Regardless of his well-crafted preparations to protect his children’s inheritance rights, his wife and children are litigating ownership of his personal effects.

In an article we published in August, 2014, we described how Williams carefully established a tiered trust in which each of his children were to receive received one-third of their share of the principal at the age of 21, half at 25, and their full share at 30, most likely to ensure their maturity in decision-making regarding the disposition of their assets. 

Williams’ Trust also included specific instructions on what personal effects he wanted to pass on to his three children, including all of his clothing, jewelry, personal photos prior to his marriage to Susan, all memorabilia and awards he earned in the entertainment industry, as well as all tangible personal property in Williams’ Napa Valley property.

So What Went Wrong?

Susan’s legal proceedings present several arguments over William’s estate.  First, she challenges that the word “memorabilia” should be read to include only “specific items of tangible personal property as it relates to Williams’ acting career.”  Susan also feels that the term “jewelry” should exclude his collection of watches and that the contents of the Tiburon home should include items that are not actually on the premises of the home, but may be kept in storage off-site.  Susan also includes a request that the court interpret the list of property going to children to exclude all items in the Tiburon house, even though the trust explicitly states they are to receive the majority of personal property on the premises.

Williams’ Trust is a lesson that even though sometimes the best wills and trusts cannot avoid legal disputes, regular check-ups will make any potential disagreements less difficult, costly and drawn-out. You may have concerns or questions about the details involved in making arrangements regarding the inheritance of your estate. Talley & Company can provide the best available options for financial structure and personal effects disposition.  For more information, please contact Talley & Company.

January 23, 2015

It looks like the IRS is going to have a particularly tough time of it this year, which doesn’t bode well for taxpayers, either. CNNMoney reports that the 2015 budget for the IRS is 10 percent less than it was back in 2010. At the same time, IRS staff has been reduced by at least eight percent, money budgeted for agent training has been reduced by 83 percent, and the number of taxpayers has increased by seven million, according to IRS Commissioner John Koskinen. Although the IRS is the one getting squeezed, taxpayers are taking a hit, too. Here’s why.

In the Taxpayer Advocate Service (TAS) annual report to Congress, Nina Olson writes that the single most serious problem facing U.S. taxpayers is “the declining quality of service provided to them by the IRS when they seek to comply with their federal tax filing and payment obligations.” Not a good note given the IRS began accepting 2014 returns this week.

According to the TAS report, the IRS expects to answer less than 50 percent of the phone calls it receives this year, and those that do get through will probably have to wait 30 minutes or longer to reach someone. These service levels may be the worst since 2001.The IRS will also be answering a lot fewer questions. During filing season, only basic questions will be answered. The 15 million who file later in the year will get no answers at all.

It’s not just responses to taxpayer questions being affected. IRS services include accepting and processing returns, issuing refunds, depositing tax payments and other remittances, resolving errors, processing amended returns and processing responses to IRS notices, among other tasks. With limited agency capacity, all of these touch-points could be subject to delays, increasing taxpayer frustration and decreasing confidence in the system.  

On top of financial and staffing constraints, the IRS will also need to add a number of “firsts” to its increasingly complex areas of oversight this year. These include administration of the Foreign Account Tax Compliance Act as well as the premium tax credits and individual mandates from the Affordable Care Act.

“For every phone call or piece of correspondence that goes unanswered, there is a great likelihood problems will arise that will require more IRS resources and impose more burden on taxpayers to later resolve,” Olson wrote in her preface.

Given the state of service with the IRS, working with experienced advisors to prepare your returns, documentation and correspondence with the IRS may be more valuable than ever. Not only can enlisting a professional firm save you time, it can help minimize complications and delays with your case in the event of an audit or any other IRS inquiry. Whether or not you choose to utilize Talley & Company’s services this season, call us if you find yourself unable to get the answers you need from the IRS. We’re always glad to help.

January 16, 2015

In an inaugural event, Ohio State took home the title trophy in the first-ever College Football Playoff (CFP) National Championship. The new playoff structure initiated this year was designed to bring together the nation’s best teams and declare a single, undisputed collegiate winner. Over 80,000 pig-skin fans watched as the Buckeyes defeated the Oregon Ducks 42-20 at AT&T Stadium. Despite losing two Heisman quarterbacks in the last six months, Ohio’s third-in-line talent Cardale Jones led Ohio to a truly momentous win.

And while the new playoff format made sports headlines and a big impression on fans for good reason, it’s not the only thing shaking up college athletics.

