Wednesday, November 30, 2011

Ponzi Schemes and Income Taxes

Some Ponzi scheme victims may get more tax relief for their losses since the IRS issued Revenue Procedure  (abbrev. Rev Proc) 2011-58 which modifies one issued over two years ago, Rev Proc 2009-20

Ponzi Scheme victims have had the option of treating their losses as theft losses instead of capital losses if the loss in question was qualified. In general, a qualified loss was only incurred if the lead figure of the scheme was the subject of a federal or state criminal complaint or the right sort of civil proceeding. If the lead figure died before the complaint was filed, then the loss wasn't qualified.
Rev Proc 2011-58 broadens the definition of a "qualified loss." Now, the limit described in the preceding paragraph has been removed under certain circumstances.

There is a bunch of other technical gobbledygook in the new Rev Proc and the one it modified so don't rely on this post to justify claiming a deduction. However, if you or someone you love was taken advantage of in a Ponzi scheme (also known as pyramid scheme) then it might be worth while to buy an hour or two of time from a qualified tax professional.

Most of us, by the way, will talk about an issue like this at no charge for a half hour or so to filter out at least some of the folks who clearly aren't going to get a useful deduction. Note, however, there are no guarantees. At the end of the freebee 30 minutes the tax pro might not be sure whether the prospective client has a "qualified loss." At that point, the person with the loss may have to decide whether to start paying for the tax pro's time to get a final answer.

Tuesday, November 29, 2011

Thanksgiving Weekend

It's been a little hectic around here. My wife had full knee replacement surgery on Nov 23, the day before Thanksgiving, and that has pretty much absorbed my time since then.

Fortunately, she's making better than average progress where progress is measured by the angle of the knee joint fully extended - 0º (straight) is the target – and fully flexed – 105º is the target.

All things considered, it was a good Thanksgiving and we have much to be thankful for.

Thursday, November 17, 2011

Scams Using IRS as Bait

The Internal Revenue Service and others continue to report on various schemes directed at persuading people to reveal personal information in the mistaken belief that are responding to an IRS request.

Here is a simple fact.


If you get an unexpected email from the IRS, forward it to, then delete it.

I have heard is at least one report that con artists are sending phony requests for personal information through the U.S. Postal Service on the pretext of being from the IRS. Be careful.

Note also that the IRS web domain is The web address that has .org instead of .gov does NOT belong to the IRS. It is a fraud.

Wednesday, November 16, 2011

Like A Four Year Old?

Here are some extracts from a pdf document available at Iowa State University.
  • dresses self without much help
  • walks a straight line
  • understands the concepts of tallest, biggest, same, more, on, in, under, and above
  • asks and answers who, what, when, why, where questions
  • likes to talk and carries on elaborate conversations
  • persistently asks why
Of course, I picked favorable characteristics of four year olds. There are others that are more like ... well, like what you would expect from a four year old ... or ... fill in the blank.

Monday, November 14, 2011

Sarbanes-Oxley and Internal Control

The Sarbanes-Oxley Act of 2002 (SOX), among other things, created a requirement that publically traded companies have an adequate system of internal controls in place and that management those companies prepare an annual report on the adequacy of those controls (the infamous Section 404). SOX also requires that an independent auditor examine each covered company's internal controls and express an opinion on the management report.

According to James Doty, chair of the SOX created Public Company Accounting Oversight Board (PCAOB), the outside auditors are not doing an acceptable job of evaluating the assertions made by company managements. A Reuters article is here.

A major motivation that led to SOX being enacted was the need to ensure better detection and prevention of corporate fraud as perpetrated by the management of Enron, Xerox and a number of other companies. A major tool in achieving that goal is to have an effective system of internal control in place. The problem described by Mr. Doty means that tests of internal control are inadequate to detect weaknesses in the system, weaknesses that could be exploited by people inside these publically traded corporations.

Regulations and laws do little good if not enforced. Since the PCAOB is the single most important regulator of both reporting by publically traded companies and auditing of those companies by CPA firms, it will be interesting to see what he and the PCAOB do about this problem.

Chesterfield Location for Science Museum of Virginia

A Chesterfield satellite location of the Children's Museum of Richmond has been funded by a couple long active in the museum.  This RTD story has some additional details.

