Sunday, November 06, 2016

There's a fraction too much fiction! Taxing Greed

 A man without enemies is a dead man. Never worry about tomorrow. Tomorrow, you might inherit a million dollars or be run over by a truck. Or inherit a million dollars and be run over by a truck...

Ukrainians shocked as politicians declare vast wealth ...
TaxGrrrl,Blast From The Past: Who Was Alleged Tax Evader & Subject Of Presidential Pardon Marc Rich?. “After the pardon, it was alleged that the President had given into political and donor pressures which were influenced by donations made by Denise Rich, Marc’s ex-wife, to the Democratic party and other entities (including, as it turns out, both Democratic and Republican committees

Robert Wood, Donald Trump Got An (Amazing) Tax Opinion, When Should You? “So, was Trump’s 1991 tax opinion too aggressive? The answer may be in the eye of the beholder.”

These are the giant US companies that paid the least in taxes last year

The World Bank’s Dirty Finance  (the brightest brains tend to work at ze banks)

Secret Recordings Fueled FBI Feud in Clinton Probe WSJ. I was struck while reading this how closely it conformed to the master narrative for many crime shows, thrillers (both film and books), etc.: work of diligent, honest (FBI, DoJ) investigators thwarted by political machinations of their superiors. Almost to the point of cliche

“In order to make the State all-powerful, freedom had to be killed in all facets of life. It was not only in politics and public activity that freedom was overcome.  Freedom was overcome everywhere, from the realm of agriculture – the peasants’ right to sow freely and harvest freely – to the realms of poetry and philosophy.  It is the same whether we are talking about shoemaking, the choice of reading matter, or moving from one apartment to another; in every sphere of life freedom was overcome.

Freedom, after all, is life; in order to kill freedom, Stalin had to kill life.”

This newspaper covers Trump from a unique angle: his college years

The Rational Approach to Make Sense of Our Irrationality

Get cracking, payroll departments. Billions of dollars in theft losses too late, the IRS is finally getting serious about ID-theft tax refund fraud. Payroll departments and tax preparers are key players in the  battle. Taxpayers in a hurry for tax credit refunds are collateral damage.
The biggest change this year is theaccelerated deadline for employers to file W-2 information with the government. While employers have long been required to issue W-2s to employees by the end of January, they have had until the end of March to file with the IRS, if submitting their W-2s electronically, or until the end of February if filing on paper. No more. Employers now have the same January 31 deadline to get forms to the government that it faces for employee copies.
This deadline is a challenge that might be met easily by large and sophisticated filers, with their fancy newfangled compuers and all. It will be more of a challenge to smaller filers, for whom preparing W-2s and the related federal employer tax firms might be a manual task. I also suspect it will be a challenge for payroll services who will need to do a lot of work for unsophisticated clients to get the W-2s issued, often with last-minute information.
Some of the other changes coming up this season, according to the IRS:
Expanding a W-2 Verification Code test to cover approximately 50 million forms in 2017. The selected forms contain a 16-digit code that taxpayers and tax preparers enter when prompted by software. The code helps validate not only the taxpayer’s identity but also the information on the form. This pilot is among the most visible Summit action for 2017.
Identifying additional data elements from tax returns that will help improve authentication of the taxpayer and identify possible identity theft scams and sharing data elements from corporate tax returns.
Creating a process for financial institutions to identify questionable state tax refunds and return them to states for validation. Twenty-three states have signed on.
The W-2 code is good, and long overdue, step, if it is combined with pre-refund matching of 1040 claims with W-2 data.  It will be difficult for a thief to spoof a number unique to a W-2, even if he has all of the taxpayer’s other identification data. It will also go far to kill the already illegal practice of filing returns based on pay stubs by taxpayers who are too impatient to wait for W-2s.
The new season will also see some tentative steps to turn back our “rapid refund” culture:
The new law requires the IRS to hold the refund for any tax return claiming either the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until Feb. 15. By law, the IRS must hold the entire refund, not just the portion related to the EITC or ACTC.
Much ID theft occurs on the first day of filing season, as the thieves fire up their off-the-shelf software to claim fraudulent refunds before the real taxpayers file. This should help some.
Ultimately, the whole bias in the withholding system to withhold too much and then issue big refunds fast should change. IRS should tweak withholding tables towards smaller refunds, and Congress should reduce the penalties for underwithholding to make it less risky for taxpayers to undershoot their withholding. That would reduce the pressure for rapid refunds while giving the IRS time to match 1040s with third party information filings.
Don’t delay. If you are a small taxpayer, don’t wait until the bowl games end to think about these new deadlines. Make sure you can get the information together and get your filings done on time. If you use a payroll service or a third party preparer for employment tax returns, remember that they will be swamped. Get them clean information early to make sure you don’t face late filing penalties.

