California Commercial Tenants Be Aware

 By Laurie Murphy

Laurie Murphy

Commercial tenants in California, unless the lease provides to the contrary, have no rights to offset from their rent payments, any amounts the landlord might otherwise owe the tenant for repairs for which the landlord was responsible but refused to make.

It has long been the law in this state and others that in residential tenancies, the landlord has the obligation to ensure that the premises are habitable when leased and to make any repairs that they are obligated to make to maintain the habitability of the premises.  If the landlord fails to do so, the tenant may, after giving notice to the landlord make the repairs himself and then deduct from the rent owed, the costs he incurred.  This is generally known as the "Repair and Deduct" rule.  (Civil Code section 1942).  Commercial tenants have no such rights. 

So, even if the landlord has the obligation under the lease to maintain the building and make necessary repairs, if the landlord fails to do so, no matter what harm befalls the tenant as a result of the landlord's refusal to repair or maintain, the tenant must still pay its rent.  If the tenant fails to do so and the landlord files an unlawful detainer action, the tenant will be evicted notwithstanding the fact that the landlord did not comply with its obligations under the lease.  The tenant's only recourse is to sue the landlord for breach of lease.   Unless the lease permits him to offset, he simply cannot do so without risking eviction. 


Contact Laurie Murphy

How Low Can You Go? A California Employer's Potential Liability For Salary Reductions

 By David Krol 

David Krol

The economy in California still hasn't fully recovered, and employers may be faced with the tough decision of reducing employee salaries.  There are two risks associated with salary reductions, however. 

First, the salary reduction cannot run afoul of minimum wage laws.  Under California law, employees who are in the professional, technical, clerical, mechanical, or similar occupations and who are exempt from overtime requirements must earn at least twice the minimum wage for  a 40-hour work week.  Cal. Code Regs., tit. 8, § 11040(1).  At the current minimum wage of $8 per hour, the minimum salary for such employees is $640 per week, or $33,280 per year.
 
Second, if the reduction is substantial enough, an employee will be found to have had “good cause” to leave the job so as to render the employer liable for unemployment compensation benefits.  How substantial does the reduction have to be?  According to a precedential decision issued by California's Unemployment Insurance Appeals Board ("CUIAB"), a reduction of over 20%, standing alone, is sufficient to constitute "good cause."   http://www.cuiab.ca.gov/Board/precedentDecisions/docs/pb124.doc 
 
If the reduction is less than 20%, other factors, such as the employee's other job prospects, will be considered to determine whether the employee’s best alternative was to stay on board at the reduced salary.  In one case, an employee was notified of an impending layoff, and was unable to find work elsewhere at a comparable salary.  He was then offered a downgraded position with the company, at an 11% salary reduction.  The CUIAB denied the employee's claim for unemployment benefits, holding that the reduction in pay didn't constitute a compelling reason for leaving work, because the other factors existing at the time weighed in favor of continued employment at the reduced salary. http://www.cuiab.ca.gov/Board/precedentDecisions/docs/pb88.doc 
 
The moral of the story is … before instituting any salary reductions, employers should communicate with their counsel.
 

Contact David Krol

Unlimited FDIC Insurance Sunsets - Trustees Should Immediately Review their noninterest bearing accounts with Balances in Excess of $250,000 and Act Before 2013

by Bruce Sires

Bruce Sires

Effective after December 31, 2012, the currently unlimited insurance on non-interest bearing demand deposit accounts will be reduced to $250,000.  Trust companies and many individuals act as trustees over vast amounts of money and property.  Since unlimited insurance became effective for these accounts in  2011, it has become very easy to maintain significant amounts in a single account. 

