February 2010 Archives

Bernie Madoff's daughter-in-law wants out.

Out of the Madoff name, that is. Stephanie Madoff wants her name, and the name of her two children, changed. On Wednesday, the wife of Bernie Madoff's son, Mark Madoff, filed a petition for name change in a New York court.

She is asking that she and her two children change their names from "Madoff" to "Morgan."

In many states, a name change petition is not necessary. Simple usage of a name can be enough for a name to be legally changed. In light of privacy issues and the desire to protect people from becoming identity theft victims, banks and certain agencies are now becoming more stringent on proof of legal name requirements, sometimes insisting that they be provided with legal documents showing the name. 

We all have been worrying about this for some time, but each time the end is near, we get one more chance. The Senate will review a proposal for a temporary extension (again) of the COBRA benefits subsidies, which was added to a new jobs bill this week. 

Across the country, the educational system is flailing under the pressure of internal educational challenges combined with increased budget constraints due to the economic downturn. Lack of funds for schools have resulted in lay-offs and lawsuits in many districts, but this week Indiana and Los Angeles, California are in the news. In addition, there is the small issue of a mass firing at a struggling Rhode Island High School.

Massachusetts is attempting to address the growing problem of school and cyber bullying with a bill that will go to the state Senate early next month. According to the Boston Globe, the bill follows the suicide last month of a bullying victim in South Hadley, Mass.

In light of the sour economy and high rate of distressed homeowners marching to bankruptcy court, many see a serious need for some decisive legislative action.

Well, action that accomplishes something, instead of proposed legislation that keeps dying in Congress. But in the current political climate, is the prospect of bankruptcy law reform dead? 

Will bankruptcy judges ever be given more power to help the masses of distressed homeowners flooding their courtrooms? 

President Barack Obama has repeatedly promised the introduction of legislation intended to help distressed homeowners. But every time President Obama has proposed a brilliant plan, the bank lobby groups seem to reply with their own brilliant plans.

Among the reader comments following a report of yesterday's court action in the almost infamous Lower Merion School District spying case, was this: "that's one more reason you should keep duct tape handy." This is an excellent, common sense solution to the immediate concerns of parents and students who are coping with the fall out of learning via lawsuit, Robbins v. Lower Merion School District, that their schools allegedly have been spying on them using the webcams attached to school issued laptops. However, on February 22, a court initiated a slightly more long term solution.

As discussed in a prior post, California's biggest for-profit health insurer, Anthem Blue Cross, recently proposed a major rate hike of up to 39% which would affect its individual policy holders in California. This announcement drew the attention of Health and Human Services Secretary Kathleen Sebelius as well as California Insurance Commissioner Steve Poizner. Today, the Los Angeles Times reports that Poizner's office is alleging over 700 violations of California law by Anthem Blue Cross over the last several years. Anthem's parent company is Well Point, Inc., and is based in Indianapolis.

If you too have been avidly following the case of the spying school, there is news today as reported by The New York Times and PCWorld. Last week, a post on this blog reported the suit brought by a high school student and his parents against the Lower Merion School District in Pennsylvania, for allegedly spying on the plaintiffs and every other high school student via the webcams attached to school issued laptops. As you may know, the suit by student Blake Robbins accuses the District of breaking several electronic and privacy laws and has engendered an bit of an uproar. A follow-up post here discussed the reply by the District to the suit.

At what point can a court restrict a parent's right to expose their child to a certain religion? On first glance, one would be inclined to say "never." 

Look again. And this time, throw a bitter divorce into the equation.

The Chicago Tribune reports that a Chicago area father, Joseph Reyes,  baptized his three year old daughter, in violation of a court order and of what his ex-wife claims was an agreement to raise their daughter in the Jewish faith. 

Lawyers for the mother, Rebecca Reyes, claim that the 3-year old daughter would suffer "confusion to her emotional detriment" as a result of her father's so-called "malicious" actions. Indeed, when deciding issues of custody in a divorce, courts generally look to the best interests of the child.

