December 31, 2016

Lawyer Who Represents Client in Tax Case
Cannot Recover Attorney Fees

          The Tax Court ruled that even though the taxpayer bested the service, the lawyer could not recover fees from the IRS when the client refused to pay his fees.  While the lawyer sought his fees as an administrative cost of the case, the Court stated only the prevailing party in the underlying tax dispute has standing to ask for costs.  (Greenberg 147TC No. 13)

Couple Cannot Sue IRS for Damage Due to Emotional Distress

          A couple owed taxes, which the IRS attempted to collect.  Even after they filed for bankruptcy, the IRS improperly and repeatedly sent letters demanding payment and enforcement action.  The couple sued the IRS for emotional distress, and the bankruptcy court ruled that the IRS must pay the couple $4,000 for the anxiety it caused.  The District Court reversed the decision, saying sovereign immunity bars taxpayer claims against the IRS (Hunsaker D.C. Oregon)

Bitcoin Users Beware

          The Justice Department and IRS are now aggressively seeking users of bitcoin after an IRS agent found three people were using the virtual currency to evade tax.  A Federal District Court granted the IRS permission to issue a summons to Coinbase, a virtual currency exchange in the U.S., which would allow the Service to obtain names and records of U.S. customers who bought and sold bitcoins through the company.

          The IRS promises to adopt a plan to clamp down on tax cheats who use bitcoin and coordinate logistics with criminal investigators.  The Kiplinger Tax Letter Vol. 191 #2412/3/16.

Expenses Investigating a Parent’s death are Not Deductible

          A CPA deducted millions of dollars paid to private investigators and other experts to help him find out whether his father, who died when the taxpayer was a child, was murdered or committed suicide.  He believed if he gathered enough evidence, the story could become a book, or even a movie.  The Tax Court categorized his activity as a hobby and denied the deductions.  (Vest TC Memo 2016-187)

          But, if he had a contract from a publisher or a studio or an advance, the result might have been different.

The Biggest Money Mistakes People Make – Decade by Decade

                               20s   -                         Playing it too safe 
                               30s   -                         Overwhelmed by Complexity
                               40s   -                         Misjudging Big Experiences
                               50s   -                         The Difficulty of Catching Up
                               60s and Beyond -       Not Delegating 

The Biggest Mistake Estate Executors Make

          Settling an estate is often a thankless task.  Here is how to avoid some of the most common pitfalls (and maybe getting sued).

Paying Bills Too Quickly

          Often an Executor will start receiving the deceased’s mail and paying credit and bills and other invoices as they arrive.  This is done in the mistaken belief that timely payment is required.  In truth, such bills are well down the list of priorities for payment.  Paying these debts before all other classes is a breach of fiduciary duty and potentially exposes the executor to personal liability.

Playing the Market

          Some Executors are tempted to invest an estate’s assets in an attempt to increase the value of the estate during the settlement process.  That can be a risky tactic.  An Executor does not have an obligation to increase the value of an estate’s holdings, even if the distribution to heirs is prolonged.

Mishandling Real Estate

          Real estate is often one of the hardest assets to administer.  One beneficiary might be living in the house, while another might want it sold quickly.  The executor must decide the listing price and the commission to pay the listing agent.  Unless amicable decisions can be reached among all the beneficiaries, the Executor may be forced to seek probate court assistance.

Losing Tangible Assets

          Executors sometimes do not realize that assets, tangible and intangible belong to a new entity, the estate, as of the date of death.  It is the Executor’s responsibility to keep the assets safe while arrangements are made to distribute them according to the decedent’s plan.

One Other Word of Advise

          Don’t succumb to family pressure to make distributions too soon.  It may result in insufficient assets to pay off creditors.  Money has a habit of changing the attitudes of a lot of people but an Executor’s job is not simply to distribute wealth.  Wall Street Journal 2/1/16 p. R4.

          As always, if you have any questions about these or any other matters, do not hesitate to call us.
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