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Tuesday
Jul292014

L.A. Dodgers—$18 Million Verdict Tax Deductible

Giants fan Brian Stow got an $18 million verdict for injuries he received in a Dodgers parking lot in 2011. The defendants were the L.A. Dodgers and others, including the two men who administered the beating. Tax attorney Rob Wood discusses the tax consequences for everyone involved, something he wrote about in his Forbes article “LA Dodgers Draw $18 Million Verdict In Fan Beating Case....Before Taxes.”

 

As for Mr. Stow, his damages were awarded for physical injuries, so he should have no tax liability. Wood believes that the Dodgers will get a deduction for their payment, assuming they pay the damages and do not appeal. Wood suggests that situations like this, where a big company is able to write of damages for bad or negligent conduct, is confusing to many people. But, as Wood says, “That’ our system.” The damage payment would be considered a business expense.

If the case were to be appealed, new issues would enter the picture, such as interest on the award. In some cases, punitive damages are awarded, Interest and punitive damages are taxable to the plaintiff. However, punitive damages would be deductible by the corporate defendant. And attorney fees are another issue. The lawyer owes taxes on any fees collected.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.

Sunday
Jul272014

Corporate Inversions: Obama Treasury Wants Them Gone

Corporate inversions are not something new, but what is new is the Obama administration’s desire to stop them. Tax attorney Rob Wood discusses the situation, also the subject of his Forbes article “Obama Treasury Urges Halt Of Inversions For Foreign Headquarters & Tax Savings.” Corporate inversions have been the subject of a previous LBN report and an article by Wood.

 

Wood thinks that the government has never really turned a blind eye to these transactions, which have been going on for the past ten years. Congress tried to stop inversions, but more sophisticated corporate mergers got around the law. Now, the Obama administration wants to stop this latest wave of inversions.

The proposed change takes aim at the so-called 20% rule and would change the number to 50%. The objective, says Wood, is to require that a foreign company involved in a merger that would move the headquarters offshore would have to be the purchaser of the American company. In the meantime, Wood notes, companies are trying “to get in under the wire” and merge with foreign companies to take advantage of the lower tax rates in some foreign countries.

Ireland is an example of a country with a very favorable tax rate for corporations. Companies seeking to maximize their profits for shareholders have tried to take advantage of these foreign shelters. Wood suggests that one result of the inversion movement might be to take a look at corporate tax rates with a view to lowering them.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.

Sunday
Jul272014

How Warren Buffet’s $2.8 Billion Deduction Works

Billionaire Warren Buffett is a generous man who makes (and has made) very large donations to charities. He donated $2.6 billion last year, and this year, he’s giving $2.8 billion. Tax attorney Rob Wood discusses the deduction, which was the subject of his Forbes article “Supersizing Warren Buffett's $2.8 Billion Tax Deduction.”

 

Wood notes that Buffett is a very savvy investor, and his investments and tax moves are not ill-considered. This year’s very large donation involved very highly-appreciated shares of stock. A donation of this type provides a powerful benefit to the taxpayer in that the amount of the deduction is the fair market value of the stock, not what the taxpayer paid originally for it. And, Wood explains, Buffett will not pay taxes on the gain in the value of the stock.

Buffett is not the only wealthy taxpayer to take advantage of this benefit. Wood points out that Mark Zuckerberg and many others have availed themselves of this provision in the tax law. See 26 U.S. Code § 170. There is nothing wrong with making donations of this type, Wood explains. And donations of the stock are good deals for the recipient charities.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.

Sunday
Jul272014

Fake Soccer Injuries—The IRS View

The recent World Cup provided a workshop on fake injuries. Tax attorney Rob Wood discusses injuries, fake and real, and the IRS perspective on injuries in his Forbes article “Cash For Best World Cup Fake Injuries?

 

Wood points out that the IRS examines injuries, and damage awards for them, and parses the damages into those awarded for real physical injuries and others awarded for emotional injuries divorced from bodily harm. As Wood puts it, “Does the IRS actually look at who was hurt? [S]ometimes, they do.”

So someone who gets a money award from an injury may receive it tax-free if it is an award for physical injury. Post-traumatic stress disorder is a new area of concern. Wood has written on the subject, as has tax advocate Nina Olson, who believes PTSD should be tax free. PTSD can arise in an employment setting that does not involve combat. Medical studies show that the brain is affected by PTSD.

Another issue could be stress-related injuries—physical problems that actually arise from mental stress. Wood suggests that the best solution for taxpayers is to avoid being audited. Explain any 1099 that might raise a flag with an IRS auditor.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.

Sunday
Jul272014

Internet Tax Ban—Who Wins, Who Loses?

 

The U.S. House of Representatives voted on July 15 to permanently ban the taxation of Internet access. Tax attorney Rob Wood discusses this development, reported in his Forbes article “Internet Tax Ban Could Be Big Win For Skype And Snapchat, Major Loss For States.”

 

Wood notes that this is a different issue from Internet sales taxes. This is a good thing for Skype and Snapchat, among others. The taxes covered by the House action are excise taxes. Wood believes that most people believe that the Internet should be open and available to everyone.

At the same time, the Internet is growing constantly; more and more things are taking place on the Internet – “Things we haven’t even thought of yet.” Wood observes that many states are struggling financially and need revenue. Taxes are a large part of the cost of landline telephone service. A moratorium on Internet taxation went into effect in 1998 and would be due to expire without this action by Congress.

The Internet has fundamentally changed society in the years since the original moratorium in ways that we never could have imagined. The question of a federal sales tax on the Internet has not been laid to rest by this latest congressional action, and it may come up again.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.