Spurred by a lawsuit filed by former UCLA basketball player Ed O’ Bannon, who saw his likeness in a video game more than a decade after graduating, the court made a ruling that allows recruits to finally share a portion of revenues with colleges for 1) their likenesses and 2) licensing. In O’Bannon’s case, he had neither given his consent to the use of his image, nor was he compensated for it 10 years after playing for the school.

Does this mean Cardale Jones might get a cut of Ohio State’s revenues when his face is splashed all over fan memorabilia? Not just yet. The ruling goes into effect in July 2016, which is when recruits will be able to receive revenues from the use of their names, images and likenesses (that the NCAA can cap). Licensing monies can also be deposited into trust funds each year and then paid to recruits when leaving school or their eligibility expires.

While the decision applies only to Football Bowl Subdivision recruits and Division I basketball recruits, it has the potential to alter how everything from amateur status to recruiting competitiveness is seen in college sports.

The court’s decision in O’Bannon’s case finally wins some of the highest-caliber athletes compensation above and beyond the scholarships they may receive. This has been a hotly contested point for years given the millions made by schools from the athletes in their “employ” of sorts. However, it also opens student athletes up to new potential tax obligations. Unlike full-ride scholarships, which are typically tax-free as long as stipulations are met, it will be hard to see athletes’ shares of revenues from their likenesses and licensing as anything other than taxable compensation.

As long as these elite players are subject to taxes from revenues, what other areas might the IRS decide to scrutinize in the future? Extra perks? The scholarships themselves? This is new territory for the IRS and it could widen the doorway for the agency’s reach into students’ pocketbooks.

No matter what changes the IRS may be setting up for, Talley & Company’s advisory team follows all developing tax legislation affecting athletes and high-net-worth individuals. Let us know if you’d like to learn more about any upcoming legislation that may affect your tax position.

