TaxProf Blog

IRS: Defective Chinese Drywall May Qualify for Casualty Loss Deduction

The IRS has sent this letter to Sen. Jim Webb (D-VA), explaining that homeowners may be able to deduct losses caused by defective Chinese drywall as casualty losses under  § 165(c)(3):

[Y]our constituents['] ... homes were constructed with Chinese drywall. The constituents said that Chinese drywall emits putrid smell and gas causing various health problems, as well as extreme and unusual corrosion of pipes, air conditioning coils, and electrical appliances. They indicated that these problems arose soon after construction of the homes, with the result that the homes are uninhabitable. ...

A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, and unusual.  Damage or loss resulting from progressive deterioration of property through a steady operating cause is not a casualty loss. ...

The EPA and the Consumer Product Safety Commission are investigating the reported problems with Chinese drywall. If it is determined that Chinese drywall emits an unusual or severe concentration of chemical fumes that causes the extreme and unusual damage you describe, affected taxpayers can qualify for a casualty loss deduction.

• Fox News Orlando
• Sarasota Herald-Tribune
• The Virginian-Pilot
• Web CPA

Advanced Placement for Law Schools

Ben Barros (Widener) of our sister PropertyProf Blog has a provocative idea:  Advanced Placement for Law Schools:

What we teach in law school can be roughly divided into two components: stuff and skills. In its current incarnation, legal education is largely focused on teaching stuff – the basic doctrinal rules, and related policy issues, of various areas of law. There is a reasonable amount of legal analytic skill that is taught in your typical casebook course, especially in the first year. But most of what we teach is stuff – basic knowledge of one sort or another. Some types of stuff are more complex than others, but most of the basics really aren’t that hard. I’m pretty confident that undergraduates would be able to handle most of the basics of property law, and of any other legal area. ...

Presuming that it is desirable to shift some legal education to the undergraduate level, how do we get there? My proposal is to create an advanced placement system for law school. High school students can take advanced placement tests in a wide range of subject areas. If they score well enough, they are given college credit and can place out of some introductory college courses. The same thing could be done with legal education. Exams could be offered in a number of doctrinal areas. If students score well enough, they would be given law school credit and could place out of the introductory course in that subject (or could take an abbreviated version of that course).

Moneyball Lives!

Following up on my prior post, Moneyball: The Movie:  

Sony Corp. has revived the Brad Pitt baseball film “Moneyball” after hiring “The West Wing” writer and producer Aaron Sorkin to rework the script, according to a person with knowledge of the situation.

Pitt remains committed to the movie, based on Michael Lewis’s book about Billy Beane, general manager of Major League Baseball’s Oakland A’s, the person said yesterday. The studio is looking for a director to replace Steven Soderbergh, according to the person.

Sony Pictures Entertainment stopped work on the film days before filming was scheduled to begin after Soderbergh submitted a revised script. The studio may have concluded that the changes reduced the film’s prospects, Variety reported at the time. Sony gave Soderbergh the option to offer his revised script to other studios, the person said.

Bloomberg:  Sony Hires Sorkin to Rework Brad Pitt’s Moneyball.  (Hat Tip: Steven Sholk.)

VAT: No Solution for Health Care or Fiscal Woes

The Heritage Foundation has published Value-Added Tax: No Solution for Health Care or Fiscal Woes, by Curtis S. Dubay.  Here is the Introduction:

The value-added tax (VAT) is currently the topic of much conversation in Washington. With growing deficits and mounting government debt, many see it as the only viable alternative to restore fiscal order. It is also an option to fund government-run health care.

Congress should resist calls for a VAT on top of all the taxes Americans already pay. It should instead focus on reducing spending, including fundamental reforms to entitlements like Social Security and Medicare/Medicaid.

Dean Announces New Admissions Policy at Illinois: Treat All Applicants Equally

National Law Journal: Illinois Law Dean Announces New Admission Policy, by Lynne Marek:

University of Illinois College of Law Dean Bruce Smith, in an effort to counter a scandal that indicated that some applicants to the college were admitted with the help of influential people, said on Thursday that no applicant will get special treatment under a new policy.

In a letter to staff, faculty, students and alumni, Smith said the new policy will also require the college to respond only to inquiries on the status of an application if the inquiry is made by the applicant. In addition, the school will now accept only formal letters of recommendation that are made to the admissions office and placed in the applicant's file.

"Under my deanship, the college will give no 'special' consideration, treatment, or procedure to any application," Smith said in the letter. "All applicants will be treated equally."

For a scathing critique, see Law Librarian Blog's Can $300,000 in Additional Scholarship Money to Prop up U of I's US News Law School Ranking be Defended on Moral Grounds?

Burke & McCouch: Carlisle -- A "Hollow Victory"?

Karen C. Burke (San Diego) & Grayson M.P. McCouch (San Diego) have posted Carlisle: A "Hollow Victory"?,124 Tax Notes 169 (July 13, 2009), on SSRN. Here is the abstract:

Arthur Andersen LLP v. Carlisle [No. 08–146, May 4, 2009)] is the first investor suit involving a failed Son-of-BOSS tax shelter to reach the Supreme Court. Although the Court rests its decision on procedural grounds under the Federal Arbitration Act, the case offers a tantalizing glimpse into the structure of the shelter transaction and the relationships between the various participants. This comment argues that the primary impact of the Court’s decision will be to invite tactical maneuvers by litigants seeking to delay litigation and avoid discovery.

Settlement Near in US - UBS Tax Shelter Case?

• ABC News
• Bloomberg
• Financial Times
• New York Times
• Wall Street Journal

Update:  U.S. District Judge Alan S. Gold this morning granted the parties' joint motion to stay the trial pending settlement negotiations and rescheduled the trial for August 3 (with a telephone conference on July 29).