On February 19, Massachusetts Attorney General Martha Coakley tried to move her state one step closer to completing its challenge to the constitutionality of the Defense of Marriage Act. As discussed in the post on this blog, What is The Defense of Marriage Act (DOMA)?, the federal act, signed into law by President Bill Clinton in 1996, defines marriage for federal legal purposes as the union of one man and one woman. The law also allows states that do not permit same sex marriage between their own citizens to refuse to recognize those marriages legally performed in states that do.

You might be excused for thinking it is a snack of Greek origin, involving grape leaves. No, this is the Defense of Marriage Act, signed into law by President Clinton in 1996. DOMA is a federal law that defines marriage, with two key components. First, Section 2 allows states that do not themselves recognize marriages between same sex couples to refuse to recognize legal same sex marriages performed in other states that do, and second, Section 3 defines marriage for purposes of federal law as "a legal union between one man and one woman as husband and wife." 

In a prior post on this blog, the attempts of same sex couples to divorce in Texas, a state where same sex marriage is banned, were discussed. Today, there is an update from this outpost on the frontier of same sex divorce.

As widely reported and written about here, last week a high school student and his parents in the Lower Merion School District of Pennsylvania, sued the district over their alleged use of webcams onboard the school laptops issued to high school students. Today, the district responded.

It's hard out there for a model. 

The Illinois Attorney General, Lisa Madigan, issued a news release yesterday, announcing that she was pursuing judicial relief against two Chicago area modeling agencies, in a nationwide crackdown by the FTC, known as "Operation Bottom Dollar." 

Madigan filed suits against Glamour Model Talent Inc. and its President John Vuolo. She also filed a separate complaint against Latte Model and Talent Agency Ltd. and its owner, Robert Owczarek. 

Latte allegedly sold travel packages to customers, promising them a trip to a modeling convention in New York, along with top tier accommodations and career coaching. When push came to shove, nobody met the customers in New York and they did not have access to the convention.

Everyday so many of us adjust our thoughts and expectations about what is still private in the age of Facebook, reality TV and camera phones. Today, reports come of one more incident that would make George Orwell turn over and sit up in his grave. The Lower Merion School District in Pennsylvania was sued on February 10, 2010, for allegedly spying on its own students and their families via webcam.

The current estate tax debacle isn't only a mess for Congress. It's causing phones to ring at the offices of estate planners across the country. 

Estate planners are left with the riddle that is the current state of affairs -- estimating what the Obama Administration's actions will be with regards to estate tax in the coming years.

Will the pre-Bush era estate tax rates and personal exemption amounts be revived? Or will the government introduce a new scheme, applied retroactively to the date of the lapse? Or, will 2010 go down in history as a tax-free year in estate tax? 

So what should you expect from your estate planner, if you are thinking of drafting estate planning documents in the coming year?  

According to a report Monday by The Los Angeles Times, there was something resembling an real taxpayer/citizen revolt in a Los Angeles County courtroom. Spurred by the financial hardship of serving on a jury for an extended period, empanelled jurors about to be sworn in by the judge voiced loud and extreme doubts about the case they were supposed to hear. The angry jurors claimed they could not believe that someone brave enough "to go out and get shot at" would suffer emotional distress at being falsely accused of being gay, as claimed by the plaintiff, a sheriff's deputy suing his former sergeant, in the case before them.

Consider this scenario: You lent $10,000 to your cousin Arty but when time comes to pay back that loan, Arty says "No! It was a gift!"

Your conflict with a deadbeat cousin aside, what does the Internal Revenue Service have to say about your non-business bad debt?

For starters, let's look at how the IRS treats non-business bad debts. Bad personal debts are treated as short term capital losses. This means that you can deduct them from your income tax calculation, but only up to a maximum of $3,000 above your capital gains for the year. 

What is a non-business bad debt and when would it apply to the average taxpayer?  In Publication 550, the IRS describes a non-business bad debt as a bad debt (i.e. an uncollectible debt) that has no relation to the lender's business. In order for the debt to be deductible, it must be "totally worthless" and must be a genuine debt. 