January 9, 2015
While most of us were settling back into the office this week, Teresa Giudice from the infamous reality TV show “The Real Housewives of New Jersey” was settling in to her new home at the Federal Correctional Institution in Danbury. She’ll be trading the opulent, Italian-style divans inside her NJ mansion for a shabby, not-so-chic cot in a jail cell for the next 15 months (if she actually serves her full sentence).
According to the New York Daily News, Teresa and husband Joe were convicted of mail, wire and bankruptcy fraud. They took out millions in falsified mortgage and construction loans to support their lavish lifestyle. Joe was also convicted of tax fraud, since he failed to file a return in 2004 and admitted he didn’t pay taxes on some $1 million in income between 2004 and 2008.
At sentencing, Judge Esther Salas was infuriated by the Giudice’s lack of transparency in their pre-sentencing disclosure documents. Among the omissions the judge seemed to think had dubious justifications were the estimates of the family’s furnishings and jewelry. The courts and the IRS have increasingly sophisticated tools for identifying discrepancies in stated earnings and assets, but in this case a simple paperwork trail proved enough.
That’s because when declaring bankruptcy in 2009, the Giudices listed $60,000 in furnishings, but only $25,000 on sentencing day. Other recreational vehicles, cars and construction equipment seemed also to be missing from the probation office report that managed to make it to the Feds. When asked why no jewelry assets were reported, the Giudice’s lawyer said Teresa wore only the costume type.
Judge Esther Salas gave Teresa 15 of the maximum 27 months but allowed her to spend the holidays with family. The judge also allowed Teresa’s husband to begin his sentence after hers expressly to maintain a parent in the household for their four children.
For Joe the sentence is 41 months, but even then he may not be altogether free. Although he has lived in New Jersey for most of his life, he never became a U.S. citizen and will likely face deportation.
Albeit this couple offers an egregious example of misconduct, it goes to show the seriousness with which the courts take tax and bankruptcy fraud. Particularly if, as some believe, the judge in this instance was being lenient, whether owing to the couple’s fame or other reasoning.
Should Teresa miss the spotlight facilitated by Bravo, she can take heart knowing she’s staying at the prison made famous by the Netflix original series “Orange is the New Black.” The reality of it all is that she’s likely to be back in the limelight fast, though maybe not at her NJ home since it was put up for sale. Once she’s free to go, she may very well pick up her hair extensions on the way out and get back to the celebrity life.
December 19, 2014
In a heated bidding war that ended last week, the Chicago Cubs scored big by signing left-handed pitcher Jon Lester with a $155 million deal for six years and a vesting option for a seventh. Lester’s annual $25.8 million earnings will put him in second place for the highest annual salary paid to a pitcher, behind only Clayton Kershaw with $30.7 million. To draw Lester to Wrigley Field, the Cubs raised their bid from $135 to $155 million in the final inning, and yet this wasn’t the highest offer Lester received.
The San Francisco Giants’ last bid gave him the largest potential contract: A seven-year deal for around $168 million. Lester’s pros and cons list with each team was sure to be a long one. On the money side, while the Giants offered the highest figure, California taxes would have put Lester in the 12.3 percent tax bracket and since his income is over the $1 million threshold, subject to an additional 1% tax due to the Mental Health Services Tax. With the Cubs, Lester will instead enjoy a rate less than half that, thanks to Illinois’ 5 percent flat state income tax.
So even with the $13 million premium the Giants were willing to pay, Lester’s take-home salary in Chicago will be at least $1 million more when factoring in state taxes. That’s more money he could give to his favorite charities. (Since Lester’s battle with lymphoma at 22, he has actively advocated for the pediatric cancer community.) As a free agent, Lester has been quoted saying, “I want to go to a place that appreciates what I do on the field and off the field, as far as with our charitable work, how we represent the team in the community.”
Lester may also have chosen the Cubs for the chance to reunite with two executives who drafted him back in the day for the Red Sox: now-Chicago president Theo Epstein and general manager Jed Hoyer.
The Boston Red Sox made a lower final offer of six years for $135 million after starting with a low-ball $70 million contract that led to his trade to Oakland this past summer. Still, the star pitcher might have had sentimental reasons to head back, since it was with the Red Sox that he took two World Series Championships. But even the Giants’ prestige of having won the World Series three times in the last five seasons wasn’t enough. Lester still chose the Cubs, who in striking contrast haven’t won a World Series in over 100 years.
It’s not likely Lester’s decision hinged entirely on taxes, nor should any major life decision we make. But that doesn’t mean Lester or any of us can afford NOT to know what the tax impact of a particular choice holds. Having this knowledge in hand, regardless of which way we choose to go with a major decision, can help us find other ways to mitigate tax liabilities and preserve income.
In the event of any upcoming life or business change, whether planned or unexpected, consult with an advisor from the Talley & Company team to understand how your tax profile might be affected.    
What If? Let’s be honest, succession planning is not a topic that comes across an entrepreneur’s mind frequently. After all, we’re all occupied with creating successful ventures. But let’s imagine for a second, after years of effort, you suddenly become ill, pursue opportunities outside of your professional career or just feel it’s time to step down.  Your company may be in good shape, but is it positioned to operate successfully without you as its leader? 
It is difficult for the busy owner of a mid-sized company to make a serious effort toward succession planning and start-up entrepreneurs contend with a roller-coaster ride that divides and challenges attention every day—never mind straining to focus on the distant future toward something called Succession Planning.  Nonetheless we’ve already seen the disaster levels escalate when there was no succession provision as we reported in the case of Microsoft’s Steve Ballmer’s abrupt exit—minus a replacement CEO prepared to take the helm. 
THE “NOW IS BETTER THAN LATER” STRATEGY:  The importance of succession planning is such that it requires careful thought, far in advance, about the resources you will need to develop in order to ensure your successor will carry on the vision you’ve taken years to advance. Think of it another way:  planning for succession means planning for success and the sooner you start planning, the sooner you can secure the objectives that effective succession planning requires.
RESOURCES Roughly 60% of first level managerial positions and 52% of senior positions are hired from within.  Recruiting from outside the company can also run up expenses in record time and may take a year or more before the right person appears. In the meantime, the company is at risk without a take-charge individual in the wheelhouse, steering the course, perhaps during a trying time made worse without expedient action to fill the office.
Then there’s the “getting acquainted” factor—orienting the new individual to the work, company culture and personality.  Which may not be easy when internal management has been “passed over.”  Those who have been with the company for years couldn’t help but feel a negative effect on their morale, unless they have somehow been properly prepared to accept an outsider. 
STRUCTURING THE FUTURE TODAY  To address the resource dilemma, there are two main processes that lead to effective planning:
  • Establish a depth of commitment within the company that spells out HR required standards of quality and officially burdens all managers with developing and having their successors in place.
  • Encourage employees to remain in the company by creating a proactive program of performance objectives and reward achievement to develop a strong back bench of candidates, one of whom is ultimately your choice for the next CEO.
PROFESSIONAL SUPPORT ENSURES SUCCESS  To prepare our clients with the most appropriate planning strategies Talley & Company delivers expert counseling to entrepreneurs, C-suites and management groups. Providing them with training, tools, and resources allows them to monitor a flexible road map, based on the company vision, while their business grows toward the time when they can position the best successor their organization needs to continue to thrive.

