Michael Morris Interviewed on KTLA Television on Income Tax Pitfalls

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"

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

What You Should Know About Title Insurance (Part 3)

By Laurie Murphy

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

Here, I discuss generally what an ALTA policy covers.  In general the ALTA policy covers 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 but those who succeed the owner by operation of law.  The risks insured against include the standard risks of incorrect vesting, undisclosed liens and encumbrances, unmarketabilty of title, lack of lien priority, and the invalidity or unenforceability of an insured mortgage lien on title.  It also includes coverage of unrecorded liens water rights, mining claims and discrepancies and conflicts in boundary lines and shortages in areas not reflected in the public records.   

Because an ALTA policy will provide coverage for off-record defects in title and boundary line defects, the insurer will usually survey the property prior to issuing the policy.  Based upon what it learns from the survey and/or any inspection, it can exclude certain items, e.g. an open or notorious encroachment.  The costs of the survey and the additional coverage provided is why the ALTA policy is more expensive than the CLTA policy.  ALTA policies are typically used in commercial transactions.   

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

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

IRS Reopens Offshore Voluntary Disclosure Program

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)

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)

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