As discussed in a prior post on FindLaw's Decided, the EPA has taken a major step in its fight against climate change and greenhouse gases. Late last year, the Agency released its findings that carbon dioxide and other greenhouse gasses were pollutants that "threaten the public health and welfare of current and future generations." These findings may pave the way for stricter regulations on the emissions of the pollutants. Now, the state of Texas begs to differ.

So, you received a notice from the IRS?

But not every notice or letter means that the IRS is after you. Some letters are just asking for clarification on your income tax calculation. How do you distinguish between the normal correspondence and the scary ones? Let's take a stab at it, briefly in this small overview.

• You received a letter from the IRS asking you to explain something: Ah, the "Correspondence Examination." Relax. Although it is an audit, it's a mild one, just asking you to explain something in your income tax calculation.
• The IRS asks you to come in to their office: This is called the "Office Audit." Read the letter the IRS sent you and familiarize yourself with the scope of this audit. The Agent will probably ask you a series of questions. If, for any reason, the Agent goes beyond the scope of the letter, politely tell the Agent that you are not prepared to answer these questions. Don't be a jerk to the IRS Agent. Remember that they have the power to make things very easy for you, if they want to. At any time in the interview, you have the right to ask to consult with an attorney.

Now that the government has granted temporary protected status (TPS) for Haitians to stay and work legally in the U.S., applications have begun to roll in.

According to the Associated Press, more than 12,000 illegal Haitian immigrants have applied and paid for TPS legal status while their country is rebuilding its infrastructure from the devastating 7.0 earthquake.

California is in a state of crisis.  Financial crisis, that is.  And ever so slowly, the state of California is seeing itself teethering on the edge of insolvency.  So naturally, there are some pundits who have been talking of bankruptcy for California. 

There is just one problem with that-- states can't declare bankruptcy.  But try telling that to the former CEO of one of the world's largest Fortune 500 companies and US Senate hopeful.

Carly Fiorina, former CEO of Hewlett Packard and avid sheep advocate, made the comments on Monday during a round-table discussion with business leaders at a cement plant in the Inland Empire community of Colton. 

Chapter 9 of the Bankruptcy Code applies to municipal bankruptcies and provides that an eligible "municipality" is a "political subdivision or public agency or instrumentality of a State."

Did walking away from your CitiMortgage just get easier?

CitiMortgage, a CitiGroup mortgage provider, announced the launch of a pilot project this week. The new program will allow distressed homeowners to hand over the keys and walk away, under certain conditions.

The notion of "deed in lieu of foreclosure" isn't a new one. It's the idea that you can convince your lender to take the house instead of having them run you through the gauntlet of foreclosure proceedings. It can save a lot of headache and potentially even have less of an impact on your credit score. 

In both cases, the owner of the house loses their home for failure to make payments. A deed in lieu of foreclosure is just a more streamlined process, one that reduces legal fees the lender would have to spend on foreclosing. 

You've heard about it. A friend's friend somewhere in a different state walked away from their home. They just left it there for the bank and happily rid themselves of debt. Now, you hear, they live somewhere on a golf course, in a McMansion that cost them half the price.

So, you've heard, like some sort of urban legend in the social circles of distressed homeowners.    

Do people really walk way that easily from their homes? 

If only the solution were as wonderful as the story of the booming housing market. Remember the days when homes were worth more than you bought them for? The days when it was possible to rely on that huge equity in your house and ask the bank for a Home Equity Line of Credit (a HELOC)? Yes, not long ago, many could and did ask the bank to give them a loan, using their home equity as collateral.

Ahh, the HELOC -- once a blessing and now a curse for distressed homeowners who want to walk away. With home values having fallen, often far below the owner's purchase price, how does having taken out a HELOC affect the decision to walk away or stay?

William Halby learned that the medical expense deduction income tax rules aren't as broad as he originally thought. The IRS wouldn't let him deduct expenses paid to prostitutes.

But, of course, how was he to understand section 213 of the Tax Code, after all, he was only a mere tax lawyer?

