Broker Check

September 30, 2014

Where Were You?

          Can you believe it?  It has been 45 years since Woodstock was held in that summer of ’69.  Where were you?  I was in boot camp for the U.S. Coast Guard.

Too Old For Your Assets?

           A 65 year old male with above average health and a family history of longevity has a 30% chance of living beyond 97.  Financial Planning 9/14 p. 57.

           Are you saving enough to handle this lifespan?

DOJ’s IRS Connection

           It was fishy enough when the Democratic donor, Barbara Bosserman, was appointed to lead the Justice Department’s investigation of IRS targeting of conservative groups.  Now there are new questions about Justice’s staffing choice on one of the private lawsuits brought against the IRS.

           The pro-Israel group Z Street sued the IRS in 2010 on grounds that the IRS engaged in viewpoint discrimination when it singled out 501(c) groups with Israel related missions for additional scrutiny.  The case has been handled by Justice Department, trial attorney, Andrew Strelka, who previously worked in the IRS office run by Lois Lerner.  (You remember her – the IRS misplaced thousands of her emails!)

           From August 2008 until August 2010, Mr. Strelka was a presidential management fellow assigned to the IRS Exempt Organizations division.  That is the same period that Z Street says it was told by an IRS agent that its application had been singled out for special scrutiny to see if it comported with Administration policies.  Mr. Strelka was thus both Justice’s lawyer on the case and potentially a witness.  We say “was” because Mr. Strelka was withdrawn as the Justice Department’s counsel of record on the Z Street case as well as two other cases involving tax-exempt groups and Judicial Watch’s suit against the IRS.

           Cleta Mitchell, who represents conservative groups who saw their applications for tax- exempt status slow-tracked, says she talked to Mr. Strelka when he was at the IRS starting in June and July 2010 about a client whose tax-exempt application was delayed.  After applying for 501(c)(4) status in October 2009, the client heard nothing until June 2010, when Mr. Strelka asked to see ads the group had run that were critical of Administration healthcare policy.

           This means that Mr. Strelka was directly engaged in the policies at the Exempt Organizations Unit that led to the lawsuits charging viewpoint discrimination.  Under the Rules of Professional Conduct, barring special exceptions, “A lawyer shall not act as advocate at a trial in which the lawyer is likely to be necessary witness.”

           If Mr. Strelka had personal knowledge of the processing of tax-exempt organization while he was assigned to the IRS, he should have recused himself from handling the cases from Justice.

           If the goal of Justice was to inspire confidence in the process, it is likely to have had the opposite effect.  Wall Street Journal 8/12/14 p. A12.

Obama Wants Roth Changes

           In his proposed budget for 2015, President Obama has proposed changes to the treatment of Roth IRAs.  Currently, a contribution to a Roth IRA is not currently deductible and when distributed the distribution is not taxable.  It, however, may be subject to certain premature distribution penalties.  Unlike a traditional IRA, which must start distributions when the account holder reaches 70½ years of age, the Roth IRA need never be distributed to the account holder.  Upon the death of the account holder, the beneficiary must take annual distributions from the account over their government-determined life expectancy.  The current structure allows a potentially long time frame for the Roth IRA to grow the assets tax-free over two life spans, an invaluable benefit to the tax paying public.  It also means that the government will not be able to tax any of the assets and income for a very long time.  The only way the government could tax the assets of a Roth IRA would be to FORCE large distributions, after which the taxpayer would feel a need to invest the difference of the amount in excess over current consumption.  It is these earnings on the subsequent investment, which would now be taxable earnings rather than tax-free earnings that would have a negative impact to the taxpayer.

           It is exactly this that the Obama administration proposes.  They are proposing to force the account holder to start to take annual lifetime distributions when they are 70½, and to force beneficiaries to take a full distribution within 5 years of the death of the account creator.  In this way, the government will get more of OUR money sooner!

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

           Remember, We’re Here For You!