Now, it is time particularly for individuals who are acting as a trustee for family, friends and clients, to take note of the pending change and act to confirm that you have adequate insurance, and can avoid any claim of breach of trust/fiduciary duty, which could from maintaining uninsured balances in excess of $250,000 in any one institution, without a reasonably considered basis for doing so.  This change has no effect on the insurance for interest bearing accounts, and does not apply to Money Market Deposit Accounts or NOW accounts.  If you are a trustee, custodian under a uniform transfer/gift to minors act, conservator or guardian, and currently maintain deposits in excess of $250,000, then before 2012 ends, determine for yourself if you hold uninsured accounts, and memorialize why you have determined that it is prudent for you to continue to hold such deposits, or take the actions necessary to avoid the effect of this change. 

I have been extensively involved in representing trustees and other fiduciaries, institutional and individual, concerning administrative and tax issues arising in trusts, probate estates, guardianships and conservatorships for more than 30 years. I'm an experienced trust and estates attorney, having represented numerous high net worth clients with their personal, family, tax and administrative issues arising in the accumulation and transmission of wealth.

Contact Bruce Sires

Vanity Fair Not Fair To La Toya Jackson, Say Valensi Rose Attorneys

Steve F. Moeller

Michael R. Morris

Valensi Rose entertainment lawyers Michael Morris and Steve Moeller have been retained to pursue a claim against Vanity Fair magazine, and its publisher Advance Magazine Publishers, Inc., regarding certain false and libelous statements made about Valensi Rose client La Toya Jackson. The statements involve Ms. Jackson’s  supposed actions immediately following the 2009 death of her brother Michael Jackson.

The statements appear in an article in the November issue of Vanity Fair entitled “Estate of Siege”, which generally deals with certain disputes involving Michael Jackson’s family and the executors of his Estate.

The firm’s lawyers have made a formal demand for retraction of the statements, since the magazine article includes a description of certain purported actions by members of the Jackson family which are untrue, and unsupported by any reliable sources or witnesses. As of the present date, it has not been determined whether a lawsuit will be filed against the magazine. 

Both Michael Morris and Steve Moeller have been extensively involved in representing recording artists, writers, producers, and other talent for more than 20 years. Steve Moeller is an experienced entertainment litigator who has represented numerous clients in lawsuits involving copyright infringement, trademarks, libel, and many other media related disputes.

Contact: Stephen F. Moeller

Contact: Michael R Morris

Firm's 60th Anniversary Profiled in the Daily Journal

2012 Year-End Tax Planning Tips

Year-end planning is a bigger challenge this year than in past years because, unless Congress acts, tax rates will go up next year, many more individuals will be snared by the alternative minimum tax (AMT), and various deductions and other tax breaks will be unavailable. To be more specific, as a result of expiring Bush-era tax cuts, unless Congress ascts, individuals will face higher tax rates next year on their income, including capital gains and dividends, and estate tax rates will be higher as well. The AMT problem arises because, for 2012, AMT exemptions have dropped and fewer personal credits can be used to offset the AMT. Additionally, a number of other tax provisions expired at the end of 2011 or will expire at the end of 2012. Rules that expired at the end of 2011 include, for example, the research credit for businesses, the election to take an itemized deduction for State and local general sales taxes instead of the itemized deduction permitted for State and local income taxes, and the above-the-line deduction for qualified tuition expenses. Rules that will expire at the end of this year include generous bonus depreciation allowances and expensing allowances for business, and expanded tax credits for higher education costs.

These adverse tax consequences are by no means a certainty. Congress could extend the Bush-era tax cuts for some or all taxpayers, retroactively "patch" the AMT for 2012 to increase exemptions and availability of credits, revive some favorable tax rules that have expired, and extend those that are slated to expire at the end of this year. Which actions Congress will take remains to seen and may well depend on the outcome of the elections. While these uncertainties make year-end tax planning more challenging than in prior years, they should not be an excuse for inaction. Indeed, the almost certain prospect of some higher taxes next year makes it even more important to engage in year-end planning this year. To that end, we have compiled a checklist of actions that may help you save tax dollars if you act before year-end. Many of these moves may benefit you regardless of what Congress does on the major tax questions of the day. Not all actions will apply in your particular situation.

