Stein Sperling has an immediate opening for an experienced bilingual (English/Spanish) personal injury paralegal for our Langley Park, Maryland office. Qualified applicants should have two years of experience in personal injury case management and client interaction.  Good typing skills and ability to learn new software quickly are required. (Needles software experience is a plus!) Please send qualified resumes to recruiting@steinsperling.com.

Alexia Kent McClure will be speaking on liability and governance issues at a national nonprofit organization’s chapter officers annual meeting.

Alexia Kent McClure will be speaking to the Nonprofit Cooperation Circle on fiduciary responsibility.

Practice Area: Injury Law

John Williams finds it very gratifying to assist people injured in accidents. It is consistent with why he chose to become a lawyer. John listens to his clients’ concerns and helps them navigate through their physical recovery process.  He’s an advocate for their positions and works to obtain satisfactory results on their behalf.

Before joining Stein Sperling and while in law school, John served as a legal intern for a solo practitioner in Falls Church, Virginia. There, he handled matters related to immigration law and criminal law, and often assisted with filing petitions for Temporary Protected Status and drafting complaints for the Virginia Office of Consumer Affairs. John also volunteered as a legal intern for Catholic Social Services in Winston-Salem, North Carolina.

Outside of the office, John enjoys reading and following current events.  He also enjoys camping, biking and kayaking. As an avid sports enthusiast, John also enjoys basketball and football.

John lived in Central America for nine years and is fluent in Spanish.
 

• ADMISSIONS + CERTIFICATIONS

  Virginia

• EDUCATION

  Virginia Tech (B.A., magna cum laude, 2008)
       Phi Alpha Delta Law Fraternity
       Democracy Matters, Founder and President (2006-2008)

   

  Wake Forest University School of Law (J.D., 2011)
       Domestic Violence Advocacy Center, President (2010-2011)
       Academic Success Program Leader, Business Organizations
       (2010-2011)

• LANGUAGES

  Spanish, fluent

• MEMBERSHIPS + ACTIVITIES

  Virginia Bar Association (2011–present)
        Virginia Bar Association Young Lawyers Division (2011–present)
  Fairfax Bar Association (2011–present)
  Virginia State Bar Business Law Group (2011–present)
  Virginia State Bar Litigation Group (2011–present)
  Virginia Trial Lawyers Association (2011–present)
  Virginia Amateur Athletic Union, Volunteer Basketball Coach (2007-2008)
  McLean Youth League, Volunteer Basketball Coach (2002-2004)

Stein Sperling, a well-known and prestigious law firm in Rockville, MD has an excellent opportunity for a bright, energetic, hard-working, and detail oriented individual.

A successful candidate will have:

• Bachelor's degree in Computer Science, Information Technology or experience in a related field
• 2+ years of applicable experience in Microsoft server administration
• In-depth knowledge of Microsoft Active Directory to administer, maintain and resolve issues
• Support and maintain Windows Servers 2008/2003, Microsoft Exchange 2003/2010, SQL Server 2008
• Knowledge and understanding of virtualization technologies (VMware)
• Support and maintain enterprise storage SANs (EMC)
• Experience implementing and administering TCP/IP based services such as DNS, DHCP, SMTP, FTP, etc
• Setup and support LAN/WLAN connections, including VLANS & IP traffic routing
• Knowledge of back-up and recovery methodologies (Symantec BackupExec)
• Support and maintain Blackberry Enterprise Server
• Knowledge of IP telephony and PBX systems
• Management and maintenance of remote sites using network-based tools
• Strong work ethic, strong organization skills & team player.  Ability to manage multiple critical projects and maintain high quality of work
• Ability to communicate effectively with a diverse group of network users

Great people to work with, good salary and benefits.   E-mail resumes to recruiting@steinsperling.com or fax 301-354-8140.

Millard Bennett will again be participating in an exclusive round table discussion and share valuable insight about best practices and emerging trends in business law. Hosted by Washington SmartCEO magazine, this roundtable discussion is a unique opportunity for Mr. Bennett to collaborate with other attorneys who are local thought leaders in the field of business law. He will share advice, strategies and perspectives with the magazine’s C-suite readers. The roundtable will be recorded and transcribed for publication in an upcoming issue of Washington SmartCEO.

For more information, visit SmartCEO magazine’s website at www.smartceo.com.

Karen Shapiro and Mark Schweighofer will be presenting the anatomy of buying and selling a business to the Maryland Society of Accountants.

Karen Shapiro and Mark Schweighofer will be conducting a seminar on the anatomy of buying and selling a business for the Maryland Association of CPAs.

This presentation will begin with a discussion on valuing a business. It will cover the lifecycle of a transaction from the first steps of dealing with brokers, the execution of NDA's and the Letter of Intent, through financial disclosures, due diligence, and negotiations surrounding the definitive agreements, and will end with a discussion on closing and post closing issues. This presentation will include a discussion of the joint efforts of attorneys and accountants working on the various tax considerations (including sales/use tax, federal and state tax concerns, payroll, new 83(b) elections, assumption/cancellation of options, election under IRC Section 338(h)(10) and tax-free transactions under Section 368).

Stein, Sperling, et al., one of the largest law firms in Montgomery County, Maryland, is seeking a bright, talented and bilingual (Spanish) full-time Marketing Assistant to support its personal injury practice.

The successful candidate will bring a positive, proactive, creative and energetic approach to client development initiatives. These initiatives include administrative tasks, such as management of the department’s client database and the development and maintenance of print and online marketing materials. S/he will be responsible for making off-site visits to cultivate and maintain referral source relationships and will have an active role in pursuing new and existing relationships with professional and community organizations in the surrounding area. S/he will report to the Client Development Manager.

The Marketing Assistant's primary responsibilities will include, but not be limited to:

• Writing and translating (English to Spanish) practice group descriptions, client alerts, regular firm publications and other marketing/client development materials
• Writing, translating and posting regular updates to social media sites regarding upcoming events and topics of interest.
• Researching and establishing relationships with professional and community organizations to identify opportunities for outreach.
• Cultivate and maintain programs for client and referral source outreach, including off-site visits to connect with these individuals or groups.
• Representing the firm at community events and festivals.
• Tracking and reporting progress toward department goals.
• Performing other tasks as assigned.

Specific requirements:

• Bilingual (Spanish) with exceptional verbal communication and writing skills required.
• Education and/or professional experience in Communication, Marketing or related subject required.
• 1-2 years professional experience preferred.
• Experience working in personal injury law or professional service firm environment a plus.
• Advanced computer skills:  proficiency in Microsoft Word, Excel and Outlook required; and database software highly preferred.
• Experience coordinating social media marketing (specifically Facebook) a plus.
• Strong organization and ability to build and maintain systems, with attention to detail.
• Ability to interface, speak publicly and communicate effectively with individuals or groups.
• Client-centered and solution-oriented mindset.
• Ability to work independently and collaboratively to set goals, devise work plans and meet deadlines.
• Reliable vehicle with valid driver’s license and clean driving record required.

Qualified candidates should submit a cover letter and resume to recruiting@steinsperling.com.

David Torchinsky will be speaking at the Library of Congress retirement program. He will be speaking on tax and estate planning covering the topics of wills, trusts, powers of attorneys and estate and inheritance taxes.

David Torchinsky will be speaking to the Montgomery/Prince George’s County Tax Study Group. He will be presenting the information that he learned from the 46^th Annual Heckerling Institute on Estate Planning Conference.

The annual Heckerling Institute on Estate Planning Conference is the nation’s leading conference for estate planners, including attorneys, trust officers, accountants, insurance advisors, and wealth management professionals. In addition to traditional estate planning topics, this year's Institute offered programs on related areas such as elder law, asset protection and income tax planning. To learn more about the Heckerling Institute Conference, please click here.

On January 9, 2012, the Internal Revenue Service (IRS) announced that it is extending the 2011 offshore voluntary disclosure initiative (OVDI). The terms of the program are substantially similar to the 2011 OVDI but the top tier penalties increased from 25% to 27.5% of the highest account balance. While the extension of the OVDI is indefinite, the IRS cautioned that it could be discontinued at any time.

Each U.S. citizen or resident who owns or has signing authority over one or more foreign bank accounts with an aggregate balance over $10,000 is generally required to file a Foreign Bank Account Report (FBAR) by June 30 of each year. The repercussions for failing to file an FBAR are significant. In addition to any back taxes, penalties and interest on any unreported income, criminal exposure can range from up to $500,000 in fines to 10 years in prison. Civil penalties can reach the greater of $100,000 or 50% of the balance of the foreign account.

The extension of the OVDI represents the third attempt by the IRS to encourage taxpayers who are delinquent in their FBAR filings to come forward voluntarily in exchange for reduced penalties and (in most cases) without the threat of criminal prosecution. In order to participate in the OVDI, taxpayers must complete the following steps:

• File original and/or amended tax returns including any income that was not reported from the overseas assets for the all years from 2003-2010;
• Pay any back income tax plus a 20% accuracy penalty and interest on such amounts;
• File FBARs for all years from 2003-2010; and
• Pay or make acceptable arrangements to pay an amount equal to 27.5% of the highest aggregate balance in the foreign bank accounts for the period spanning 2003-2010 (some taxpayers may qualify for a reduced penalty of 12.5% or 5%).

A further trap for the unwary is a new separate filing requirement for the 2011 tax year. Married taxpayers living in the U.S. and filing a joint return must file Form 8938 with their 2011 income tax returns if their “specified foreign assets” exceed $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year ($50,000/$75,000 for single filers). Specified foreign assets include not only any financial account maintained by a foreign financial institution but also other assets held for investment including stock or securities that are issued by someone other than a U.S. person. Taxpayers who fail to file Form 8938 face a penalty of $10,000 (increasing to $50,000 if not paid within 90 days). While there is significant overlap between the FBAR and Form 8938, taxpayers must be aware that they are separate obligations.

If you have questions about these or other tax law issues, please call 301-340-2020.

Tax Law at Stein Sperling
Stein Sperling’s tax law attorneys counsel clients on the intricacies of business and personal taxes in order to minimize tax liabilities. Each of our tax law attorneys holds either a Master of Laws degree in Taxation or is a Certified Public Accountant (CPA) or both. We participate in programs that allow us to stay on top of the rapidly changing world of tax laws, regulations, cases and rulings. We decode the tax talk and carefully guide our clients, helping them understand the big picture tax implications and tailoring strategies that benefit their short- and long-term objectives.

David De Jong will be co-presenting with David Malcolm of Lanigan, Ryan, Malcolm & Doyle on Business Tax Updates to Hispanic Business Owners. Their presentation will focus on how business owners can maximize their 2011 tax returns.

Click here to view the Federal Tax Update for 2011.

