Valensi Rose Law

Valensi Rose Attorneys Receive 2012 Super Lawyers Designation

2012-02-14T11:53:00.000-08:00

We are pleased to announce that four of our attorneys were named by Law and Politics Magazine and the Publishers of Los Angeles Magazine as Super Lawyers in Southern California for 2012. Only 5% of lawyers statewide receive this designation.

The following attorneys were designated Super Lawyers in their individual practice areas:

Philip S. Magaram for Estate Planning and Probate
Designated nine years in a row

Michael R. Morris for Tax
Designated seven years successively

Bruce D. Sires for Estate Planning and Probate
Designated six years

Peggy Lennon for Estate Planning and Probate
Designated seven years

Super Lawyers employs a rigorous selection process – one that has been recognized by bar associations and courts across the country for its credibility and sophistication. It combines peer nominations and evaluations with third-party research. Each candidate is evaluated on 12 indicators of peer recognition and professional achievement. Selections are made on an annual, state-by-state basis.

Super Lawyers are chosen based on a variety of criteria, including transactions, experience, honors and awards, special licenses and certifications, bar and other professional activities and scholarly lectures and writings, just to name a few.

Bruce Sires Interviewed on KTLA-TV News on Child Labor Laws in Entertainment Industry

2012-02-10T10:18:00.000-08:00

Bruce Sires was interviewed by Manny Medrano for his "Inside the Law" segment on KTLA-TV Channel 5 News about the rights of child actors here in the entertainment capital of the world. Bruce states that child actors have a lot of rights.

http://www.youtube.com/user/ValensiRosePLCLaw

If you have any questions regarding child labor laws in the entertainment industry and sports, please contact Bruce Sires.

How Does A Studio Protect Itself When the Hot Young Star It's Hired Starts Filming and the Deal Goes Awry?

2012-02-06T11:46:00.000-08:00

By Bruce Sires

Your studio has hired one of the most sought after young minor actors to star in the next blockbuster movie for the summer of 2013. Not only that, but the studio has paid top dollar for this bankable up-and-coming young star. The actor loves the script and particularly his part in it. Because minors can unilaterally avoid (disaffirm) a contract, you've had the contract approved by the court. Court approval of employment contracts for minors employed in entertainment will protect the studio. And now, filming is about to start. Of course, over the past six months the writers have been tinkering with the script, and when the minor actor, and perhaps his parents, see the re-write, they are beside themselves with the precarious scenes they have written for him. All of the talk about how much these scenes will advance his career fall on deaf ears and both sides enter into lengthy settlement negotiations which result in a deal. But, the attorneys in Business and Legal Affairs tell you that the statutes which allow you to have a minor's employment contract approved by the court to avoid disaffirmance do not apply to the settlement of a contract dispute. Can you protect the settlement from disaffirmance?

Yes, you can. There is a statutory procedure for the approval of settlements with minors, and there are form petitions and orders which must be used to obtain that court approval. This procedure protects both the studio from the minor's right to disaffirm and the minor by preserving the money or property received until the minor reaches age 18. However, the forms, as you'd quickly discern, are designed for personal injury and medical malpractice settlements, not for contract disputes! Because of this, the forms require fitting a square peg into a round hole and that requires the skill of a practiced expert. In cases where the dispute cannot be settled by agreement and the matter is litigated in a civil action, the court hearing the suit may apply the same statute.

Two other issues need to be considered before making the request to the court. How will the court protect the money received until the minor attains age 18; and, when you're dealing with a popular and well known individual, how can you keep the actor's name out of the courtroom and the press?

The rules of court provide for filing under seal, so that the public documents have names and other identifying information redacted, such that only the judge, hearing the matter, will know the true identity of the minor and the minor's family. The process is simple, but requires a lot of paper. The petition is initially filed totally redacted, along with the complete, unredacted petition left with the court in a sealed envelope for the judge's eyes only. The petition and envelope are accompanied by an application requesting the court to order the file sealed. If granted, the public file remains redacted throughout the process, and the actual names are never publicly revealed. If the application is denied, then the unredacted documents are taken out of the envelope, filed with the court and become public.

The money or other property to be paid to the minor is required to be placed in a protective account or trust for the minor's benefit. The petition will include a request that the money be set aside: (1) in a probate guardianship of the estate; (2) in a custodial account under the Uniform Transfers to Minor's Act; (3) in a blocked account, similar to a Coogan Trust account, with withdrawals made only upon court order; (4) in a special needs trust, where the minor has a disability; or (5) in a trust established by, or approved by, court order, and revocable by the minor upon attaining age 18. In any event, the court retains jurisdiction over the trust until the minor attains age 18. Not all of these options are available when the amount awarded to the minor does not exceed $20,000.

These provisions provide employers of minors, not only in entertainment, but also sports, and not just movie studios, with a relatively straightforward procedure to make a settlement agreement permanent for the benefit of all the parties. At the same time, they allow the court to approve a method to preserve the money for the minor. Generally, the revocable trust discussed above will provide the most flexibility. Seeking out experienced legal counsel to guide the parties through this process is essential.

For more information on settling disputes under a minor's contract in entertainment and sports or any other related questions, please contact Bruce D. Sires.

Michael Morris Interviewed on KTLA Television on Income Tax Pitfalls

2012-01-27T09:48:00.000-08:00

KTLA-TV Channel 5 Legal expert Manny Medrano interviews Michael Morris warning consumers about some pitfalls you want to avoid when filing your income taxes.

VIDEO: Tax Time Pitfalls - Manny Medrano "Inside the Law"

Formore information on the subject or any other tax related questions, please Contact Michael Morris

What You Should Know About Title Insurance (Part 3)

2012-01-23T12:22:00.000-08:00

By Laurie Murphy

In two prior blogs I discussed title insurance in general, whatit covers and what it doesn't, introduced the two types of title insuranceavailable in California (CLTA and ALTA policies) and discussed the coveragegenerally available and the exclusions which apply to a CLTA policy.

Here, I discuss generally what an ALTA policycovers. In general the ALTA policycovers everything that a CLTA policy covers, plus it also covers certain"off-record" risks not covered by the CLTA policy. The ALTA policy covers not just the owners butthose who succeed the owner by operation of law. The risks insured against include thestandard risks of incorrect vesting, undisclosed liens and encumbrances, unmarketabiltyof title, lack of lien priority, and the invalidity or unenforceability of aninsured mortgage lien on title. It alsoincludes coverage of unrecorded liens water rights, mining claims anddiscrepancies and conflicts in boundary lines and shortages in areas notreflected in the public records.

Becausean ALTA policy will provide coverage for off-record defects in title and boundaryline defects, the insurer will usually survey the property prior to issuing thepolicy. Based upon what it learns fromthe survey and/or any inspection, it can exclude certain items, e.g. an open ornotorious encroachment. The costs of thesurvey and the additional coverage provided is why the ALTA policy is more expensivethan the CLTA policy. ALTA policies aretypically used in commercial transactions.

In California, there is a hybrid CLTA/ALTA homeowner's policy availablefor owner occupied 1-4 family housing or condominium units. This policy typically costs 20% more than aCLTA policy and is generally only available for natural persons which includesa trustee. This hybrid policy inaddition to covering what a CLTA policy covers also covers adverse claims totitle or to any interest in the land or claims that limit the use of the land includingeasements, claims based upon leases, contracts or options, claims based uponforgery or impersonation, neighboring structures encroaching upon the land aswell as the cost of removing encroachments on neighboring land or easements,CC&Rs violations, violations of building permit laws, subdivision laws orregulations and zoning laws.

If you have any questions regarding title insurance, please contact: Laurie Murphy

IRS Reopens Offshore Voluntary Disclosure Program

2012-01-19T09:58:00.000-08:00

by Geoffrey Weg

On Jan. 9, 2012, the Internal Revenue Service ("IRS") reopened the Offshore Voluntary Disclosure Program ("OVDP"), which provided taxpayers with undisclosed income from offshore accounts an opportunity to "get current with their taxes" and limit potential penalties.

IRS Commissioner Doug Shulman stated, "Our focus on offshore tax evasion continues to produce strong, substantial results for the nation's taxpayers. We have billions of dollars in hand from our previous efforts, and we have more people wanting to come in and get right with the government. This new program makes good sense for taxpayers still hiding assets overseas and for the nation's tax system."

Commissioner Shulman added, "people need to come in and get right with us before we find you," and that IRS is "following more leads and the risk for people who do not come in continues to increase."

With a few key differences, this OVDP is similar to the 2011 program, which allowed participating taxpayers to avoid potential criminal prosecution by filing missing tax returns and paying applicable taxes, penalties and interest. Unlike the 2011 program, there is no set deadline for taxpayers to apply to the 2012 OVDP. It is important to note, however, that the terms of the 2012 program could change at any time - IRS could end the program entirely at any point, or increase penalties for all or some of the affected taxpayers.