We can narrow down the specific actions that you can take once we meet with you to tailor a particular plan. In the meantime, please review the following list and contact us at your earliest convenience so that we can advise you on which tax-saving moves to make. We also should schedule a follow-up for later this year to see whether the November election results will require changes to year-end planning strategies.

 Year-End Tax Planning Moves for Individuals  

  (1)   Realize losses on stock while substantially preserving your investment position. There are several ways this can be done. For example, you can sell the original holding, then buy back the same securities at least 31 days later. It would be advisable for us to meet to discuss year-end trades you should consider making. 

(2)   If you are thinking of selling assets that are likely to yield large gains, such as inherited, valuable stock, or a vacation home in a desirable resort area, try to make the sale before year-end, with due regard for market conditions. This year, long-term capital gains are taxed at a maximum rate of 15%, but the rate could well be higher next year as noted above. And if your adjusted gross income (as specially modified) exceeds certain limits ($250,000 for joint filers or surviving spouses, $125,000 for a married individual filing a separate return, and $200,000 for all others), gains taken next year (along with other types of unearned income, such as dividends and interest) will be exposed to an extra 3.8% tax (the so-called "unearned income Medicare contribution tax").

(3)   Make gifts sheltered by the annual gift tax exclusion before the end of the year and thereby save gift and estate taxes.You can give $13,000 in 2012 to each of an unlimited number of individuals but you can't carry over unused exclusions from one year to the next. The transfers also may save family income taxes where income-earning property is given to family members in lower income tax brackets who are not subject to the kiddie tax. Savings for next year could be even greater if rates go up and/or the income from the transfer would have been subject to the 3.8% tax in the hands of the donor.

 Year-End Moves for Business Owners

(1)   If your business is incorporated, consider taking money out of the business by way of a stock redemption if you are in the position to do so. The buy-back of the stock may yield long-term capital gain or a dividend, depending on a variety of factors. But either way, you'll be taxed at a maximum rate of only 15% if you act this year. If you wait until next year to make your move, your long-term gains or dividends may be taxed at a higher rate if reform plans are instituted or the Bush-era tax cuts expire. And if your adjusted gross income (as specially modified) exceeds certain limits ($250,000 for joint filers or surviving spouses, $125,000 for a married individual filing a separate return, and $200,000 for all others), gains taken next year (along with other types of unearned income, such as dividends and interest) will be exposed to an extra 3.8% tax (the so-called "unearned income Medicare contribution tax"). Keep in mind that you will need expert help to plan and execute an effective pre-2013 corporate distribution.

  

(2)   Set up a self-employed retirement plan if you are self-employed and haven't done so yet. 

(3)   Increase your basis in a partnership or S corporation if doing so will enable you to deduct a loss from it for this year. A partner's share of partnership losses is deductible only to the extent of his partnership basis as of the end of the partnership year in which the loss occurs. An S corporation shareholder can deduct his pro rata share of an S corporation's losses only to the extent of the total of his basis in (a) his S corporation stock, and (b) debt owed to him by the S corporation.

 

These are just some of the year-end steps that can be taken to save taxes. Again, by contacting us, we can tailor a particular plan that will work best for you.  Please contact a member of the Tax & Wealth Planning Group for more information.

Michael Morris to Moderate Music Producer Roundtable at California Copyright Conference

Michael Morris  will moderate the California Copyright Conference (CCC) Music Producer Roundtable, discussing “So What Does a Music Producer Do Anyway,” on Tuesday evening, October 9, 2012 at the Sportsmen’s Lodge in Sherman Oaks, California. 

“I’m very pleased to be moderating this roundtable, since it will bring together three multi-generational producers working in different musician genres and one producer manager,” said Mr. Morris.  “They will discuss how they got started in the business, how the changes in the music industry have affected the business of being a music producer and recording budgets, the art and craft of making records, the changes in recording technology, and more.”