• Order
• Joint Motion for Stay

Summer/Fall 2009 Law Review Article Submission Guide

Nancy Levit (UMKC) & Allen Rostron (UMKC) have updated their incredibly useful document, which contains two charts for the summer and fall 2009 submission season covering 188 law reviews.

The first chart (pp. 2-74) contains information gathered from the journals’ websites on:

• Methods for submitting an article (such as by e-mail, ExpressO, or regular mail)
• Any special formatting requirements
• How to request an expedited review
• How to withdraw an article after it has been accepted for publication elsewhere

The second chart (pp. 75-80) contains the ranking of the law reviews and their schools under six measures:

• U.S. News: Overall Rank
• U.S. News: Peer Reputation Rating
• U.S. News: Judge/Lawyer Reputation Rating
• Washington & Lee Citation Ranking
• Washington & Lee Impact Factor
• Washington & Lee Combined Rating

They also have posted a list of links to the submissions information on each law journal’s website.

For more on the law review submission process, see

• Leah M. Christensen & Julie A. Oseid, Navigating the Law Review Article Selection Process: An Empirical Study of Those With All the Power - Student Editors, 59 S.C. L. Rev. 465 (2008)
• Nancy Levit, Scholarship Advice for New Law Professors in the Electronic Age, 16 Widener L.J. 947 (2007)

Michael Jackson's Estate May Owe $80m to IRS

Associated Press:  Death and Taxes: Big IRS Bill Looms for MJ Estate, by Stevenson Jacobs:

Creditors and heirs of Michael Jackson hoping for a cut of his musical empire will have to line up with the Internal Revenue Service, which could lay claim to $80 million or more in federal estate taxes.

To settle his tax bill, the executors of his estate may have to sell or borrow against lucrative but hard-to-value assets or ask the IRS for a multi-year extension. That could allow the estate to pay the tab over time with earnings from Jackson's share in rights to songs by the Beatles and his own music — prized properties whose value will likely make the estate's tax bill only bigger.

"The government is not going to take a Beatles record as payment. They want to be paid in cash," said Roy Kozupsky, a veteran estate lawyer in New York who has worked on behalf of several wealthy clients. ...

According to documents obtained by The Associated Press, he claimed $567.6 million in assets as of March 31, 2007, including Neverland and his share of the Sony/ATV Music Publishing catalog, which holds the rights to songs by the Beatles, Bob Dylan and other artists. The documents also show that Jackson had $331 million in debt. That would leave him with a net worth about $236 million at the time. Based on that number, Jackson's federal estate tax bill could exceed $83 million after exemptions. California, where Jackson lived at the time of his death, has no estate tax, but some states do. ...

The estate's tax dilemma highlights the cost and complexity of dying wealthy in America. Ironically, had Jackson died six months later, his estate may have had to pay no estate tax at all. Under current law, the estate tax is set to be lifted for one year starting Jan. 1, 2010. However, most experts expect Congress to overturn the one-year suspension before the end of 2009, meaning the estate tax would remain in place.

First DePaul Faculty Departure Following Firing of Dean Glen Weissenberger

Brian Leiter has predicted that DePaul's abrupt firing of Dean Glen Weissenberger will cause "at least 10% of DePaul's law faculty to be gone by the end of the academic year 2009-10; the number may well be higher, though the difficult economic situation means that many schools that would be keen to hire faculty at DePaul may not have the money to do so."   The first shoe has already dropped:  Assistant Clinical Professor Cynthia Roseberry is leaving DePaul to become Executive Director of the Federal Defenders of the Middle District of Georgia.

TaxProf Blog Weekend Roundup

Saturday:

• House Wants 1%-3% Surtax on "Wealthy" to Pay for Health Care Reform
• Democrats for a Flat Tax?
• IRS Not Pursuing 18% of Taxpayers Who Owe >$1m in Taxes
• University of California Faculty Face 4%-10% Pay Cut
• NYSBA Releases Tax Reports

Sunday:

• Top 5 Tax Paper Downloads
• NY: Widow Cannot Sue Husband's Attorney for Estate Planning Malpractice
• More on the Deductibility of Michael Jackson's Funeral Expenses
• How Two Illinois Law Schools Choose Interim Deans

Top 5 Tax Paper Downloads

This week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list, with some minor reshuffling within the Top 5:

1.  [438 Downloads]  Now You See it, Now You Don't: Exiting a Partnership and Making Gain Disappear, by Howard Abrams (Emory)

2.  [247 Downloads]  The Obama International Tax Plan: A Major Step Forward, by Reuven S. Avi-Yonah (Michigan)

3.  [161 Downloads]  Recent Developments in Federal Income Taxation: The Year 2008, by Martin J. McMahon, Jr., (Florida), Ira B. Shepard (Houston) & Daniel L. Simmons (UC-Davis)

4.  [144 Downloads]  What is Wrong with Tax Evasion?, by Stuart P. Green (Rutgers-Newark)

5.  [123 Downloads]  The Last Best Hope for Progressivity in Tax, by Edward J. McCaffery (USC) & James R. Hines Jr. (Michigan)

NY: Widow Cannot Sue Husband's Attorney for Estate Planning Malpractice

New York Law Journal:  Widow Lacks Standing to Sue Husband's Lawyers Over Mishandled Will, Judge Finds, by Mark Fass:

A widow who claims that the mishandling of her husband's will by his attorneys will cost her $9 million may not pursue a malpractice claim against them, a Manhattan judge has ruled. Supreme Court Justice Marilyn Shafer ruled that there was neither privity nor even "near privity" between the widow, Jeanne Sorenson Leff, and the attorneys, William Bush and Richard J. Cunningham of Fulbright & Jaworski.

Shafer discounted Leff's argument that her occasional interactions with the attorneys, including their preparation of her own will, created an attorney-client relationship regarding her husband's estate planning. "[T]he mere fact that plaintiff might have had a 'subjective belief as to the existence of an attorney-client relationship' is not enough to create [one]," Shafer wrote in Leff v. Fulbright, 117424/06.