Individuals

• Public Law 112-9, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, expands the required repayment of excess advance payments of the health insurance premium assistance credit for those with rising incomes effective 2014.
• Public Law 112-________, created a two month extension through February 2012 of the two percent social security tax reduction; unless extended, the reduction expires on February 29, 2012 and self-employeds will apply the two percent reduction to $18,350 of income.
• In National Federation of Independent Business v. Sebelius, and Florida v. Health and Human Services, the US Supreme Court agreed to resolve a split among the Circuits and determine the constitutionality of the healthcare legislation including the individual mandate; 5½ hours of oral argument are scheduled.
• In Bakken v. Commissioner, TC Summary Opinion 2011-55, the Tax Court determined that a police officer’s disability pension continued to be tax free after he reached age 50 when he would have been eligible to retire had he been able to stay on the job and that it did not convert to taxable retirement as he had completed less than the required 20 years of service and remained ineligible for retirement; the Court distinguished the facts from an earlier Tax Court case in which disability benefits effectively terminated under state law at age 50.
• In Harper v. Commissioner, TC Summary Opinion 2011-56, the Tax Court characterized payments by a municipality to the mother of a disabled child as taxable even though she was not a professional caregiver inasmuch as the payments were for her services.
• In Karlen v. Commissioner, TC Summary Opinion 2011-129, the Tax Court determined that an individual who withdrew from his children’s Section 529 Plan but changed his mind and endorsed the unused check back to the Plan had to include the earnings in income; however, the Court did not impose the 10 percent penalty as the distribution was not used for non-educational expenses.
• In Goosen v. Commissioner, 136 TC No. 27, the Tax Court reached a result between that advocated by the taxpayer and the IRS, breaking out the golfer’s endorsement fees between personal service income and royalty income and then determining the portion subject to tax in the United States.
• n Rose v. Commissioner, TC Summary Opinion 2011-117, the Tax Court determined that interest paid following demolition of an old property to build a vacation home which was never constructed due to financing issues constituted qualified residence interest for up to 24 months.
• In Van Dusen v. Commissioner, 136 TC No. 25,  the Tax Court determined that out of pocket expenses including a portion of utilities expended in caring for “foster cats” in the home qualified for a charitable deduction.
• In Schramm v. Commissioner, TC Memo 2011-212, the Tax Court found that an adjunct professor who taught online courses was an employee and not an independent contractor and could only deduct expenses as miscellaneous itemized deductions.
• In Hamper v. Commissioner, TC Summary Opinion 2011-17, a television news anchor was denied a deduction for such expenses as on-air clothing and news magazine subscriptions, the court determined that the clothing expenses were inherently personal despite her testimony that she did not wear such conservative clothing except on the job (she lost credibility by also deducting underwear worn to work).
• In McLauchlan v. Commissioner, TC Memo 2011-289, the Tax Court denied all $100,000 of alleged unreimbursed expenses by a law partner claimed on a Schedule C rather than as an adjustment on a Schedule E; the law partnership reimbursed the partner for over $60,000 of expenses in each year and had a policy of reimbursing all expenses except for in-town transportation.
• In Pang v. Commissioner, TC Memo 2011-55, the Tax Court determined that an individual who went out of pocket by $250,000 in settling a lawsuit for wrongful death of a pedestrian in an automobile accident could not deduct the payment as a casualty loss (limited to physical damage of a taxpayer’s own property).
• In Mayo v. Commissioner, 136 TC No. 4, the Tax Court determined that the limitation allowing gambling losses only to the extent of winnings did not apply to other expenses of gambling in the case of a gambling professional.
• In Crandall v. Commissioner, TC Summary Opinion 2011-14, the Tax Court disallowed a like-kind exchange where the escrow arrangement did not restrict withdrawals and made no mention of Code Section 1031.
• In Bailey v. Commissioner, TC Summary Opinion 2011-22, the Tax Court determined that an individual attempting to qualify as a real estate professional, which would allow all rental property losses to be deducted irrespective of income, could not aggregate the 324 hours spent running an inn which had short term rentals with other rentals inasmuch as the inn activity is reportable on a Schedule C.
• In Kay v. Commissioner, TC Memo 2011-159, the Tax Court held that a wage earner averaging $45,000 per year in income with losses averaging $850,000 per year from stock trading could not get an ordinary deduction for these losses despite a “mark to market” election inasmuch as he traded only on a small portion of the trading days, had outside income and held most securities in excess of 30 days.
• In Schroerlucke v. Commissioner, 108 AFTR2d 2011-5305, the Court of Federal Claims denied a theft loss related to the decline in the stock value of WorldCom of $6.7 million although the CEO was subsequently convicted of conspiracy to defraud and other crimes; the Court determined that no theft was committed by the Corporation which would have required authorization, request or tolerance by the board of directors or by a manager acting within the scope of his employment.
• In Estate of Morhene v. Commissioner, TC Memo 2011-299, the Tax Court denied a theft loss deduction to a former husband for amounts spent by a wife authorized to control the checkbook during their 7-year marriage.
• In Tempel v. Commissioner, 136 TC No. 15, the Tax Court determined that the sale of state tax credits constitutes a sale of a capital asset (not a statutory ordinary income item) in which the taxpayer was found under the facts to have no basis; in McNeil v. Commissioner, TC Memo 2011-109, the Tax Court reiterated its decision but found that the gain was short term in this case as there could be no tacking of the period under which the land was held and the subsequent period in which the easement was held.
• In Dagres v. Commissioner, 136 TC No. 12, a venture capitalist was allowed a business bad debt deduction as an ordinary loss when he lent money to a person who had given him multiple leads; the dominant motivation was found to be business related.
• In Mayo Foundation v. United States, 107 AFTR2d 2011-341, a unanimous US Supreme Court determined that medical students training as residents do not qualify for the student exemption from social security.
• In Announcement 2011-14, IRS reversed two prior Information Letters and determined that breast pumps and similar supplies qualify as a medical expense deduction.
• In News Release 2011-117, IRS issued the final version of Form 8938 for individuals to report foreign financial assets not reported on another IRS form; thresholds for single individuals living in the United States are $50,000 on the last day of the tax year or $75,000 at any time during the tax year (doubled on a joint return) and for singles living abroad $200,000/$300,000 (doubled on a joint return).
• In Chief Counsel Advice 201125015, IRS confirmed that the federal government is a single employer for purpose of determining whether an employee has received wages equal to the OASDI base.
• In Letter Ruling 201135022, IRS revoked Letter Ruling 201005014 which generously allowed employees to receive work related articles of clothing bearing the taxpayer’s logo as a de minimis fringe benefit.
• In Chief Counsel Advice 201138048, IRS determined that an employee is subject to tax on personal use of an employer-provided aircraft to a friend of the employee even if the employee is not on the plane.
• In Legal Advice 20115101F, IRS determined that compensation for the temporary taking of property by the Government is ordinary income rather than capital gain because the taxpayer’s entire interest in the property was not the subject of an involuntary conversion.
• In Action on Decision 2011-03, IRS reversed a 2006 position and accepted a 2010 Tax Court decision which allowed the taxpayer to deduct most costs of sex reassignment surgery as a medical treatment for gender identity disorder.

Retirement Plans

• In Christy & Swan Profit Sharing Plan v. Commissioner, TC Memo 2011-62, the Tax Court determined that a single participant profit sharing plan which did not make required statutory changes to its documents could lose its exempt status retroactively even though the plan accepted no new contributions.
• In Hellweg v. Commissioner, TC Memo 2011-58, the Tax Court determined that an IRA may own a business and that the contribution limits are not subverted despite the annual flow of large dividend payouts to the IRAs (the prohibited transaction rule did not apply as the IRAs obtained the stock at the inception of the corporation); in Ohsman v. Commissioner, TC Memo 2011-98, the Tax Court reiterated its interpretation.
• In Chilton v. United States, 107 AFTR2d 2011-1391, a Texas Federal District Court overruled the Bankruptcy Court and that district fell in line with all other Courts which have decided the issue that inherited IRAs qualify for an exemption in bankruptcy; in In Re Thiem, 107 AFTR2d 2011-529, an Arizona Bankruptcy Court reached the same result.
• In Willis v. Menotte, 107 AFTR2d 2011-752, the Eleventh Circuit Court of Appeals agreed with a Florida Federal Court that an IRA loses its protection in bankruptcy when the account holder has engaged in a series of prohibited transactions.
• In Letter Ruling 201118025, IRS refused to waive the 60-day rollover period for a taxpayer who withdrew funds to assist his elderly mother but failed to redeposit them, indicating that a taxpayer assumes the risk in such a case.
• In Letter Ruling 201150037, IRS determined that protections placed on an IRA by a person suffering from bipolar disease requiring, among other steps, notification of the taxpayer’s attorney in the case of distributions beyond the required minimum do not disqualify the IRA.

Estates and Trusts

• Proposed Regulations under Code Section 67 would allow “unusual investment objectives” of a trust or estate exceeding what would normally be charged individual investors to be deducted irrespective of the 2 percent of adjusted gross income floor.
• Proposed Regulations under Code Section 2032 repeal prior Proposed Regulations and provide broad guidance as to how the alternate valuation date works in case of dispositions and exchanges during the six-month period, permitting estates to use alternate valuation not only in the case of a decline due to market conditions but also due to other post-death events including reorganizations and certain distributions.
• In In re:  Does, 108 AFTR2d 2011-5589, a California Federal District Court allowed IRS to issue a summons to the State of California to detect transfers of real property between non-spouse relatives that were not reported on a gift tax return; California marks the 16th state which will be providing real property transfer records to IRS.
• In Estate of Adler v. Commissioner, TC Memo 2011-28, the full value of a large parcel of land divided into fifths during the decedent’s lifetime and given to his children was fully included in the estate without discounting as the decedent continued to use and treat the property as his own during his life (which not only brought the gifts back into the estate but also cost the discontinuing of fractional shares).
• In Estate of Jorgensen v. Commissioner, 107 AFTR2d 2011-2069, the Ninth Circuit Court of Appeals agreed with the Tax Court that assets transferred to two family limited partnerships remained in a decedent’s gross estate where he continued to write checks on partnership accounts to pay personal expenses and to make gifts.
• In Estate of Turner v. Commissioner, TC Memo 2011-209, the Tax Court required full inclusion without discounting the full value of assets transferred five years prior into a family limited partnership where the decedent received a management fee for de minimis services and the entity made payments for personal purposes of the transferor.
• In Estate of Liljestrand v. Commissioner, TC Memo 2011-259, the Tax Court included the full value of family limited partnership assets in a decedent’s estate where the partnership agreement guaranteed the decedent all of the income of the partnership.
• In Estate of Liljestrand v. Commissioner, TC Memo 2011-259, the Tax Court included the full value of family limited partnership assets in a decedent’s estate where the partnership agreement guaranteed the decedent all of the income of the partnership.
• In Estate of Riese v. Commissioner, TC Memo 2011-60, a residence occupied by a decedent was not included in the gross estate where no rent was paid for the six-month period between termination of a Qualified Personal Residence Trust (QPRT) and the death but an intent to pay could be shown.
• In Linton v. United States, 107 AFTR2d 2011-375, the Ninth Circuit Court of Appeals reversed a Washington Federal District Court and remanded the case for further fact finding in order to determine whether gifts of interests occurred prior to creation of a limited liability company (in which case they would not be eligible for discounts) or whether they occurred subsequently (in which case they would be eligible for discounts).
• In Estate of Duncan v. Commissioner, TC Memo 2011-256, the Tax Court allowed an illiquid estate to deduct interest expense from a preexisting trust with substantially the same beneficiaries in order to pay estate taxes.
• In Estate of Shapiro v. United States, 107 AFTR2d 2011-942, the Ninth Circuit Court of Appeals reversed a Nevada Federal District Court, sending the case back for determining the proper amount of the deduction, and allowed an estate a deduction for the value of a claim by the decedent’s live-in paramour who had sued months before death alleging that the couple had agreed to pool resources and to share assets (the claim valued at $5 million on the return settled at $1 million following a defense verdict).
• In Estate of Saunders v. Commissioner, 136 TC No. 18, the Tax Court denied a $30 million deduction claimed by the estate of a deceased attorney as an estimate related to a large malpractice claim in that the amount was not reasonably ascertainable at the date of death; the deduction allowed was based on the ultimate payment of $250,000.
• In Bacoei v. United States, 107 AFTR2d 2011-468, the Ninth Circuit Court of Appeals agreed with a California Federal District Court that an incomplete request on Form 4768 for an extension of time to pay estate taxes is not reasonable cause for abatement of the late payment penalty even when accompanied by a letter requesting an extension.
• In Revenue Ruling 2011-28, IRS determined that an irrevocable life insurance trust is not included in a decedent’s estate by virtue of a power retained by the decedent, as creator of the trust, to substitute assets of equivalent value.
• In Revenue Procedure 2011-41 and Notice 2011-66, IRS indicated that estates of 2010 decedents otherwise subject to estate tax avoid the tax by filing Form 8939 and by providing a statement to beneficiaries within 30 days of that filing in order to allocate the limited step-up in basis; the guidance confirms that the Personal Representative may not allocate to an asset beyond its fair market value.
• In Notice 2011-37, IRS indicated that investment expenses bundled with fiduciary fees will not need to be segregated until after issuance of final regulations.
• Notice 2011-76 gives an extension for filing an estate tax return in the case of 2010 decedents to the later of March 19, 2012 or 15 months after the date of death with no late filing or other penalties due but interest still applying; the due date to file Form 8939 allocating the increase in basis for property acquired from a 2010 decedent was extended two months until January 17, 2012.
• In Notice 2011-101, IRS indicated that it is studying the tax treatment on transfers between one irrevocable trust and another, the concept known as “decanting.”
• In Letter Ruling 201125009, IRS allowed a surviving spouse to disclaim the balance of her husband’s retirement benefits although a distribution was received by automatic quarterly deposit in an account which had been joint with rights of survivorship; the disclaimer related only to the balance in the IRA excluding the post-death deposit.
• In Technical Advice Memorandum 201126030, IRS determined that use of the language “it is my desire” in a Will in the usual context constitutes a specific bequest.

