March 1, 1994

Change in form of business was not Separation from Service

          A change in a surgeon`s status from that of an employee and sole shareholder of a professional association to that of a sole proprietor was not a separation from service, according to the Tax Court. Therefore, distributions from a qualified profit-sharing and pension plan to the surgeon did not constitute lump-sum distributions, and the 10-year forward averaging method could not be used to determine his tax liability.

          When the surgeon liquidated the professional corporation, all of the assets were distributed to him and he carried on the same medical practice without interruption. Thus, he had not separated from service. There was only a technical change in the employer; no meaningful change in the beneficial ownership of the business had occurred. Moreover, the taxpayer did not establish that the distributions were made on account of separation from service rather than on account of a plan termination.

Clinton Health Plan Fosters Discrimination Against Jewish Doctors

          If President Clinton`s 1342 page plan to revamp the nation`s health care system is approved by Congress, the careers of up and coming Jewish physicians will be derailed by a quota system designed to boost the number of racial minorities in medicine. Though the proposal in question has been largely ignored in the debate over health care reform, its implications are dramatic. The little known provision calls for the creation of yet another government body, the National Council on Graduate Medical Education, that will divide up residency slots to training hospitals based on a formula that not only considers a hospital`s competence but also its success in recruiting members of racial minority groups. This will give hospitals great incentive to set numerical goals for minority recruitment. Jews, widely believed to be represented in medicine in numbers far disproportionate to their percentage of the population will suffer the brunt of the discrimination.

What else does Hilary have in store for the country?

The IRS Moves

          The IRS will no longer be at 120 Church Street in Manhattan. This fall it is slated to divide itself in two. There will be a midtown office with nost revenue agents at 1133 Avenue of the Americas; other operations will be across the street from us at 290 Broadway. I hope they send us all a change of address notice.

Business Interest Definition Expanded

          The Income Tax Regulations define as personal interest, and therefore nondeductible, the interest on a noncorporate taxpayer`s income tax deficiency even if the deficiency resulted from a adjustment of the taxpayer`s business income. In a recent District Court case the Court held the position of the government as set forth in the abovementioned regulation was unreasonable and therefore invalid as far as interest on business related deficiencies was concerned.

          The IRS assessed deficiencies against a farming couple for 1982 and 1983 and the taxpayers deducted in 1988 the interest they paid on the deficiency in 1988 which they deducted on their Schedule F.

          The IRS will probably appeal the District Court`s decision. Meanwhile, it is suggested that if you are in this position you should have a protective claim filed for any open years in which such interest is in issue.

Pension Coverage for Women Up

          There was good news from a report on pension coverage released late last year. While overall pension coverage of the working population was dropping, an increasing number of women in the labor force were being covered. But while the trend bodes well for the future of the well educated female in her early thirties and younger who are benefitting from the expanded occupational opportunities of the last two decades the great mass of women are still only a man or a misstep away from penury in retirement. This group includes people who have little in common except their gender: younger working women without college degrees or high school diplomas, middle aged women who worked outside the home intermittently to balance their responsibilities to children and, perhaps, to elderly parents, and older women who may never have worked outside the home.

          Financial planners talk about the three legged stool of retirement income: Social Security, investments and pensions. If you feel you need some help to increase the amount of assets and income available for retirement call us for an appointment for a consultation.

          If you have any questions on this or any other matter, please do not hesitate to call us.