The decision raises the question of who, if anyone, may sue in New York for malpractice when attorneys make mistakes in planning estates.

"That's a very good question," said Sanford J. Schlesinger, the chair of the wills and estates department at Schlesinger Gannon & Lazetera. "In New York, we're one of the few states left with the privity doctrine. When the decedent died, he was the only one who had privity and he was the only one who could sue." Not even the administrator or executor of a decedent's estate may stand in his stead for a malpractice action, according to Schlesinger, whose firm is not involved in the Leff case. Nationally, the law is evolving away from that position, he added, as states move to abandon the doctrine.

More on the Deductibility of Michael Jackson's Funeral Expenses

Following up on Thursday's post, Deductibility of Michael Jackson's Funeral Expenses, we note in the new edition of our casebook, Federal Wealth Transfer Taxation 505 (Foundation Press, 6th ed. 2009):

In Estate of Davenport v. Commissioner, 92 T.C.M. 324 (2006), the Tax Court disallowed a claimed $3,639 deduction for a “funeral luncheon”:

“[T]he record is likewise insufficient to establish the requisite necessity in connection with decedent’s funeral. From the testimony at trial, it is to be inferred that the focus of the luncheon was on recognizing and thanking third parties for their support both during decedent's life and after her passing. That represents a shift from the traditional focus of a funeral in eulogizing and laying to rest the deceased. The evidence, consisting only of broad and generalized statements about the intent of the luncheon, deprives the Court of any ability to compare what may in fact have transpired there with activities typically associated with funeral services.”

How Two Illinois Law Schools Choose Interim Deans

Chicago Daily Law Bulletin: SIU Taps Houdek to be Interim Dean, by Jerry Crimmins:

The former director of the law library at the Southern Illinois University School of Law is now the school's interim dean. Frank G. Houdek's appointment was announced this week by the provost of Southern Illinois University at Carbondale, Don S. Rice.

Houdek, 60, said he was appointed after the school followed its written procedure, which calls for an internal search, a request for applications and the submission of faculty recommendations to the provost. ...

Last month, the DePaul University College of Law appointed Illinois Appellate Justice Warren D. Wolfson to be its interim dean. DePaul had fired Glen Weissenberger from the post after Weissenberger complained about the level of financial support that the law school received from the parent university.

Th[at] prompted an associate dean, Stephen A. Siegel, to resign his administrative post to protest the process of naming Wolfson interim dean. Siegel said the faculty was not consulted. "No one should ever be appointed — and in my 37 years, no one has ever been appointed — without faculty consultation and a chance to express substantial opposition,'' Siegel said on June 22.

Also on June 22, members of the DePaul law faculty presented a petition to DePaul Provost Helmut Epp in which the faculty members stated their opposition to DePaul's "announced intention to install an interim dean without any input from the College of Law community."

Houdek's appointment at SIU as interim dean appears to be less controversial.

House Wants 1%-3% Surtax on "Wealthy" to Pay for Health Care Reform

House Ways & Means Chairman Charles Rangel announced yesterday that the House will propose an income tax surcharge, effective in 2011, to pay for health care reform:

• 1% for married couples earning $350,000 - $500,000
• 2% for married couples earning $500,000 - $1,000,000
• 3% for married couples earning > $1,000,000

Press and blogosphere coverage:

• Associated Press
• Bloomberg
• Fox News
• New York Times
• Wall Street Journal
• Washington Post

Democrats for a Flat Tax?

Op-ed in the Weekend Wall Street Journal: Democrats For a Flat Tax?, by Joe Mathews:

Karen Bass is an unlikely tax cutter. She's the Democratic speaker of the California State Assembly, a fierce defender of the labor movement, and an advocate for repealing a constitutional provision that requires that tax increases pass the state legislature with a two-thirds majority.

But as California faces a budget crisis that defies efforts to resolve it, there is a woman-bites-dog story developing with Ms. Bass at its center. By the end of the month, a commission she pushed to create is expected to recommend that the state adopt a flat (or at least flatter) personal income tax and cut or repeal corporate and sales taxes.

Normally, such proposals would be dead on arrival in Sacramento. But now many Democrats, including the speaker, are realizing that what they need is a tax base that will provide steady funding for their programs. In other words, they need a tax base that doesn't count on a large slice of revenue from taxes on a relatively small number of wealthy residents who can flee the state or who are themselves vulnerable to losing a substantial portion of income in a recession. ... [S]he [is] worried about the state's heavy reliance on about 144,000 wealthy people to pay half of all income taxes for a state with a population of 38 million.

IRS Not Pursuing 18% of Taxpayers Who Owe >$1m in Taxes

The Treasury Inspector General for Tax Administration has released a report, Collection Actions Could Be Accelerated on Some Large Dollar Balance Due Accounts (2009-30-090):

On December 22, 2007, there were 2,454 individual taxpayers in the IRS’ potentially collectible inventory who each owed more than $1 million in taxes, penalties, and interest. While the vast majority of these individuals (2,006 of 2,454) were being actively pursued for collection, we identified 448 accounts totaling approximately $1.2 billion that were in the Queue1 (357 accounts) or that had been shelved (91 accounts).

• Web CPA:  IRS Overlooks Hundreds of Big Overdue Accounts

University of California Faculty Face 4%-10% Pay Cut

The latest chapter in Law Faculty Furloughs, Pay Cuts, Pay Freezes, and Hiring Freezes:  L.A. Times, UC President Outlines Revised Budget-Cutting Proposal:

Most University of California professors and staff would be forced to take between 11 and 26 unpaid furlough days a year -- cutting their paychecks between 4% and 10% -- under a revised budget reduction proposal presented today by UC President Mark G. Yudof. ...

The proposed furlough days would increase in seven steps up the pay scale, from those earning less than $40,000 to those above $240,000. ...

Faculty leaders said professors would not be allowed to take furlough time on days when they have teaching responsibilities.