The overall penalty structure is essentially identical to prior programs, but with an increase in the highest penalty rate to 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. During the 2011 program, the highest penalty was 25 percent. Like the 2011 program, taxpayers whose offshore accounts did not exceed $75,000 in any calendar year covered by the 2012 OVDP will be eligible for a lower 5% or 12.5% penalty. In addition, taxpayers who feel that the penalty is disproportionate may opt instead to be examined.

In announcing the 2012 OVDP, IRS highlighted the success of past offshore voluntary disclosure programs, which to date have resulted in $4.4 billion in collections for the federal government from some 33,000 taxpayer voluntary disclosures. Taxpayers who have made voluntary disclosures to IRS since the closure of the 2011 program will be eligible to participate in the 2012 OVDP.

Any taxpayer who wishes to participate in the 2012 OVDP must file all original and amended tax returns and include payment for back taxes and interest for up to eight years, as well as pay accuracy-related and/or delinquency penalties.

More details will be available within the next month on IRS.gov. In addition, the IRS will be updating key Frequently Asked Questions and providing additional specifics on the offshore program.

Should you have any questions or concerns about the OVDP, please contact any of the attorneys in the Valensi Rose Tax and Wealth Planning Group for assistance.

Email: Geoffrey Weg

What You Should Know About Title Insurance (Part 2)

2012-01-10T15:40:00.000-08:00

By Laurie Murphy

In a prior blog, we introduced the two types of title insurance available in California to protect a buyer against claims related to title.

The blog discussed the coverage provided and excluded by a standard CLTA policy. A standard CLTA policy covers the property owner and the lender. It does not cover a subsequent purchaser and it does not automatically cover a trust if the insured buyer transfers title to his or her family trust. However, endorsements for such transfers are available. Typically a title insurer is not liable to the insured if the property in question is smaller than stated in the policy so long as the boundary lines are properly described in the policy. A standard CLTA policy insures the owner against any loss associated with the property not being vested in the name stated on the policy. It also protects against any losses arising out of any recorded lien or encumbrance with the exception of those which were listed on the policy.

An encumbrance refers to taxes, assessments, and all liens. Not all recorded documents, however, are encumbrances. Thus, a CLTA policy will not cover a recorded notice by the department of building and safety of a violation of building code(s). Such a violation affects the market value of the property, not the marketability of the property –i.e. title. The same holds true for environmental cleanup costs – title insurance does not cover the cost of removing hazardous waste material. A CLTA policy covers losses suffered by an insured based upon the lack of a right of access to an open street or highway. Thus, if the parcel in question is truly landlocked, the policy would cover the cost of obtaining physical access to an open street or highway. However, that policy provision is not triggered unless the parcel is truly landlocked. If the parcel has access to an open street or highway which would be impractical, difficult or expensive to create, the coverage is not triggered since access must be entirely lacking.

Standard CLTA policies expressly exclude coverage for laws, ordinances and governmental regulations (including building and zoning laws). A recorded notice of a building code violation might be covered if it was not listed as an exclusion in the policy. In addition, there is no coverage for losses resulting from title defects, liens or encumbrance created, assumed or agreed to by the insured, unrecorded but known to the insured at time of purchase and not disclosed in writing to the insurer, losses caused by title defects, liens or encumbrances created after the date of the policy or disclosed by the seller to the buyer such as unrecorded easements claimed by adjoining parcel owners which are not disclosed in the public records, nor are conflicts in boundaries or any such facts that a correct survey would disclose covered. The insured can buy extended coverage (an ALTA policy) at generally twice the premium which will be discussed in a later blog.

What You Should Know About Title Insurance (Part 1)

2012-01-04T10:36:00.000-08:00

By Laurie Murphy

When you buy real property it is customary for the purchase agreement to require that a seller also provide (as a condition for sale) a policy insuring title. What exactly is covered however by the policy that the seller provides the buyer? And, more importantly, why should you, the buyer care? There are generally two kinds of policies that cover buyers of California real estate. The first is called a California Land Title Association Policy (referred to as a CLTA Policy). The second is an American Land Title Association Policy (referred to as an ALTA Policy).

The CLTA policy is more restrictive than the ALTA policy which typically includes a survey of the property's boundaries, is more expensive and takes longer to obtain. The basic difference between the two polities is that the CLTA policy primarily insures the buyer against title defects discoverable only through an examination of the public records.

An ALTA on the other hand policy extends to certain off-record title defects. These off-record title defects can include building permit violations, post–policy encroachments and forgeries. Generally a title policy will insure against defects which affect the marketability of title. Marketability of title coverage does not typically include defects which affect the market value of property. Marketability of title and market value of property two distinct concepts which buyers must understand when acquiring title insurance. In subsequent blogs, we will address these concepts as well as standard endorsements and exclusions in CLTA and ALTA policies.

Contact Laurie Murphy at mlm@vrmlaw.com

California Creates Two New Business Entities

2011-12-05T12:29:00.001-08:00

By Arlen Gunner

Governor Brown recently signed two new laws which have the effect of creating two new classes of corporations in California. These laws give for-profit corporations the ability, in certain circumstances, to engage in activities that have been traditionally reserved for non-profit organizations. These new corporations are called the flexible purpose corporation and the benefit corporation.

The Flexible Purpose Corporation (SB201)

A flexible purpose corporation is a corporation that designates in its articles of incorporation a special purpose, which may include charitable and other public purpose activities traditionally undertaken by nonprofit public benefit corporations.

A flexible purpose corporation permits its shareholders to designate its special purpose. The special purpose designation allows the board of directors to consider not only the best interest of the corporation and the shareholders, but also whether the corporation's actions will further its special purpose. The flexible purpose corporation is required to prepare an annual report which measures its success in carrying out its special purpose and report all material actions taken to carry out the special purpose. It must also prepare a current report on expenditures made in pursuit of the special purpose if the expenditures will have a material adverse impact on the flexible purpose corporation's profits. Current reports and portions of the annual report must be made publicly available on the corporation's website. An existing corporation or other business entity may convert to a flexible purpose corporation by a two-thirds vote, subject to dissenters' rights.

The Benefit Corporation (AB361)

A benefit corporation must adopt the purpose of creating a general public benefit, which is defined as a material positive impact on society and the environment. A benefit corporation may also adopt a specific public benefit from a list of seven categories identified in the law. In carrying out their fiduciary duties, directors are permitted to consider the best interest of the benefit corporation, which is deemed to include the impact on employees, customers, shareholders, the community and society, and the environment. In making its assessment, a benefit corporation must use a third-party standard selected by the boards of directors. This corporation type must also prepare an annual benefit report explaining, among other things, whether the corporation pursued a general public benefit, the ways in which it pursued that public benefit, and the extent to which those benefits were created, as measured by the third-party standard. The corporation's annual benefit report must be made publicly available through its website. Existing corporations and other business entities may convert to a benefit corporation by a two-thirds vote, subject to dissenters' rights.

Whether or not there is an advantage to using either of these new corporations will have to be determined over time. Both laws are very detailed additions to the Corporations Code and should be thoroughly reviewed.

SB201 relates to the Flexible Purpose Corporation and AB361 relates to the Benefit Corporation. Both laws go into effect on January 1, 2012. For more information or to evaluate the pros and cons of these new corporate structure, please contact me arg@vrmlaw.com

Estate Planning Alert: Potential Changes from the Congressional Super Committee

2011-11-18T15:18:00.000-08:00

by Geoffrey Weg

The Joint Select Committee on Deficit Reduction (the "Super Committee"), a 12 member bipartisan Congressional committee, is scheduled to announce its proposals on Wednesday, November 23rd for reducing the national deficit by at least $1.5 trillion over the next 10 years. While the Super Committee's proposals are technically secret until November 23^rd, rumors have begun to circulate among tax and financial advisors about possible changes to the current estate, gift and generation-skipping transfer tax laws, including a proposed early reduction of the $5 million estate, gift, and generation-skipping transfer tax exemption. The exemption is currently set at $5 million through December 31, 2012, after which it will revert to $1 million barring further congressional action. Other rumored changes include a return to higher estate, gift, and generation-skipping transfer tax rates, imposing minimum terms on grantor-retained annuity trusts, and limiting or eliminating valuation discounts for minority interests in entities. It is possible that the Super Committee may recommend these changes to become effective as early as November 23, 2011.

Although rumors of an immediate reduction in the Federal gift tax exemption are unsubstantiated and information on specific proposals of the Super Committee is not yet available, the possibility of such a reduction has been widely discussed by practitioners around the country. Therefore, we wanted to share this information with you in the event you or your clients are considering utilizing your $5 million Federal gift tax exemption. If you or your clients are considering making any gifts in 2011, it may be advisable to complete these gifts prior to November 23rd, if possible. Additionally, you may want to consider accelerating gifts that you otherwise planned to make in 2012 to avoid any potential impact from any Super Committee proposals.

