Jeffrey B. Kahn, Esq. and Windus A. Fernandez Brinkkord Discusses Finances, IRS CI 2015 Annual Report and Taxes On ESPN Radio – December 4, 2015 Show

Topics Covered:

1. The strife of the Chinese tourist and how it impacts the U.S. economy.
2. How OPEC and the level of production for oil can impact your financial plan.
3. IRS Criminal Investigation Division releases Fiscal Year 2015 Annual Report – What You Need To Know If You Have Undisclosed Foreign Accounts.
4. Question from our listeners – What should I do if I have a large win-fall in company stock?  My company was sold and I am walking with a mix of payouts between Restricted Stock Units (RSU’s) and regular stock.

Jeff states: Yes sometimes we just have to take the money and run!

Good afternoon! Welcome to Inside Advantage – Your Financial And Tax Radio Show.
This is Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.

Windus states:
And this is Licensed Financial Planner, Windus A. Fernandez Brinkkord, Senior Vice President Of Investments at Trilogy Financial Services.
You are listening to our weekly radio show where we talk everything about finances and taxes from the ESPN 1700 AM Studio in San Diego, California.

Jeff states:
When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

Windus states:
And whether you are on the rebound or flying high, we have the information you need to make sound financial decisions and map out your strategy for success.

Jeff states:
Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into the KahnTaxLaw website at www.kahntaxlaw.com.

Jeff states:

For today’s show we have coming up:

Segment 2 material: How OPEC And The Level Of Production For Oil can impact your financial plan.

Windus states:

Also coming up is:

Segment 3 material: IRS Criminal Investigation Division Releases Fiscal Year 2015 Annual Report – What You Need To Know If You Have Undisclosed Foreign Accounts.

And of course towards the end of our show, we will be answering some of your questions.

Jeff starts chit chat with Windus.

Jeff states so our top story today is about –

The strife of the Chinese tourist and how it impacts the U.S. economy.

Jeff states: Windus you picked up this article http://on.wsj.com/1NY4T2w in the November 30, 2015 Wall Street Journal and I think this is another fine example that we are a global economy and what impacts one country or one region will impact us too. 

[Windus replies with following talking points allowing for comment and discussion with Jeff on each]
1. The trouble that started in China this summer and spread to the world markets is now spreading to the Chinese tourist.
2. Out bound Chinese tourism is slowing due to the decline in the Yuan. 
3. Spending on travel by Chinese abroad dropped from $25 Billion in September to $19 Billion in October!  Year over year, this is still higher given that $16 billion was spend in October of 2014.  But year of year growth is slowing.  In what used to be a 60% growth rate in the first half of the year is now a 20% growth rate is all. 
4. As with most tourists, your vacations are planned well in advance so there is a slight delay from when currency pressure begins to when we see this reflected in the numbers.
But there is other data this will impact.  Chinese love to travel and buy luxury goods.  If their currency is lower, the ability to buy those goods declines. 
5. And try as they might to stabilize the currency, the Chinese government has been unable to full stop this decline.  A drop in currency won’t kill the Chinese travel bug entirely, but slow it down, it will. 
6. To continue this, the Chinese tourist is still the largest buyer of Luxury goods internationally.  In 2014, they made up 46% of all luxury goods purchased and that number is holding steady for 2015, even with the yuan pressure.
7. Chinese are also becoming more sophisticated in terms of quality and not just buying a brand due to good marketing. 
8. Up to 78% of Chinese luxury goods purchases took place outside of China.  Chinese feel that price is just one aspect to buying abroad; they are often treated better and enjoy the experience more.
9. To make matters worse, when they buy at home they pay a 25% premium due to duties being charged on importation.  Even though this is down almost 60% from 4 years ago, it isn’t down enough.

What I do know, trouble in China kicked off a very turbulent August and September for the markets.  If the Yuan stays under pressure and the economy slows, it isn’t just luxury goods that will suffer.
Travel will suffer and other economies will feel that pain more than they already did in August.  Something to keep an eye on. 
Although we do not have a crystal ball, it is important to make sure you are investing with your time horizon in mind and not trying to time investments.  Markets are often volatile and even more so now.

Well it’s time for a break but stay tuned because we are going to tell you how OPEC and the level of production for oil can impact your financial plan.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

How OPEC And The Level Of Production For Oil Can Impact Your Financial Plan.