Business 

• Public Law 112-10, the Department of Defense and Full-Year Continuing Appropriations Act, repealed the provisions of the Healthcare Legislation dealing with “free choice vouchers” as an alternative to employer sponsored health insurance.
• Public Law 112-29, the America Invests Act of 2011, bans tax strategy patents excepting those related to preparation and financial management software.
• Temporary Regulations under Code Sections 162 and 263 establish the distinction between a capital expenditure and a repair, requiring capitalization of improvements to building structures or to component parts such as HVAD, plumbing, electrical, all escalators, all elevators, fire and alarm systems, security systems, gas distribution systems and any other systems separately classified by IRS; (an improvement includes a replacement of a major component of the overall structure or component or a rebuilding to a new like condition after the class life has been exceeded); a retirement of a structural component is treated as a disposition allowing a loss on the undepreciated portion of the component.
• Proposed Regulations under Code Section 168, permit a dropdown from 100 percent to 50 percent bonus depreciation despite contradictory instructions in the 2010 Form 4562.
• Proposed Regulations under Code Section 469 provide that an interest in a limited liability company or limited liability partnership will be treated as an interest of a limited partner in a limited partnership where the entity is classified as a partnership for federal income tax purposes and the holder of the interest does not have rights to manage the entity at all times during the applicable year under law or under the governing documents including the power to bind the entity; the effect is to make the right to participate in management rather than limited liability as the determinant in whether a partner or member can seek to show material participation based on the number of hours of involvement in the activity.
• In Gudmundsson v. United States, 107 AFTR2d 2011-852, the Second Circuit Court of Appeals agreed with a New York Federal District Court that income must be recognized by an employee on receipt of an employer’s stock despite a one-year inability to transfer the securities in the public market because certain private transfers were permitted; the Court indicated that the trading price set the value despite the fact that it was inflated due to corporate fraud.
• In Freda v. Commissioner, 108 AFTR2d 2011-5985, a divided Seventh Circuit Court of Appeals agreed with the Tax Court that a payment to settle trade secret litigation is ordinary income determined by the nature and basis of the action settled rather than the origin of the claim.
• In Healthpoint, Ltd. v. Commissioner, TC Memo 2011-241, the Tax Court determined that the allocation in a post-trial settlement must parallel that of the Court decision; punitive damages awarded at trial were recast here.
• In Davis v. Commissioner, TC Memo 2011-286, the Tax Court determined that options awarded to a company president and chief executive officer for putting cash in the business for expansion were compensatory in nature, allowing a deduction to the business timed to the reporting of income by the recipient; the Court rejected an additional argument that the value of the options which was in excess of $36 million constituted unreasonable compensation inasmuch as it was the result of arm’s length bargaining although in a family held business.
• In Herrington v. Commissioner, TC Memo 2011-73, a business owner was permitted to deduct a theft loss representing funds taken by her boyfriend where she remained silent because he physically abused her and intimidated her verbally with threats to kill her and her children.
• In Douglas v. Commissioner, TC Memo 2011-214, a business which acquired an airplane at year end but had no qualified pilot on staff or through outside contract was treated as not having the plane in a state of readiness for use on December 31 and was not allowed to expense or depreciate the cost (the Court did rule in favor of the taxpayer on the accuracy penalty).
• In United States v. Howard, 108 AFTR2d 2011-5993, the Ninth Circuit Court of Appeals agreed with a Washington Federal District Court that goodwill on the sale of a dental practice by a C corporation was not personal where the individual had entered into restrictive covenants with the corporation; the Court noted that “the incidence of taxation depends upon the substance, not the form of a transaction” and further stated “so having then made himself available to the advantages of using the corporation, and having entered into the agreements that he did with the corporation, then why should we try to allow him … out of what he got himself into.”
• In Watson v. United States, 107 AFTR2d 2011-311, an Iowa Federal District Court found $67,000 of purported dividends from the wholly owned S corporation of a certified public accountant with a masters degree in taxation to constitute additional compensation where the CPA took salary of only $24,000 per year; the Court left alone an average of $122,000 in other distributions for each of the two years in issue.
• In Shellito v. Commissioner, 108 AFTR2d 2011-5218, the Ninth Circuit Court of Appeals, accepting that a spouse may be on a payroll to create a valid family medical reimbursement plan despite being the only employee, remanded the case to the Tax Court to determine whether the spouse was a bona fide employee when she received $100 per month plus medical reimbursements and the checks were cut on a joint checking account into her individual account (she did work significant hours on the farm).
• In Robinson v. Commissioner, TC Memo 2011-99, a vocational instructor teaching police officers and other criminal justice personnel but receiving a paycheck from Temple University under a contract billed to the Commonwealth of Pennsylvania was found to be an independent contractor rather than an employee notwithstanding that he received a W-2 from Temple; the Court looked to the lack of control by the University and the absence of being allowed to participate in benefits given to faculty.
• In Colosimo v. United States, 107 AFTR2d 2011-622, the Eighth Circuit Court of Appeals agreed with an Iowa Federal District Court that a 50 percent shareholder and president of a corporation with knowledge of unpaid taxes at some point during the nonpayment could not blame a bookkeeper for failure to pay.
• In Concert Staging Services v. Commissioner, TC Memo 2011-231, the Tax Court determined that personal payments labeled “trust fund only” but intended to satisfy a corporation’s installment agreement to IRS could be applied by IRS to non-trust liability in accordance with its Manual.
• In Oppliger v. United States, 107 AFTR2d 2011-1518, the Eighth Circuit Court of Appeals followed the weight of authority and agreed with a Nebraska Federal District Court that business owners were responsible for over $2 million in a trust fund recovery penalty notwithstanding the embezzlement by a bookkeeper who failed to file employment tax returns for more than three years and subsequently committed suicide in that they were responsible parties throughout and used funds for other purposes after they became aware of the liability; the Court indicated that the liability of a newly responsible person is limited to funds on hand upon taking control but this principle does not apply to a responsible person throughout.
• In Blackwell v. Commissioner, TC Memo 2011-188, the Tax Court determined that a couple was engaging in horse breeding activities for profit where they had an elaborate business plan and worked diligently in the activity despite full time jobs despite only $167,000 gross income and $806,000 in expenses over a 7-year period; the couple had discontinued the activity prior to trial.
• In DKD Enterprises v. Commissioner, TC Memo 2011-29, the Tax Court determined that two cat lovers who spent 2,000 and 800 hours per year respectively in the activity including breeding, raising, showing and offering for sale cats were not engaging in a trade or business but were carrying on a hobby, thus disallowing vet bills, litter and food, mileage to cat shows and other expenses (the taxpayers’ corporation was however found not to be a personal service corporation as alleged by IRS).
• In Campbell v. Commissioner, TC Memo 2011-42, the Tax Court determined that an Amway distributorship was not run for profit but was for the purpose of acquiring products at a discount for use in other businesses and for personal consumption under facts indicating that the activity was not conducted in a business-like manner.
• In Rundlett v. Commissioner, TC Memo 2011-229, the Tax Court found that a taxpayer owning 11 weekly timeshares was not engaged in an activity for profit but a “fly by the seat of the pants experiment” involving pleasure travel to lavish beach resorts.
• In Revenue Ruling 2011-29, IRS reversed itself and indicated that an accrual basis employer can accrue a dollar amount for bonuses even if individual bonuses are not set provided that the amount cannot revert to the employer and must be divided among employees.
• In Revenue Procedure 2011-29, IRS created a “safe harbor” for “success fees” in transactions, permitting payors to immediately deduct 70 percent of the fees while capitalizing the remaining 30 percent.
• In Notice 2011-1, IRS delayed the effective date of the nondiscrimination rules for new group health insurance plans which were scheduled to take effect September 23, 2010 for plans not in existence on enactment of the healthcare legislation until an undetermined date subsequent to the issuance of regulations.
• In Notice 2011-28, IRS announced that small employers with under 250 Forms W-2 will not be required to report health coverage cost information on the W-2 at least through 2012.
• In Announcement 2011-64, IRS announced an effective “amnesty” for businesses treating workers improperly as independent contractors under which the business may file Form 8952 at any time and pay 10 percent of the amount which would have been payable in the preceding tax year in the event of an IRS audit on the groups of workers being converted to employee status; eligibility requires that the workers must have been treated consistently as independent contractors, Forms 1099 must have been issued in the three preceding years when required, the taxpayer must not be under examination by IRS for any reason and the taxpayer must not be under examination by the Department of Labor or any state agency regarding classification (if examined previously, the taxpayer must have complied with the results).
• In Field Attorney Advice 2011101, IRS indicated that an automobile dealer could not write off a portion of goodwill acquired when he purchased a franchise containing four lines of automobiles notwithstanding that the manufacturer terminated one line; a 15-year write off continues to apply to all goodwill acquired in the same transaction
• In Action on Decision 2011-06, IRS announced its acquiescence in the 2011 decision of the Tax Court in Mayo that the indirect expenses of a gambler engaged in such a business are not subject to an income limitation as are the direct losses.
• In Letter Ruling 201114015, IRS allowed 12 subsidiaries engaging in the practice of medicine in separate states to deduct insurance payments to a “captive company” also owned by the parent finding that there was a sufficient shifting of the risk.
• In Internal Legal Memorandum 20115002F, IRS determined that costs associated with retrieving company artifacts for exhibiting at company headquarters are not an “ordinary and necessary” business expense.
• In Chief Counsel Advice 201151020, IRS determined that meals provided to airline crew members do not qualify as a “de minimis” fringe benefit; IRS found that the meals are excludable as they are furnished on the employer’s business presence for the convenience of the employer but that only 50 percent of the cost may be deducted by the employer rather than 100 percent if it had qualified as de minimis.
• In Chief Counsel Advice 201151021, IRS determined that increased interest deductions in closed years, although not usable in those years or in carryback years, may be carried forward to open years to the extent that they would not have been absorbed in the tax years or carryback years.