Until Congress enacts a long-term extension or reformation of the current estate and gift tax system, the rumors and speculation will persist. Rather than add to the speculation about what might happen, we note the following points and opportunities that indicate now is a good time to take advantage of the current $5 million gift tax exemption:

Even without any legislative action, under current law the current $5 million exemption and 35% rate will revert at the end of 2012 to a $1 million exemption and a 55% rate.
In recent years, the Treasury Department has consistently recommended changes to substantially reduce the effectiveness of certain widely used planning techniques, including a significant reduction in the availability of valuation discounts applicable to transfers of limited partnership interests and other minority interests in family controlled entities, and an increase in the minimum term of grantor retained annuity trusts ("GRATs') from two to ten years.
The benchmark interest rates that are required to be used in many estate planning transactions are at historically low levels. For example, the November rate used for GRATs is 1.4%, while the November rate for annual interest paid on a short term private loans is 0.19%.
The current volatility in the financial markets may create favorable valuations of interests in closely-held entities for transfer tax purposes.

Many observers consider a sudden adverse change in legislation unlikely. However it would be wise to remember that the legislation implementing the current favorable structure was enacted suddenly last December without any significant public discussion, and was not anticipated by many observers. With the current emphasis on deficit reduction, it is plausible that Congress could very quickly enact legislation that would have substantial adverse impacts on the estate and gift taxes applicable to standard wealth-transfer techniques.

Geoffrey Weg to Speak at Cal Poly Pomona Inaugural Tax Institute Seminar On October 28

2011-10-25T11:28:00.000-07:00

Geoffrey A. Weg is a tax attorney with the law firm where he practices tax and estate planning, tax controversy, and general corporate law. He is currently on the Executive Committee of the California State Bar Taxation Section, and also the current Chair of the Taxation Section of the Beverly Hills Bar Association. He has received an LL.M. in Taxation at Loyola Law School, graduating with Distinction.

Cal Poly Pomona Inaugural Tax Institute
Date: October 28, 2011
Time: 7:30am – 5:00pm
Location: Sheraton Fairplex Hotel and Conference Center
601 West McKinley Avenue Pomona, California, 91768
To register logon to Cal Poly Pomona Inaugural Tax Institute
Or call the Accounting Department at (909) 869-2327 Mon-Fri, 9 a.m.- 4:30 p.m.
or email nsmiller@csupomona.edu

Business Alert: SB 459 Imposes New Substantial Penalties For Miscategorizing Independent Contractors

2011-10-21T10:00:00.000-07:00

by Gregory Gorman

Many businesses seek to cut costs by categorizing employees as independent contractors. By doing so, they avoid additional employment costs such as benefits, worker's compensation and unemployment. Governor Brown recently Senate Bill 459 into law (among other employment bills) which makes employers liable for civil penalties of $5,000 to $15,000 for each violation of “willful misclassification” of employees as independent contractors. In addition, if it is found that the employer has a pattern and practice of misclassifying independent contractors, the penalties can increase to a minimum of $10,000 to $25,000 per violation. The new law adds Sections 226.8 and 2753 to the Labor Code.

In addition to the substantial civil penalties, employers who violate the law are also required to post a notice on their website, or if the employer does not have a website they must post it in an area available to employees and the general public, for one year about the violation.

The new law also

Prohibits the willful misclassification of workers as independent contractors to avoid properly classifying them as employees.
Prohibits charging misclassified workers any fees or making deductions from their compensation where those acts would have violated the law if the individuals had not been mischaracterized.
Gives the Labor and Workforce Development Agency authority to assess penalties and take other action against violators, and requires it to report violators who are licensed contractors to the Contractors' State License Board; further it requires the Contractors' State License Board, once notified, to bring an action against the contractor.
Subjects non-lawyers who advise an employer to misclassify a worker to joint and several liability with the employer.

This new law makes it of paramount importance that employers exercise caution when characterizing workers as independent contractors.

Gregory G. Gorman Joins the Litigation Group

2011-10-06T13:55:00.000-07:00

We are pleased to announce that Gregory G. Gorman has joined the firm. Mr. Gorman is a commercial, real estate and employment law trial lawyer who for 25 years has successfully represented numerous clients in high profile cases and multi-million dollar claims.

“I’m thrilled to be joining a team of such talented and accomplished lawyers,” said Mr. Gorman. “They’re truly a group of outstanding attorneys that not only inspire me, but most importantly, motivate me to continue to excel at law.”

Mr. Gorman has been retained as trial counsel in numerous commercial real estate and employment law cases. He uses his litigation expertise as a tool to obtain efficient results for his clients. His high-profile cases include: A jury awarded his client more than $8 million for fraud; he defeated a claim for negligent misrepresentation and breach of contract even though his client did not disclose all of the problems challenging a shopping mall; and he defeated a wrongful termination claim in which the plaintiff and defendant were having an affair.

Mr. Gorman’s business and strategic acumen is polished from years of practical experience as managing counsel of a Fortune 400 company and general counsel to several start-up and mid-sized companies. Mr. Gorman recently assisted a client through two workforce reductions and the termination of underperforming employees within the scope of the ADA, FMLA and ADEA – all without a lawsuit. He has represented both plaintiffs and defendants in wage and hour class actions.

Mr. Gorman teaches executive legal and ethical decision making, business modeling and business law in an organizational consulting doctoral program at Phillips Graduate Institute. He has been hired to train boards regarding their responsibilities and turnaround strategies.

He was recognized as a "Super Lawyer" for his work in real estate and litigation before becoming managing counsel in charge of development for Yum Brands, which owns the Taco Bell, Kentucky Fried Chicken and Pizza Hut brands, among others.

Mr. Gorman earned a Juris Doctorate from the Northwestern University School of Law in 1987 and a bachelor’s degree in journalism from Northwestern’s Medill School of Journalism in 1984.

Contact Mr. Gorman

IRS Extends Deadline for Offshore Voluntary Disclosure Initiative Through September 9, 2011

2011-08-30T10:39:00.000-07:00

by Geoffrey Weg

Due to the potential impact of Hurricane Irene, the IRS has extended the due date for Offshore Voluntary Disclosure Initiative ("OVDI") requests until September 9, 2011. The IRS has also significantly reduced the amount of information required by the revised deadline.

For those taxpayers who have not yet submitted their request and any documents, identifying information must be submitted by September 9, 2011. This includes name, address, date of birth and Social Security number and as much of the other information requested in the Offshore Voluntary Disclosures Letter as possible.

A 90-day extension for submitting the complete voluntary disclosure package of information is available. Such requests must include a statement of those items that are missing, the reasons why they are not included, and the steps taken to secure them. Requests for extensions must be made in writing and sent on or before the September 9 deadline.

The experienced tax attorneys of the Valensi Rose, PLC Tax & Wealth Planning Group are available to advise any taxpayers who may have an offshore account filing requirement or who may be eligible for participation in the OVDI.

Additional Relief For Short Sellers Of Real Property

2011-07-22T13:42:00.000-07:00

By: Arlen R. Gunner, Esq.

Numerous homeowners have found themselves in the unenviable position of having to sell their homes for less than the amount they owe. This situation is commonly called a short sale. On September 30, 2010, the California legislature provided some initial relief for short sellers who obtained the consent of the First lien holder to the short sale. The law that became effective on that day created a new Section 580(e) to the California Code of Civil Procedure which required that no judgment can be rendered for any deficiency under a note secured by a First deed of trust or First mortgage for a residence in any case where the owner sells the residence for less than the amount owed at the time of sale so long as the written consent of the lender is obtained. Once the lender gives its written consent, it must accept the net sale proceeds as payment in full, and must fully discharge any remaining indebtedness on the First deed of trust or First mortgage. An exception to this rule occurs if the borrower commits fraud or waste with respect to the residence.

This statute, although well intended, did not protect the borrower in situations where the borrower had also placed a Junior lien on the residence. To correct this problem, the legislature passed an amendment to Section 580(e) on July 15, 2011 which expands Section 580(e) to prohibit a deficiency judgment upon all notes secured by deeds of trust or mortgages which encumber a residence. In any case where the borrower sells a residence for less than the remaining amount of all loans, and at the time of the sale it has the written consents of all lenders, then no deficiency judgment can be obtained against the borrower by any lien holder. The bill also provides that when the note is not secured solely by a deed of trust or mortgage on a residence, no judgment shall be rendered for any deficiency if the borrower sells the residence for a sales price less than the amount owed in accordance with the written consent of the lenders. Additionally, the law prohibits the lender from requiring that the borrower pay any additional compensation or consideration aside from the proceeds of the short sale in exchange for the written consent of the lender.

