Tuesday, September 27, 2005
It was August 2003 when Michael Fatale got a call from his friend Bruce Fort. It is the time of the year when most of us would be talking Sox, but not these guys: They are tax guys -- they love this stuff -- and they were talking taxes.
Fort, a lawyer for the New Mexico revenue department, wanted to know whether Fatale, a lawyer for the Massachusetts Revenue Department, had been following the giant MCI bankruptcy case. In particular, he said, the counsel for the unhappy bondholders committee had unearthed the fact that MCI (formerly WorldCom) had been avoiding state taxes by charging its subsidiaries billions for the ''foresight of top management." In short, MCI was claiming chief executive Bernie Ebbers' brain was worth billions!
New Mexico was not interested in pursuing the complicated case, Fort said, but Massachusetts, which had gone after two firms in recent years over the creative use of intangible assets, should. For Fatale it was a bolt of inspiration: ''I felt I was the right guy, in the right place, at the right time," he says. ''I knew we were going to get a big recovery out of these guys." Think home run. Think walk-off grand slam in the seventh game of the playoffs against the Yankees. What that call and the dogged persistence of Fatale and his colleagues helped produce is a massive settlement that eventually will return about $500 million to nearly 20 states.
New York Times:
Billionaire investor Warren Buffett testified Monday in the trial of his investment firm's two lawsuits accusing the Internal Revenue Service of making it pay more than $23 million in taxes and interest by disallowing certain deductions. The trial began in U.S. District Court after some three years of legal wrangling between Berkshire Hathaway Inc. and the IRS.
With a house here and a condo there, Dr. Daniel Scotti probably amassed more wealth buying real estate over the last two decades than he did in a career of practicing internal medicine. Now, two years after retiring to Northern California from Brooklyn, he is ready to divest himself of all his residential holdings and concentrate on commercial properties, which he believes are easier to manage.... But Dr. Scotti, who is 63, does not expect to relinquish a dime, at least for now. Using a once-obscure tax strategy, known as a 1031 exchange, he rolls the gains from the sale of one investment property into another of similar value. He can defer such taxes indefinitely and pass on the income-producing property to his heirs. As real estate prices have soared, more and more investors have been doing these like-kind exchanges
The Federal Election Commission filed suit Monday against the Club for Growth, a well-funded Republican group, in an effort to force the organization to comply with limits on political contributions. The suit is the first major enforcement case to involve a "527 committee," the independent political organizations that both Republicans and Democrats used to raise and spend hundreds of millions of dollars in the 2004 races. Commission officials describe it as a test case that could have a major impact on how future elections are financed.
Wall Street Journal:
- A Closer Look at the New Katrina Tax-Relief Bill (Tom Herman):
Wide-ranging tax relief designed to help Hurricane Katrina victims and to stimulate more charitable donations sailed through Congress this week. The new tax package, which will cost roughly $6 billion, comes on top of recent changes announced by the Internal Revenue Service. President Bush signed the bill into law Friday. Most of the new legislation is designed to address Katrina. But a few provisions may also be useful in the aftermath of Rita and other storms.