Michael Gray, CPA's Tax and Business Insight

July 1, 2016

© 2016 by Michael C. Gray

ISSN 1539-395X

A monthly report to help you prepare for your financial future, keep more of what you earn by minimizing your taxes, and build an extraordinary business!

Route to _______   _______   _______   _______   _______

(If you find this information valuable, please pass it on to a friend!)

Table of Contents

Minerva Siemer gets a new haircut.
My granddaughter, Minnie Siemer with Daddy John Siemer near Natural Bridges Beach.

Happy Independence Day!

"What constitutes the bulwark of our own liberty and independence?... Our reliance is in the love of liberty which God has planted in our bosoms. Our defense is in the preservation of the spirit which prizes liberty as the heritage of all men, in all lands, everywhere. Destroy this spirit, and you have planted the seeds of despotism around your own doors. Familiarize yourselves with the chains of bondage, and you are preparing your own limbs to wear them." -- Abraham Lincoln, September 11, 1858

(Travel safely. We will be closed July 4 for the holiday.)

Return to Table of Contents

The year is half over!

Time is sneaking by us again! How is 2016 going for you? Is there any way we can help you reach your goals? How is your tax picture shaping up this year? Call Dawn Siemer at 408-918-3162 or Michael Gray at 408-918-3161 to make a planning appointment now.

Return to Table of Contents

Our schedules.

Michael Gray will be away from the office starting July 1, returning July 19 and starting July 29, returning August 3. Dawn Siemer has changed her hours and will be working Mondays, Wednesdays and Fridays again. She will be away from the office starting July 25, returning August 8. We won't be available for telephone calls or emails during our absences. While Dawn is away, please call Michael Gray directly at 408-918-3161.

Return to Table of Contents

Family celebrations.

My son, James Gray, is celebrating his birthday this month.

My daughter (and office manager), Dawn Siemer, and her husband John are celebrating their 10th wedding anniversary this month.

Congratulations!

Return to Table of Contents

'Tis the season for extensions.

If you need help preparing your income tax returns for which you have filed an extension, call Dawn Siemer at 408-918-3162 on Mondays, Wednesdays or Fridays to make an appointment.

Return to Table of Contents

Surviving spouse's community property share of IRA didn't qualify for rollover.

The IRS has ruled that a surviving spouse who claimed a community property interest in an IRA didn't qualify for a spousal rollover. The surviving spouse was not the named beneficiary of the account. The IRS also said that any distribution from the account to the surviving spouse would be taxable income to the named beneficiary. The federal tax laws for IRAs don't recognize community property and supersede state laws under federal preemption.

A state court issued an order for a spousal rollover for her community property interest in the account, but the IRS said such a rollover wasn't allowed.

This ruling highlights the need for special attention to retirement accounts in estate planning - especially for second families. Other assets, such as life insurance, might be needed to equalize community property when persons other than the surviving spouse are named as beneficiaries of an IRA.

Unlike other retirement accounts, spousal consent isn't required when naming someone other than the spouse as a beneficiary of an IRA. If such consent isn't received, the survivors will have to clean up the mess when the account owner dies.

(Letter Ruling 201623001, March 3, 2016.)

Return to Table of Contents

IRS can require reporting a disregarded entity's identification number on the owner's income tax return.

The IRS Chief Counsel has issued program manager technical assistance stating the agency has the authority to require the owner of a disregarded entity, such as a single member LLC, to report the entity's employer identification number on the owner's tax return. The Chief Counsel noted that a return would be valid even if it lacked the EIN for the disregarded entity.

(PMTA 2016-08.)

Return to Table of Contents

Request for private ruling is privileged, but not really.

A federal district court has ruled that the disclosure on a private ruling request that it was submitted during litigation with the government was a waiver of its attorney non-disclosure privilege with respect to the work product for the ruling. Although the work product itself was privileged, applying for the ruling was a waiver of the privilege. The case related to a forfeiture of foreign bank accounts traceable to criminal acts performed by the former prime minister of the Ukraine between 1992 and 1998. The official was convicted in the U.S. for money laundering, wire fraud and extortion.