This new Section only applies if the borrower is an individual. It is not available if the borrower is a corporation, limited liability company, limited partnership or a political sub-division of the state. Nor shall this Section apply to any deed of trust, mortgage or other lien given to secure the payment of bonds or other evidence of indebtedness authorized or permitted to be issued by the Commissioner of Corporations or that is executed by a public utility.

The provisions of this Section cannot be waived and any attempt to do so will be void as against public policy.

This new statute, as amended, does not change existing law where no deficiency can be obtained in connection with the foreclosure of a purchase money loan or a loan that is secured by deed of trust or mortgage that is foreclosed pursuant to a power of sale.

Bruce D. Sires to Speak on Panel at Upcoming IRS Valuation Summit

2011-07-08T14:05:00.000-07:00

Thursday, August 25, 2011 at 8:00 AM to 5:00 PM at the Hyatt Regency Century Plaza, Los Angeles
Bruce D. Sires will be a featured panel speaker at the upcoming IRS Valuation Summit presented by the Southern California Chapter of the Appraisal Institute. The Summit will feature several speakers and panels discussing a broad range of topics, including Bruce's panel on "Progressive Planning Strategies for Real Estate and Closely Held Businesses."
For more information on speakers and topics or to register for the event, click here .

Gary F. Torrell's Article "Winning Strategies For Resolving Consumer Complaints" Published in The Corporate Counselor

2011-06-23T09:18:00.000-07:00

Gary F. Torrell was recently published in the Summer 2011 edition of "The Coporate Counselor," a publication for in-house counsel provided by The Corporate Law Departments Section of the Los Angeles County Bar Association. Gary was invited to write the keystone article for the Summer issue because of his background as in-house counsel for several corporations.

Gary’s article, entitled "Winning Strategies For Resolving Consumer Complaints," discusses the challenges of defending a corporation against a single or small group of consumers. The article also gives some valuable tips and tricks to assist in-house counsel with navigating the delicacies of defending their company against consumer complaints.

To the full article...

Entrepreneurs Face New Challenges When Selling Their Businesses

2011-06-03T09:47:00.000-07:00

By Arlen Gunner

When an entrepreneur sells his business, a lot of things change; not just for the company, but for the entrepreneur personally as well. Regardless of whether the entrepreneur is required to stay involved with the daily operations of the business, or whether he is given a consulting arrangement, there are several factors an entrepreneur should be prepared to face before he signs on the dotted line.

In the sale of a private business, the acquiring party may view the continued presence of the entrepreneur, who presumably commanded the loyalty of his previous employees, as an obstacle for the acquiring company to imprint its own management style on the business and its employees. Many times, consulting or employment agreements with the previous owner do not work out due to the inability of the entrepreneur to adjust to the new set of circumstances in which he finds himself, mainly, no longer in complete control. The adjustment to not being the boss anymore can be very difficult. This, along with the loss of a place to go every day, could be a very real struggle for the seller to contend with.

On the other hand, if it turns out the acquirer is counting on the continued presence of the seller (at least in the beginning) to assist with business operations, the acquirer and the entrepreneur should have a serious discussion prior to the closing of the transaction about the exact role that the entrepreneur will play post-closing. It should be made very clear, not only to the entrepreneur, but also to the employees, exactly who will be running the business and who is at the top of the hierarchy. An ambiguous structure could hinder the integration of the business into the acquiring company. The failure to do appropriate preplanning can cost all the parties involved, so it is imperative that such planning occur prior to the closing.

To the extent that the selling entrepreneur will remain with the company, it is important for him to have a written agreement, which is as detailed as possible, setting forth his duties and authority post-closing. It is wise to have counsel review these documents to make sure that there is no ability of the acquiring company to subvert any authority granted to the entrepreneur post-closing. There should be prohibitions set in place that prevent the acquirer from diluting the seller's authority through direct or indirect means.

In the event that a foreign company is acquiring a business located in the United States, there can be not only managerial differences, but cultural differences that need to be understood and dealt with as well. It may be advisable, once the acquirer determines which senior managers they wish to retain, to have a third-party consultant brought in to analyze the cultural differences and to draw up a strategy in order to best integrate the companies.

Lastly, if the entrepreneur is in the enviable position of retiring from his business or working on a drastically reduced basis, what is he going to do with all this extra time he will have on his hands? Many times people who are creative and active businesspeople have a problem adjusting to the loss of structure usually provided by a business environment. The answer? Develop a hobby! This is a wonderful opportunity for the entrepreneur to expand on existing interests or pick up something new that will at least offer a part-time outlet for his creative energy.

Geoffrey A. Weg to Speak at Whittier Law School 2011 Annual Income Tax Seminar

2011-06-03T09:36:00.000-07:00

Friday, June 17, 2011 at 8:30 AM at Whittier Law School, 3333 Harbor Boulevard in Costa Mesa, California

Tax and wealth planning attorney, Geoffrey A. Weg, will be a featured speaker at the 2011 Annual Income Tax Seminar at Whittier Law School on Friday, June 17. The annual seminar is sponsored by the State Bar of California Taxation Section and the California Society of Certified Public Accountants (CalCPA).

This year's seminar will highlight the following topics: the IRS 2011 Offshore Voluntary Disclosure Initiative; FBAR, FATCA and the future of global information reporting; California property tax “Change of Ownership,” including when to report entity change of ownership to BOE; developments in the Office of Professional Responsibility: Practice before the IRS; mergers and acquisitions of Passthrough Entities: And “S” corporations, partnerships and LLCs.

The Program qualifies for 9 hours of CPE for CPAs; 9 hours of continuing education credit for enrolled agents; and 7.5 hours of MCLE and tax specialization credit for attorneys (including 1 hour of ethics).

Registration to this all-day event Register...

Valensi Rose Attorneys to Moderate and Speak at 2011 Entertainment Industry Conference

2011-05-27T11:31:00.000-07:00

Wednesday, June 15, 2011 at 8:30 AM to Wednesday, June 15, 2011 at 5:00 PM
Valensi Rose will make a strong showing at this year's Entertainment Industry Conference, presented by the CalCPA Education Foundation. Michael R. Morris, an active member of the conference's planning committee, will once again moderate the tax update portion of the day long event. Joining him in this session on the tax update panel will be tax and wealth planning partner Philip S. Magaram, who will contribute his expertise to this discussion on the current estate and charitable planning opportunities in the entertainment industry. Bruce D. Sires will also be speaking at the conference on the topic of children in entertainment and the various challenges and laws that go along with this special category of entertainers.

For more information on the conference and to register, click here .

Renewing Judgments

2011-05-10T14:38:00.000-07:00

By
Laurie Murphy

Don’t let time rob you of your right to enforce your judgment!

Money judgments in California are enforceable for a ten year period, during which time simple interest accrues at 10% per annum. However, unless you renew it, a judgment creditor cannot enforce a judgment after the ten year period has expired. This predicament can easily be avoided since renewing a judgment is very straightforward. The judgment creditor simply needs to fill out and file an application for renewal of the judgment and file it with the court. In that form, the judgment creditor lists the original judgment amount plus any costs incurred after the original judgment was entered plus the accrued interest.

The judgment creditor does not need to wait until the ten years is about to expire in order to review the judgment. In addition, if the case in which the judgment was entered provided for the recovery of attorney’s fees, the judgment creditor can recover the attorney’s fees incurred in enforcing the judgment as well and add them to the original judgment along with interest and other costs. Finally, unlike some other states, there is no limit to the number of times that a judgment can be renewed in California. Even if the judgment debtor moves out of state, most other states permit the judgment entered in California to be enforced in the new state. Similarly, in California, a judgment entered in another state can be enforced if the judgment debtor moves to California.

Michael Morris Interviewed About Music Entertainment Law

2011-05-09T14:40:00.000-07:00

Michael Morris was recently interviewed on the Experts and Leaders Network on Big Media USA, an Internet broadcasting company. Mr. Morris has blended his tax law expertise and a passion for music and entertainment into a practice that is quite unique. His practice areas include tax controversy, transactional matters, estate planning, music, entertainment and general business law.

Although he has a variety of business and tax clients, the entertainment industry is a niche in which Mr. Morris has developed a strong loyal base. His interest in music and years of servicing clients in entertainment has allowed him to build a solid reputation for providing valuable and effective business solutions in such areas as tax planning, copyrights and contractual matters. His entertainment clients include production companies, post production houses, personal managers, talent agents, industry executives of major studios, and numerous recording artists, including Alice Cooper, Grammy winner Kurt Elling, Ministry and La Toya Jackson.