Worker exploitation has been like boiling a frog. That frog has now boiled. 

Caltex Franchise Owner spills beans on service stations

"In Pakistan, it costs $50 to kill someone. Life is cheap."

One worker was forced to withdraw his consent to have his photo published and story told when he received a late night visit threatening him not to speak up. The next day his family in Pakistan were visited by four armed men. He is now fearful of speaking out to authorities or the media in case the threats of violence against his family are carried out.
Wage Fraud 

Brookings: “China’s emergence as a global economic power and its fuller integration in the international order are among the principal policy challenges facing Europe and the United States in the early 21st century ...

Wall Street Journal, Taxing the Rich, In Four Charts: New IRS Statistics Show a Concentration of U.S. Income Among a Few Households

The U.S. has a progressive income tax system—if you make more money, you pay a higher rate—and new IRS statistics from 2014 tax returns offer fresh

The system, developed over the past 100 years and constantly enmeshed in political campaigns, is partly a response to the concentration of earnings at the top of the income scale.

The top 1% of households received more than 20% of adjusted gross income in 2014—and paid almost 40% of income taxes. As you go down the income scale, that flattens out, and the top half of the population pays only slightly more in income taxes than its share of earnings.

Note, too, that the income tax is especially concentrated on the top half of the income distribution, with less than 4% of the tax paid by the bottom 50% of households. These numbers would look much different if payroll taxes and state and local taxes were included. Those are much flatter and regressive, with bigger impacts on middle-class and poor families.

LLOmri Y. Marian (UC-Irvine), Is Something Rotten in the Grand Duchy of Luxembourg?, 84 Tax Notes Int’l 281 (Oct. 17, 2016):

In November 2014 the ICIJ published hundreds of privately negotiated advance tax agreements (ATAs) granted by tax authorities in Luxembourg to MNEs. The documents were leaked by two former employees of the PwC Luxembourg office. The documents revealed that by securing ATAs in Luxembourg, MNEs were able to avoid high tax liability in jurisdictions where they had real activity and instead pay a much smaller amount of tax to Luxembourg, where they had no or little activity. The affair, appropriately coined ‘‘LuxLeaks,’’ caused a major popular uproar. Several official investigations followed the leak. This article argues, however, that the discussion over the past two years missed the worst aspects of the LuxLeaks scandal.

Brutal assault on reason watch.* In an election year that has generated more dumb than was known to exist on the planet, the New York Times has chipped in a little more with Donald Trump Used Legally Dubious Method to Avoid Paying Taxes. The report says that Trump used a partnership debt-for-equity swap to settle debts he couldn’t pay in 1992 (my emphasis):

