outside of the Internal Revenue Code that turn on marital status may also apply, including those relating to employment benefits and other social service benefits.
Interesting Procedural Aspects. Generally, the Justice Department defends the U.S. in refund cases, and further defends challenges to U.S. laws such as DOMA. However, earlier this year, the Attorney General indicated that the Justice Department would not defend Section 3 of DOMA based on his belief, and the belief of President Obama, that the provision is subject to strict constitutional scrutiny and under such scrutiny the law is violative of the equal protection clause of the Constitution. This left the case in the unusual situation of having no one to defend the U.S.’ case. However, the District Court allowed the Bipartisan Legal Advisory Group of the U.S. House of Representatives (BLAG) to intervene in this case to defend the constitutionality of the statute.
Presumably, BLAG will have or receive standing to prosecute an appeal of the Court’s ruling, although the constitutional questions of whether a group of U.S. Representatives has automatic or permissive standing to do so is beyond the expertise of this author.
What to Do In the Meanwhile. Same-sex married couples that have overpaid taxes by reason of not being treated as “married” under the Internal Revenue Code should contemplate filing refund claims before any applicable statute of limitations expire. This applies both in the income tax and transfer tax arenas.
In regard to new filing and tax payment positions, taxpayers will need to explore whether it is better to file as unmarried, pay tax, and then seek a refund, or not pay the extra taxes in the first instance. The refund route is more conservative since it avoids the running of interest and potential penalties if Section 3 of DOMA is ultimately upheld. However, avoiding penalties in that eventuality will probably be easier to accomplish now in the case of an original filing asserting marriage per the holding in this case than it was beforehand. This is because there is now judicial support for treatment as married  - except perhaps in other jurisdictions with case law that has rejected the rejection of Section 3 of DOMA, if any.
CITES: Windsor v. U.S., 109 AFTR 2d ¶ 2012-870 (DC N.Y. 6/6/2012)