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Romney offshore accounts contain up to $32 million.

January 23, 2012

The Miami Hearld reports that Republican presidential candidate Mitt Romney owns investments worth between $7 million and $32 million in offshore-based holdings, which are often used legitimately by private equity firms to attract foreign investors. Such offshore accounts also can enable wealthy investors to defer paying U.S. taxes on some assets.

The six Romney offshore holdings are in investment funds run by Bain Capital, the private equity powerhouse he led in the 1980s and 1990s. The six funds are listed only by name and a range of amounts in Romney's financial records, but the Cayman addresses are in other corporate documents filed with the U.S. Securities and Exchange Commission and in foreign investment portfolios.
Five of the Cayman-based funds are included within a blind trust for Romney's wife, Ann, and worth between $2.8 million and $7.6 million.

A sixth fund, called Bain Capital Investment Partners Trust Associates lll, is part of Romney's IRA retirement account and worth between $5 million and $25 million.

Using offshore funds to attract foreign investors is a legitimate and standard business practice. Increased foreign investment in a U.S. fund based abroad could increase financial returns for American investors. Offshore funds offer advantages for U.S. investors looking to diversify their portfolios and for foreign investors seeking to avoid U.S. reporting and tax-withholding requirements.

Romney's taxpaying strategy may become clearer when he makes his 2012 tax returns available in April as he has promised.

Posting Supplied by Kevin E. Packman, Partner at Holland & Knight.

Read more at: Tax Times blog

IRS's Right to Examine a Taxpayer's E-Mails

January 20, 2012

A recent advisory issued by the Chief Counsel's Office of the Internal Revenue Service ("IRS") sets forth the IRS's position on the procedures that its agents must follow in order to obtain a taxpayer's e-mails from his or her Internet service provider ("ISP").  

In I.R.S. Chief Counsel Advisory("I.R.S. C.C.A.") 2011-41-017 (July 8, 2011), the IRS interpreted provisions of the Internal Revenue Code relating to examination of a taxpayer's records, the Stored Communications Act ("SCA"), and a decision by the U.S. Court of Appeals for the Sixth Circuit, and concluded that there are certain restrictions on the ability of an IRS agent to issue a summons to a taxpayer's ISP, seeking the contents of a taxpayer's electronic communications. 

The Sixth Circuit, relying on the Fourth Amendment to the U.S. Constitution, recently held that since an Internet "subscriber enjoys a reasonable expectation of privacy in the contents of emails that are stored with, or sent or received through, a commercial ISP,  the government may not compel a commercial ISP to turn over the contents of a subscriber's emails without first obtaining a warrant based on probable cause."United States v. Warshak,631 F.3d 266, 288 (6th Cir. 2010). 

However, the Chief Counsel also advised that with respect to the "contents" of a taxpayer's e-mails or other electronic communications that are more than 180 days old, there is a "warrantless" administrative summons procedure described in 18 U.S.C. § 2703(c)(2) that can be followed by an IRS agent in order to obtain such communications from the taxpayer's ISP.

Furthermore, the Chief Counsel noted that various federal courts "have recognized that a warrant is not required by the Constitution for a government entity to require an electronic communications provider to produce a customer's non-content information regarding an electronic communication."

The above-described rulings by the IRS provide up-to-date guidance as to the IRS's position on the procedures that an IRS agent must follow in order to review the content of a taxpayer's e-mails or other electronic communications. 

However, it should be noted that under I.R.C. § 6110(j)(3), the Chief Counsel's Advisory "may not be used or cited as precedent."

Read more at: Tax Times blog

What Type & Form of Disclosure is Necessary to Avoid Penalties?

January 18, 2012

Revenue Procedure 2012-15 updates Rev. Proc. 2011-13, 2011-3 I.R.B. 318 and identifies circumstances under which the disclosure on a taxpayer’s income tax return with respect to an item or a position is adequate for the purpose of reducing the understatement of income tax under section 6662(d) of the Internal Revenue Code and the purpose of avoiding the tax return preparer penalty under section 6694(a).
Revenue Procedure 2012-15 will appear in IRB 2012-7 dated Feb. 13, 2012.

Read more at: Tax Times blog

Supreme Court Denies Review of Sixth Circuit's Decision that Property Held as Tenants By the Entirety is Subject to Forced Sale!

January 18, 2012

The U.S. Supreme Court denied review on Jan. 17 of the court of appeals ruling that a Michigan woman who did not owe unpaid taxes to the United States but owned a home with her tax delinquent husband as tenants by the entirety could not prevent the government from selling the property in a tax lien foreclosure (Barczyk v. United States, U.S., No. 11-710, cert. denied 1/17/12).

In U.S. v. Barczyk , No. 10-1498 (6th Cir. 8/17/11), the Sixth Circuit found that the federal government could force the sale of real property held as tenants by the entirety where only one spouse was delinquent and that the sale proceeds should be distributed equally between the federal government and the non-delinquent spouse. Accordingly, not only can joint creditors reach property held as tenants by the entirety, the federal government can also force a sale of property held as tenants by the entirety that is subject to a federal tax lien even if only one spouse is delinquent.

Advisors often recommend that married couples own their residence as tenants by the entirety because of the creditor protections afforded. However, in advising clients, it is important to note that joint creditors can always reach property held tenants by the entirety. Additionally, in light of the decisions in Barr and Barczyk, clients should also be advised that in the event that a tax lien is imposed on either spouse, the federal government can force a sale and that regardless of relative contributions to the purchase of the home or life expectancy, a non-delinquent spouse will receive only 50% of the proceeds of sale.
For more details on this matter go to: http://www.bna.com/us-barczyk-sixth-n12884903539/

Read more at: Tax Times blog

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