Procedure

• Public Law 112-9, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, repealed the previously enacted expansion of the use of Forms 1099 including its applicability to products, payments made generally to corporations and payments by owners of rental properties.
• Proposed Regulations under Code Section 6402 set forth guidance on various types of refunds, stating that, in the absence of specific directive on a form, a refund must be filed with the Service Center at which a taxpayer would be required to file a current tax return for the type of tax related to the claim.
• Final Regulations under Circular 230 set the rules for Registered Tax Return Preparers (RTRPs) who are not attorneys, CPAs or Enrolled Agents, permitting them to represent taxpayers before Revenue Agents, customer service representatives and the Taxpayer Advocate but not before Revenue Officers or Appeals Officers.
• Proposed Regulations under Circular 230 would require uncredentialed tax return preparers to be fingerprinted; attorneys, CPAs, enrolled agents and enrolled actuaries would be exempt.
• In United States v. Richey, 107 AFTR2d 2011-573, the Ninth Circuit Court of Appeals reversed an Idaho Federal District Court and determined that the work papers of an appraiser retained by a law firm who valued a charitable easement were reachable in discovery and were not attorney work product or otherwise protected by attorney-client privilege.
• In Custom Stairs and Trim Ltd., Inc. v. Commissioner, TC Memo 2011-155, the Tax Court abated a company’s failure to deposit penalty, determining reasonable cause from significant business downturns and from “cascading” penalties because of allocations to the earliest tax liability; the Court noted that certain circuits have taken a contradictory position that financial difficulties can never constitute reasonable cause for failure to deposit.
• In Wickersham v. Commissioner, TC Memo 2011-178, taxpayers were found not liable for the accuracy penalty when they hired an enrolled agent to prepare their return who made several errors; the Court determined that the preparer’s experience and expertise was sufficient to justify reliance where they provided her with all needed and accurate information.
• In Seven W Enterprises, Inc., et al., v. Commissioner, 136 TC No. 26, the Tax Court determined that a business could not avoid the accuracy related penalty based on professional advice when the CPA was an in-house employee (abating the penalty for the earliest year in which he was an outside accountant and separately paid preparer).
• In Olsen v. Commissioner, TC Summary Opinion 2011-131, the Tax Court determined that a taxpayer was not liable for the accuracy penalty when he made an “isolated error” in entering K-1 information on the input sheet of his tax preparation software.
• In United States v. Quinn, 107 AFTR2d 2011-712, a Kansas Federal District Court ruled that an individual could be prosecuted for willful failure to pay over payroll taxes notwithstanding that she paid the full liability before her trial.
• In Shockley v. Commissioner, TC Memo 2011-96, IRS was not allowed to proceed against three former shareholders for amounts in excess of $26 million as transferees inasmuch as IRS did not send the notice of deficiency against the corporation to its last known address and, accordingly, was returned as undeliverable.
• In Thompson v. Commissioner, 137 TC No. 17, a divided Tax Court determined that the applicability of an accuracy penalty relating to a partnership investment in a tax shelter is determined at the partnership level in a TEFRA proceeding.
• In Bloomfield State Bank v. United States, 107 AFTR2d 2011-2153, the Seventh Circuit Court of Appeals reversed an Indiana Federal District Court and determined that a bank mortgage loan including a provision giving the bank a security interest in future rental income takes priority over a subsequently filed federal tax lien even though the rentals were received after the tax lien was filed.
• In United States v. Heli USA Airways, Inc., 108 AFTR2d 2011-7216, a Nevada Federal District Court indicated that an employer was liable for an employee’s unpaid taxes and additions as well as a 50 percent penalty directly against the Company for failure to honor a levy upon the employee’s pay; the fact that the CFO had a mental breakdown was determined as insufficient to even avoid the statutory 50 percent penalty
• In United States v. Ryan, 107 AFTR2d 2011-1785, a California Federal District Court allowed IRS to seize the principal residence of a couple with a $6.2 million outstanding tax liability where no voluntary payment had been made in five years and a transfer of assets to avoid levy had previously been made.
• In Law Offices of Scott E. Combs v. United States, 107 AFTR2d 2011-784, a law firm was unable to challenge a levy on its trust account due to “lack of standing”, forcing individual clients to sue for funds; IRS believed that the taxpayer was commingling personal and trust funds.
• In Azzari v. Commissioner, 136 TC No. 9, the Tax Court determined that IRS abused its discretion in not subordinating its lien and in not granting an installment arrangement where the taxpayer showed that it would have been able to remain current in payroll taxes and make installment payments upon the subordination.
• In Tucker v. Commissioner, TC Memo 2011-67, the Tax Court determined that losses from day trading activities constitute “dissipated assets” that IRS could consider in determining the reasonable collection potential for purpose of considering a taxpayer’s offer in compromise.
• In Milhouse v. Commissioner, TC Summary Opinion 2011-12, the Tax Court gave innocent spouse relief to a wife who maintained separate finances from her husband for the one year that they were married and could file a joint return, determining that the wife did not have actual knowledge of the husband’s withdrawals from a retirement plan; IRS attempted to improperly use the “reason to know” standard as opposed to the required actual knowledge of the withdrawals.
• In Richard v. Commissioner, TC Memo 2011-144, a husband was granted innocent spouse relief to a taxpayer related to his former wife’s non-reporting of a $50,000 distribution from a retirement plan; the Court indicated that the husband may have had reason to know of the distribution but lacked actual knowledge which would have denied him the requested relief.
• In Thomassen v. Commissioner, TC Memo 2011-88, the Tax Court gave equitable innocent spouse relief to a wife of 50 years from liabilities on joint returns dating back to 1964 which caused IRS to seek foreclosure of the marital home after the husband’s death; the husband, an orthopedic surgeon, was found to have abused her psychologically during more than 50 years of marriage with fits of rage and controlling behavior.
• In Torrisi v. Commissioner, TC Memo 2011-235, a widow who separated from her husband a decade prior to his death but continued to file joint returns for a number of years following the separation was granted equitable innocent spouse relief for all but the last year with the distinction being that at that point she should have known that the liability would not be paid.
• In Waldron v. Commissioner, TC Memo 2011-288, a psychologist was given equitable innocent spouse relief for 30 percent of the unpaid liabilities, tied to the percentage of the pre-divorce installment payments paid by her husband rather than the 50-50 split under the divorce decree where the circumstances strongly suggested that the taxpayer reasonably believed that her former husband would pay only 30 percent.
• In Harbin v. Commissioner, 137 TC No. 7, the Tax Court determined that a prior trial in that Court did not bar the husband of a gambler from claiming innocent spouse relief in a subsequent proceeding as he was held to not have participated meaningfully in the prior case where the attorney represented both parties and did not advise as to or assert innocent spouse relief for the husband.
• In United States v. Home Concrete & Supply, LLC, the US Supreme Court agreed to hear an appeal from IRS from a decision of the Fourth Circuit that an overstatement of basis does not give rise to a six-year statute of limitations based on understatement of gross income; the Courts of Appeal are deeply divided.
• In Brady v. Commissioner, 136 TC No. 19, the Tax Court determined that overpayments in earlier tax years for which refund claims were filed late may not only result in a denied refund but also in a denial as an offset to liability in succeeding years.
• In Boensel v. United States, 108 AFTR2d 2011-5626, the US Court of Claims determined that an overpayment of approximately $112,000 of a $435,000 payment against federal estate tax was an estimated tax payment and not a “tax deposit”; the latter would have permitted return of an overpayment seven years late but the deposit mechanism was not added to the law until five years after the payment was made.
• In Nicholas Acoustics & Specialty Company v. United States, 107 AFTR2d 2011-950, the Fifth Circuit Court of Appeals agreed with a Mississippi Federal District Court that payroll tax remittances were payments rather than “tax deposits” and thus were subject to a 3-year statute of limitations on refunds.
• In United States v. Storey, 107 AFTR2d 2011-844, the Sixth Circuit Court of Appeals reversed an Ohio Federal District Court and determined that an individual who met the statutory criteria for discharging income taxes in bankruptcy could not be denied a discharge on a theory of evasion where IRS was unable to show a lavish lifestyle.
• In In Re Cannon, 107 AFTR2d 2011-2070, a Georgia Bankruptcy Court concurred with the prevailing view and determined that liability shown on IRS-prepared Substitute for Returns (SFR) can never be discharged in bankruptcy.
• In Revenue Procedure 2011-25, IRS indicated that a preparer required to file electronically must obtain a hand-signed and dated statement documenting a taxpayer’s choice to file a paper return in which case the return must actually be sent by the taxpayer; an email statement from the taxpayer is insufficient according to the IRS.
• In Notice 2011-80, IRS indicated that preparer tax identification numbers (PTINs) must be renewed on an annual basis commencing October 16 of the preceding year.
• In News Release 2011-14, IRS revealed a new voluntary disclosure program for taxpayers with undeclared offshore assets under which individuals coming forward would not be criminally prosecuted but must pay back taxes, interest and penalties for eight years (instead of six under the prior program) and creating an additional 25 percent penalty applied to the highest account balance (up from 20 percent under the prior program); a 12½ percent rate will apply for accounts of $75,000 or less and a 5 percent rate will apply to taxpayers with little connection to their accounts).
• In News Release 2011-20, IRS announced that it would not impose a federal tax lien in the case of direct debit installment agreements where the debt is less than $25,000 and indicated that it would streamline the Offer in Compromise procedure for taxpayers with liabilities of less than $50,000 and annual incomes of up to $100,000.
• In News Release 2011-80, IRS announced that it will not apply a two-year limitation on seeking equitable innocent spouse relief after the first targeted collection activity.
• In Chief Counsel Memorandum 2011-5, IRS indicated its acquiescence in a 2009 Tax Court case of Vinatieri v. Commissioner, 133 TC No. 16, requiring IRS to release a levy creating economic hardship even if the taxpayer has not filed required returns.
• In Program Manager Technical Assistance 2010-67, IRS attempted to distinguish a deposit from an overpayment which has a three year statute of limitations, indicating that a deposit must be labeled as such, applied to unassessed taxes and the tax years and basis for the disputable tax must be set forth.
• In IRS Memorandum SBSE-05-0711-064, IRS created a policy in which a revenue officer must contact an employer within 15 days following notification through an “alert program” when a semi-weekly payroll tax depositor becomes delinquent (the intent is to catch large delinquencies prior to filing of the quarterly returns).
• In Chief Counsel Advice 201106009 and 201106010, IRS said that “adult entertainment clubs” and other businesses that pay cab drivers to deliver customers must file Form 1099 for each driver paid $600 or more in a calendar year.
• In Chief Counsel Advice 201118020, IRS determined that a taxpayer who omits over 25 percent of gross income on the original tax return cannot avoid a six-year statute of limitations on assessment by filing an amended return.
• In Chief Counsel Advice 201134018, IRS determined that IRS is precluded from cancelling acceptance of an amended return and reinstating the original liability once the statute of limitations has expired on the original return.
• A TIGTA Report dated December 20, 2011 indicated that more than 300 prisoners have received PTIN numbers including 43 who are serving life sentences.

David Torchinsky and Eric Rollinger to present a Maryland/Federal Fiduciary Income Tax Workshop. This workshop will feature hypothetical situations including completed Federal and appropriate Maryland fiduciary income tax returns. You will receive helpful techniques to minimize fiduciary income tax liability as well as understand the significance of transferring the estate or trust assets before the end of the final year.

In addition to explaining and illustrating the technical aspects of preparing the actual returns, the program covers various planning techniques to minimize the tax liability to the fiduciary and the beneficiaries.