 
Mr. Morris’ co-moderator is Kent Liu, Esq., Vice President of Business and Legal Affairs at Concord Music Group in Beverly Hills.  The panelists include Walter Afanasieff, a multiple Grammy award winning producer whose credits include records by Mariah Carey, Celine Dion, Barbara Streisand, Darryl Hall, Michael Bolton, Kenny G, and Chris Botti; Paul Fox,  whose producing credits include records by the Wallflowers, Ziggy Marley, Phish, They Might Be Giants, 10,000 Maniacs, Sugarcubes, XTC, and Robyn Hitchcock; Brian Kennedy,  a Grammy winning producer whose producing credits include records by Rihanna, Chris Brown, Kelly Clarkson, and Jennifer Hudson; and Alan Melina of New Heights Entertainment and a renowned personal manager whose producer clients include RedOne, Adam Anders, and Orange Factory Music Moderator.

Mr. Morris is an active member of the conference’s planning committee and a frequent participant in this important industry event.  He is past president of the California Copyright Conference and has been named a “Super Lawyer” among Southern California lawyers for seven consecutive years, from 2006 through 2012.   He was also designated by the Los Angeles Business Journal as one of “L.A.’s Top 100 Lawyers” in 2009. 

Mr. Morris’ clients include Grammy winners and other recording artists, record labels, production companies, music composers, on-screen talent and talent agents.  

Contact Michael Morris

Fleeced Madoff Ponzi Investors Receive Partial Payments on Initial Investments

by Mayer Nazarian and Geoffrey A. Weg 

Geoffrey Weg

Mayer Nazarian

On Thursday, September 20, 2012, Irving H. Picard, Securities Investor Protection Act (“SIPA”) Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC ("BLMIS")(the “Trustee”) announced that checks for the second pro rata interim distribution to eligible account holders totaling $2.5 billion were mailed on Wednesday, September 19, 2012. This second distribution, when combined with the funds already returned to account holders, fully satisfies more than 50 percent of the total current accounts with allowed claims.

 

The Trustee also reported the following: 

• 1,230 accounts will receive approximately 1/3rd of the allowed claim amount;
• The average payment will be slightly more than $2 million;
• Of these 1,230 accounts, previously 892 were fully satisfied; an additional 182 accounts will be fully satisfied by this second distribution;
• A total of $3.625 billion has been returned to account holders;
• The Trustee has recovered or reached agreements to recover more than 50% of the approximately $17.3 billion lost by claimants.  

“In addition to recovering as much stolen money as possible for Madoff’s victims, we are also moving forward aggressively to resolve litigation and appeals which are delaying further distributions to BLMIS customers,” said David J. Sheehan, Chief Counsel to the SIPA Trustee. “We are confident in our positions and we look forward to putting more recovered funds back in the hands of their rightful owners in the near future.”

 

Amounts not recovered by claimants may be claimed as a theft loss deduction on the taxpayer’s federal income tax return, which may offset other income and result in a tax refund. For taxpayers who suffered similar losses from investment fraud, IRS offers tax relief in Revenue Procedure 2009-20 (the “Revenue Procedure”). The Revenue Procedure provides that investors may deduct up to 95% of the investment loss, less any actual recovery and any potential recovery from SIPC or other insurance claim. The investor may have to report income or an additional deduction in future years depending on any actual recovery.

 

For more information, contact Mayer Nazarian or Geoffrey A. Weg
Tax & Wealth Planning Group.

The Perils Of Terminating A Lease Early

by Laurie Murphy

Most businesses, unless they own the property in which they operate their business lease the premises they conduct their businesses out of.  A commercial lease can be quite daunting to a small business owner and can go on for pages.  Most people simply look at the basic terms (how much the rent is and when it is due) and simply sign what is put in front of them.  And most tenants do not really understand the extent of their liability to the landlord if they leave the premises early – say if the business fails.  Unless the lease provides otherwise (and they never do) a landlord whose tenant has left before the lease term has expired is permitted to sue the tenant for the amount of future rent the tenant was required to pay under the lease less whatever the landlord collects from new tenant for that same period less other expenses associated with reletting the premises. 