NYSBA Releases Tax Reports

The New York State Bar Association Tax Section has issued tax reports on:

• Proposed § 108(e)(8) and § 721 Regs on Partnership Debt-for-Equity Exchanges (No. 1184)
• Recommendations for 2009-2010 Tax Guidance Priority List (No. 1185)

Adultery and Tax Planning

As Kay Bell points out, there is a tax angle to the sordid tale of Sen. John Ensign (R-Nev.), who had an extra marital affair for eight months with Cynthia Hampton, a campaign staffer who is married to Douglas Hampton, Sen. Ensign's chief of staff.  Sen. Ensign's parents made $96,000 in gifts (hush money) to the Hamptons in the form of eight checks of $12,000 each -- four checks each from Sen. Ensign's father and mother to Cynthia Hampton, her husband, and their two children.   The eight checks thus took full advantage of the $12,000 gift tax annual exclusion available in 2008 (it is $13,000 this year).  Nice.

• The Hill
• New York Times
• Talking Points Memo
• Wall Street Journal
• Washington Post
• Wonkette

Are Catholic Law Profs "Ministers"?

National Law Journal: Seeking to Avoid Termination Suit, Catholic Law School Claims Professors Are Ministers, by Tresa Baldas:

Are Catholic law school professors really ministers?

A Michigan trial judge will decide that next week in a controversial employment dispute involving Ave Maria School of Law, which is trying to declare law professors as ministers to avoid a wrongful termination suit from proceeding.

In the latest twist to the two-year-old suit filed in state court by a three former professors, Tom Monaghan, the school's founder and financier, filed a motion last month claiming that the law professors are "ministerial." Therefore, he argues, because the school is a religious institution, the administration over these minister-professors is exempt from civil trial court under the "Establishment and Free Exercise of religious clauses of the First Amendment."

Monaghan also claims that the institution is eligible for "ecclesiastical abstention," requiring courts to "abstain from inquiring into, or interfering with, governance of the religious institution."

 "We got a curveball thrown into the case, and the law school is shooting itself in the foot," said Deborah Gordon of the Law Offices of Deborah Gordon in Bloomfield Hills, Mich., who is representing the law professors. Gordon is aghast at the theory that Catholic law school professors are ministers. "Are you people kidding or what," Gordon said, baffled by Monoghan's theory. Gordon thinks this argument could draw the ire of the ABA.

Of course, if Catholic Law Profs are indeed ministers, this would open the door to some very lucrative tax advantages, including most importantly the housing allowance permitted by §107.  See Warren v. Commissioner, 114 T.C. No. 23 (2000).

Wisconsin Orders Faculty Not to Work During 16-Day Furlough

From Ann Althouse:

The Governor’s furlough mandate, established in response to the State’s projected budget shortfall, requires an effective cut in pay for all full-time, 12-month employees equivalent to 16 days over the two-year period July 1, 2009 through June 30, 2011. The resulting furlough time off (FTO), required by the Governor and approved by the State Legislature, is required for all State and University employees, regardless of the funding sources used for their individual salaries and benefits. The mandatory furloughs result in a 3.065% annual pay reduction. ...

Everyone at The University of Wisconsin will have their pay cut by about 3% and will be “furloughed”—told they do not have to work—for a corresponding period of time. But it turns out that we not only don’t have to work, we are being told we cannot work. The guidelines ban any kind of work during furloughs, anywhere. This means that even if you are at home you are not supposed to read professional material, get and send emails, make calls, use a smart phone, etc. Employees who violate the work ban can be disciplined.

More Fallout From DePaul's Firing of Dean Glen Weissenberger

I previously blogged one aspect of the fallout from DePaul's abrupt firing of Dean Glen Weissenberger:  the postponement of its conference on Vanishing Act: Legal Education in a World Without Trials later this month to which 185 law school deans had been invited.  In the its email to the Deans, DePaul said:

The withdrawal of a number of panelists has persuaded us that we should look at restaging this important event at a later date.

Here is the joint letter from panelists Stephen Burbank (Penn), JoAnne Epps (Dean, Temple), Marc Galanter (Wisconsin) & Phoebe Haddon (Dean, Maryland):

At the invitation of Dean Glen Weissenberger, we agreed to participate in a July 30 and 31 symposium entitled Vanishing Act: Legal Education in a World Without Trials. We have recently been informed that Dean Weissenberger no longer serves as DePaul Law School’s Dean and that the University administration has appointed an Acting Dean for a two year term without consulting the Law School’s faculty. Although we do not dispute the authority of the University to make administrative changes, we are mindful of the provisions of ABA Accreditation Standards 106(7) and 206(d) and Interpretation 206(a). Together, those standards provide that the faculty shall have substantial involvement in the selection of a Dean. Specifically, the faculty or a representative body of it shall advise, consult, and make recommendations to the appointing authority in the selection of a dean. Moreover, Standard 106(7) unequivocally states that as used in the Standards and Interpretations, “Dean” includes an acting or interim dean.

We express no opinion regarding the person selected to serve as your Acting Dean. Given the circumstances of his appointment, however, we are concerned that our participation in the Symposium might be understood as suggesting either that we believe the change in leadership is in compliance with ABA Standards or that we condone the manner in which it was effected. Therefore, we regret to inform you that we are no longer able to participate in the upcoming symposium.

The Pope on Taxes

Pope Benedict XVI has released his encyclical, Caritas in Veritate, which focuses on the current economic crisis and includes this tax policy proposal:

One possible approach to development aid would be to apply effectively what is known as fiscal subsidiarity, allowing citizens to decide how to allocate a portion of the taxes they pay to the State. Provided it does not degenerate into the promotion of special interests, this can help to stimulate forms of welfare solidarity from below, with obvious benefits in the area of solidarity for development as well.

(Hat Tip: Ted Afield.) 