Family law attorneys may find themselves in unfamiliar territory when faced with divorcing a husband and wife who own a business together. In most cases, continuing joint ownership of a business after divorce is not feasible. So what do you do with the business? Karen Shapiro and Eric Rollinger will provide insight on the various possibilities including one spouse buying out the other, a sale to a third party and dissolution.

Karen will start with a basic discussion about the different types of entities, the governing documents for each and the types of documents you'll want to make sure you get in discovery. Eric will discuss issues around valuing the business. They will also address other obstacles for divorcing couples who jointly own a business such as employment, benefit, and alimony issues.
 

Practice Area: Civil Litigation

Alan Kerxton concentrates his practice in financial restructuring of distress businesses, bankruptcy reorganization and commercial law. His clients appreciate his depth of experience and the importance he places on fully understanding and analyzing their businesses.

Prior to joining Stein Sperling, Alan was an attorney with several law firms in Washington,D.C.and Montgomery County, Maryland. His previous experience also includes working as an attorney with the Securities and Exchange Commission, Corporate Reorganization Division. Alan is a past adjunct professor of bankruptcy law at The Catholic University of America, Columbus School of Law.

• ADMISSIONS + CERTIFICATIONS

  Maryland
  District of Columbia

• EDUCATION

  Ohio State  University (B.A., 1960)
  Ohio State  University (J.D., 1962)

• HONORS + AWARDS

  Best Lawyers (1993 - present)
  Martindale-Hubbell, AV Preeminent peer review rating

• MEMBERSHIPS + ACTIVITIES

  Bar Association of Montgomery County
  The District of Columbia Bar
  Bar Association of the District of Columbia

Effective April 30, 2012, most private sector employers are required to post a notice advising employees of their rights under the National Labor Relations Act (“NLRA”). The NLRA guarantees the right of employees to organize and bargain collectively with their employers and to engage in other protected concerted activity. 

An employer should post this poster at its worksite in the same place as other federal posters advising employees of their rights. This notice must be in both English and in another language if at least 20% of employees are not proficient in English and speak the other language. The notice must be 11 x 17 inches in color or in black and white and can be downloaded or printed online: www.nlrb.gov/poster.

The National Labor Relations Board (“Board”), the agency which enforces the NLRA, does not audit workplaces or initiate enforcement actions on its own and does not have the ability to assess fines or penalties. Notwithstanding, a failure to post the notice could be brought to the Board’s attention by a charge filed by an employee, union or other person. 

Typically, if unaware of the requirement to post this notice, the Board would advise the employer of the requirement and the employer would comply without further action needed. However, if an employer knowingly and willfully failed to post the notice, that failure may be considered evidence of unlawful motive in an unfair labor practice case involving other alleged violations of the NLRA.

If you have questions about this or other employment law issues, please call 301-340-2020.

Practice Areas: Business Law, Civil Litigation, Criminal Law, Employment Law, Estates + Trusts, Family Law, Injury Law, Municipal Law, Real Estate Law, Tax Law

In its 2012 edition, Maryland Super Lawyers recognized 16 of Stein Sperling's attorneys. 

Super Lawyers is a rating service of outstanding lawyers (top 5%) from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. The annual selection process is multi-phased and includes independent research, peer nominations and peer evaluations. Seven Stein Sperling attorneys were recognized as Super Lawyers, including principals Millard Bennett, David De Jong, David Driscoll, Ann Jakabcin, Jeff Schwaber, Paul Stein and Steve Widdes. Mr. Widdes, co-chair of the firm's estates and trusts department, was listed among the Top 100 attorneys in Maryland.

In addition, the publication awards its Rising Star designation to the top 2.5% of young lawyers in the state, by practice area. In addition to its seven attorneys named to the Super Lawyers list, Stein Sperling recognizes its 2 principals, 4 senior counsel and 4 associates named to the Rising Star list. They are Monica Harms, Karen Shapiro, Robert Garagiola, Ivonne Lindley, Mary Lombardo, Deanna Peters, Casey Florance, Diego Rojas, Eric Rollinger and Andrew Schwartz.

Practice Areas: Business Law, Civil Litigation, Criminal Law, Employment Law, Estates + Trusts, Family Law, Injury Law, Municipal Law, Real Estate Law, Tax Law

Stein Sperling Bennet De Jong Driscoll PC was recognized as a “Top Ranked Law Firm” in the December 2011 issue of Fortune magazine.  Stein Sperling was selected based on its large percentage of AV® rated attorneys.

Out of 254,000 firms rated by Martindale-Hubbell, a leading peer-rating service within the legal industry, only 965 firms were selected nationally for inclusion on the list.  The list was compiled by LexisNexis Martindale-Hubbell using the comprehensive Martindale-Hubbell Peer Review Ratings^TM. The Peer Review Rating is given to attorneys based on their high ethical standards and professional ability. It reflects a firm’s expertise, experience, integrity and overall professional excellence. Peer Review Ratings^TM are determined by the confidential opinions of lawyers and members of the judiciary who receive invitations from LexisNexis Martindale-Hubbell to review lawyers of whom they have professional knowledge.

Stein Sperling found several ways to contribute to local charities this holiday season.

Forgetting Secret Santa and remembering those in need

Firm employees opted to forego their annual secret Santa gift exchange and instead made personal donations to two local charities. As a component of the firm’s annual holiday party, attorneys and staff have for many years exchanged small gifts with each other. This year, employees voted to instead make monetary contributions to Manna Food Center in Gaithersburg, Maryland, and Operation Second Chance in Clarksburg, Maryland. In the end, the firm’s combined donations totaled over $1,000 to each organization.

“Stein Sperling has a proud history of supporting our local community, and this year’s holiday donation campaign is no exception,” said Millard Bennett, managing principal of the firm. “What started as a new idea for our holiday party by a few employees grew into an effort all of our attorneys and staff could get behind.” The firm asked employees to suggest deserving charities for consideration. Then employees voted to narrow those nominations to two organizations that would receive the donations collected in advance of the firm’s holiday party.

Sharing cheer at local shelters

Female attorneys and staff in the firm’s Estates and Trusts practice gathered supplies for women at the Rainbow Shelter located at Rockville Presbyterian Church in Rockville, Maryland. They collected everyday items such as shampoo, toothpaste and hairbrushes which the cold weather shelter used to fill stockings for its residents on Christmas Eve.

In addition, the firm shared the bounty of gift baskets it received with the residents of Chase Partnership men’s shelter, run by Community Ministries of Rockville in Rockville, Maryland.  The shelter distributed food items from the baskets as a special treat for residents on Christmas Day.

For the 11th consecutive year, Stein Sperling sponsored the Hermandad Fiesta held at the Langley Park Community Center in Hyattsville, Maryland. This annual holiday party brings craft projects, refreshments and a visit from Santa to families in our local community.  As in past years, several Stein Sperling attorneys and staff volunteered at the event on Saturday, December 17. 

To view photos from the Hermandad Fiesta, click here and you will be redirected to a photo album on Stein Sperling's Facebook page.

David De Jong will be speaking on how to be an effective expert witness to the MD-DC Chapter of the National Association of Attorney-CPAs.

PREPARATORY CHECKLIST

• Designate an “official custodian” responsible for responding to Public Information Act requests. 
• Designate a central repository for electronic correspondence. This can help avoid situations where individual council or board members are acting as “custodians” for the emails received and sent from private email accounts and computers. 
• Confirm records are being retained according to the document retention schedule. Records should be retained according to the schedule approved by the State Archivist.
• Adopt a schedule of fees for research and copying costs. 
• Consider adopting a written policy for processing requests. The policy should include a process for fee waiver requests.

RESPONSE CHECKLIST

Provide an Initial Response

• If requested documents are not in your agency’s custody or control, provide notice of this fact within 10 business days. If known, provide the applicant with the identity of the actual custodian and the location or possible locations of the records.
• If a request is unclear or unreasonably broad, ask the applicant to clarify or narrow the request. Often, applicants believe they need to request documents in broad terms to ensure full access, not appreciating the extent of the time and cost that would be required to strictly comply. A letter to the applicant may help clarify which documents are really pertinent to the applicant. If the scope is revised by the applicant, the applicant should submit a new written request.
• Provide, in advance, an estimation of the cost of compiling the records for inspection. The estimate should include the cost for copying (and delivery) of records, if requested by the applicant. Reasonable expenses can be charged. The first two hours of research must be provided at no charge.

Assess Whether an Exemption Applies

• Assess whether denial is authorized by other law.  Records cannot be made available for public inspection if a law outside the Act or a court rule or order prevents disclosure.
• Assess whether denial is mandated. There are thirty-two categories of records that cannot be made available for public inspection. If only part of the information in a record is exempt, the exempt portion of the record can be redacted so that the remainder of the record can be inspected.
• Assess whether denial is discretionary. There are twelve categories of records that may be made available for public inspection, at the discretion of the agency. Before disclosing a record that contains potential confidential information submitted by a third-party, e.g., commercial or financial information, provide advance notice to the entity and an opportunity to address the confidentiality. 

Respond

• Respond to a request in writing as soon as possible, but no later than 30 calendar days. The Act requires immediate inspection of public documents, but allows an additional reasonable period, not to exceed 30 days, if such time is needed.  
• If the responsive documents cannot be compiled and made available for inspection within the 30 day deadline, even with due diligence, request an extension. If an agreement cannot be reached, inform the applicant in writing of the reasons for the delay and an estimated date when review will be complete. Offer to allow inspection of records currently available.
• If inspection is to be denied, in whole or in part, provide notice of denial within 10 business days. This period is in addition to the maximum 30-day response period above. As a practical matter, the denial and explanation generally are provided as part of the same response. Any denial letter must include the reasons for denial, the legal authority for the denial, and notice of the remedies for review of the denial. A denial letter should be reviewed by legal counsel to ensure compliance with the law.

Author: Karen N. Shapiro

Practice Area: Employment Law

The US Court of Appeals for the Fourth Circuit has rejected a Fair Labor Standards Act (“FLSA”) claim by an applicant that she was not hired and retaliated against because of a prior FLSA lawsuit against a prior employer.

In July 2009, Natalie Dellinger sued her former employer, CACI, Inc. (“CACI”), for alleged violations of the FLSA.  Soon thereafter she applied for a job with Science Applications International Corporation (“SAIC”).  SAIC offered Ms. Dellinger a position contingent on the transfer of her security clearance, among other things.  On the form required for the security clearance, Ms. Dellinger was asked to identify any pending court cases to which she was a party.  She listed her lawsuit against CACI.  A few days later, SAIC withdrew its offer of employment.

Ms. Dellinger sued SAIC alleging that it discriminated and retaliated against her based on her exercise of her right to file an FLSA lawsuit.  The Court found that, by the language of the FLSA, an applicant who never began or performed any work could not be an employee with a private right of action under the statute.  The Court held that the FLSA gives an employee the right to sue only her current or former employer and that a prospective employee cannot sue a prospective employer for retaliation under the FLSA.

To download the full MCSHRM Newsletter, click here.

This article is reprinted with permission from MCSHRM.

David Driscoll was featured in a recent episode of “Law School for the Public,” a television program designed to help residents of Montgomery County become familiar with laws and the court system. The program is produced by the Montgomery County, Maryland, Bar Foundation and hosted by Bill Davis and Laurie Cleary.

This episode discussed expert witnesses and invited Mr. Driscoll, as well as The Honorable Ronald B. Rubin, as featured guests on the topic. The show airs weekly on Montgomery Community Television (Comcast channels 21, 23 and 49) on Tuesdays at 8:30 p.m.