December 5, 2014

Target Leverages Big Data to Predict Customer Pregnancies

Leveraging buying trends into dynamic strategies is nothing new to the retail industry, though some companies have turned it up a notch in recent years.  Target, for example, has found a way to data-mine your purchases to figure out whether you have a baby on the way long before you are stocking up on diapers So let’s take a closer look at Target’s usage of “Big Data”—and what you can learn from this impressive feat.

With copious amounts of highly detailed data on shoppers’ behaviors and preferences, Target’s marketing specialists saw an opportunity to take the information a step further and developed a specific profile that took note of how women’s shopping habits evolved when they first learned they were pregnant. Identifying 25 new indicator products purchased within a defined period, Target is able to assign each shopper a “pregnancy prediction” score and can estimate a due date with a high level of accuracy.

With this information, a mail-out campaign of coupons and discounts is disbursed with each specific stage of pregnancy.  Perhaps a bit unsettling to some, but it’s hard to argue with success.

The important element/lesson of this strategy, applicable to most businesses large or small, is seen in how Target converted “Big Data” into proactive data.

By the same token, accounting reporting systems reveal how a business is operating and deserve the owner’s attention.  How are you looking at them:  as a collection of numbers on a spreadsheet—or are you analyzing trends and how they impact your business?  You may find a few surprises with a closer look.

“If you can measure it, you can manage it.”

Being able to construct an accurate and flexible system that can adapt as new market forces, trends and opportunities arise in real-time, versus waiting until month’s end may mean the difference between achieving your revenue forecast or moving beyond it at a time when cash flow is critical.

Until just recently only large corporations had both the time and resources available to dedicate toward leveraging Big Data into producing meaningful results…Today the entrepreneur utilizes Big Data solutions to help level the playing field.  Several factors, including recent technological advancements and the affordability of both cloud computing and outsourced business solutions keep new businesses competing well enough.    Entrepreneurs can click on their Smart Phone, iPad or laptop anywhere in the world and access this information at will, particularly if owner and accountant have set up various protocol profiles in the form of customized data.

Now, more than ever, the small business owner has the ability to develop the same Big Data analysis as larger corporations—an important step in achieving a competitive position.

Talley & Company and its affiliate, Group 11 Advisors, keep clients on track with how to properly leverage technology to meet the needs of their growing businesses.  From outsourced accounting solutions to management information, analysis and reporting, we are the premier business consulting practice to entrepreneurs and their closely-held businesses.

For more information on how to leverage your business’ data technology, contact Talley & Company today to explore your opportunities.  

 

November 21, 2014

Resolve to Get These 3 Things Done in 2015

Yes, you have it right: It’s not quite time for turkey yet and we’re pressuring you about resolutions already—but for good reason. With just a handful of weeks left before the official end of 2014, outlining your new year’s resolutions now, with ample time to establish a definitive game plan, can set you up for success. Waiting for Jan. 1 to tackle projects that have been on your to-do list for as long as you can remember won’t. It’s time for all of us to take action, whether we resolve to eat better and get more exercise or develop concrete growth tactics for our businesses.

Here are three things you’ll want to be sure are on your list, along with the easiest ways to get moving on them.

  1. Organize Your Taxes – We’re not just talking about keeping all your papers together so they’re handy come tax time later, although that’s a great start. We’re talking about creating a real strategy for both your household and business that takes a holistic view of your assets, income, revenues and expenses. A 360 view will give you the best options for creating tax savings in full accordance with IRS rules. Want to see a few examples of how this works? Call us and we’ll show you.

  2. Optimize Your Bookkeeping and Accounting – If you haven’t automated these tasks, doing so can free up time and energy for you to conquer more strategic jobs in 2015. If you’re already utilizing software or outsourcing to a professional, make sure you’re accessing data from your financials. Already got that done? Then you’re ready to translate as much of that data as possible into real-world decision-making. If you’re using your statements to create a business plan for the months and years ahead but aren’t sure you’re properly interpreting everything your financials are telling you, consult with a Talley & Company advisor to increase your knowledge base.

  3. Establish a Will and Build an Estate Plan – If you haven’t secured your family’s future yet, spending the holidays surrounded by your loved ones might be the extra reminder you need to finally accomplish this task. If you’ve already created an estate plan, well done, but when was the last time you reviewed it? Be sure your plans suit your family’s present needs.

Making resolutions is a great way to stay focused on important goals. Creating a strategy for making good on those resolutions is much, much better. Small steps are often the best ones, since they keep us from feeling overwhelmed and procrastinating. So here’s your first step no matter where you stand in all three areas: make one phone call. This task is so small there’s no good reason to put it off. Set up a time to discuss your needs with a Talley & Company advisor and you’ll be better positioned to achieve all that you want to in 2015.