(U.S. v. All assets held at Bank Julius Baer, D.C. of District Columbia, June 20, 2016.)

Return to Table of Contents

IRS issues new deferred compensation guidelines.

The IRS has issued proposed regulations clarifying previous final regulations for nonqualified deferred compensation plans (including nonqualified stock options) under Internal Revenue Code Section 409A. The regulations will be effective when final regulations are issued, but may be relied upon by taxpayers on or after June 22, 2016.

See your tax advisor for more details.

(REG-123854-12, June 22, 2016.)

Return to Table of Contents

FTB loses! Taxpayer was a nonresident and not subject to California income tax.

Michael Bills retired from his job as managing partner of Brandes Investment, LP on December 31, 2004. Michael and his wife, Mary, bought a retirement home in Friday Harbor, Washington. They moved into the Washington home on January 10, 2005, including their personal possessions and furnishings. The Bills also got Washington drivers licenses and registered to vote in Washington during January 2005. They didn't sell their California residence. Their daughter lived in the California home. They stayed in the California residence for a few months during 2015 while repairs were made to the Washington residence. During March 2015, the Bills received a payment in redemption of their partnership interest of $7,553,083.

The Franchise Tax Board said the Bills still had sufficient ties to California to be California residents, subject to California income tax for the redemption of the partnership interest.

The State Board of Equalization ruled in favor of the Bills. The Board was persuaded that the Bills were sincere in changing their permanent residence before the redemption of their partnership interest. The sale of a partnership interest is the sale of intangible property, taxable in the state of residence of the taxpayer.

(Appeal of Bills, April 28, 2016, California State Board of Equalization Case Nos. 610028, 782397.)

Return to Table of Contents

Think carefully, America.

In 1933, a charismatic leader, exploiting the fear of his country relating to a terrorist act, successfully took control of the government as dictator. He persuaded the population that he could "make our country great again!" He secured the support of the leading industrialists of his country. He refused to honor his country's treaties with other countries. He encouraged violence, creating secret police who were thugs enforcing his policies. He "fired" the opposition of any other political parties in his country. He declared that only certain "pure blood" white people with certain religious affiliations were acceptable. He required groups of people to be registered by race and religion, eventually having them relocated to concentration camps for forced labor and extermination.

The only reason the free world united to remove him and his party from power was that he had the greed and hubris to use military force to attack and conquer other countries and subject them to his control. The country that was the cavalry riding to Europe's rescue was the United States. Finally, he elected suicide when it was clear his crusade of terror was over.

If he didn't attack other countries, Germany might still be a Nazi country today with its populations of Jews, Gypsies, Catholics and homosexuals exterminated.

All of us should know the story of Adolf Hitler and the carnage he inflicted on the world. He still has fans and admirers today.

Fascism is contrary to the American traditions of freedom of thought, freedom of speech, freedom of worship, and diversity as a nation of immigrants. Promoting fascist ideals should be a deal breaker for anyone running for political office to represent the American people. It's disgusting that the propaganda playbook of Joseph Goebbels is being successfully used to appeal to the baser emotions of Americans.

Return to Table of Contents

Does your group need a speaker?

We are seeking opportunities to speak before groups. Topics include recent tax developments, tax issues relating to real estate, how estate planning has changed recently, tax issues relating to alternative investments using retirement accounts, and marketing topics such as "How I created a public access television show broadcast on eleven Bay Area stations." To make arrangements, call Michael Gray at 408-918-3161.

Return to Table of Contents

Please share your good experiences with Michael Gray, CPA.

As you know, more and more people are going to the internet to find information about service providers. We hope you will share some good words about experiences that you have had with our firm<. Some of the sites where you can share your experiences include yelp.com and siliconvalley.citysearch.com.