The landlord is required to mitigate his damages by taking commercially reasonable steps after his tenant leaves to locate a new tenant.  In a market where rents are rising, a landlord might end up leasing the premises for more than the prior tenant paid and under certain scenarios the prior tenant may not end up owing the landlord anything.  In a declining or stable market that is never the case.  In addition, commercial landlords often will require a personal guaranty from the principal(s)/owner(s) of entity tenants.  In those circumstances the landlord can pursue not only the entity but the person who guarantied the lease unpaid rent.

Contact Laurie Murphy

Valensi Rose Profiled in Daily Journal

To Read Article Clearly Open Link

Patient Protection and Affordable Care Act of 2010 Upheld by the Supreme Court, and How We'll Pay For It

By Autumn Ronda

On June 28, 2012, the Obama Administration was successful in its battle to have the Supreme Court uphold most of the provisions of the Patient Protection and Affordable Care Act of 2010 (the "Act").  In an effort to fund the Act, beginning January 1, 2013, taxpayers at higher income levels will feel the pinch of the new taxes included in the bill, which initially passed in March, 2010.

The first tax is a .9% increase in the Medicare Hospital Insurance Tax portion of FICA on wages over $200,000 ($250,000 for couples, $125,000 for married filing separately). Generally, every wage earner owes a 2.9% tax, which is split between the employee and the employer. Under the new tax, the additional .9%, which brings the total Hospital Insurance Tax for these high earners to 3.8%, is payable entirely by the employee.  Self-employed persons will be equally affected by a .9% increase Hospital Insurance Tax portion of the SECA tax on self-employment, subject to the same income limits.

The second tax, called the Unearned Income Medicare Contribution Tax, is a tax on lesser of net investment income, or the excess of Modified Adjusted Gross Income over the threshold amount of $200,000 (or $250,000 for couples, $125,000 for married filing separately), at a 3.8% flat rate.  Investment income is a broad category including, but not limited to, most interest, rents, dividends, royalties, capital gains from the sale of stocks and bonds, and passive rental and business income. Even taxable gain on the sale of a home is hit by this new tax to the extent the gain exceeds the Section 121 exclusion for the sale of a principal residence.  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. 

The effort to raise revenue to pay for the costly healthcare act has made two very significant changes to the tax system. Historically, the tax on wages to fund Medicare has been a flat tax and has only been imposed on earned income. The new .9% tax will impose a progressive Medicare Hospital Insurance Tax on wages, and the new Unearned Income Medicare Contribution Tax of 3.8% will impose a Medicare tax on investment income which previously did not exist.

Contact Autumn Ronda

Geoffrey Weg Speaks on 2012 Income Tax Updates at Beverly Hills Bar Association

Tax attorney Geoffrey A. Weg, who was recently appointed for the third year as Vice Chair of the State Bar’s Taxation Section Executive Committee, will speak on recent income tax developments, including new laws and noted Tax Court opinions, at the Beverly Hills Bar Association luncheon on Thursday, August 23 at the Association's offices in Beverly Hills.

The presentation has been approved for Minimum Continuing Legal Education credit by the State Bar of California.

For more information and to register Logon

Contact Geoffrey Weg

Autumn Ronda Speaks to the California Society of CPAs, Estate Planning Committee

Tax and Estate Planning attorney Autumn Ronda, spoke to the California Society of CPAs, Estate Planning Committee at an August 8, 2012 panel titled "Wealth Transfer Strategies in Low-Interest Rate Environment." 

The program detailed those advanced estate planning strategies that are specifically helped by the recent historically low interest rates, including Grantor Retained Annuity Trusts, Charitable Lead Annuity Trusts, Sales to Intentionally Defective Grantor Trusts and Intra Family Loans.

Contact Autumn Ronda

Attorney Mayer Nazarian Joins Valensi Rose

We are pleased to announce the addition of tax attorney Mayer Nazarian to our Tax and Wealth Planning practice group. 

 

Mayer Nazarian is a transactional tax attorney distinctively trained within top regional and national tax firms. Mayer capitalizes on his depth and breadth of business and taxation expertise when advising and advocating for his clients and providing planning, research and consultation services. Mayer has successfully represented his clients and negotiated on their behalf before the Internal Revenue Service, the California Franchise Tax Board, the California State Board of Equalization and other taxing authorities.