    

Senate Democrats to Propose Raising Taxes on Capital Gains, Dividends, and Interest to Fund Health Care Reform

Bloomberg reports that Democrats on the Senate Finance Committee are considering embracing a proposal put forth this week by Citizens for Tax Justice to apply the 1.45% Medicare tax to capital gains, dividends, and interest to fund health care reform, coupled with a 2.5% surtax on incomes over $200,000 (single) and $250,000 (joint):

 

Former BDO Seidman Partner Pleads Guilty in Criminal Tax Shelter Case

Robert Greisman, a CPA and tax lawyer, former partner in BDO Seidman's Chicago office, pleaded guilty yesterday to three counts of conspiracy to defraud the United States in connection with tax shelter transactions marketd by his firm and the Jenkens & Gilchrist law firm.   United States v. Daugerdas,  No. S109CR581 (S.D.N.Y. July 9, 2009).

• U.S. Attorney's Press Release
• Indictment
• Plea Agreement
• ataxingmatter
• Chicago Tribune
• New York Times
• Wall Street Journal

Tax Protesters Ed and Elaine Brown Are Convicted on All Counts

I previously blogged (here, here, here, here, and here) the case of tax protesters Ed and Elaine Brown who, after being convicted of evading $1.9 million in taxes on her dental practice, holed up in their New Hampshire mountaintop home for months, vowing to die fighting rather than surrender.  The Associated Press reports that they were convicted yesterday on weapons charges and of plotting to kill federal agents.  They face a minimum sentence of thirty years in prison.

Roller Skating Babies

Deductibility of Michael Jackson's Funeral Expenses

David Shulman (via the Tax Girl) asks Are Michael Jackson's Funeral Costs Deductible for Estate Tax Purposes?  His answer:

1. Everything involved with the funeral (not the public memorial but the private funeral) itself, no matter how extravagant or expensive will be allowed as a deduction.
2. Everything involved with purchasing and maintaining the burial site itself should also be deductible, even if they build a monument to him. ...
3. The costs of transporting Michael Jackson’s body from the hospital, to the funeral home, to the memorial, to wherever his final resting place may be will probably also be deductible. ...
4. Any other costs paid for by the estate for the public memorial which was not part of the funeral should not be allowed as a deduction. The public memorial, while touching, was not really part of the funeral, and the IRS would have a strong argument if they chose to disallow the deduction. However, that being said, I wouldn’t be surprised if the estate took the deduction, and the IRS allowed it. The larger estate tax battle is going to be over the valuation of Michael Jackson’s intangible intellectual property and the actual size of his liabilities.

Prior TaxProf Blog coverage of estate tax issues to be faced by Michael Jackson's estate:

• Michael as Elvis: Post-Death Exploitation of Jackson's Name Will Create "Money-Making Machine" to Pay Off Hefty Estate Tax Bill
• Michael Jackson's Looming "Estate Tax Disaster"
• Settling Michael Jackson's Estate May Be a Thriller for the Lawyers

Wells Fargo Redux: Sen. Grassley Accuses IRS of Overstepping its Authority in IR-2009-44

Dow Jones:  Sen Grassley Says IRS Defied Congress on Tax Credit, by Martin Vaughan:

A senior Republican senator is questioning whether the IRS overstepped its authority in implementing a tax credit in economic stimulus legislation for home energy efficiency upgrades. The provision allowed homeowners to claim a tax credit of up to $1,500 for replacing property including windows, doors, skylights and insulation. It replaced a tax credit that was worth up to $500 for such upgrades. But the stimulus provision also included tougher energy efficiency requirements for windows, doors and skylights to qualify for the new credit.

Sen. Charles Grassley, R-Iowa, charges that the IRS contradicted Congress by allowing the tax credit to apply to property that met the older, less stringent standard, if purchased before June 1. "The question apparently becomes ... can the IRS essentially change the words of the statute to reach a result that the IRS deems more appropriate than the one clearly intended by Congress," Grassley wrote in questions to an Obama administration nominee this month.

The IRS says it did not go outside its legal authority. "Under Code section 7805(a) and (b) the secretary of the Treasury has broad authority to provide rules to interpret and administer the tax law, and that is what IRS did in this specific situation," said IRS spokeswoman Michelle Eldridge. ...

It is not the first time in recent months Treasury has faced criticism for allegedly encroaching on Congress' legislative powers. The Bush administration's Treasury Department came under fire from lawmakers for a decision that allowed banks to use tax losses racked up by failing banks they acquired -- a move that was seen as intended to ease the acquisition of Wachovia Corp. (WB) by Wells Fargo & Co. (WFC). Congress reversed that Treasury policy as part of the stimulus bill, although it did not take away any benefits from Wells Fargo.

On April 22, IRS announced [in IR-2009-44] that property qualifying for the older standard -- that is, property that earned an "Energy Star" label -- purchased between Feb. 17 and June 1, would qualify for the new, expanded tax credit. ... 

Michael Desmond, a former Treasury official who leads the tax practice at law firm McKee Nelson, said it is not uncommon for Treasury to improvise a transition period when faced with new tax provisions that involve technical standards. "The IRS is acting very pragmatically here. They're allowing people to utilize the credit in the interim until the experts can catch up with the standard," he said.

Tax Court: LLCs Not Subject to Limited Partnership Passive Loss Disallowance Rule

Section 469(h)(2) treats a limited partnership interest as presumptively passive for purposes of the passive loss rules, with the result that partnership losses cannot offset the limited partner's salary or investment income.  In Garnett v. Commissioner, 132 T.C. No. 19 (June 30, 2009), the Tax Court held that LLC interests are not subject to § 469(h)(2), with the result that members of LLCs can deduct LLC losses if they can prove that they materially participated in the LLC under the general rule of § 469(h)(1),

The Wall Street Journal discusses the importance of the Garnett decision in Entrepreneurs Win Tax Case Versus IRS; Losses on Business Investments Can Be Deducted Against Salary, Other Income; An Appeal?, by Laura Sanders:

The IRS lost a key battle in its long-running fight to limit tax deductions that can be taken by investors in small businesses in a case that could have wide implications for entrepreneurs.