The estate planning and tax attorneys at Stein Sperling are often asked whether making large gifts to family members or other loved ones has any material benefit. In the right situation, the benefits may be significant. In contemplating such a transfer, there are certainly practical considerations that must be reviewed, not the least of which is to make sure that the individual considering the transfer has sufficient funds remaining for his or her needs and comfort level. However, recent developments have added other factors favoring large gifts as a planning alternative in the right scenario.

Currently, the maximum exemption for federal estate and gift tax purposes is $5 million in 2011 and $5.12 million in 2012. In the case of gifts, these exemptions are for transfers in excess of the annual gift tax exclusion, which is currently $13,000 per donor per donee plus added amounts for direct payment of certain medical and educational expenses. In the near future, Congress will be determining the post-2012 law and it is possible that federal exemptions will be lowered. In fact, even before 2013, Congress, as part of the “budget crisis,” may lower the federal gift tax exemption to $1 million.

The impact of this speculation is that those who are considering making large gifts, whether directly, in trust or otherwise, may wish to act now. The primary purposes for making large gifts are to exclude post-transfer appreciation from federal taxes and to avoid transferred property from being subject to Maryland or District of Columbia estate tax, each jurisdiction having only a $1 million exemption (Virginia has no estate tax). As Maryland and D.C. have no gift tax and the $1 million state exemption at death is unreduced by lifetime transfers, residents of these jurisdictions have special motivation to make gifts.

While this planning option is not necessary or even appropriate for everyone, we encourage you to contact us to review possible gifting opportunities.

Practice Areas: Estates + Trusts, Tax Law, Business Law

In its December 2011 issue, Washingtonian published its “ultimate guide to Washington’s very best legal talent.” The bi-annual listing of “Washington’s Best Lawyers” named David De Jong and Steven Widdes among its 800 “Stars of the Bar” who encompass “Washington’s best legal minds.”

David De Jong was named a Top Tax Lawyer, one of only 41 attorneys in the D.C. metropolitan area to call “if you’re dealing with the Internal Revenue Service or puzzling over complicated tax issues.” As Chair of Stein Sperling’s Tax practice group, Mr. De Jong helps businesses and individuals with a broad range of tax planning and controversy matters, estate planning, business transactions and valuations. A CPA with a Master of Laws in Taxation, he is accredited in estate planning and in business valuation.

With over 35 years of experience, Mr. De Jong is a nationally recognized tax authority and speaks to various industry groups throughout the country. Additionally, he is active in many professional groups. Among them are the American Association of Attorney-Certified Public Accountants, where Mr. De Jong formerly served as National President and received the Louis S. Goldberg Memorial Award for lifetime service to the organization, and the Montgomery County Bar Association and Foundation, which recognized him as an Honorary Life Bar Leader for his many years of committed service.

Steve Widdes was named a Top Trust and Estate Lawyer, one of only 42 attorneys in the D.C. metropolitan area who “can help you manage your wealth and plan for the future.” Mr. Widdes is Co-Chair of Stein Sperling’s Estates and Trusts practice group and works with clients in the areas of estate planning, estate and trust administration, and tax and business succession planning.  He also assists them in protecting assets for future generations through long-term trusts for children, as well as pre- and post-nuptial agreements.

Honored as a Fellow of the American College of Trust and Estate Counsel (ACTEC) and nationally accredited as an estate planner, Mr. Widdes also serves on ACTEC’s Asset Protection Committee. An active participant in the local community, he is a past co-chair of the Hebrew Home of Greater Washington’s Planned Giving Committee and a past vice-chair of its Board of Governors. Mr. Widdes currently serves on the Planned Giving Committee for Suburban Hospital.

To view the full list of Washingtonian’s Top Lawyers, click here.

Don Sperling will attend the National Institute on Negotiating Business Acquisitions on November 10-11 in Miami, Florida. The Institute, which is sponsored by the Mergers and Acquisitions Committee of the American Bar Association's Business Law Section, will feature discussions on negotiating the acquisition of privately held and public company businesses. Trends and recent developments, together with statistical analysis, will be presented. Cash sales, stock swaps, earn outs, private equity investment and buy out transactions will be highlighted with emphasis on negotiation and drafting issues. To download the program brochure, click here.

Mr. Sperling has led the Mergers and Acquisitions practice at Stein Sperling for over 30 years, handling transactions from under $1M to over $100M in enterprise values. He has worked with buyers, sellers and investment bankers in many industries including technology, biotech, health and professional services. Recently, with Stein Sperling's team of business, tax and transaction attorneys, Mr. Sperling successfully completed a complex private equity investment transaction in the health care industry. Working closely with the client from the interview and engagement of the investment banker through letters of intent, due diligence, contract and closing, the firm brought the transaction to closing on time.

The Washington Metropolitan Chapter of the Community Associations Institute (WMCCAI) named Ron Bolt a 2011 Rising Star. Each year, the organization awards this honor to up to 10 members who have taken an active role within the chapter, demonstrated leadership skills and shown interest in future chapter leadership roles.

Mr. Bolt is chair of WMCCAI’s Maryland legislative committee and also serves on the organization’s editorial committee. In addition, he frequently contributes to Quorum, a magazine for community association property managers and volunteers. Mr. Bolt will accept the 2011 Rising Star award at a chapter event in January 2012.

During the weekend of November 12-13, Stein Sperling sponsored a Drowsy Driving Awareness campaign targeting interstate drivers along I-95 and I-70 in Maryland. The event provided free coffee, brochures and bumper stickers to drivers promoting safe driving. The firm has supported six campaign events since March 2009.

The campaign was founded by a Stein Sperling client, Lynn Lee, whose 18-year-old daughter, Nicole Lee, was killed in a tragic automobile accident in January 2008. Nicole and her friends were on their way back from a skiing excursion when their driver of the vehicle fell asleep at the wheel. Though the Lee family’s loss was immeasurable, Lynn has transformed her tragedy into an opportunity to educate drivers about the dangers of drowsy driving. She visits local high schools to speak to students about the issue and twice a year holds events at interstate rest stops to inform drivers about safe driving habits.

Stein Sperling’s injury law practice handles nearly 1,000 accident cases each year, but its attorneys take time to get to know each client and his or her family. The firm is honored to assist the Lee family as they celebrate Nicole’s life and promote safe driving. Below is a message from Lynn expressing her gratitude for the firm’s sponsorship of the Drowsy Driving Awareness campaign.

Dear Stein Sperling,

This past weekend we had our Drowsy Driving Event at I-95 and I-70 Maryland Welcome Centers/Rest Areas. I felt that this weekend was very successful. We gave away over 800 cups of coffee and talk to over a thousand travelers. Although it is a very emotional weekend for our family, we still think that it is a way to honor our Nicole and make something good out of such a tragedy. We have been so blessed to have such wonderful people help us to carry out our mission of educating travelers in the State of Maryland about the dangers of this preventable situation.

I want to thank you for your continual generosity and support. This mission makes a difference to our family and hopefully we have saved a life this weekend and spared another family such tragedy.

Again thank you!

Lynn Lee (Nicole's Mom)

Drive Alert. Arrive Alive.

For more information on the Lee family’s efforts to fight Drowsy Driving, click here.

To learn more about Drowsy Driving prevention from the National Sleep Foundation, click here.

Andrew Schwartz and Eric Rollinger will be speaking at the Collaborative Dispute Resolution Professional’s practice group meeting on November 28.  Their presentation will cover business issues, including topics such as valuation and business start-ups and dissolutions.

Practice Areas: Criminal Law, Estates + Trusts, Family Law

Stein Sperling Bennett De Jong Driscoll PC (“Stein Sperling”) is pleased to announce that Steven A. Widdes, David C. Driscoll, Jr. and Paul T. Stein were named among “Washington DC’s Best Lawyers” by Best Lawyers® in its 2012 edition. This listing was based on more than 3.9 million confidential evaluations from the top attorneys across the country. In addition, Stein Sperling was recognized by Best Lawyers® and U.S. News Media Group as one of the 2011-2012 “Best Law Firms” in the areas of Trusts & Estates Law (Tier 1) and Family Law (Tier 3).

Listed by Best Lawyers® since 2006, Steven A. Widdes was recognized again as a top lawyer in Trusts & Estates Law. He is Co-Chair of Stein Sperling’s Estates and Trusts practice group and works with clients in the areas of estate planning, estate and trust administration, and tax and business succession planning. Steve is a Fellow of the American College of Trust and Estate Counsel (ACTEC) currently serves on the Planned Giving Committee for Suburban Hospital in Bethesda, Maryland.

David C. Driscoll, Jr. was recognized by Best Lawyers® as a top lawyer in Criminal Defense (Non-White-Collar). He is Co-Chair of the firm’s Criminal Law practice group and a senior member of the Family Law and Civil Litigation groups. He is a Fellow of the American College of Trial Lawyers, has served two terms on the Executive Committee of the Bar Association of Montgomery County and is a past member of the Board of Governors of the Maryland State Bar Association (1996-1998).

Paul T. Stein was recognized by Best Lawyers® as a top lawyer in Family Law. He is Co-Chair of Stein Sperling’s Criminal Law and Family Law practice groups and concentrates his practice in the areas of complex contested family law matters and criminal defense. Paul is a fellow to the American College of Trial Lawyers and is board certified as a civil and criminal trial advocate by the National Board of Trial Advocacy. He is a member of the Board of Directors for Hearts & Homes for Youth in Silver Spring, Maryland.

About Stein Sperling Bennett De Jong Driscoll PC
Stein Sperling was established in 1978 and, over the years, has grown to be one of Montgomery County’s largest law firms. Combining their experience, knowledge and success in diverse areas of law, the founding principals focused on creating a firm that could effectively serve all the needs of our clients. From business, litigation, family law, estate planning, tax and criminal law, we have provided guidance and counsel to thousands of clients. Our teamwork-oriented atmosphere gives us a competitive advantage, allowing the strengths and resources of each of our practices and attorneys to work together to achieve the best possible results for our clients. For more information, call 301-340-2020 or visit www.steinsperling.com.

About Best Lawyers®
Best Lawyers® is the oldest and most respected peer-review publication in the legal profession. For over a quarter century, the company has helped lawyers and clients find legal counsel in distant jurisdictions or unfamiliar specialties. The 2012 edition of The Best Lawyers in America includes 41,284 lawyers covering all 50 states and the District of Columbia and is based on more than 3.9 million detailed evaluations of lawyers by other lawyers. Best Lawyers® also publishes peer-reviewed listings of lawyers in nearly 70 other countries, covering many of the world’s major legal markets. Best Lawyers® lists are excerpted in a wide range of general interest, business and legal publications worldwide, reaching an audience of more than 17 million readers.

About the U.S. News Media Group
The U.S. News Media Group is a multi-platform digital publisher of news and analysis, which includes the monthly U.S. News & World Report magazine, the digital-only U.S. News Weekly magazine, www.usnews.com, and www.rankingsandreviews.com. Focusing on Health, Money & Business, Education, and Public Service/Opinion, the U.S. News Media Group has earned a reputation as the leading provider of service news and information that improves the quality of life of its readers. The U.S. News Media Group’s signature franchises include its News You Can Use® brand of journalism and its series of consumer guides that include rankings of colleges, graduate schools, hospitals, health plans, and more.