In addition to his law degree, Mayer earned a Master of Business Taxation degree from the University of Southern California. He established a practical foundation as a tax professional with the accounting firm of Holthouse, Carlin and Van Trigt, LLP and then as a tax manager with Deloitte Tax, LLP.  Mayer went on to become the founder and managing principal of a law firm in Los Angeles, the Nazarian Law and Tax Group, Inc.

Contact Mayer Nazarian

Gary Torrell to Speak on Tax Law and Bankruptcy at the Beverly Hills Bar Association

Attorney Gary F. Torrell of Valensi Rose PLC will speak on “How Tax Law Affects Bankruptcy” at the Beverly Hills Bar Association luncheon on July 25 at the Association’s office in Beverly Hills, California. Mr. Torrell is a partner at Valensi Rose and has over twenty-five years of legal and business experience working with high-net worth individuals and sophisticated companies.

                                                                         

The  luncheon program is designed to provide a brief overview of the three most common types of bankruptcy cases filed by individuals and businesses, Chapters 7, 11 and 13.  Mr. Torrell is joined by co-speaker David M. Agler of Crowe Horwath LLP.  They will cover certain tax and related issues that arise frequently in bankruptcy cases, and tax planning  associated with bankruptcy.

Mr. Torrell’s expertise includes managing complex, nationwide commercial real-estate restructurings and bankruptcies for institutional lenders and private equity firms.  He has handled a wide spectrum of properties including hotels, office buildings, apartments, condominiums, resorts, residential developments and other properties.  

Mr. Torrell is a  Bankruptcy Court mediator and  represents secured and unsecured creditors, including major banks and landlords, in various bankruptcy cases throughout the United States.  

The Beverly Hills Bar Association is located at 9420 Wilshire Boulevard in Beverly Hills, California.  The event provides two hours of Minimum Continuing Legal Education credit by the State Bar of California.

Contact Gary Torrell

Philip S. Magaram to Speak in Jewish Community Foundation Speaker Series

Senior Tax and & Wealth Planning partner, Philip S. Magaram, will be a featured speaker at the upcoming seminar series presented by the Jewish Community Foundation, Los Angeles.  The series will focus on Tax Planning and Charitable Giving and provide attendees with information on various topics, including benefit corporations, charitable trusts, charitable gifts, ethical challenges of estate planning and administration and recent developments in these practice areas.

Mr. Magaram’s presentation, entitled “Portability or Exemption Trust – Which is Better?,” will take place on June 13, 2012 in Beverly Hills and June 20, 2012 in Woodland Hills.  Both presentations are from 7:30 a.m. to 9:30 a.m.  For more information on the series or to register, visit the Jewish Community Foundation website at www.jewishfoundationla.org/2012PASS.

Contact Philip Magaram

Michael R. Morris to Moderate at 2012 Entertainment Industry Conference

Michael Morris will moderate the 2012 California Entertainment Industry Conference’s “Music Industry Updates” portion of the daylong event. The Conference will highlight the path to fraud prevention, sports and sports media rights, trends in new media, music industry updates, copyright terminations, entertainment tax and current trends in film. The annual Entertainment Industry Conference is presented by the California CPA Education Foundation and will be held on June 13, 2012 at the Beverly Wilshire Hotel in Beverly Hills.

 
“The purpose of the Music Industry Updates presentation is to keep CPAs and other financial and business professionals in the entertainment industry apprised of the present state of the music industry.  This includes current trends in recording and music publishing agreements, artist branding and related revenue streams, and developments in concert promotion and touring,” said Mr. Morris.  “There have been important business and legal developments that music industry representatives must be aware of to better serve their clients.”

For more information or to register, click here.