The story states, "The museum is evaluating locations in the area of Hull Street Road and state Route 288 because of the high concentration of children there." Some zoning classifications allow museums by right but several do not. It is not unlikely that any proposed location will require action by the Chesterfield Planning Commission and the Board of Supervisors. It will be interesting.

A Year With Frog and Toad

A Year With Frog and Toad is a great story of friendship. There is also a lot of singing, dancing and jokes. A few of the jokes will only seem funny to older people who need a longer lifetime's experience to recognize the reference but that's probably a good thing. One ongoing gag gives real meaning to "snail mail."

The publicity blurb suggests ages 4 and up which is probably about right. It was a stretch for one 3 year old earlier today but he managed to enjoy it (and to get just a little bit scared during the thunder storm scene). Be aware, winter doesn't get much play in this production since that's when toads and frogs hibernate.

This Theatre IV production is currently running at the Barksdale Theater at Willow Lawn and will do so through December 31.

Friday, November 11, 2011

Pet Peeve of the Moment: Quick Claim

There is no such thing as a "quick claim," at least not in relationship to real estate ownership. There is a thing called "quitclaim." Definitions are at the links below.


Economy moving upwards

Job and trade data show an improving economy. Both new unemployment claims and the trade deficit fell in most recent federal reports. A Reuters article is here.

For September, American manufacturers reported the most new orders since July 2008. As seems reasonable, stocks of those companies have increased in price. A Bloomberg article is here.

Info for Veterans Who Own Small Businesses

The Small Business Administration provides a range of resources to assist all small business owners become more successful. This week (for what I hope is an obvious reason), the SBA has been focusing on how veterans can benefit from their services.

In an article on the SBA web site, Deputy Administrator Marie Johns provides an overview of such services and a link to a report of the Interagency Task Force on Veterans Small Business Development which she chaired. That report, a 34 page pdf file, is available here.

Thursday, November 10, 2011

Tax Practice Improvement Committee

I've been appointed to the AICPA's Tax Practice Improvement Committee. As the name implies, our mandate is to find ways for CPAs in tax practice to improve their operations by delivering better services to their clients in a cost effective manner. I attended my first meeting of the committee yesterday in Washington, DC.

Four working groups were created yesterday. I'm on the Technology Working Group with Ed Zollars of Phoenix,  AZ (Thomas, Zollars & Lynch) and Michael Gebura of Cleveland, OH (Grant Thornton).

I'm looking forward to this.

Wednesday, November 9, 2011

Jim Holland Wins Reelection

Four of five incumbants will be returning to the Chesterfield Board of Supervisors. Of the three challenged incumbants, only Marlene Durfee was unable to hold her seat. With three true Republicans on the BOS, it will be interesting to see what influence, if any, Dan Gecker will have on decisions reached by that body.

Vote counts for the Dale Supervisor race are here.

Michael Jackson made a good run at the School Board seat for the Dale district. I expect next time he runs for office, he will win.

Word on the street is that the Chesterfield Planning Commission could see as many as three new members in January.

Sunday, November 6, 2011

RTD -- Election 2011: All politics is local

In its editorial this morning,  Richmond Times-Dispatch didn't exactly say, "Vote for Jim Holland." They did say, "The Dale District's Jim Holland responded with dignity to a difficult situation regarding the board's chairmanship." The editorial did not mention Jim's opponent either by name or other reference.

That is about as close as they will ever come to endorsing a Democrat.

Friday, November 4, 2011

My Favorite Cardinal


Election day in Virginia is Tuesday, November 8th. The polls are open from 6:00 AM to 7:00 PM.

Here are the people I hope will win in Chesterfield.

For Board of Supervisors:

In the Dale Magisterial District, JAMES "JIM" HOLLAND. Jim is my business partner, the man who appointed me to the Planning Commission and my friend of 16 years. Four years ago his campaign slogan was "Leadership that Listens." Since that time he has lived up to the promise of that slogan. He listens, he gathers information, and then he decides based upon what is best for the citizens of the Dale District and of Chesterfield County. He is a strong supporter of education, public safety, and creating jobs. He also believes in holding people and organizations accountable for meeting their responsibilities to the chagrin of the current School Board, among others.

Unlike his opponent, Jim knows that a good system of public education is crucial to attracting employers to Chesterfield County. Jim also knows, as do we all, that bankers don't make beans and that CPAs are, deservedly, one of the most trusted professions in the United States. Bankers suffer the fate of lobbyests and politicians, 90% of the group give the other 10% a bad name.