Click on this picture frame to hear the interview:

Interview with Bruce D. Sires in The National Law Journal

2011-04-22T09:05:00.000-07:00

Bruce D. Sires was recently interviewed by the National Law Journal on the subject of child actor laws, specifically the Coogan Law. Bruce specializes in Coogan Trust Accounts, which hold the required 15% of a minor actor’s earnings until they reach the age of 18. The article was released concurrently with a speech Bruce gave on April 20th on the same subject at the Beverly Hills Bar Association.
Click the link below to read the full article.
Coogan Law Loophole Leaves Child Actors At Financial Risk. pdf

Bruce D. Sires to Speak at BHBA Seminar on Child Actors

2011-04-08T13:32:00.000-07:00

Wednesday, April 20, 2011
LAWRY'S Restaurant
100 North La Cienega, Beverly Hills
Lunch & Registration: 12 Noon; Program 12:30 p.m. - 2:00 p.m.

Bruce D. Sires will be a featured speaker at an upcoming Beverly Hills Bar Association lunch seminar entitled "Child Actors - What's All The Fuss?: A Look at the Current State of Laws and Regulations." The seminar will review and discuss recent changes in the industry governing the employment of minors in entertainment.

Bruce will be speaking on the proper handling of a minor's earnings under the Coogan Act, specifically the 15% employers are required to deposit into a Coogan Trust Account for the benefit of the minor after age 18.

For more information on this event or to register, please click here.

Five Valensi Rose Lawyers Designated 2011 Super Lawyers

2011-02-03T10:42:00.000-08:00

Valensi Rose is pleased to announce that five of its attorneys were designated "Super Lawyers" among Southern California lawyers for 2011. Only 5 percent of the lawyers in the state are awarded this designation. Please join us in congratulating our attorneys on their achievement.

Philip S. Magaram
Estate Planning & Probate

Phil has been recognized as a Super Lawyer eight years in a row: 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011

Michael R. Morris
Tax

Michael has been recognized as a Super Lawyer for his sixth year: 2006, 2007, 2008, 2009, 2010, 2011.

M. Laurie Murphy
Business Litigation

Laurie has been recognized as a Super Lawyer in this practice area for 2011.

Bruce D. Sires
Estate Planning & Probate

Bruce has been recognized as a Super Lawyer for his fifth year: 2004, 2005, 2006, 2009, 2011.

Peggy Lennon
Estate Planning & Probate

Peggy has been recognized as a Super Lawyer for her sixth year: 2004, 2005, 2006, 2007, 2009, 2011.

Gary Torrell To Give Lecture at Santa Clara Law School on Physician Leases

2011-01-18T10:01:00.000-08:00

Gary Torrell will be a guest lecturer at the Santa Clara University School of Law in Northern California on February 15, 2011, to discuss the tension between commercial realities and federal law when a hospital is the landlord in medical office buildings leased to physicians.

Gary is the guest of the vice president and general counsel from one of Valensi Rose’s largest and valued nonprofit healthcare clients. Gary was invited to share his expertise on leasing with students who are taking a course in Health Law.

Founded in 1911, Santa Clara University School of Law is one of the nation’s most diverse law schools. They offer graduate degrees in international law and intellectual property law and certificates in intellectual property law, international law, and public interest and social justice law.

Autumn Ronda to speak on Ethics on Panel at CalCPA Joint Meeting, January 12, 2011

2011-01-07T12:40:00.000-08:00

Valensi Rose Tax and Estate Planning associate, Autumn Ronda, will be a guest speaker on a panel at an upcoming joint meeting between CalCPA and the Los Angeles Young Tax Lawyers. As the Chair of the LA YTL association and a CalCPA Steering Committee member, Autumn brings a young and fresh perspective to both organizations.

She was invited to speak on the panel in order to share her perspective on the ethical issues she faces as a young estate planning attorney. The seminar, entitled "Ethical Implications of Estate Planning Practice," is being offered by CalCPA and is open for registration to all.

Click here for more information and to register for the event.

Bruce D. Sires to Moderate CEB Seminar on Practical Problems in Probate - January 21, 2011

2011-01-06T11:02:00.000-08:00

Friday, January 21, 2011

Bruce Sires will once again be moderating the popular CEB seminar entitled "Practical Problems in Probate." The seminar is best suited for those with some probate experience and covers the following topics:

How to Avoid Common Litigation Issues
Contesting Appointment of Personal Representative
Family Protection Statutes
Co-Ownership Issues
Determining Entitlement Under Probate Code §21700
Heirs of Predeceased Spouse
Disputes over Value and Disposition of Tangible Personal Property
Creditor Claims
Simultaneous Trust Administration (Heggstad Petitions)
Attorney's Compensation: Statutory and Extraordinary Fees

Bruce will moderate the Irvine and Los Angeles seminars on January 21, 2011 and January 28, 2011, respectively.

Click here for more information or to register for the program.

President Obama and Republicans have reportedly reached an agreement on some of the burning tax issues.

2010-12-07T13:41:00.000-08:00

Posted by Autumn Ronda

The proposal boils down to a two-year extension of the Bush tax cuts. President Obama made it clear in the statement he made after Monday night’s compromise, that he doesn't favor extending tax cuts for the upper tax brackets, but that he compromised in order to keep the tax breaks for the middle class. Although the agreement on these tax issues still needs to be introduced as legislation, voted on by Congress and signed by the President (meaning that the agreement could vary from its reported form), President Obama stated that legislators "have arrived at a framework for a bipartisan agreement," and it is expected that the proposed legislation will look something like the following…

- The estate tax will be reinstated with a 35 percent rate on estates worth more than $5 million for individuals and $10 million for couples;

- The current tax rates from 10% to 35% will remain intact for the next two years, rather than reverting back to 15% to 39.6%;

- The section 179 deduction will be expanded to allow businesses to completely write off their investments next year;

- The top rate of 15 percent on capital gains and dividends would remain in place for 2011 and 2012;

- There will be a reduction in the employee-portion of Social Security taxes to 4.2% from 6.2%.

- The child tax credit will continue to be $1000, rather than reverting back to $500;

- The earned income credit will continue to provide tax credits for a three dependents, rather than reverting back to a maximum of two dependents;

- The American opportunity credit for college expenses will be extended;

- Unemployment insurance benefits will be extended for 13 months.

Contact Autumn Ronda...

Arlen Gunner to Hold Workshop on Nonprofits - January 12

2010-11-23T12:26:00.001-08:00

Nonprofit management and legal representation are becoming increasingly critical to the survival of nonprofits. With the governance and legal landscape regarding non-profits changing, nonprofit professionals and volunteer leaders need to broaden their skills set and learn about these critical areas so that you can provide accurate and up to date business advice for your clients. If you have ever been on a board or thinking about being on a board, you need to attend this session (Part 2 of 2).

Topics include:
· REGULATIONS, THE IMPACT OF THE 990S
· NON-PROFITS AND UNRELATED BUSINESS INCOME TAX
· EVALUATING NON-CORE REVENUE STREAMS
· USE OF DONOR-ADVISED FUNDS
· MERGERS, ACQUISTIONS AND COLLABORATION, RECAPILIZATION, SALE OF ASSETS
· SET UP FOR-PROFIT ENTITIES FOR A NONPROFIT

Speakers:
Arlen Gunner, Esq.
Managing Partner, Valensi Rose, PLC

Bob McKim
McKim Nonprofit Consulting

Time and Location:
Wednesday, January 12, 2011
12:00 p.m. - Registration and Lunch
12:30 p.m. - 1:30 p.m. - Program

Beverly Hills Bar Association
300 S. Beverly Drive, #210, Beverly Hills
Beverly Hills, California 90211
(Public parking at 216 S. Beverly Drive)

Price:
$50 for BHBA Business/Immigration Section Members who pay in advance*
$60 for BHBA Members who pay in advance*
$75 for all Non-BHBA Members who pay in advance*
$30 for BHBA Law Students who pay in advance*
($10.00 more at door for all)
FREE for members of The Order of Distinguished Attorneys

*Refund with 48 hours notice - Raincheck with 24 hours notice

Section Chair: Leigh Leshner, Esq.

MCLE CREDIT: This activity has been approved for Minimum Continuing Legal Education credit by the State Bar of California in the amount of 1.0 Hour and the Beverly Hills Bar Association certifies that this activity conforms to the standards for approved education activities prescribed by the rules and regulations of the State Bar of California governing minimum continuing legal education.

To Register Click

Arlen Gunner - Interview on Big Media USA

2010-11-03T12:27:00.001-07:00

Trivedi v. Curexo Technology: a warning about pre-dispute employment arbitration agreements

2010-10-25T13:41:00.000-07:00

Posted by David Krol

Take a look at your pre-dispute employment arbitration agreements. Do they have standard prevailing party attorneys’ fees provisions and provisions which purport to allow the parties access to the courts for injunctive relief? If they do, and if the arbitration forum’s applicable rules have not been provided to the employees, these agreements may be unenforceable – rendering the employer liable for attorneys’ fees if the employer attempts to enforce such agreements. That was the result in Trivedi v. Curexo Technology Corporation (Sept. 28, 2010, RG09459748) ____ Cal.App.4th _____ (2010 WL 3760224).