The Tax Court decision would allow investors in certain kinds of businesses to deduct losses against salary and investment income. Right now, investors often can only deduct losses in a business against future profits from that business, which in some cases prevents taxpayers from getting to use the deductions at all.

The case, which involved Nebraska farmers seeking to deduct losses from their chicken and pig operations, can still be appealed by the IRS, but makes loss deductions much easier to obtain for some investors. ...

The decision specifically applies to investors in limited-liability companies and limited-liability partnerships and benefits those who actively work in several businesses. One example would be a Microsoft engineer who owns a stake in a local restaurant and tends bar twice a week. His spouse, meanwhile, is a part owner of a money-losing gift shop, where she works a few hours a week. Under this decision, losses from the two businesses could offset salary or investment income earned by both.

The IRS has long taken the position that losses generated by businesses held within LLPs and LLCs can't generally be used to offset salary and investment income. The IRS position has had the effect of forcing investors in LLPs and LLCs to delay loss deductions, sometimes for years.

Chronicle: Are Law Schools Churning Out Too Many Lawyers?

Chronicle of Higher Education:  Law Schools Mull Whether They Are Churning Out Too Many Lawyers, by Katherine Mangan:

At a time when law-school graduates are facing greater debt and fewer job opportunities, the University of Miami School of Law has offered to pay accepted students to stay away—at least for a year. The school's unusual offer, which followed an unexpectedly high number of acceptances for this fall's entering class, comes during a period of soul searching in legal education about just how many lawyers the nation needs and whether educators have an obligation to paint a realistic picture of students' prospects for landing jobs that would justify taking out loans of $70,000 or more.

At least 10 new law schools are on the drawing board around the country, in addition to the 200 already accredited by the ABA. At the same time, the demand for legal services has dropped during the economic recession, prompting hundreds of firms to lay off lawyers, cut salaries, and delay the start dates of new associates. As law schools continue to churn out graduates, the resulting bottleneck could make the competition for jobs even more fierce. And some legal experts predict that even when they do resume hiring, many big firms won't be able to continue paying new associates the salaries of $120,000 or more that students had counted on to whittle down their debt.

But that sobering news hasn't stopped students from flocking to law schools, which saw the number of applicants rise 4.3 percent for this fall, according to the ABA. ...

William D. Henderson, an associate professor at Indiana University at Bloomington's Maurer School of Law who has done extensive research on the legal job market, says he would like to see a Web site in which law schools published accurate details about bar-passage rates and employment statistics. That, he says, would give students a more realistic idea of how readily they would be able to pay off their debts. Instead of just reporting that a certain percentage of graduates went into "business," the site would detail the kinds of jobs and salaries they earned. “The reality hasn’t filtered down to students that this isn’t like Boston Legal where you get a law degree and walk into a great, high-paying job,” Mr. Henderson says. “We’re taking their money and putting people $100,000 in debt,” he says, while their job prospects are at best uncertain.

Update:  Stephen Bainbridge (UCLA), Is Law a "Mature" Industry?:

If law in fact is a mature industry, we face a problem of systemic oversupply. The rate at which demand for new lawyers grows has permanently leveled off. Economic recovery will help, but it will not change the fundamental structural changes in the market for lawyers.

Unfortunately, the growth in the number of law schools and size of entering classes at many law schools was premised on the assumption that the demand for lawyers would continue to rise at the high rate characteristic of the period, say, 1960-1990. Because that growth rate was artificially high due to the exogenous shocks of the preceding decades, the number of law schools and large law school class sizes no longer make sense. Indeed, if law schools continue to grow in number and size at their current rate, the gap between demand for new lawyers and the number of new lawyers will continue to rise every year.

Put another way, we have been growing the number of law schools as though the demand for lawyers would permanently continue to experience exponential growth, whereas in fact it follows the classic natural growth x-curve.

My suggestion? Assuming we aren't going to have real free markets for legal services, but will continue to have such barriers to entry as ABA law school accreditation, bar exams, and so on, which presumably would solve the problem, we need to constrict supply. Lop off the bottom third of law schools and see if that solves it.

Disgraced Former Cravath Tax Lawyer Wants $100m For Police Monitoring After Guilty Plea to Teenage Rape Charges

I previously blogged (links below) the sordid tale of James Colliton, a former tax lawyer at Cravath who plead guilty to statutory rape and patronizing a prostitute.  The latest chapter in this sordid tale from the Poughkeepsie Journal:

[A] Town of Poughkeepsie man who allegedly paid a mother so he could have sex with her underage daughters in Manhattan may file a $100 million federal suit against the town and Dutchess County.

The potential suit from registered sex offender and disbarred attorney James Colliton would challenge whether authorities can monitor sex offenders through a county program in which police visit offenders in their homes. ...

Colliton, a father of five from Spackenkill and a former Manhattan tax lawyer, was convicted in 2007 of statutory rape and patronizing a prostitute in a case that made tabloid headlines. ...

Describing police visits as the "intentional infliction of emotional distress," Colliton recently served town and county officials with a notice of claim -- often a precursor to filing suit. In his eight-page claim filed last month, Colliton indicates he intends to seek $3 million in compensatory damages and $97 million in punitive damages in federal court.