Thanks to this one maneuver, which was later outlawed by Congress, Mr. Trump potentially escaped paying tens of millions of dollars in federal personal income taxes. It is impossible to know for sure because Mr. Trump has declined to release his tax returns, or even a summary of his returns, breaking a practice followed by every Republican and Democratic presidential candidate for more than four decades.
Tax experts who reviewed the newly obtained documents for The New York Times said Mr. Trump’s tax avoidance maneuver, conjured from ambiguousprovisions of highly technical tax court rulings, clearly pushed the edge of the envelope of what tax laws permitted at the time. “Whatever loophole existed was not ‘exploited’ here, but stretched beyond any recognition,” said Steven M. Rosenthal, a senior fellow at the nonpartisan Tax Policy Center who helped draft tax legislation in the early 1990s.
The tax law normally requires taxpayers who have debt forgiveness to include it in income. Exceptions exist for insolvent taxpayers and debt forgiven in bankruptcy proceedings, and for a few specific politically-favored transaction classes.
Prior to 2004 legislation, there was a long-running controversy over whether there was a blanket exclusion from income for swaps of debt for partnership equity. Mr. Rosenthal aside, it wasn’t a settled issue. For instance, in August 1993, a New York tax attorney contributed Existence Of Partnership Equity For Debt Exception Explored (subscriber link) to Tax Notes. Its conclusion included this:

Whether partnership equity for debt transactions are (or should be) exceptions to both the realization and recognition of COD Income is a rather vexing question and one fraught with corollary tax concerns which are unique to partnerships. Further, it is impossible to provide a definitive answer given the lack of authority on this issue.
Certainly, valid arguments can be made which support either side. The position taken herein is that such an exception exists, and properly so.
The Senate Finance Committee report for the 2004 legislation discussed it this way:

In the case of a partnership that transfers to a creditor a capital or profits interest in the partnership in satisfaction of its debt, no Code provision expressly requires the partnership to realize cancellation of indebtedness income. Thus, it is unclear whether the partnership is required to recognize cancellation of indebtedness income under either the case law that established the stock-for-debt exception or the present-law statutory repeal of the stock-for-debt exception.
The report also said that “no inference is intended as to the treatment under present law of the transfer of a partnership interest in satisfaction of partnership debt.” The Trump situation appears to be clouded by other issues, including whether Trump was the right taxpayer to take advantage of the exclusion, but he apparently was advised that he had substantial authority to exclude the COD income. Of course, we still don’t know for sure how the return was actually filed.
The New York Times report makes a big deal of the standard CYA language of the legal opinion:

One letter, 25 pages long, analyzed seven distinct components of Mr. Trump’s proposed tax maneuver. It found only “substantial authority” for six of the components. In the stilted language of tax opinion letters, the phrase “substantial authority” is a red flag that the lawyers believe the I.R.S. can be expected to rule against the taxpayer roughly two-thirds of the time.
The “red flag” business isn’t quite right. “Substantial authority” in respect to an undisclosed tax position is defined in Regs. Sec. 1.6662-4(d)(3)(i):

There is substantial authority for the tax treatment of an item only if the weight of the authorities supporting the treatment is substantial in relation to the weight of authorities supporting contrary treatment. All authorities relevant to the tax treatment of an item, including the authorities contrary to the treatment, are taken into account in determining whether substantial authority exists. The weight of authorities is determined in light of the pertinent facts and circumstances in the manner prescribed by paragraph (d)(3)(ii) of this section. There may be substantial authority for more than one position with respect to the same item.
Volumes have been written on what this means, but it can be understood as being able to make an sincere argument based on existing authority. Such authority can include court cases, prior IRS rulings, and other guidance. It doesn’t mean you will win, but you have a good enough argument that you won’t have to pay “accuracy-related” penalties if you lose.
There is a lower standard that can be used on a return. You can use a return position that has a “reasonable basis” but no “substantial authority,” but only if you specifically disclose the position on IRS Form 8275 or 8275-R.
The New York Times says, in effect, that Trump took a position his lawyers said was good enough that he didn’t have to disclose it to avoid penalties. That a taxpayer would take such a position when there is a lot of money at stake should surprise or offend no one.
University of Iowa tax prof Andy Grewal says of the legal language that bothers the Times: “This dull language, common in tax advice, is not evidence of some type of scandal.”
This is not to endorse Trump, or Clinton, or anyone. Both campaigns have tax issues that would frighten me if I were doing their candidates’ returns. Specifically, both candidates have serious potential issues with their charitable foundations.
Charitable entities are required to be “organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes” to retain a tax exemption. The information on Trump’s use of his foundation to buy portraits of himself seems an obvious violation of this rule. So does the Clinton Foundation’s keeping Sydney Blumenthal on its payroll as an unofficial advisor to Hillary, or the foundation’s apparent sale of access to her while she was Secretary of State. 
Compared to  disqualificaton of a big non-profit, taking a favorable position on an uncertain tax issue is small beer.
*Classical reference.
Related: Steven Rosenthal, Trump’s $916 million of NOLs: The Art of the Dodge? (TaxVox); Amy Elliot, Documents Reveal Dubious Tax Planning Behind Trump’s Big Losses (Tax Notes)