In Trivedi, the Court of Appeal found that a pre-dispute employment arbitration provision was procedurally unconscionable, because it was prepared by the employer and was a mandatory part of the arbitration agreement, but the employer failed to provide the employee with a copy of the arbitration rules under which the employee would be bound.

The Court of Appeal also found that the clause was substantively unconscionable, because it did not limit the employer’s right to recover attorneys fees to instances where the employee’s claims were found to be “frivolous, unreasonable, without foundation, or brought in bad faith,” which is the standard under California case law, and because it was far more likely that the employer, not the employee, would seek to enforce an injunctive relief provision in court.

After refusing to enforce the provision, the Court of Appeal awarded costs and attorneys’ fees to the employee on appeal.

Pre-dispute employment arbitration agreements which purport to expand employers’ rights to attorneys’ fees, and which contain injunctive relief provisions, and which are executed without ensuring that the employees have received the rules of the applicable arbitration forum, may be unenforceable in light of this new decision.

Contact David Krol

PRESS RELEASE: Gary Torrell Wins La Toya Jackson Royalty Dispute

2010-08-11T13:18:00.000-07:00

Valensi Rose, PLC partner Gary F. Torrell prevailed on behalf of his client La Toya Jackson by successfully opposing a trustee's motion to obtain additional royalties due to the internationally renowned entertainer.

Mr. Torrell said, "This was a very challenging case, to convince a judge in New York that Ms. Jackson's creditors should not obtain additional royalties, even though they had not received any payment. Luckily, the judge agreed with my arguments and issued a well-reasoned opinion in favor of our valued client."

A written trust agreement allowed the trustee to collect Ms. Jackson's royalties for a specified time period, pay the priority claims of the trustee and his lawyers, and then distribute the balance to certain creditors. Because the priority claims exceeded $780,000, they were expected to consume nearly all of the royalties collected during the term of the creditor trust. As a result, the trustee filed a motion seeking to extend the term for an additional five years and thereby obtain additional royalties for the benefit of creditors.

On August 5, 2010, the Honorable James M. Peck issued a published opinion denying the motion. The court agreed with Mr. Torrell's argument that it would be unfair and inequitable to Ms. Jackson to grant the motion, despite no distributions to creditors, because Ms. Jackson had honored the trust agreement and was not responsible for the trustee's high fees, which had consumed the allocated royalties.

The judge also interpreted the trust agreement to not permit an extension of the term to allow creditors to obtain additional royalties otherwise due to Ms. Jackson.

Contact Gary Torrell...

Warning to California Employers

2010-08-11T13:07:00.000-07:00

Posted By

Laurie Murphy

The federal courts have long held that "stray remarks which are defined as isolated discriminatory comments unrelated to the decision-making process were not admissible to prove employment discrimination. The California Supreme Court recently (in ruling against Google in an age discrimination case) held that stray remarks can be considered in the totality of the circumstances of the case. Bottom line, this will make it even harder for employers to defend employment discrimination cases prior to trial.

Attorneys Beware

2010-08-09T14:49:00.000-07:00

By
Laurie Murphy

A recent California appellate decision holds that an attorney who entrusted a filing with a paralegal who did not get the papers filed timely did not adequately supervise his employee and was therefore not saved when the trial court found for the defendant because the opposition to the motion for summary judgment was not timely filed. The trial court did not buy plaintiff's counsel's argument that the late filing was the result of surprise, mistake or excusable neglect. The court of appeals agreed and found that it was inexcusable neglect for the attorney to entrust the preparing and filing of the opposition to a summary judgment motion to his paralegal who took the file on vacation with her and did not file it timely.

Should Chipotle Lower Their Counters?

2010-07-30T13:53:00.000-07:00

Posted By
Lynda Chung

In a decision that came down a few days ago, the Ninth Circuit Court of Appeals held that Chipotle Mexican Grill violated the Americans with Disabilities Act because its food preparation counters were too high for for wheelchair-bound customers, meaning that such customers could see the food on display or how it was assembled. (Antoninetti v. Chipotle Mexican Grill, Inc. (2010) 2010 DJDAR 11537.)

Both the disabled plaintiff and Chipotle agreed that all, except for the tallest wheelchair-bound persons, could not see the food preparation counter or the food on display, such as salsa, guacamole, cheese, lettuce and tortilla. The Ninth Circuit found that Chipotle's 45-inch tall wall violated federal regulations which require that a main counter height not exceed 36 inches.

While I sympathyze for the plaintiff for not being able to see the food preparation, I wonder whether there were reasons why the counter in the restaurant was 45-inch tall. Perhaps that was the optimal height for the average-height employee assembling food while standing. Maybe federal regulations should not apply to this scenario as lowering the counter may create problems for the workers who are on their feet all day wrapping burritos.

Tax Law Update

2010-07-19T10:22:00.000-07:00

Posted by Michael Morris

Tax laws are always changing. Here are some of the most recent changes that may affect you and your clients.
Read...

Dynasty Trusts: The Power Of Compounding And Avoiding Estate Tax

2010-07-01T15:19:00.000-07:00

By Geoffrey A. Weg

Clients who engage in estate planning are generally thinking long-term, and want to provide financial benefits for future generations. The dynasty trust is a uniquely powerful estate planning tool to achieve these goals.

What is a Dynasty Trust?
Simply stated, a dynasty trust is an irrevocable trust with an extremely long or unrestricted term. The trust is governed by the terms initially established by the grantor, and is designed to hold assets in trust without direct ownership of the trust assets being transferred to any beneficiary. Successive generations of beneficiaries may receive distributions of income and/or principal. For transfer tax purposes – gift tax and generation skipping transfer tax ("GST" tax) – trust assets are usually valued at the time of transfer into the trust. The trust assets and any future appreciation thereon are generally exempt from estate tax.

Read Complete Post...
Contact Geoffrey Weg

Paying for Health Care Reform

2010-06-17T15:55:00.000-07:00

Posted by Autumn Ronda

Starting in 2013, taxpayers at higher income levels will feel the pinch of two new tax hikes included in the Health Care bill that passed in March. The first is a .9% increase in the Medicare tax on wages over $200,000 ($250,000 in the case of a couple). Generally, every wage earner owes a 2.9% Medicare tax, which is split between the employee and the employer. Under the new tax, the additional .9%, which brings the total Medicare tax for these high earners to 3.8%, is payable entirely by the employee.

The second tax contained in the bill is a Medicare tax on investment income at a 3.8% flat rate for taxpayers with a modified adjusted gross income of $200,000 (or $250,000 for couples). Investment income is a broad category including, but not limited to, most interest, rents, dividends, royalties, capital gains from the sale of a stocks and bonds, and passive rental and business income. Even any taxable gain on the sale of a home is hit by this new tax. The tax on investment income not only affects individual taxpayers, but also can have a significant effect on the income taxes owed by trusts and estates.

Congress’s effort to raise revenue to pay for the costly healthcare bill has made two very significant changes to the tax system. Historically, the tax on wages to pay for Medicare has been a flat tax and have only been imposed on earned income. The new .9% tax on wages will impose a progressive Medicare on the previously flat tax, and the new 3.8% tax will impose a Medicare tax on investment income which previously did not exist.

Contact Autumn Ronda

Tax and Business Attorney Autumn Joins Firm

2010-06-17T14:09:00.000-07:00

We are pleased to announce that attorney Autumn Ronda has joined their firm as an associate, working in the Tax & Wealth Planning, Entertainment Group and Transactional Group practice areas.

Managing Partner Arlen Gunner said, “She is a welcome addition to our team of tax and business professionals that service a variety of individual, business and nonprofit clients.”

The San Francisco Bay Area native earned her law degree from Southwestern University School of Law while concurrently earning her M.B.A. at Loyola Marymount University. After passing the bar, Autumn joined a small entertainment and real estate development company as in-house counsel. Subsequently, she elected to continue her legal education earning a Master of Laws in Taxation.
Contact Autumn Ronda

Beverly Hill Bar Association Newsletter:

2010-04-14T15:21:00.000-07:00

Environmental Due Diligence Critical In Any Real Estate Transaction

2010-03-26T13:29:00.000-07:00

By Arlen Gunner

Due to the fact that any person or entity that takes title to real property has essentially perpetual liability for environmental matters (with a few very narrow affirmative defenses that are difficult to prove) under both federal and state of California laws, it has become increasingly important that some level of environmental due diligence should be performed as a condition to closing a transaction involving real property.

Several different situations concerning the environmental condition of real property that was the subject of a long-term ground lease, where one of our clients was the lessor and another was contemplating becoming the lessee, have crossed my desk in recent months. I have also addressed situations on behalf of certain nonprofit clients who were scheduled to receive real property as charitable donations. In reviewing the environmental condition of the properties involved in the aforementioned situations, the environmental condition of each of the separate properties was a determinative factor as to whether or not the transaction would proceed.