You see, Halby, 78, claimed that the health benefits of sex therapy allowed him to deduct his visits to his "service providers" as medical expenses.  The IRS and Tax Court weren't following.

So, what expenses may be included under the medical expense deduction rules?

Now you can't see it, now you can. That was the fate of the highly publicized Proposition 8 federal trial, but now, it is playing on a computer screen near you. In a neat circumvention of the Supreme Court ban on cameras in the courtroom where the Prop 8 trial was heard, intrepid filmmakers have taken matters into their own hands and have created a virtual trial based on transcripts and reports from the actual proceedings.

After a mere five weeks of being enacted, there is talk of having the NH gay marriage law repealed. However, there are many who will not let the NH gay marriage law go down without a fight. The Boston Herald reports that a New Hampshire House Judiciary Committee is advising against the repeal. The Judiciary Committee has advised that the House shoot down a constitutional amendment that attempts to define marriage an institution between a man and a woman, versus between two individuals.

On Monday, Health and Human Services Secretary Kathleen Sebelius asked California's largest for profit health insurance provider, Anthem Blue Cross, to send a letter detailing what she termed an "extraordinary" rate hike proposed for California customers. Blue Cross is owned by parent company Well Point, Inc. According to the report by ABC News, Well Point saw a profit in the final quarter of last year of $2.7 billion.

Here's some food for thought: A multi-millionaire who dies today in the US might not have to pay any estate tax. There may have been a silent and temporary estate tax repeal this year.  

Now, if you're thinking about drafting some estate planning documents, you might be left scratching your head. Don't worry. Your estate planning attorney is also probably scratching their head, too.

Up until last year, anything over the $3.5 million exemption amount was subject to estate tax. The estate tax rules relating to estate tax rates and personal exemptions were set to sunset in 2009. And expire they did, leaving behind a confusing mess for Congress to sort through. 

You see, with the current state of affairs involving job creation and health care, lawmakers let this little expiration date slide by. 

So what does this mean for those who have a high net worth and want to plan their estates?   

Did you know that some of your gifts could be included in your income tax calculation?

But only those that the IRS says are "not really" gifts.

Let's break this concept down.   

Also, keep in mind that there is a tax that is entirely separate from income tax and it is called "gift tax." It has its own tax return and its own set of tax rules. But gift tax is beyond the scope of this post. 

1.  Gifts are generally excluded from gross income.

Not so fast. If it doesn't walk like a duck or talk like a duck, can you really call it a duck? 

First of all, the income produced by the gift must be reported. Thus, if the tree is the gift, you don't report it but you must report the apples it produces. Or, if the gift is a house, you don't report the house but you report the rental income you get from the tenants.   

Secondly, you can't simply slap on the name "gift" just to avoid including it in your income tax calculation. In one case interpretting the taxation of gifts, the Supreme Court described "gifts" as being characterized by "a detached and disinterested generosity out of affection, respect, admiration charity or like impulses."

The Haiti earthquake was in 2010, but lawmakers are allowing charitable tax deductions for Haiti relief contributions in the 2009 income tax calculation.

We've already discussed the tax benefits of donating to Haiti relief in an earlier post in this blog. But now, 2009 taxpayers have an added tax incentive to donate to Haiti.   

In January of this year, the House of Representatives unanimously approved a measure to allow the deductions of cash donations to Haiti earthquake relief on the donor's 2009 tax returns, instead of having to wait until 2010 to take the charitable tax deductions. The measure allows this deduction for donations made between January 12 and February 28. 

Here's the interesting part about the new measure -- a donor can also deduct those $10 text-for-Haiti messages.  In order to substantiate those donations, the donor would need to keep their cell phone records on file.   

The Congressional intent behind this measure is simple. House Ways and Means Committee Chairman, Charles Rangel (D-NY) said that the bill was to provide "immediate benefit for those who have already given and an incentive for those who are considering giving."

The city of Costa Mesa, California, has just become the next in a long line of cities whose anti-solicitation ordinances aimed at day laborers have become the subject of a lawsuit. According to the Los Angeles Times, this will be the eighth federal suit in California alone over these ordinances in the last 12 years. The preceding suits have been settled or won by the laborers. One case is still awaiting a decision by the 9th Circuit Court of Appeals.