Jeff states: In one of our prior shows we talked about the riff in OPEC which was brought out in another article from the Wall Street Journal stating that the comments from Mohammed Bin Hamad Al Rumhy come as OPEC’s Persian Gulf producers unleashed a broad defense of their strategy. http://on.wsj.com/1WLRAHd

Windus states: But before we talk about this I call your attention to my offer …

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

[Windus replies with following talking points allowing for comment and discussion with Jeff on each]

1. OPEC is meeting this Friday.  More pressure to decrease production.  Arguing is pre-running that meeting.

2.  Let’s talk about who is in OPEC.  There are 13 countries.  Some of the U.S.’s best friends:  Libya, Kuwait, Venezuela, Algeria, Qatar, Ecuador, Nigeria, Angola, Iran, United Arab Emirates, Saudi Arabia, & Iraq.  And the newest one just admitted is Indonesia which produces 890,000 barrels a day.
3.  Some of the OPEC countries have already decreased production. They do not agree with the continuing to produce route that both Iraq & Saudi Arabia have deployed.
4.  Countries that are decreasing production are Libya, Kuwait, Venezuela, Algeria, Qatar, & Ecuador.  These countries have really reduced the barrel per day production.  More Libya, by a long shot but the others as well.
5.  Iran released an article Wednesday stating that they were reconsidering the level of production they are producing ahead of the OPEC meeting. 
6.  Why is this an issue for these countries?  It drives their economies.  Countries like Venezuela are hurting, and need oil to be higher to help them stabilize.  Brazil is not one of the OPEC countries but is a key example of a country struggling due to commodities being down in general.
7.  OPEC stands for:  The Organization of the Petroleum Exporting Countries
8.  Officially split by two groups.  Group1 (Saudi Arabia, Kuwait, Qatar) believe that current production levels will flush out competition that need higher prices to make money.  Group 2 are the ones who disagree.
How does this all tie into your financial plan:  Basically, with oil bouncing all over, you may be benefiting at the pump, but your commodity related investments are really down and looking like they will stay there for a while.

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

Stay tuned because after the break we are going to tell you about the IRS Criminal Investigation Division Releases Fiscal Year 2015 Annual Report – What You Need To Know If You Have Undisclosed Foreign Accounts.

You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Calling into the studio from my Walnut Creek Office is my associate attorney, Amy Spivey.

Chit chat with Amy

IRS Criminal Investigation Division Releases Fiscal Year 2015 Annual Report – What You Need To Know If You Have Undisclosed Foreign Accounts.

Jeff states: The Internal Revenue Service on December 3, 2015 announced the release of its IRS Criminal Investigation (CI) annual report, reflecting significant accomplishments and enforcement actions taken in fiscal year 2015.   In Fiscal Year 2015 the IRS CI initiated 3,853 cases. 

Amy states: Yes and for those of you who are not aware, the 2015 fiscal year for the Federal government is for the 12 months ending with September 30, 2015.

Windus asks: Amy, what is the purpose of the IRS issuing this annual report?

Amy replies: The annual report is released each year for the purpose of highlighting the agency’s successes while providing a historical snapshot of the make-up and priorities of the organization.  The very first Chief of IRS CI, Elmer Lincoln Irey, served from 1919 to 1946 and envisioned releasing such a document each year to showcase the agency’s work.   CI is the only federal law enforcement agency with jurisdiction over federal tax crimes.  This year, CI again boasted the highest conviction rate in all of federal law enforcement— 93.2%. 

Jeff states: In other words what Amy is saying is that this document is propaganda of the IRS to show taxpayers what could happen to you if you do not comply with the tax law. And in the case of criminal violations, you could lose your freedom. Which is why you need to remember that:

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states: Now this 50-page report summarizes a wide variety of IRS CI activity throughout the fiscal year and includes case summaries on a range of tax crimes, money laundering, public corruption, terrorist financing and narcotics trafficking financial crimes.  But for this show we are going to focus on that section dealing with the Bank Secrecy Act.

Amy states: The Bank Secrecy Act (BSA) mandates the reporting of certain currency transactions conducted with a financial institution, the disclosure of foreign bank accounts, and the reporting of the transportation of currency across United States borders. Through the analysis of BSA data, CI identifies money laundering schemes and other financial crimes.

Windus asks: Amy are you saying that IRS CI is into big data and analytics just like companies say like Google?

Amy replies: Yes, CI is the largest consumer of BSA data. The CI BSA Program has grown substantially since its inception in the early 2000’s when CI helped establish the initial 41 Suspicious Activity Report Review Teams (SAR-RT). The mission is to scrutinize BSA data to identify and target significant illicit financial criminal activity.

Jeff states: So what has happened to this program over the last 10 years or so?

Amy states: Well now the current BSA program is comprised of participation in 94 SAR-RTs (one in each judicial district and led by the responsible U.S. Attorney Office), and sponsorship and management of 55 Financial Crimes Task Forces (FCTF) throughout the country. The FCTF involves collaboration between CI and state or local law enforcement agencies for the purpose of identifying and investigating specific geographic area illicit financial crimes. More than 150 state or local agencies have joined FCTFs across the country and have detailed more than 350 law enforcement officers to become Task Force Officers. The Task Force Officers are granted the authority to investigate money laundering and BSA violations under the direction of CI.