One of our clients held title to real property for a long period of time upon which the client was operating a profitable business. Due to overtures made by a very financially stable potential lessee, a long-term ground lease was contemplated and a great deal of time was spent negotiating the proposed lease. The lessee had a contingency in the lease running in its favor which stated that the environmental condition of the property had to be acceptable to the lessee in its sole and absolute discretion.

When an environmental inspection was conducted it was discovered that there was underground hazardous material migration affecting our client's property, which emanated from a nearby gas station. Our client also was informed that the Regional Water Control Board was already monitoring the situation and eventually included our client's land in its investigation thus causing our client a great deal of out-of-pocket expense and a loss of the transaction since the lessee had a cancellation right if the environmental condition of the property was not satisfactory to it.

In another ground lease transaction where one of our clients was contemplating acquiring the tenant's interest under the lease, as well as fee title to other assets owned by the proposed transferor, our client was initially hesitant about incurring the expense necessary to conduct a Phase 1 review of the property in question. With a certain level of persistence (some might call it nagging) the client eventually ordered the Phase 1 report to be prepared by an environmental consulting firm. Within a short period of time, our client's environmental consultant uncovered a serious contamination issue which potentially could have had immense financial liability consequences for our client should it have closed the transaction and enterrd into the chain of title.

I am currently working on a probate situation where the trustee of an estate has instructions to convey the real property to one of our nonprofit clients as a gift. We have advised our client that it should perform the ordinary and customary real estate due diligence that would normally be performed if it was going to buy the property in an arm’s length transaction. While this may cause our client some upfront expense, the cost and expense would be de minimis if the property has any environmental liability attached to it.

One must also keep in mind that any lender, before it will be obligated to fund a loan, will in virtually every instance, involving real property, require an environmental Phase 1 report to be prepared at the borrower's expense, and they would probably also require an indemnity for environmental matters from not only the borrower but also its constituent stakeholders.

In the real estate market that currently exists, the longer a period of time that a property has been in service, the greater chance of environmental contamination coming into play due to the unknown prior uses of the property. Therefore, regardless of what position a client has in its transaction, an environmental review is more than ever a necessary due diligence contingency item.

(Mr. Gunner was named a “Super Lawyer” in 2008 in three practice areas: real estate, corporate and business, and mergers and acquisitions. Arlen was named a “Super Lawyer” in 2009 and 2010 in the area of real estate and also in 2010 as corporate counsel.)

Songwriters And Publishers Continue To Score Tax Breaks

2010-03-18T14:39:00.000-07:00

By Michael R. Morris, Esq.

(Mr. Morris recently moderated a California Copyright Conference's panel discussion "Monetizing Music Publishing" on March 9, 2010 in Los Angeles.)
Introduction.
Favorable tax law changes originally made in 2006 continues to offer significant tax planning opportunities for both songwriters and music publishers. The potential tax breaks for songwriters were especially ground-breaking, permitting self-created musical compositions or copyrights in self-created musical works to be electively treated as capital assets. Why does this matter? Because gain upon the sale of a long-term capital asset (i.e., an asset held more than 12 months) is generally taxed at an extremely favorably 15% rate, in lieu of regular personal income tax rates presently ranging as high as 35%. Thus, a seller of eligible self-created musical compositions or copyrights in musical works can save a bundle in taxes. Under a related law, buyers of these rights can elect to write off the purchase price over five years, enabling music publishers to take a tax deduction for the purchase price of copyrights (including songwriter advances) ratably over five years. Let's take a closer look at how these favorable tax laws work.

Elective Capital Gains Treatment for Self-Created Musical Works
Under prior law, copyrights, literary, musical or artistic compositions, letters or memoranda or similar property were not considered "capital assets" in the hands of its creator. Thus, a songwriter who sold his or her own songs, like an artist selling a painting, paid "ordinary" income tax rates (currently up to 35%). Conversely, the same songs in the hands of the music publisher who bought those copyrights were considered tax-favored "capital assets." Not only could the music publisher take a tax deduction for the cost of acquiring the copyrights (as a yearly percentage of the purchase price), but the subsequent resale of such copyrights would be at a tax favored capital gains rate of 15% (provided the songs had been held by a non-corporate publisher for at least the 1-year long-term capital gains period). Congress sought to redress this imbalance in tax rates between songwriters and publishers, stating in a report: “ … it is appropriate to allow taxpayers to treat as capital gain the income from a sale or exchange of musical compositions or copyrights in musical works the taxpayer created.”

Initially, this favorable capital gains election for self-created musical works was set to expire on December 31, 2010, but fortunately for songwriters, it was made permanent. However, this lower capital gains rate is not automatic! A songwriter selling compositions held more than 12 months must affirmatively elect the lower tax rate (sounds like a no-brainer, unless you want to voluntarily reduce the national debt).

This tax law does not define what constitutes a self-created "musical composition" or a self-created "musical work." For example, if one songwriter contributed lyrics and another music to a composition, should there be any tax difference? Probably not. But what if a writer's existing poem became the lyrics of a song to which another writer contributed the melody. That song would generally be covered by a single copyright, and in this author's opinion, the sale of that song should entitle the creators of both the lyrics (i.e. the poem) and the melody to favorable capital gains treatment, even though the sale of the stand-alone poem would not qualify.

The law also fails to address what music assets in addition to self-created songs qualify as "capital assets," only stating that both self-created "musical compositions" and "copyrights in musical works" qualify for elective capital gains treatment. Thus, royalty and other income from the exploitation of musical compositions is not eligible for reduced capital gain rates. However, the term "copyrights in musical works" is intuitively more expansive than "musical compositions," and could include copyrights in self-created sound recordings (which, of course, would be recordings of "musical compositions"). This distinction can have real financial impact upon an artist selling both self-created master recordings and the underlying self-created musical compositions. For example, an artist might sell a library of existing recordings concurrently with the copyrights in the underlying musical compositions to a film-TV music production house. Again, this author believes the transfer of master recordings constitutes the sale of a copyright in a self-created musical work, but the IRS has not yet issued any interpretive rulings.

Just when the 1-year holding period for long-term capital gains treatment begins can also be an interesting question. Obviously, the 1-year period begins from creation of the work for a songwriter who always retained ownership. But what about situations where a songwriter (or heirs) have rights to reclaim previously granted copyrights under the termination provisions of Sec. 203(a) of the Copyright Act? For example, grants made after 1977 of rights in a copyright may be terminated at any time during the 5-year period beginning 35 years after the date the original grant was executed. The right to the subsequent reversion of a previously transferred copyright gets triggered by the songwriter (or statutorily prescribed heirs) providing timely notice and making the proper filing under Sec. 203 (such right would then be "vested"). This notice must be given not less than 2 nor more than 10 years prior to the effective date of termination. Once the termination provisions of Sec. 203 have been met, the copyright automatically reverts at the designated future date during the 5-years following the expiration of the 35-year grant.

Since the rights to this future reversion can be sold, does the 1-year long term capital gain period begin from the date the Sec. 203 notice was given, enabling the sale of that right to be eligible for favorable tax treatment? Or does the 1-year holding period only run from the date the copyright actually reverted? The earliest effective date for termination under Sec. 203 is January 1, 2013 (for grants made on January 1, 1978). Only if the sale of a future reversion is considered the sale of a copyright in a musical work would the songwriter (or heirs) be eligible for reduced tax rates on sales made 1 year after complying with the Sec. 203 termination provisions. Otherwise, the 1-year long-term capital gain holding period would only commence from the date of actual copyright reversion, so that copyrights which begin reverting in 2013 would only then become eligible for long-term capital gain treatment (after being held for at least 12 months following reversion). Again, the IRS has issued no pronouncements on this issue.

Last year, the IRS did, however, issue proposed and temporary regulations providing that the election to treat a musical composition or copyright as a capital asset must be made separately as to each composition or copyright sold or exchanged during the taxable year. This election must be made on or before the due date of the tax return for the year of sale or exchange (including extensions). Accordingly, creators of musical compositions and copyrights in musical works who sold such rights in 2008 are reminded that an affirmative election is necessary to take advantage of favorable capital gains rates.

Five-Year Amortization Period for Musical Works.
Buyers of eligible musical works and copyrights also continue to get “tax bang” for the buck. Under prior law, the cost of acquiring a musical copyright generally had to be amortized and deducted over the period that the song was projected to generate income under the "income forecast" method (a frequently complicated computation).

