Broker Check

December 30, 2003


Engaged Couples Need PreNuptial Agreements

            So says the actor Alec Baldwin who is currently resolving financial and custody issues with Kim Bassinger.  Says Baldwin, “my ex-wife was someone I could never imagine getting divorced from.  My advisors all told me to get a prenup, but I thought it was forever.  We were very naïve.”  Mr. Baldwin’s marital problems have convinced him that all engaged couples need pre-nuptial agreements, especially when they have significant amounts of money that can become the focus of conflict.

            Without a prenup, Mr. Baldwin may soon pay Ms. Bassinger several million dollars.  If you think you are a candidate for prenuptial agreement, call me to discuss the matter.  My of counsel, Lawrence Schoenfeld, specializes in this area.         


New Year’s Resolution

            Here are my suggestions for a New Year’s resolution to think of.  In a recent article in the November, 2003 CPA Journal the authors stated “the current stock market environment has investors reassessing their investment strategies.”  They concluded that “cost minimization is often overlooked as a component of successful long-term investing.  The typical broker relationship is in direct conflict with the objective of achieving higher financial returns……. A commission based broker derives little or no revenue from non-traded accounts.  While fixed-fee brokerage accounts are available, they typically entail high annual fees.”

            “They cited that the recent SEC settlement with the brokerage industry reflects the conflict of interest between the brokerage industry and retail investors.  The following points are excerpted from the SEC press release on this agreement (

·        CSFB, Merrill Lynch and SSB admitted to issuing fraudulent research reports.

·        Bear Stearns, CSFB, Goldman, Lehman, Merrill Lynch, Piper Jaffray, SSB and UBS Warburg admitted to issuing research reports that were not based on principles of fair dealing and good faith and did not provide a sound basis for evaluating facts, contained exaggerated or unwarranted claims about the covered companies, or contained opinions without reasonable basis.

·        UBS Warburg and Piper Jaffray received payments for research without disclosing such payment.

·        CSFB and SSB engaged in inappropriate spinning of initial public offering (IPO) allocations in violation of SRO rules…..”


            The article goes on to say, “the securities industries is fraught with problems, as the recent $1.4 billion dollar settlement indicates.”  Commission based relationships have an inherent conflict of interest…..”  Fixed fee accounts are generally cost prohibitive.  Annual fees of 1% to 2% of account asset value are typical, and hidden fees are common.  Brokers, in the final analysis, work primarily for themselves and their investment house, not for their clients.                 

            The authors conclude, “A well executed strategy is needed for tax-efficient investing to occur in a low cost environment. CPAs can be the last line of defense in advising individuals on investment options….”

            We suggest that one of your New Year’s Resolutions is to review your investing situation and see if it can be made better. CPA Journal, Nov, 2003 p.6


National Guard and Reserve

            Members may claim itemized deductions for their nonreimbursable expenses for transportation, meals and lodging when they have to travel away from home and stay overnight to attend National Guard and Reserve meetings.  The new Military Family Tax Relief Act of 2003 specifically provides that attendance at these meetings is to be treated as away from home business travel.  In the past, the law was not clear but we took the position for our clients that the expenses were deductible.      

            Now the expenses of being a reservist for any period during which the individual is more than 100 miles away from home will be deductible above the line and therefore deductible in order to arrive at Adjusted Gross Income. The other expenses remain deductible as itemized deductions.


IRS Suspends Tax Exempt Status of Three Not For Profit Terrorist Organizations

            Acting under a new provision that was enacted on November 11, 2003 as part of the Military Family Tax Relief Act of 2003, the IRS announced the suspension of the tax exempt status of three organizations that have been designated as supporting terrorism.  Contributions made to these organizations during the period that their exempt status is suspended are not deductible for Federal tax purposes.

            They are the following:

·  Benevolence International Foundation, Inc.

·  Global Relief Foundation, Inc.

·  Holy Land Foundation for Relief and Development  IRS Ann 2003-74

            If you have any questions about the foregoing or any other financial matters, please call us.  If you want to read more, visit the AOHL Newsletter Archives at


Remember, We’re Here For You!!

We wish all of you a very Happy, Healthy, Prosperous and Safe New Year!!