November 14, 2014

5 Tech Time-Savers to Consider Using in Your Business

Where has the time gone, seriously? The holiday season is right around the corner (unless you’ve stepped foot into a department store, then it has been here since early September). No matter how hard you try to fight against it, attending holiday parties, performing your annual reviews, and drinking eggnog will keep your schedule filled to the brim. So what tech solutions are you leveraging to help you be more productive with the time you do have this holiday season? When time is money, tech solutions can bring in a lot more of both. See how these five options might enhance the day-to-day operations of your business.

Virtual Meeting Tools – Nothing beats a face-to-face meeting when it comes to cementing a business partnership or getting a deal done. But with the use of virtual communication tools like Skype and GoToMeeting, business leaders can spend finite resources on in-person meetings in ways that provide the greatest return. For example, web conferences can be used to present preliminary proposals and, based on initial feedback, be modified for a later in-person presentation to clients in refined form.

Bookkeeping Applications – With so many viable and cost-effective accounting applications for small businesses, no one should be manually tracking income and expenses across multiple tables, spreadsheets and systems. Software and cloud-based options allow business decision-makers to create and track professional invoices, see payments and outstanding balances at a glance, enter bills and print checks, and reconcile for tax purposes.

Online Timesheet and Payroll Services – Online time-tracking solutions make it easy for employees to submit timesheets (and managers to approve them) from anywhere and everywhere. To choose the right system for your business, think about the ways different employees would use it and where their data will need to go, from payroll to billing to reporting. If you have an existing accounting program like QuickBooks in place, a payroll solution that syncs data and issues paychecks to employees can be a great option.

Social Media Tools – It’s a full-time job creating a strategy for a business’s social media presence, selecting the channels that best suit outlined goals, and then implementing a plan of action. Programs like Buffer and HootSuite help connect accounts so businesses can plan, schedule and post to multiple outlets at one time. Leaders can set up a schedule for sharing content based on the best time for it to be released. Plus, you get the chance to see comparative analytics that can improve future planning.

Customer Service Support – With tech applications like Desk.com and Zendesk, a business can be small but still have a big customer service presence. Help desk solutions can increase the number of positive interactions customers have with you company, improve their opinions of your brand, and raise their intent to purchase from your business. Support staff can field inquiries from email, phone calls, live chat or social media using one main system, giving customers the chance to choose their preferred form of interaction.

If bookkeeping, timesheet or payroll technologies are on your list of productivity tools to investigate, Talley & Company can provide you with important points to consider when choosing the right tool for your business. Contact us and we’ll be glad to assist.

November 7, 2014

Tax Breaks Could Cut Ballmer’s $2 Billion Payment for Clippers in Half

There’s been a lot of debate on both sides as to whether Steve Ballmer’s purchase price of $2 billion for the Los Angeles Clippers exceeded the team’s worth and revenue potential. On one hand, it’s hard to ignore the fact that no one has paid remotely as much to buy any one of the 30 NBA teams in the franchise’s entire history. Then again, the NBA just inked a deal with ABC/ESPN and Turner for broadcast and Internet rights earning the franchise nearly $2.7 million each season between 2016-2017 and 2024-25. That’s almost three times what the NBA gets with its current contract.

Maybe Ballmer believed that with this new deal in the works, along with a turnaround of the team’s reported mismanagement under previous ownership, he would have a real shot at making money on his investment despite his sky-high purchase price. And, maybe he just wanted the shiny new toy badly enough to pay whatever price it took to ensure it was his.

Still, there might have been at least one other factor that impacted his decision. Because as it turns out, Ballmer could claim about half of his purchase price of $2 billion over the next 15 years against his taxable income in a niche section of the tax code applicable only to sports franchise owners. To take advantage of it, an accounting treatment using goodwill, which refers to the difference between the purchase price and the cash and fixed assets of the team, would be used to structure the deal.

The Financial Times has reported, “Using a conservative model that assumes Mr. Ballmer could account for $1.5 billion in goodwill and a re-investment rate of 7 percent, the potential tax credits equate to about $1 billion in current terms.”

In the words of Washington Wizards owner Ted Leonsis, “There’s never been a better time to be an owner of an NBA franchise or frankly any professional sports team.” And, well…it pays to have an astute group of professionals keep their eye on the ball no matter what move a billionaire makes.

But perhaps buying a sports franchise isn’t your game, and this small corner of the tax code doesn’t apply to you. That still leaves thousands pages of rules and opportunities that could. The tax code is full of small but powerful regulations that can easily escape taxpayer notice. Ballmer has a powerful tax advisory team mining it to better inform his decisions for work and play. You can, too.


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