In the Matoaca Magisterial District, MARLENE DURFEE

Marlene Durfee has been a burr under the saddle of a lot of people during the last four years and that is a good thing. Sometimes, she talks too much. But, she also believes in holding people accountable for meeting their responsibilities. She asks tough questions and keeps asking until she gets the right, accurate, complete answer. I like her style and admire her for her courage.

In the Bermuda Magisterial District, MARK FAUTZ

I don't know Fautz as well as the other two I favor for Board of Supervisors. However, his opponent, the incumbant, is just too conservative, in my opinion, even for Chesterfield County. According to one source, about 40,000,000 Americans between 18 and 40 have tattoos. To Ms. Jaeckle, those people are self-mutilators who should be separated from civilized society (or, at least, the businesses they frequent should be separated). There are over 14,000,000 college students in America. They are the sort of people Ms. Jaeckle doesn't want living in Chesterfield County. (I know I'm being generous when I presume that in her use of the phrase, "that sort," Ms. Jaeckle meant college students.)

For School Board

In the Dale Magisterial District, MICHAEL JACKSON

About a year ago I offered the suggestion that all five members of the School Board should be voted out of office. Even if I didn't hold that broad opinion I would support Michael Jackson. He understands that School Board members are accountable to the parents and voters of Chesterfield, not the paid administrators who are supposed to be answering to the School Board. Michael's background, experiences and training make him an ideal steward of Chesterfield's students and the resources intended for their education.

In the Bermuda Magisterial District, STELLA EDWARDS

Stella Edwards would bring a highly relevant set of experiences to the School Board. She has been involved in education both as a profession and as a volunteer serving, learning and problem solving for most of her adult life. Her opponent has the same good intentions and much general experience but Stella's experiences and training are specific to educating children in a public school system.

In the Matoaca Magisterial District, SHAUKAT M. SIDDIQI

The best thing I can come up with to say about incumbant Omarh Rajah is that he seems to be disliked by the other current members of the School Board. As a one term incumbant, Tom Dolan lost to Mr. Rajah four years ago.

I know from personal experience that retired college professor Dr. Shaukat Siddiqi has dealt first hand with the successes and failures produced by public education. He has been recognized for his effective contributions to both Virginia State University and Chesterfield County. He would bring a fresh, competent, effective voice to the Chesterfield School Board.

For Commissioner of the Revenue, MICHAEL J. MARCOTTE

The incumbant has spent almost $3,000,000 on two whacks at acquiring a usable computer system and failed. When budget constraints forced tough decision making, he layed off tax auditors. The Board of Supervisors recognized that lost tax revenues would be greater than the salaries saved and said so to no avail.

Marcotte recognizes the problems created and compounded by the incumbant and he has solutions ready to solve or mitigate those problems.

For the Senate of Virginia

In the 10th Senate District, DAVID BERNARD

People who pander to anti-government, anti-science extremists need to be replaced. People who care about the environment and about creating jobs across the Commonweath should be elected. Replacing John Watkins with David Bernard would accomplish both of these objectives.

In the 16th Senate District, HENRY MARSH

I saved the best for last. Henry Marsh is one of the sharpest, knowledgable people I've met. He knows the best way to get re-elected is to take care of the interests of the people who vote for him and that is exactly what he does. He is an advocate and protector of individual rights, a strong supporter of education at all levels, and a man of conviction who can be trusted to put the good of the people first.

Incorporate Your Sole Proprietorship?

I was crusing around Chesterfield running errands and listening to the radio when I heard an advertisment for service company that helps people incorporate their small businesses, for a fee. What could happen if you don't take advantage for their assistance? According to them, you could lose everything you own!

I got bad news for all you sole proprietors with no employees. Incorporation will protect you from just about nothing if you incorporate and you're the only employee. You see, when an employee messes up and damages a customer, the customer sues the employer AND the employee. Usually, the employee has zilch so, usually, the plaintiff goes after the employer's deeper pockets.

But, if you are the only employee of the corporation you own and a customer (or anyone else) is damaged by your action, then YOU are still on the hook. Oh, the horror! What will you do? What can you do?

Answer: Buy liability insurance.

Wednesday, November 2, 2011