Contact Michael Morris

The Rule 26 Amendments: One Year Later

John Keith

Louis Kempinsky

by Louis E. Kempinsky 
and John C. Keith

Originally published by the American Bar Association, April 30, 2012

On December  1, 2010, several amendments to Federal Rule of Civil Procedure 26 took effect.  The primary thrust of the 2010 amendments was to address the “undesirable  effects” of the 1993 amendments to Rule 26, which had provided for “routine  discovery into attorney-expert communications and draft reports.” 2010 amends.,  advisory committee’s notes. The four main changes were

• generally  narrowing the subject-matter of a testifying expert’s disclosure, Fed. R. Civ.  P. 26(a)(2)(B);
• extending  work-product protection to draft expert reports, Fed. R. Civ. P. 26(b)(4)(B);
• providing  new work-product protection to attorney-expert communications, Fed. R. Civ. P.  26(b)(4)(C); and
• clarifying  which testifying experts are required to provide written reports, Fed. R. Civ.  P. 26(a)(2)(B) and (C).

The 2010  amendments have been in effect for just over a year, and they have not been  applied in all cases. The 2010 amendments apply to cases pending as of December  1, 2010, only “when just and practicable.” Order Amending Federal Rules of  Civil Procedure, Apr. 28, 2010. As is not surprising in light of the standard,  cases examining whether it would be “just and practicable” to apply the new  version of the rule are highly fact-driven and have come down on both sides. Case  law interpreting the amendments is still in an early stage of development.  Nonetheless, a number of potentially significant issues have already emerged.

Read full article....

Dramatic Rise is US Expatriations May Have its Roots in Foreign Asset Disclosure Laws

by Geoffrey Weg

Since 1998, under Internal Revenue Code Section 6039G, the U.S. Government publishes in the Federal Register the names of all US citizens who choose to expatriate (i.e., renounce their U.S. citizenship).  From 2004 through 2008, the number of expatriations per year averaged approximately 625 (from a high of 744 in 2009 to a low of 232 in 2008).  However, from 2009 to 2011, something interesting happened – the number almost tripled to approximately 1800 expatriations in 2011, with the number expected to be as high or higher in the first quarter of 2012. 
 

So what’s going on?  
 

The Federal Register does not reveal an individual citizen’s purpose for expatriation (nor is any citizen required to provide a reason to the government).  However, for tax professionals, one huge change in tax law stands out like a sore thumb – FATCA – the Foreign Account Tax Compliance Act.  According to the IRS, the purpose of FATCA is, “an important development in U.S. efforts to improve tax compliance involving foreign financial assets and offshore accounts”.  Under FATCA, U.S. taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS.  In addition, FATCA requires foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest.  As a practical matter, both tax practitioners and US citizens living abroad now face a huge administrative burden in order to comply with FATCA.  And while direct evidence is lacking, anecdotal evidence from tax practitioner and taxpayer advocate groups indicates that it is this burden – FATCA – that is directly responsible for the dramatic increase in US expatriation.  
 

So why should we care?  
 

Indeed, 1800 expatriates constitutes something like 0.001% of all US taxpayers – a proverbial drop in the bucket.  On the other hand, in order to be listed in the Federal Register, a taxpayer must have a net worth above $2 million (and/or income above a specified and significant level).  In other words, these are individuals with significant income and assets, and they are deciding to leave our country, taking their skills, assets and tax-paying abilities with them.  Moreover, the number of people doing this is simply skyrocketing.  If it continues, at some point there will be a noticeable impact on the US economy.  Congress and the Department of Treasury should take this new trend seriously, and think long and hard about whether to continue to impose this burden on these taxpayers, and ultimately, on all Americans.

Contact Geoffrey Weg

Three Outstanding Attorneys Join Valensi Rose

We are pleased to announce the addition of litigators Louis E. Kempinsky and John C. Keith and the return of tax and estate planning specialist Kelly S. Keuscher to our firm.  