What is "gross income" and more importantly, why do we even care?

This is one of the most pivotal of income tax questions. 

"Gross Income" is one of the most important income tax rules and it really is a starting point in income tax calculation and in understanding how much you owe Uncle Sam. 

Now, let's confuse you by getting all taxxy and legal. Don't worry, we'll ease the pain and translate these income tax rules, once we're done with the legal jargon.

Section 61 of the Internal Revenue Code defines "gross income" as: 

All income, from whatever sources derived.

Can you see the problem with that definition? It's exceedingly broad and doesn't really define much. In fact, it essentially just defines "income" as "income."  It's somewhat like saying "the definition of 'dog' is 'a doglike animal'."

Perhaps a little elaboration is in order.  

The rights of unwed parents have always been a little tricky to define by law. However, it is even trickier for courts to decide on the parental rights of unwed fathers versus unwed mothers. According to Hofstra Law Professor Joanna Grossman, "unwed fathers in most states do not have the same rights as unwed mothers vis-à-vis their children."

However, that does not mean that the rights of unwed fathers do not exist. Grossman describes a case recently decided by the Supreme Court of Nebraska (In re Adoption of Corbin J.), where and unwed father protested against the adoption of his son by the man who had married the boy's mother.

The court ultimately decided that when an unwed father acts like a father and performs parental obligations, then he is entitled to some form of parental rights. When the unwed father performs paternal commitments, he should be granted legal rights regarding his child. 

 So, you slaved away all year baking that fabulous cake.

But now, with April 15 around the corner, that mean-old IRS wants a bite of that cake. It's tax time and you have to fill out your Form 1040, also known as filing federal income tax returns. 

So how much cake will you give the IRS? 

Why the cake analogy? Well, federal income tax law is not the most user-friendly area of the law, not even for tax lawyers.  And frankly, income tax calculation can be quite boring to read about. 

Nobody likes taxes.

But cake- that's a different story.  Who doesn't like cake?

The slow march toward integrating openly gay servicemen and women into the U.S. military appears to have begun with testimony before the Senate Armed Services Committee today in Washington D.C. Testifying before the committee was Secretary of Defense Robert Gates, and Chairman of the Joint Chiefs, Admiral Mike Mullen. The New York Times reports that in an unusually strong statement, Adm. Mullen told the committee, "allowing gays and lesbians to serve openly would be the right thing to do."

Illegal immigrants typically are loathe to report abuse they suffer because of fear of deportation; but there is a ray of hope for them with the U visa.

We wrote about how undocumented immigrants are more likely to suffer from wage theft in our Law and Daily Life post here. The New York Times quotes Susan Bowyer, the managing lawyer for the Oakland office of the International Institute of the Bay Area as saying, "Undocumented immigrants are unbelievably vulnerable to abuse, exploitation and victimization because their fear of detection keeps them from reporting that victimization."

The Obama Administration is at work on re-evaluating and overhauling the Elementary and Secondary Education Act, more often known as No Child Left Behind. With some bi-partisan support in Congress, the Administration is looking at changing several key provisions of the education law.

On Friday, the regulations implementing the standard known as mental health parity were issued. These health regulations will implement the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008. The late Senator Ted Kennedy was also a major force in the passage of that bill. 

The gay rights movement seems laser focused on gay marriage, but what about gay rights in the workplace? NPR recently reported on the gay rights movement in the workplace with an interesting timeline. It brings about the question:

What Are Your Rights Against Workplace Discrimination Based on Sexual Orientation?

There is currently no federal law that protects against workplace discrimination based on sexual orientation in the private sector, but federal government workers are protected from being discriminated against. There is hope for federal protection of gay rights in the workplace. The ACLU wrote about the Employment Non-Discrimination Act (ENDA), which offers Congress the opportunity to ensure workplace equality by protecting LGBT workers from employment discrimination. The Employment Non-Discrimination Act is currently pending in the House of Representatives.