Broker Check

May 22, 2006

Taypayer’s Lavish Lifestyle Bars Discharge of Tax Debt in Bankruptcy

     A bankruptcy judge in New York, pointing to the debtor’s lavish lifestyle, refused to relieve her of liability for tax obligations owed to the Federal Government that totaled approimately $600,000.
          Under the Bankruptcy Code, a debtor, may be discharged from tax liabilities for tax years for which a return was due more than three years before the filing of the bankruptcy petition.  However, discharge from a tax debt is not available if the IRS establishes that the taxpayer willfully attempted in any manner to evade or defeat the tax.  A willful intent is established if the debtor a) had a duty to pay the tax, b) knew of that duty, and c) voluntarily and intentionally violated the duty.
          In the discussion of the case, the Court found that it was extravagant for a childless couple in New York City to pay more than $6,000 per month for a 3 bedroom apartment (in 1990 dollars).  Similarly, the Court had a problem with charitable contributions in excess of $20,000 which consisted of tithing to an organization of which she was an ordained minister and her spiritual trips to California and China.
          During this period of time the taxpayer was making  maximum contributions to a 401(k) plan.  The Court did not consider that an affirmative attempt to evade the payment of taxes because the Court said payments to a 401(k) are routine for employees.  In re Christina Lynch 82 AFTR 2d 2003-62/63

Saving for College-Tax Deductibly

            Sounds incredible, doesn’t it?  But you can, New Yorkers, or anyone filing a New York State Individual Income Tax Return.
           New York State offers the opportunity for an annual tax deduction on the Individual Income Tax Return for contributions up to $5,000 per year for single taxpayers and up to $10,000 for married taxpayers filing a joint tax return. The maximum annual savings for a married couple living in New York City could be as much as $1,200 per year (12%).
          New York offers this opportunity having created its own 529 plan called the New York State College Choice Tuition Savings Program.  The Program includes two separate plans.  There is a Direct Plan with a limited amount of investment options which is only available directly from New York State.  Also available is the New York 529 College Savings Program Advisor Plan offered through Columbia Management.  This Advisor Plan is available exclusively through financial advisors with a wider range of investment options.
           US citizens or resident aliens can set up a plan for any beneficiary.  A person can set one up for himself, a parent for a child, a grandparent for a grandchild, an uncle for a nephew.
          An account Owner can choose from three investment options, a customized portfolio built especially for the Owner, an array of twenty (20) asset allocated portfolios depending upon the risk tolerance of the account owner, and an age-based investment option for the person who wants to have a portfolio which becomes more conservative as the designated beneficiary ages.
          The plan is easy to set up, needing only a $1,000 initial contribution and subsequent contributions of at least $50.  An automated Monthly Dollar Cost Averaging Program is available for those that have at least $5,000 in the Plan.

Spending Everyday Helps Save for College

          The Advisor Plan has teamed up with Upromise, a rewards service that turns your everyday spending with hundreds of companies into money for college.
       Upromise has agreeemnts with hundreds of national companies such as ExxonMobil, Citi, Coldwell Banker, and Avis that will reward your patronage with cash rebates for college.  You can turn your shopping at food stores such as Wegmans, Tops Markets, Foodtown, Pathmark, King Kullen, Shoprite, and Grand Union into money for college when you purchase from over 7000 items offered by brands such as Kelloggs, Diet-Coke, Huggies, and Enfamil.  With more than 8000 participating restaurants and over 350 on-line shopping sites, it is possible to generate college savings through both your everyday and larger-ticket purchases.  Upromise contributions will be swept into the 529 investment portfolio of your choice on a periodic basis subject to minimum investment requirements.
          Lisch Investment Services and Howard Lisch are able to offer you the Advisor Plan. Call today to get your enrollment package and talk with Howard Lisch as to which investment option is right for you.

           If you have any questions about the foregoing or any other financial matters, please call us. 

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