Prior TaxProf Blog coverage:

• Former Cravath Tax Lawyer Indicted on Teenage Rape and Prostitution Charges (3/2/06)
• Police Apprehend Former Cravath Tax Lawyer Wanted on Teenage Rape and Prostitution Charges (3/5/06)
• NY Post: "Pervert" Tax Lawyer Is Broke (3/9/06)
• National Law Journal: Cravath Tax Associate's Trouble Brings Spotlight (3/17/06)
• NY Post: Tax Lawyer "Skunk" v. "Skank" (3/31/06)
• Former Cravath Tax Associate Denied Bail in Teenage Rape and Prostitution Case (9/29/06)
• Former Cravath Tax Lawyer Pleads Guilty to Teenage Rape Charges (10/3/07)
• Disgraced Former Cravath Tax Lawyer Sues Firm for $1.45m Bonus (1/9/08)

Treasury Department Releases Updated Tax Gap Report

The Treasury Department yesterday delivered an Update on Reducing the Federal Tax Gap and Improving Voluntary Compliance to Senate Finance Committee Chair Max Baucus:

Building on reports previously released, this report is intended to provide a comprehensive overview of efforts to close the tax gap. This report is also intended to serve as a baseline for further work and discussion. After briefly discussing the nature and scope of the tax gap, this report summarizes previous Treasury and IRS tax gap reports and identifies the areas of strategic priority detailed in those reports. This report then summarizes the achievements, ongoing efforts, and new initiatives for achieving progress in each of those areas of strategic priority, organized according to the components of the strategy to reduce the tax gap detailed in prior reports.

As this report will make clear, the IRS and Treasury, working with Congress, are pursuing a wide range of initiatives, including a series of legislative proposals included in the Administration’s FY 2010 budget. The Administration recognizes the particular value of those efforts and initiatives that improve voluntary compliance by making the tax filing process easier and more taxpayer-friendly. While aggressive enforcement activity can also help to narrow the tax gap, it is important to recognize that increased enforcement efforts require certain trade-offs. The Administration is committed to working closely with Congress to strike an appropriate balance to maximize revenue collection without imposing unreasonable compliance and enforcement burdens on the vast majority of individuals and businesses that fully and willingly pay what they owe.

• Senate Finance Commitee Press Release

Iowa President's Goal for New Law Dean: Improve U.S. News Ranking (From #26)

From a Des Moines Register interview with University of Iowa President Sally Mason:

Q:  I am an Iowa College of Law alum, and I am concerned about the path the school has taken the past few years, dropping out of the top 25 rankings and losing key members of the faculty. There is a golden opportunity to hire a new dean, but more has to be done. Can you share your views on the future of the law school?

Mason: The latest rankings, I believe, have us placed at No. 26 overall and ninth among public universities. But I believe we can, must and will do better. Hiring the new dean will provide a great start to a process that will include rebuilding a strong faculty and setting priorities that will build on and expand the existing and traditional strengths of our law school.

(Hat Tip: Law School Headlines.)

2009 IRS Research Conference Concludes Today at Georgetown

The 2009 IRS Research Conference concludes today at Georgetown.  A list of today's panels, speakers and papers is here and below the fold:

Continue reading "2009 IRS Research Conference Concludes Today at Georgetown"

Swiss to Block Release of UBS Client Data to U.S. in Tax Shelter Crackdown

• Associated Press
• ataxingmatter
• Bloomberg
• Financial Times
• New York Times
• Wall Street Journal
• Web CPA

Illinois "Clout" Commission Doesn't Buy Law School's Explanation

Law Librarian Blog has a detailed post on Chancellor Richard Herman's testimony before the Mikva Commission investigating the "clout" admissions practices at the University of Illinois and its law school, including this fascinating exchange:

The Chicago Tribune reports Chancellor Herman tried to downplay disclosed email exchanges with then Dean Heidi Hurd about the jobs-for-admissions scheme as being "sarcastic and facetious," a claim Hurd made in a letter to the Chicago Tribune. Commission members were not persuaded.

"I love jokes, but I have to tell you that this isn't something I would think you would want to joke about or Dean Hurd would want to joke about. The law school was giving up something of importance. When you were asking for something to compensate you weren't joking. That was a serious request," Mikva said.

"That would be a fair characterization," Herman replied.

Herman said he discussed the jobs only after being forced to admit the student and said there was no "bargaining beforehand."

"I like euphemisms," Mikva said. "But sometimes you have to say a spade is a spade, a cow is a cow."

Commissioner Doris Lowry also chided the chancellor's actions. "Once the bargaining opportunity presented itself, you chose to bargain," she said.

Prior TaxProf Blog coverage:

• Illinois Bends Admissions Standards to Admit Politically Connected (June 1, 2009)
• Illinois Refuses to Release Data on Politically-Connected Admittees (June 10, 2009)
• Illinois Admitted Unqualified Applicants in Exchange for Gov. Blagojevich's Help Getting Jobs for Grads at Bottom of Class, to Boost Law School's Ranking (June 26, 2009)
• Illinois Faculty Respond to Tribune's Coverage of "Clout" Admissions (July 6, 2009)

Update:

National Law Journal:  Former Illinois Law Dean Testifies That She Fought Pressures to Accept Favored Applicants:

When former University of Illinois College of Law Dean Heidi Hurd went before the Illinois Admissions Review Commission in Chicago on Wednesday to answer ethical concerns about an alleged political clout list used to get some students into the law school, she said she fought those pressures "at every turn" and was "incensed" by them. Hurd was called to testify largely because of e-mail exchanges in which it appeared that she may have accepted unqualified students into the college and accepted the promise of jobs from some people backing those students in exchange for the admissions.

Chicago Tribune:  U. of Ill. Dean Traded Admission for Scholarships:

A former University of Illinois Law School dean agreed to admit well-connected applicants pushed by Chancellor Richard Herman in exchange for $300,000 in scholarship money, according to documents newly released by the university.

Chicago Tribune:  Ex-Dean Says Pressure by Top Officials 'Incensed' Her:

Heidi Hurd, now a U. of I. law professor, described being "enraged" when Chancellor Richard Herman not only ordered her to accept a student backed by the governor and his go-between, Trustee Lawrence Eppley, but then also tried to appease her by offering to secure five jobs for law school graduates. "I was incensed because we had just been steamrolled by what I felt to be an abuse of an official office," Hurd said. "I took it to be the case that there had been a top-down gubernatorial fiat. I was incensed at Trustee Eppley and incensed at Herman not to muscle back."

