Summer 2008
IRS Finalizes Regulation Regarding
Dependency Exemption for Children
The IRS has finalized a
regulation regarding the entitlement of divorced or separated parents who
lived apart at all times during the last six months of the year to claim a
child as a dependent. The regulation generally applies to tax years
beginning after July 2, 2008. For a noncustodial parent to claim the
dependency exemption, the custodial parent must release a claim to the
exemption. Under the final regulation, this can only be done on an executed
(1) Form 8332 or (2) a written declaration that is not on Form 8332 but
conforms to the substance of that form and is a document executed for the
sole purpose of releasing the claim. A court order or decree or a separation
agreement cannot serve as the written declaration.
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more...
Calculating Business Interruption
Damages
In litigation, it's critical to be able to quantify business damages,
whether the alleged responsible party (or parties) is an insurance company,
another business entity or an individual. Asserting and proving business
interruption damages are functions of three primary components--the duration
of the loss period, the foregone sales or revenues associated with the
interruption period and the additional
costs incurred relating to getting the business restarted and operational
following the interruption. This can be a complicated calculation, which is
why attorneys rely on financial experts in this context. In fact, the
methodologies employed by the financial expert--for
better or for worse--may prove to be key to a
successful disposition of the case.
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The Tax Impact of Splitting an IRA at
Divorce
Generally, under IRC Section 72(t), any amount distributed from an IRA is
taxable as ordinary income to the payee or distributee. One of the
exceptions to this rule, however, is found in IRC Section 408(d)(6) and
pertains to distributions made pursuant to a divorce. A transfer of an
individual's interest in an IRA to his or her former spouse under a divorce
or separation instrument is not considered a taxable transfer. Sounds pretty
straightforward, right? Well, missteps in this area are not uncommon, and
failure to abide by the requirements set forth in IRC Section 408(d)(6) can
result in a substantial tax liability for one of the spouses.
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more...
Examining the Validity of
Expert Opinions
Determining whether an opinion given by an expert is probably a correct or
reliable opinion--as distinguished from a mere assumption or belief--can be
critical in litigating a case. To this end, the application of statistics
can be a powerful tool. A party offering expert testimony bears the burden
of proving that the witness is qualified and that his or her opinion is
reliable. As a practical matter, financial experts assist in litigation by
either supporting or disproving a particular analysis. Being able to walk a
fine line between providing statistical evidence sufficiently technical to
be compelling and having the testimony also be understandable is tricky.
Courts seem to weigh whether the expert witness's testimony will be helpful
to the finder of fact.
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more...
ERISA Governs Ex-Wives' Benefits Claims
A pension plan participant's ex-wife filed a child
support lien against the participant's benefits. However, the lien failed to
qualify technically as a Qualified Domestic Relations Order (QDRO).
Subsequently, the employee and his second wife divorced, and she filed what
was purported to be a valid QDRO against the same pension benefits.
Thereafter, the first wife "corrected" her attempted QDRO. The plan sponsor
communicated to the parties that it needed a state court order adjudicating
the rights of all parties. However, a federal appeals court ultimately
decided that ERISA determined whether valid QDROs were presented to the plan
sponsor. The appeals court held that a federal district court should
determine whether the QDROs were valid and the priority of the competing
claims [Taliaferro, Marcia v. Goodyear Tire & Rubber Co. (CA-5, 2008)].
This newsletter is provided by Somerset CPAs for our clients and other interested persons upon request. Since technical information is presented in generalized fashion, no final conclusion on these topics should be made without further review. For additional information on the issues discussed, please contact Steve Riddle, Tom Thieme, Rex Collins or Doug Ayres of our Litigation & Valuation Team.
This document is not intended or written to be used, and cannot be used,
for the purpose of avoiding tax penalties that may be imposed on the
taxpayer.
Somerset CPAs, P.C.
3925 River Crossing Parkway
Third Floor
Indianapolis, Indiana 46240
317.472.2200 • 800.469.7206
FAX 317.208.1200
www.somersetcpas.com