Louis E. Kempinsky

Lou Kempinsky is a seasoned trial attorney specializing in business and commercial disputes. Lou's practice encompasses trial and appellate work in Federal, State and Bankruptcy courts. He has been lead counsel in numerous jury and non-jury trials involving a wide variety of substantive issues, including real estate, contract, corporate, business torts, Commercial Code, lender liability, bankruptcy, franchise, corporate governance, professional accountability, partnership, environmental, trademark and other intellectual property.

He also has extensive experience representing the interests of both creditors and debtors, along with all of the other constituencies involved, in bankruptcy cases and out of court workouts and restructurings.

While Lou has been privileged to represent successfully at trial both entrepreneurs and Fortune 100 companies, he is just as proud of his accomplishments in enabling his clients to enforce and protect their rights, as well as to advance their short and long-term interests, without the necessity for protracted litigation. To achieve those goals, he pursues a course of proactive counseling along with ongoing efforts to address client issues well before they reach the courthouse steps.

When not working on behalf of clients, he will act as a mediator or arbitrator to assist others in dispute resolution. He also writes and lectures frequently on matters relating to business litigation, trial practice and corporate governance. He is active in the community and in local and national bar associations. Lou has been honored by the American Bar Association for his work in the Section of Litigation and recognized by U.S. News & World Report for providing top tier legal representation. He has for the past eight years had the distinction of being named a California "Super Lawyer" by Law and Politics Magazine and Los Angeles Magazine. In his spare time, Lou is an avid wine collector and enjoys travel, the theater, wine and his bike.

Contact Mr. Kempinsky

John C. Keith

In his broad-based business litigation practice, John Keith helps resolve his clients' legal challenges across a variety of issues, including:

• Bankruptcy
• Breach of contract and commercial disputes
• Breach of fiduciary duty and director and officer liability
• Fraud and business torts
• Insurance
• Intellectual property and trade secrets
• Partnership and LLC disputes
• Securities and shareholder derivative actions

In recognition of his practice achievements in litigation, John was twice named as one of Southern California's "Rising Stars" by Law & Politics and Los Angeles Magazine, for the years 2009 and 2010. He obtained his law degree in 2003 from the University of California, Berkeley School of Law (Boalt Hall).

Contact Mr. Keith

Kelly S. Keuscher

Kelly Steven Keuscher practices in the areas of estate planning, trusts, probate, taxation, non-profit organizations, and general business transactional law. Kelly holds both J.D. and M.B.A. degrees, and his background includes more than ten years working for various public agencies. He has also served as a consulting attorney for the Probate Division of the Los Angeles Superior Court.

Kelly has represented numerous individuals, businesses, and charitable organizations in matters ranging from estate and tax planning to transactions to litigation. Kelly utilizes his broad range of experience and expertise to develop efficient and innovative solutions for his clients.

Contact Mr. Keuscher

The addition of Lou, John and Kelly compliments and expands on our exisitng practice areas and allows us to continue to serve our clients in the best way possible. For more information or to contact an attorney, email us at info@vrmlaw.com.

Bruce Sires to Speak on Employing Minors in Entertainment Projects at California Lawyers for the Arts Workshop

Saturday, April 14, 2012, 10 - 11:30am

Canoga Park Youth Arts Center

7222 Remmet Ave.

Canoga Park, CA 91303

Since 2001, minors employed in sports and entertainment have gained a unique advantage over any other employed minors.  That is, that the money they earn is theirs, and their parents have fiduciary duties to them that do not exist for other minors.  In addition, the employers of minors have unique obligations to the minors, including deposits into Coogan accounts, and unique opportunities to avoid the minor's ability to disaffirm their contracts.  

This workshop will explore the rights of children in the business and protecting those rights for the child's benefit:  the contractual issues of which those doing business with minors need to be aware; what statutory protections are available for the adults in the transactions; what can be done if your contract is not statutorily protected will be explored; which court will hear these cases; and will a guardianship be required to protect the minors estate.  Finally, Mr. Sires will explore how to deal with the conflicts of interest inherent in representing and advising minors, their families, and those dealing with them, i.e. who do the lawyers represent?

To Register go to California Lawyers for the Arts

Contact Bruce Sires