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This practical six hour training covers the nuts and bolts of family law, including:

1. Initial Interview/Retainer Agreements;
2. Pleadings & Divorce Grounds, Scheduling Hearings, Uncontested Divorce Hearings;
3. Discovery, Financial Statements, and Marital Property Statements;
4. Pendente Lite Financial Issues, Voluntary Impoverishment, Child Support, Taking Exceptions to a Master's Recommendations;
5. Litigating a Child Custody Case; and
6. Marital Settlement Agreements

We invite you to bring in your auto insurance policy for review. You cannot assume another person has chosen the right coverages for your needs. Let our attorneys help to protect and guide you through the insurance maze.

Author: Karen N. Shapiro

Practice Area: Employment Law

On September 21, 2011, the Internal Revenue Service announced its “Voluntary Classification Settlement Program.”  The Program provides an amnesty for prior misclassification of workers by allowing eligible businesses to convert “suspect” workers from independent contractor to employee status by paying a small charge.

A business is eligible to reclassify a class of workers under the Program if it:

• has consistently treated workers in the class as independent contractors;
• has issued Form 1099s to each of the workers for the three preceding calendar years;
• is not under current IRS examination on any issue and not under a Department of Labor or a State examination as to worker classification;
•  was examined previously by IRS or DOL on worker classification, it complied with the results; and
• extends the statute of limitations on assessment of employment taxes by three years for the first three calendar years beginning after the change.

A business commences the process by filing IRS Form 8952 for one or more classes of workers at least 60 days prior to the desired effective date of reclassification. 

A business seeking to reclassify a class of workers as employees must make a “VCSP payment” of 10% of the “Section 3509 tax liability” which the business would have paid on that class of worker for the most recently completed tax year in the event of an audit adjustment.  The Section 3509 rate is derived from a complex mathematical calculation; for 2011 and 2012 filings, the rates are 10.68 and 10.28 percent respectively (3.24 percent on the portion of pay over the social security base amount).  In sum, conversion will cost about 1% of the compensation paid in the prior year to affected workers.  Payment in full is due on “acceptance” into the Program.

Participation in the Program eliminates big exposure to a business and its responsible individuals for the back taxes associated with worker misclassification.

To download the full MCSHRM Newsletter, click here.

This article is reprinted with permission from MCSHRM.

David Torchinsky will be speaking at the Library of Congresses retirement program. He will be speaking on tax and estate planning covering the topics of wills, trusts, powers of attorneys and estate and inheritance taxes.

IRS Circular 230 Disclosure

The information contained in this presentation is not intended to provide Federal tax advice within the meaning of IRS Circular 230, but is a presentation prepared and/or designed to provide educational content and an avenue for free exchange of ideas of interest to the members and guests attending this NACVA State Chapter Foundation event.  Information provided herein may be incomplete or fictitious and may not be used in a court of law or in any legal proceedings.  As a condition to the use of this presentation, the user hereby agrees to the above conditions.

Traditional Definition of a Professional Practice

An occupation in which services can only be rendered by a person or entity licensed or otherwise authorized to render the service.

Characteristics of a Professional Practice

• Occupation generally regulated by the State
• Education requirements include CPE
• Can only be owned typically by those licensed in that profession
• Cannot in most professions be insulated from malpractice of self or anyone supervised
• Limited liability entities designated generally as PA, PC or Chartered if incorporated or as PLLC or PLLP if not

Special Tax Rules for Professional Practices (also applicable to certain other personal services businesses)

• C corporations taxed at flat 35 percent
• C corporations must utilize a calendar year (or face “minimum distribution requirement” with September 30, October 31 or November 30 FY
• No requirement to use accrual accounting for tax purposes irrespective of gross receipts

Scope of the Presentation

This includes accountants/tax preparers, financial planners and engineers who may in some instances be uncredentialed and/or unlicensed.

Excludes real estate salespersons and physical therapists who may be credentialed and/or licensed.

Limitation on the presentation

A fair value or fair market value standard is assumed under which the price that a willing buyer would pay a willing seller must initially be determined.  Where intrinsic or a similar standard of value is utilized (e.g., marital dissolutions in Virginia), price on a hypothetical disposition becomes irrelevant and economic value takes its place.

In the absence of a directive in an agreement among co-owners, most states use a fair value standard in dissenting shareholder/partner disputes (if at all, discount only at the entity level for lack of liquidity based upon state law/caselaw).

Most states use a fair market value standard in family law (discount at the shareholder/partner level for lack of liquidity/lack of control), with New Jersey a major exception (fair value).

Special Overall Considerations in Valuating a Professional Practice

Agreements among co-owners.  Multiple owner professional practices are more likely to have a shareholder/partnership/LLC operating agreement than other businesses.  In some engagements, the valuation or methodology for valuation set forth in the document will control.  In other engagements, a court may consider the value determined by the agreement,  but is not bound to that number.  You may be asked to determine both the value under the agreement and the value as if no agreement existed.

Additions/subtractions when using market approach.  In a professional practice, the typical conveyance is hard assets (furniture, fixtures and equipment) subject to purchase money debt (unpaid portion of the liability to acquire these items).  Added to value, generally undiscounted, is cash and collectible accounts receivable/work in progress and subtracted from value are all other liabilities.

Cash basis financials.  For most professional practices, cash basis accounting is more meaningful to the owner(s) than accrual basis as professional practices tend to have little cash on hand, making both bill paying and distributions constantly dependent on incoming cash.  Accordingly, accrual basis financials are rarely available unless you are able to go to subsidiary records to determine  receivables, work in progress, payables and other accruals as well as their effect on the historic income statements.  This will make it easier to use cash flow rather than profit if you are using an income approach to valuation.

Receivables and work in progress.  Many professional practices, especially physicians and attorneys, have large receivables and little payables.  This will necessitate determining collectibility, particularly if your valuation is with an asset approach or a market approach.

Malpractice/grievance actions.  Pending or possible malpractice actions may necessitate adjustments under most methods of valuation.  Verify the presence of malpractice insurance above a “deductible.”  A history of malpractice claims and/or grievances does not bode well for the future including marketability of the practice.

Lack of control discount.  Professionals in group situations tend to transition from one practice to another during their careers more than those in other businesses.  Accordingly, it is more difficult for many professionals to not be in control of governance of the practice.  A larger discount than usual may be appropriate for determining fair market value of non-controlling interests especially where there is a history of disharmony.

Lack of liquidity discount.  Professionals can usually only sell a practice to those licensed in that profession.  Additionally, few within a profession but outside the particular group practice wish to buy into a group of diverse personalities.  This may require use of a larger than usual discount in determining the fair market value of fractional interests in professional practices.  However, in the case of certain professions, especially dental and accounting, there is an active marketplace with practice brokers, and a smaller than usual discount may be appropriate where a 100 percent interest is being valued.  The opposite may exist in the case of professions considered quite personal such a psychiatry/ psychology and obstetrics/gynecology.

Rapid decline in solo practice value during inactivity.  On death or disability of a sole practitioner, the practice value will drop dramatically by the week (especially if client/patient needs go unserviced).  A valuation done under such circumstances must take this loss of value into account.

Intangibles.  In a professional practice, the value of the intangibles is more likely to constitute most of the overall value than in the case of other businesses and goodwill is more likely to be personal (professional) than in other businesses.  In a minority of states, personal goodwill as well as institutional (enterprise) goodwill is marital/community in nature and no breakout is necessary.  However, in a slight majority of states, personal goodwill is nonmarital/ noncommunity and must be broken out from institutional goodwill.  This will necessitate knowing under state law/caselaw how the division of goodwill is to be accomplished.  At least one state, Mississippi per 2002 decision of its Supreme Court, appears to treat all goodwill as nonmarital property.

How Do You Breakout Personal and Institutional Goodwill?

• Broad personal – difference between price with and without reasonable covenants (in which case most goodwill of a practice is personal)
• Narrow personal – portion of goodwill that is lost following a transition notwithstanding the seller’s  reasonable covenants (in which case most goodwill of a practice is institutional)
A school of thought that is emerging qualifies the difference between these      numbers as conveyable personal goodwill
• Middle ground – goodwill is divided based on a subjective or objective assessment of attributes between personal and institutional

Multiattribute Utility Model (MUM)

MUM is an allocation model for distinguishing institutional goodwill from personal goodwill in an objective manner by quantifying and weighing otherwise subjective factors.  MUM may be useful where a state has adopted a middle ground approach or otherwise permits the discretion of the valuator.  MUM was first accepted by an appellate court in 2006 (Illinois).

Personal Goodwill Attributes

• Ability, skill and judgment of individual
• Work habits of individual
• Age and health of individual
• Personal reputation
• Staff loyalty to individual
• Business carries name of individual
• Name recognition of individual
• Referrals are to individual
• Closeness of contact
• Importance of personal service

Institutional Goodwill Attributes

• Overall practice reputation
• Effective workforce in place
• Nonpersonal business name
• Favorable business location
• Multiple locations
• Practice-wide marketing
• Referrals to practice rather than individual
• Practice owns intellectual property

A Market Approach to valuation is More Feasible in a Professional Practice

• Large numbers of comparables are available for many professional practices (medical practices have their own database – “Goodwill Registry”)
• Data derived tends to have more of a commonality
• Practices often have prior transactions between willing seller and willing buyer
• Practices often sell for percentages of gross revenue (easier than normalizing cash flow/income)
• Brokers are available to discuss “real world” numbers in the case of many types of practices

What Makes Professional Practice More Valuable than the Comparables?

• Specific location (accessible and with minimum 4-5 years on lease)
• High growth area
• Affluence
• Nontransient patients/clientele
• Repeat patients/clientele
• Large referral base
• Name recognition
• Lack of competition
• Year-round business
• Diverse capabilities
• No single dominant client (attorney, accountant, etc.)
• Depth of employment talent
• Duration of practice
• Higher fee schedule (physician, dentist – few HMOs)
• Profit margin
• Less work for same pay

If You Use an Income Approach to Valuation

The past is more likely to be indicative of the future in an established professional practice (facilitating the capitalization of normalized prior earnings) which can be particularly important in states which view discounting future earnings as inappropriate because the method projects post-divorce earnings.

BUT…

Normalization of compensation may be more difficult for professional practices than in other businesses.  (Is reasonable compensation tied to (a) replacing professional with one who is comparable, (b) replacing professional with capable but more entry-level person, or (c) what professional could earn elsewhere?)

If You Use an Asset Approach to Valuation

A practice without goodwill (or institutional goodwill if that is all being considered) may still have a going concern value to be considered in the adjusted asset method for its institutions in place (personnel, lease, equipment, policies and patients/clients).  It is often valued based on the costs to replicate.

Medical Practices

Medical practices were sold most easily until the late 1980s.  During the decade that followed, as indemnity plans gave way to managed care, hospitals, carriers and other consolidators constituted most of the purchasers. In the last decade, many consolidators divested themselves of their acquisitions from the 1990s and private activity returned spurred in part in some areas by physicians who are first and second generation Americans often with family money for acquisitions.

Today most medical practices, when they can be sold, transfer in the range of 40-55 percent of annual gross often translating to about 100 percent of owner’s discretionary earnings where a single owner.  While general family and internal medicine practices used to sell at higher multiples of gross than specialty practices due to the recurrence of patients, this no longer appears to be the case.

Marketability remains an issue today, particularly in specialty practices where transition of referral sources is paramount.  Sole practices involving the most personal of services (e.g., OB-GYN, psychiatry) are often shut down without sale. 

Multiowner practices often transition in stages with a purchaser paying only as little as cash basis book value for shares or units with the remaining “price” (for the net accounts  receivable and goodwill) coming in the form of a compensation adjustment after determining tentative “draws” based on productivity.

Where the practice has had such transactions, evidence of value of an interest may be hidden but arguably distorted by the favorable tax treatment to the buyer and the adverse tax treatment to the seller caused by compensation adjustments.