We use Angie's List to assess whether we're doing a good job keeping valued customers like you happy. Please visitAngiesList.com/Review/4258970 in order to grade our quality of work and customer service.

Return to Table of Contents

Financial Insider Weekly broadcast schedule for July and August.

Financial Insider Weekly is broadcast in San Jose and Campbell on Fridays at 9:30 p.m., Pacific Time. You can watch it on Comcast channel 15 for San Jose and Campbell. The show is broadcast as streaming video at the same time at www.creatvsj.org.

Here are the scheduled interviews for July and August:

July 1 and 8, G. Scott Haislet, attorney at law and CPA, "1031 Exchanges"
July 15, G. Scott Haislet, attorney at law and CPA, "Real estate professionals and passive activity losses"
July 22 and 29, G. Scott Haislet, attorney at law and CPA, "Sale of a principal residence"
August 5, Charles H. Packer, attorney at law, Hopkins & Carley, "Should you terminate a family trust considering recent tax law changes?"
August 12, Charles H. Packer, attorney at law, Hopkins & Carley, "Tax planning for real estate change of ownership in California"
August 19 and 26, Charles H. Packer, attorney at law, Hopkins & Carley, "Succession planning issues of family businesses"

Financial Insider Weekly is also broadcast as follows:

Past episodes of Financial Insider Weekly are posted on YouTube. One way to watch them is to go to our web site, www.financialinsiderweekly.com, and click on "Past Episodes."

Let me know any ideas that you have for topics or guests. Guests will usually have to be located in or near the Silicon Valley in California.

Hope you can watch or record the show. Please tell your friends about it!

Return to Table of Contents


Michael Gray regrets he can no longer personally answer email questions. He will answer selected questions in this newsletter.

For your questions about dependent exemptions, see IRS Publication 501 at www.irs.gov.

Return to Table of Contents


Visit our new article!

Return to Table of Contents

Follow me on Social Media!

Want to see new episodes of Financial Insider Weekly as soon as they're posted on Youtube? Want to see Michael Gray's blog posts as soon as they're live? We post them (and more) on social media!

If you enjoy Twitter, please follow me at www.twitter.com/michaelgraycpa. I would especially appreciate retweets of our messages announcing episodes of Financial Insider Weekly.

I'm also on Facebook, LinkedIn, and Google+.

you can also follow me on other social media sites, Facebook, LinkedIn, and Google+.

Return to Table of Contents

If you have employee stock options, have you subscribed to Michael Gray, CPA's Option Alert at no charge or obligation?

To learn more, visit stockoptionadvisors.com/subscribe.shtml

Return to Table of Contents

Real estate investors, have you subscribed to Michael Gray, CPA’s Real Estate Tax Letter at no charge or obligation?

For details, visit www.realestatetaxletter.com

Return to Table of Contents

Check out my blog.

I have also started a blog at www.michaelgraycpa.com. Check it out!

Return to Table of Contents

P.S.

My daughter and her husband, Holly and Dan Baker, have a Southern French Restaurant at 23 Ross Common, Ross, California, about 15 minutes north of the Golden Gate Bridge. The name of the restaurant is Marché Aux Fleurs and their website address is marcheauxfleursrestaurant.com. For the best meal of your life, call 415-925-9200 for a reservation and give them a try! For directions, visit our website at www.taxtrimmers.com/directions.shtml.

Return to Table of Contents


Home    Newsletter Archive    Introducing Michael Gray, CPA    Articles    Tax FAQ   Need Help?    Other Links


Michael Gray, CPA
2190 Stokes St. Ste. 102
San Jose, CA 95128
(408) 918-3162
FAX: (408) 998-2766
Hours: 8am - 5pm PDT Monday - Friday

Find us on Facebook
Follow me on Twitter
Connect on LinkedIn
Connect on Google+
Our Blog

Sign up for our free monthly newsletter,
Tax & Business Insight,
for the latest tax news!

subscribe html
unsubscribe text only

We respect your email privacy!