Windus: So it seems that CI is well connected to data collected by the Federal government and state enforcement agencies to establish a huge dragnet to catch taxpayers suspected of violating the tax laws.

Amy replies: That is correct and with the electronic transmission of data by banks (both domestic and foreign) to the BSA Data Center and the improved analytic resources of CI, it will be harder for taxpayers to avoid getting caught in these networks.

Jeff states: I pulled from the report a table on BSA Investigations which is posted on our site www.kahntaxlaw.com. It covers the last three fiscal years. You may not have access to your computer now so Amy please summarize what is presented in this table:

Amy summarizes [except do not talk about Percent of Investigations NOT Recommended For Prosecution]

BSA Investigations	FY 2015	FY 2014	FY 2013
Investigations Initiated	613	809	922
Prosecution Recommendations	519	677	771
Indictments/Informations	533	608	693
Sentenced	557	535	453
Incarceration Rate	72.4%	74.8%	70.6%
Average Months To Serve	31	35	35
Percent of Investigations NOT Recommended For Prosecution	15.3%	16.3%	16.3%

Windus shares her comments.

Jeff states: Now in this table I added another statistic and that is the Percent of Investigations NOT Recommended For Prosecution. It is consistent each year in that 15% or so of all BSA cases initiated by CI DO NOT GET REFERRED FOR CRIMINAL PROSECUTION. What this tells me is that if you are under criminal investigation for a tax crime, early intervention by a tax attorney is key as you want to fall within this group of 15%. Which is why …

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Thanks Amy for calling into the show. Amy says Thanks for having me.

Stay tuned as we will be taking some of your questions. You are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord on Inside Advantage on ESPN.

BREAK

Jeff states: Welcome back. This is Inside Advantage – Your Financial And Tax Radio Show on ESPN and you are listening to Board Certified Tax Attorney, Jeffrey B. Kahn, and Licensed Financial Planner, Windus A. Fernandez Brinkkord.

Windus PLUG: Trilogy Financial Services will provide you with a retirement cash flow analysis which is a $600.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Windus A. Fernandez Brinkkord. The number to call is 858.314.5169. That is 858.314.5169.

You should also know that the securities and advisory services are offered through National Planning Corporation (NPC) Member FINRA, SIPC, and a Registered Investment Advisor.  Trilogy Financial Services and NPC are separate and unrelated Entities.

Jeff states: If you would like to post a question for us to answer, you can go to my website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

OK Windus, what questions have you pulled for us to answer?

Sampson from Mountainview, California asks: What should I do if I have a large win-fall in company stock?  My company was sold and I am walking with a mix of payouts between Restricted Stock Units (RSU’s) and regular stock.

Windus to address financial planning concerns involving RSU’s.

Restricted stock – Stock is ownership of a company. When that stock has limitations on it, it is said to be restricted.

Kind of restrictions – One of the most common restrictions requires a certain length of time to pass or a certain goal to be achieved before the stock can be sold. This is the vesting period.

Vesting period – The vesting period is the length of time before the restrictions are lifted. If the restricted stock is awarded based on the employee remaining with the company for two years, those two years are the vesting period. If the stock vests when “gross sales increase beyond $10 Million” the vesting period is however long it takes for that to happen, if it ever does.

Outcome if one leaves the company before stock vests – You forfeit the stock.

Windus to talk about other financial aspects.

Jeff to address taxes.

When you own stocks outside of tax-sheltered retirement accounts such as IRAs or 401(k)s, there are two ways you might get hit with a tax bill. If your stock pays a dividend, those dividends generally are taxed at a rate of up to 15% at the end of each year.

In addition, if you sell a stock, you pay 15% of any profits you made over the time you held the stock. Those profits are known as capital gains, and the tax is called the capital gains tax. One exception: If you hold a stock for less than a year before you sell it, you’ll have to pay your regular income tax rate on the gain – a rate that’s higher than the capital gains tax.

The tax treatment of RSU’s are governed by the set of rules under I.R.C. § 83, which apply generally to the receipt of property in exchange for services. Under § 83(a), taxable events occur only when unrestricted property rights vest or when restrictions on the enjoyment of the property lapse. Section 83(a)(1) actually states this in terms of saying that the fair market value of property received for services must be recognized “at the first time the rights of the person having the beneficial interest in such property are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier.” Thus, the receipt of property, whether stock options, stock, or other property, is not taxable if there are substantial restrictions on transfer and it is subject to a substantial risk of forfeiture.

Where you receive RSU’s you may want to consider making an election under IRC Section 83(b). Under this election you recognize as income now the value of the RSU and now when the restrictions lapse. If you expect the value to go up, you would want to make this election to recognize less income.

Jeff PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the Inside Advantage Radio Show when you call to make an appointment. Call my office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff states: Well we are reaching the end of our show.

Remember you can send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com.

Windus states: Have a great day everyone!