Today, pain management practices are a growth area of the market and may change hands at seemingly unlikely multiples.  And once again in parts of the country hospitals are acquiring practices or guaranteeing minimum compensation levels to physicians.

Law Practices

Few law practices convey outside of terms of a prior or contemporaneous agreement among co-owners or with a rising associate.  While the ethical prohibitions to such a sale have been eroded in recent years, there is little outside market as goodwill is considered personal in almost all situations.  Exceptions include firms which derive most of their clients from mass media advertising (generally personal injury practices) and large institutional firms (however, their value is almost always determined by an existing agreement commonly honored by the courts).

In smaller firms, agreements among principals typically make no allowance for goodwill and give the outgoing principal a return of his or her “investment” in the practice including the portion tied up in receivables and work in progress.

In larger firms, an additional payout is often made taking the form of nonqualified deferred compensation which, if vested, is often best stated as a separate asset and may need to be discounted if paid out over time and/or bears risks of uncollectibility.

For most law firms, value in the absence of a controlling agreement is best determined using the adjusted net asset (economic book value) method starting with the cash basis book value and making the following adjustments:

• Restate the hard assets to fair market value.  They may carry little or no book value due to the ability to expensing/bonus depreciation for tax purposes.  The adjustment may be insignificant as used furniture and equipment may be worth as little as 10-15 percent of original cost.
• Determine the collectible accounts receivable and work in progress, considering that it is more difficult to bill and collect these items post-retirement.
• Ascertain how contingency cases are to be valued under state law/caselaw (if transferred, the original attorney may be paid for time or more likely get a percentage of overall attorney fees).

Alternatives for Valuing Contingency Cases

1.   Case by case basis where a small number and likely recovery and percentage worked can be determined
2. Historic averages on collections per case times assumed average of each case 50 percent worked (possibly adjusting upward or downward for larger cases)
3. Historic averages based on taking hours worked on outstanding cases and applying a recovery factor per hour worked
4. Valueless unless and until an amount is realized

Dental Practices

Dental practices have an active market with multiple practice brokers in most metropolitan areas.  With a number of practitioners delaying retirement due to financial setbacks in their outside investments, buyers are often left waiting on the sideline. In most of the country, general dental practices continue to sell in the range of 55-75 percent of annual gross, often constituting about 100 percent or slightly more of owner’s discretionary income in a single professional practice.  Higher multiples are common in desirable locations in the West.

Certain specialty practices, dependent on referrals of general dentists and especially those without regular recurring patients (e.g., endodontists) have traditionally sold for lower multiples.  Practices less dependent on such referrals (e.g., orthodontists) also sell in the same range as general practices.  However, there are numerous reported transactions of oral surgery practices, virtually all in the same range as general practices.

Accounting Practices

Tax season intense practices and bookkeeping practices typically are commonly sold from 40-100 percent of annual gross with the most common number being around 60 percent of gross.  Full service CPA practices are commonly sold from 70-125 percent of annual gross with the most common number being around 90 percent of gross.

Consolidation in the 1990s brought increased multiples at the upper end and often smaller multiples at the lower end as strategic purchasers paid premiums to enter a market and then “lowballed” smaller firms they sought to acquire.  More so than other professional practices, accounting firm transactions often involve “earnouts” where the seller is given a percentage of collections on continuing clients (e.g., 18 percent of gross for five years).  Because many of these transactions do not account for time value and/or normal attrition occurs, the effective price may be less than the apparent price.

Other Professional Practices

Engineering – Smaller engineering practices tend to sell in the range of 1.75 to 3 times discretionary earnings, often in the range of 55 percent of gross.

Financial Planning – For firms doing asset management on a percentage basis, the historic “rule of thumb” has been 1 percent of assets under management or, stated alternatively, 75 to 100 percent of annual gross.

Chiropractors – Easier to sell than medical practices, chiro practices tend to sell at similar ratios to gross income, often causing a higher multiple of discretionary earnings.  Some practices have parallel rehabilitation businesses which may necessitate separate valuations.

Architects – Like engineering firms, most comparables are in the range of 1.75 to 3 times discretionary earnings, converting to a number on either side of 55 percent of gross.

Veterinarians – For at least a couple decades, vet practices have sold for higher multiples of  gross income and seller’s discretionary income than medical practices though buyers (as in the case of most nonprofessional businesses) shop based on multiples of EBITDA or the like.  With practice brokers to facilitate, most practices sell in the range of 70 to 100 percent of gross, down from a period of consolidation a decade ago.

Psychologists – Like psychiatry practices, they are difficult to sell, especially to a buyer outside the practice.  If they sell, a transaction may only be in the range of 35-40 percent of annual gross.

Ann Jakabcin will be speaking at the Association of Practicing CPA's Estate and Trust Day.  She will discuss federal estate tax planning for individuals in 2011 and 2012.

David De Jong will speak at a Federal Tax Update course for the capital area chapter of the Maryland Association of CPAs.

David De Jong will be co-presenting with Donald Williamson, chair of the graduate tax program at American University, at the Corporate and Partnership Taxation Update CPE Update course.

This CLE program is titled "The Divorce Tax Workshop: Understanding & Handling the Tax Issues of Separation & Divorce."  It will cover many of the tax and other economic issues related to separation and divorce.  The format is a combination of lecture and workshop which presents a rare opportunity to work through problems you face daily, with the help of experienced family law and tax attorneys.  For the workshops, registrants will be divided into three groups based on practice experience, and their case studies will reflect the appropriate complexity.

David De Jong will speak at a CPE Update course. His presentation will focus on how to successfully deal with the IRS in examinations, appeals and collections.

David De Jong to speak at the Bar Association of Montgomery County’s CLE course entitled, “Will you be ready when the IRS knocks on your door?”  He will focus on the topics of IRS Examinations and Innocent Spouse Relief. 

Karen Shapiro to speak at the Maryland Society of Accountants 2011 Solo & Small Firm Conference.  This event is designed for Principal Owners of Accounting and Tax Practices and will focus on Administrative Practices, Marketing, Personal Development and Computer Science topics.  Karen will be speaking on the topics of hiring and firing employees.

Practice Area: Civil Litigation

Throughout the development of each case, Melanie Konstantopoulos meticulously analyzes and evaluates facts and circumstances to develop creative and effective strategies to meet the needs and goals of her clients. Melanie is a member of the civil litigation practice group and works on business dispute and other litigation matters.

Prior to joining Stein Sperling, Melanie served as a judicial law clerk for two judges in the Circuit Court for Montgomery County, Maryland. There, she prepared detailed case briefs, wrote legal memoranda and drafted numerous proposed Orders for the Court on an array of substantive and procedural matters. 

Prior, during and after law school, Melanie served as an intern for the Montgomery County, Maryland, State’s Attorney’s Office, both in the Circuit Court and in the District Court. During law school, Melanie represented low income taxpayers in complex tax disputes with the Internal Revenue Service as Rule 16 Student Attorney.

Outside of the office, Melanie enjoys bicycling, playing tennis and participating in various cultural activities. She particularly enjoys traveling, and has visited such places as Greece, Egypt and China.

• ADMISSIONS + CERTIFICATIONS

  Maryland 

• EDUCATION

  The George Washington University (B.A., summa cum laude, 2006)
      Presidential Scholarship Award (2002-2006)
      Dean’s List (2002-2006)
      Golden Key International Honor Society
      National Society for Collegiate Scholars
  
  University of Baltimore, School of Law (J.D., 2009)
      Phi Alpha Delta Law Fraternity
      Rule 16 Student Attorney

• MEMBERSHIPS + ACTIVITIES

  Bar Association of Montgomery County (2011-present)
  Maryland State Bar Association (2009-present)
  Montgomery County, Maryland American Inn of Court, Associate Member (2011-present)

Practice Areas: Business Law, Civil Litigation

In July of this year, Millard Bennett was invited by SmartCEO magazine to participate in a round table of "11 of Washington's best business lawyers." The magazine's October issue summarizes how the roundtable's participants addressed issues that keep CEOs up at night. The discussion was compiled into an article titled "Power of Attorneys," which featured quotes from Mr. Bennett about relationships between business owners and their attorneys, as well as important business and employment policies for e-mail communication.

Sharing his philosophy about attorney-client relationships with business owners, Mr. Bennett remarked, "We have to be good listeners first. We need to take in all of the pieces and also hear what the client is looking for ... and gather all of the information you need to make a contribution."

When asked about how social media and technology are changing the business landscape, Mr. Bennett suggested that a challege for CEOs relates to e-mail communication within their businesses.  "More cases are lost on e-mail than any other factor, I believe," Bennett said.  "You encourage the employer to adopt email policies ... [and] develop a document destruction policy. You could have to review hundreds of thousands of e-mails that only clear your name, but you're talking hundreds of thousands of dollars into just the screening process."

To view the full article online, click here.

To listen to a podcast of the roundtable on which the article was based, click here.

Author: Karen N. Shapiro

Practice Area: Employment Law

The Job Applicant Fairness Act takes effect October 1, 2011! 

This new law prohibits Maryland employers from obtaining or using credit reports to deny employment to an applicant, terminate an employee, or set the terms and conditions of an individual’s employment except in limited circumstances.  Financial institutions, credit unions, certain investment advisors, and entities required by law to obtain credit reports are exempt from this law.  All other employers in Maryland must have a bona fide job related reason for obtaining a credit report which must be disclosed in writing to the applicant or employee.  A job related reason exists when the position for which the individual applied meets one of five criteria:

1. The position is at the managerial level and involves setting the direction of the business or a department or unit within a larger business; 
2. The position involves access to certain personal information of customers or employees such as social security numbers or financial account numbers, provided that the personal information is more detailed that what is customarily provided in a retail transaction;
3. The position involves a fiduciary responsibility to the employer, including the authority to make payments, transfer money, or enter into contracts;
4. The position requires that the employee hired will be provided with an expense account or a corporate debit or credit card; or
5. The position involves access to the employer's trade secrets or other confidential business information.

The Job Applicant Fairness Act does not prohibit employers from obtaining consumer reports or investigative consumer reports (which are subject to the federal Fair Credit Reporting Act) provided such reports do not contain credit information. 

Applicants or employees who believe a violation of the law may have occurred may file a complaint with the Department of Labor, Licensing and Regulation.  The Act does not create a private right of action for individuals to file a lawsuit.

To download the full MCSHRM Newsletter, click here.

This article is reprinted with permission from MCSHRM.

Steven Widdes will be co-presenting a CLE state-wide program for the Maryland Bar Association entitled, "Fiduciary Litigation in Maryland - an Overview for Planning and Litigation Practitioners." 

Please click here to view the agenda.

The Attorney Grievance Commission of Maryland appointed Fred Balkin as a member of its Peer Review Committee effective September 30, 2011. The partial appointment extends through June 30, 2012, at which point he will be eligible for reappointment to the committee.

“It has been a long-term ambition of mine to serve on this committee,” Balkin said. “I look forward to contributing my time to better our profession and its reputation.”

Established in 1975, the Attorney Grievance Commission oversees the discipline of Maryland lawyers and reviews the conduct of lawyers to determine the need for alternatives to discipline. The Commission also seeks to prevent the unauthorized practice of law.

The Commission appoints the volunteer members of the Peer Review Committee, which is made up of one-third non-attorney residents and two-thirds attorneys who maintain offices for the practice of law within that circuit. Peer review panels review certain cases for the Commission and recommend action, which may be approved or disapproved.

To learn more about the Attorney Grievance Commission of Maryland, click here.