Henry James wrote extensively and glowingly about Robert Louis Stevenson even as there was a chair in Stevenson’s house known as the “Henry James chair” for the Master’s use of it during salons and soirees; and H.L. Mencken went after Theodore Dreiser — really lit him up — after having met him a number of times.  Neither James’s nor Mencken’s opinions are likely the direct product of these relationships, but how can we know that for sure?  The relationships are not acknowledged in the critical essays that we must trust to be assessments that are uncorrupted by non-critical views.  And now, 100 years later, in a literary world notably smaller and vastly more interconnected, it still works the same way: friends (and enemies) write about each other’s books, but pretend they are writing about strangers Blurbs ...


The Economist review (The lock-’em-up mentality for white-collar crime is misguided) that:
One thing right-wing populists and left-wing progressives can agree on is that society is too soft on white-collar crime. Conservatives abandon their admiration for business when it comes to “crooked bankers”. Left-wingers forget their qualms if locking up “corporate evil-doers”. Hillary Clinton’s line that “there should be no bank too big to fail but no individual too big to jail” would go down equally well at a Donald Trump rally.
But is society really soft on corporate wrongdoing? And would locking up bankers and businessmen and throwing away the key really solve any problems? Two new books try to inject reason and evidence into a discussion more commonly driven by emotion and hearsay: “” by Eugene Soltes, of Harvard Business School, and “Capital Offenses: Business Crime and Punishment in America's Corporate Age” by Samuel Buell, the lead prosecutor in the Enron case, who now teaches at Duke University. ...

Sylvia Plath wrote: "Everything in life is writable about if you have the outgoing guts to do it, and the imagination to improvise. The worst enemy to creativity is self-doubt."

Misbehaving: The Making of Behavioural Economics A history of how this new discipline developed into such a major force over the past four decades and has come to dominate the mainstream economic thinking

CIA today released the long-contested Volume V of its official history of the Bay of Pigs invasion, which it had successfully concealed until now by claiming that it was a “draft” and could be withheld from the public under the FOIA’s “deliberative process” privilege.

How To Have Your Novel Win Over All Of China: Don’t Publish It

Actually, don’t publish it *in print.* Media execs “are mining a once-secluded corner of the internet that has become a booming billion-dollar business: a flourishing online literary world that bypasses ink and paper entirely to grab readers by their smartphones, with subjects like tomb raiding, science fiction, fantasy, romance and martial arts.”

What exactly do philosophers do?  They write lines like these:

“There is nothing ordinary about anything.” 

“The process of disturbing the mind is the mind.” 

“The desire to love is stronger than the desire to be loved.” 

Stolen medical data on the cheap after waves of healthcare hacks

The Inevitability of Being Hacked The Atlantic

How the UAE Is Recruiting Hackers to Create the Perfect Surveillance State

Payback? Russia Gets Hacked, Revealing Putin Aide's Secrets

Still from 'HyperNormalisation' trailer
German magazine “konkret” interviews Naked Capitalism about about Tor, spies and the cult of crypto Yasha Levine

Tax Office tries to crush whistleblower with legal bill

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