Since 2006, any expenses paid or incurred creating or acquiring any "applicable musical property" can be amortized over the 5-year period beginning with the month during which the property was "placed in service" (for example, when a song gets exploited). Both songwriters who incurred expenses creating "applicable musical property" and music publishers who acquire them can take advantage of this business-friendly 5-year schedule. For example, assume a music publisher paid $1,000,000 for applicable musical property on January 2, 2008 and places it in service on January 31, 2008. Provided the 5-year amortization election is made, the publisher would get to deduct $200,000 as an expense for 2008 (and a like amount for 2009-2012). The term "applicable musical property" is defined as any musical composition (including any accompanying words) or any copyright with respect to a musical composition that is depreciable under the income forecast method. This means that sound recordings are probably not eligible for the 5-year amortization schedule.

Conclusion.
Congress has lowered tax rates for songwriters who sell their catalogs and electively take advantage of capital gains treatment, provided such songs were held more than one year. This is in stark contrast to the higher non-capital gain tax rates paid by authors and painters who sell their literary works or paintings. In addition, music publishers buying songs can recover the purchase price over an election 5-year period.

Questions do remain as to what constitute self-created musical works eligible for favorable capital rates. Does it include sound recordings and/or vested future reversion rights? Hopefully, the IRS will provide rulings that favorably resolve these issues. In the meantime, these tax incentives afforded songwriters and publishers will continue to provide a powerful stimuli to the music publishing market.
© 2009 Valensi Rose PLC
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
Michael R. Morris is a former president of the California Copyright Conference and a principal in the Century City law firm of Valensi Rose PLC (www.vrmlaw.com). A former IRS trial attorney and Certified Specialist – Taxation Law (State Bar of California), Michael's practice emphasizes music, entertainment and tax-related matters.

How To Succeed With In-House Counsel

2010-03-04T14:37:00.000-08:00

By Gary F. Torrell
Valensi Rose, PLC

After serving as temporary in-house counsel (IHC) to a client in 1990, I published an article entitled “How to Work With In-House Counsel.” Since then, I have been general counsel at a publicly-owned financial institution and a privately-owned real estate company and developed the following guidelines based on my experience as both IHC and outside counsel. The guidelines may seem unremarkable, but following them will increase your chances of obtaining business from (and developing strong bonds with) IHC and their companies. As with most everything in the law, there are exceptions to every guideline below, and you must always tailor your service to the wants and needs of the particular client and matter.

1. Getting Retained. Most IHC (and their companies) already have a full compliment of outside counsel to contact for new matters. To break in with them, you need a hook to distinguish you and your law firm from other law firms soliciting IHC for business -- e.g. being referred to IHC, promoting specific lawyers (by name) at your law firm with necessary expertise, offering a fee discount, or some other incentive. Money is a huge incentive, but not at the expense of high quality services. As general counsel, I regularly retained lawyers with big-firm training who charged lower rates at their present (smaller) law firm. If your law firm’s regular hourly rates are low compared to national law firms or other lawyers with similar credentials, sell this feature. Consider offering a discount for the initial matter or for an initial time period, to give IHC an obvious reason to try you. Diversity can also be an asset: Advertise and promote the minority lawyers employed at your law firm – this may be an important criteria to IHC. If you simply ask for business because you provide quality lawyers, competitive rates and good service, chances are your solicitation will go in IHC’s round file.

2. Your First Matter. Congratulations – you’ve been retained! The next step is to ask for and review all of IHC’s policies and procedures (written and unwritten), and then share them within your law firm and follow them to the letter. The point is to recognize that IHC is in control of the relationship, so ask how and when IHC prefers you communicate with them and accommodate IHC’s preferences. Do not speak directly with others at the company without IHC’s permission (unless it’s an emergency). When permitted to communicate with others at the company, copy IHC on all written/electronic communications; it’s more than a courtesy, it keeps IHC where they should be—the number one spot.

3. Get Noticed For the Right Reasons. IHC knows the client, the goals in the matter, the budget concerns, the internal politics and the other important considerations. As outside counsel, you should talk less and listen more, especially on your first matter. Let IHC interrupt you and ask questions; they are not hiring you to hear speeches. Encourage IHC to ask questions and ask for their opinion on substantive decisions. Treat them as you would want to be treated as co-counsel. Be humble when asked about your experience; give examples, but undersell. Be cost conscious--ask before you charge substantial fees or incur substantial costs. Try to offer ways to reduce the legal expenses and behave as if you were paying (rather than collecting) the fees and costs being charged.

4. Give Substantive Advice and Be Accessible. If IHC leaves a substantive question on your voicemail, give a substantive response in your return voicemail/e-mail and don’t just say “returning your call.” Give IHC choices on possible legal strategies, but recommend your top choice and justify it. Then, if/when IHC (or the company) chooses a different direction, support the client’s choice. Do not direct – suggest, and always solicit IHC for suggested strategy. When IHC asks about your availability later that day or in the next few days, tell IHC when you are available, rather than what you’re doing that prevents you from being available – IHC didn’t ask for that and doesn’t really care (sorry). Give IHC ample advance notice of your planned absences/unavailability and remind IHC as the dates approach. Return all calls/e-mails promptly. If you cannot, have your assistant promptly return the call/e-mail and politely explain when you will be available again.

5. Predicting Results, Fees and Costs. Often IHC will request a budget from outside counsel for the matter and, in a disputed matter, your opinion on the likelihood of success. (As general counsel, I had a third question for outside counsel: the likelihood of recovery of legal expenses as the prevailing party.) At the outset of a new matter, outside counsel often underestimate the fees/costs and overestimate the likelihood of success. Be conservative on predicting results and on the high side in estimating legal fees; then strive to obtain a better result and charge lower fees than estimated. It is also essential to update all estimates as the matter progresses, to avoid surprises and offer a meaningful option for IHC to change direction midstream, before the fees and costs have gone too high.

6. Meet or Exceed Time Deadlines. The following should be familiar for those of you who have had regular, recurring meetings (business or pleasure) with the same group of people: Certain (few) attendees are almost always early, most are on time or slightly tardy and some are almost always late. Most lawyers (IHC and outside counsel) promise and endeavor to provide prompt service, but often deliver/show up late. To distinguish yourself from many outside counsel, you must accept IHC’s tardiness yet be on time (or early) for meetings. The same goes for providing legal advice and draft documents to IHC. In litigation matters, my rule of thumb is to get a polished (not rough) draft of pleadings to IHC at least a few business days before the filing deadline (earlier for dispositive pleadings), then request substantive input from IHC on the pleadings. To reduce costs, ask whether IHC wants to use company resources to respond to discovery requests, especially gathering documents. Remind IHC as deadlines approach, rather than telling IHC only once about the deadline.

7. Promptly Send Clear Billing Statements. Outside counsel’s billing statements should follow the same general guidelines for good legal writing: They should be clear, concise, descriptive and complete. Many companies now have billing guidelines or requirements; follow them to the letter. Also, a person unfamiliar with your matter may review the invoice, sometimes years later, so it should contain enough information for a stranger to understand what you did for the time charged. Make it easy on IHC to see the total time and billing rate charged for each timekeeper. Describe and itemize the costs in easily understood terms. When you write off time or do not charge for certain services, show that on your invoice (when appropriate) so IHC realizes this benefit you provided. When IHC questions you about the invoice, promptly respond and resolve all doubts in favor of IHC, lest you win the battle but lose future business. Try to get your monthly invoice to IHC within 20 days after the end of the month; you can create problems for IHC (and for payment) with tardy, incomplete or inaccurate billings.

8. Other Important Services. Give credit to IHC for successes, especially in front of IHC’s client and superiors. Offer free services – seminars, etc. Send new published cases and articles of interest to IHC (about relevant legal issues, the company, the industry in general, competitors, etc.). When asked by IHC for a lawyer referral, it’s fine to recommend another lawyer in your law firm (or yourself) if the person has the expertise, but recommend the right lawyer, even if that lawyer is outside your firm. Give practical advice. Suggest IHC and/or outside counsel get involved in any actual or potential dispute early on, to help develop better facts in the event the dispute goes to litigation. Finally, try to be positive and upbeat in conversations and other communications with IHC.

Gary’s career spans over twenty-four years of solid legal and business experience working with extremely sophisticated clients, companies and firms. He spent the first seventeen years of his career working in the Los Angeles area with such notable law firms as Paul, Hastings and Brobeck, Phelger & Harrison, where he honed his legal skills and developed savvy business insight handling creditors’ rights and bankruptcy cases. In 2000, Gary changed the focus of his career to become in-house counsel to several major corporations, including holding the Executive Vice President, General Counsel and Corporate Secretary titles for Downey Financial Corporation, a $16 billion, NYSE traded company that had over 2,500 employees. Gary Torrell’s role as a partner at Valensi Rose brings his practical business thinking and problem solving approach to their clients. Gary helps continue the Valensi Rose tradition of providing clients the highest level of business and legal advice, structured to keep fees and costs in check without sacrificing results.

###