Tax Profs For Judge Sotomayor

Columbia today released a letter signed by 1,200 law professors supporting the nomination of Judge Sonia Sotomayor to the U.S. Supreme Court.  Among the signatories are these Tax Profs:

• Nancy Abramowitz (American)
• Ellen Aprill (Loyola-L.A.)
• Reuven Avi-Yonah (Michigan)
• Karen Brown (George Washington)
• Noel Cunningham (NYU)
• Barbara Fried (Stanford)
• Brian Galle (Florida State)
• Wendy Gerzog (Baltimore)
• Roberta Mann (Oregon)
• Elena Marty-Nelson (Nova)
• Ajay Mehrotra (Indiana-Bloomington)
• Reginald Mombrun (North Carolina Central)
• Robert Peroni (Texas)
• William Popkin (Indiana-Bloomington)
• Mildred Robinson (Virginia)
• Richard Schmalbeck (Duke)
• Ted Seto (Loyola-L.A.)
• Joshua Tate (SMU)
• William Turnier (North Carolina)

Update:

• ABA Journal
• The Blog of the Legal Times

Does Judge Sotomayor Have a Tax Problem?

Following up on this morning's post, Judge Sotomayor's Law Practice: A Tax Dodge?:  the issue was first flagged by Glenn Reynolds (Tennessee), and he notes that he "was just following Ralph Winter’s advice from my Business Associations class in law school:  When you see a business arrangement that doesn’t seem to make any sense, just say 'it’s probably for tax reasons,' and you’ll be right nine times out of ten."  At my invitation, Linda Galler (Hofstra) expands on the potential tax issues surrounding Judge Sotomayor's sideline legal practice:

While I am supportive of Judge Sotomayor's nomination to the Court, and do not think that the facts in the New York Times article suggest that there is a problem large enough to preclude confirmation, I do think there is an interesting tax issue. There is also an interesting non-tax issue, which I will address first.

Most law firms have strict policies prohibiting partners and associates from engaging in legal work “on their own.” This is because conflicts of interest problems can be created. For example, the New York Times article indicates that Judge (then attorney) Sotomayor reviewed contracts for an insurance salesman. What kind of contracts were they, and who was the other party? If the other contracting party was an insurance company that was represented by the judge’s law firm, or later sought representation, the firm could have found itself in an awkward position. This suggests three possible alternatives: (1) the firm had a policy and Judge Sotomayor violated it, (2) the firm had no policy, or (3) Judge Sotomayor wasn’t really practicing law out of her home so getting the firm’s permission was never an issue for her.

Which brings us to the tax issue. The judge presumably did not bring her clients into the firm because she could not justify charging them the fees generally charged to other clients. Otherwise, she (like most lawyers) would have represented the client through the firm. If that is the case, then she was either doing the side legal work for free or for almost-free. Does the amount of work that she did and the income that she brought amount to a trade or business, justifying Schedule C (above the line) deductions? If she had represented the clients through the firm, then expenses either would have been the firm’s expenses (perhaps deductible by the firm but not by Judge Sotomayor) or, if she paid them herself, they would have been deductible below the line since she was an employee.

Her position as to this issue is slightly stronger with respect to the side work that she did when she was employed by the district attorney’s office because she could not have gotten permission to represent the clients “at work.” The question remains, however, whether her side activities amounted to a trade or business.

Moreover, what were the expenses? If they were minimal, who really cares. But suppose she was taking home office deductions. If my earlier presumption is correct, then the receipts from her side practice were likely to have been trivial or insignificant at best. Maybe she claimed to run a law practice out of her home so that she could take home office deductions when she was really (just) an employee whose employer provided her with an office, and the home office deductions would then have been improper. (Employees generally are not permitted to deduct the costs associated with home offices, no matter how much work they actually perform at home. But people who run businesses out of their homes often can.)

2009 IRS Research Conference Kicks Off Today at Georgetown

The two-day 2009 IRS Research Conference kicks off today at Georgetown.  A list of today's panels, speakers and papers is here and below the fold:

Continue reading "2009 IRS Research Conference Kicks Off Today at Georgetown"

Kornhauser: Gender and Capital Gains Taxation

Marjorie E. Kornhauser (Arizona State) has posted Gender and Capital Gains Taxation on SSRN. Here is the abstract:

Most countries grant capital gains preferential treatment under their income tax laws by either excluding them from taxation or taxing them at a lower rate than wage or interest income. Although this preference is not uncontroversial, few people question it on grounds of gender. Nevertheless, gender issues exist. Most obviously, men as a group benefit more from the preference than women because they generally have more capital gains than women. Moreover, a major justification for the preference is that it increases economic growth by encouraging investments. However, to the extent it does so, it can have a disparate impact on men and women because economic growth can affect men and women differently. More subtle gender differences also exist. Empirical evidence suggests that attitudes and behaviors regarding financial decisions, including capital gains, are gendered. Women, for example, being more risk averse than men, may have fewer capital gains because they invest in fewer risky assets, which are the type of assets that produce the biggest capital gains. Risk aversion could produce this result even if men and women value economic growth equally, but it is possible that women do not value economic growth per se as highly as men do. They might value economic security and steady income more than men and therefore prefer less volatile investments that produce ordinary income, such as certificates of deposits, to riskier investments that produce capital gains.

This essay explores the relationship between gender and capital gains taxation, an analysis that generally has been absent from debates about capital gains. Although it briefly looks at disparate impact due to disparities in economic situations, it concentrates on differences in attitudes and behaviors relative to capital gains. The essay’s limited space permits only an introduction; a fuller discussion awaits not only more space, but more data.

TaxProf Blog Passes 10,000,000 Page View Milestone

Yesterday, TaxProf Blog passed the 10,000,000 page view milestone, after just five years in operation.  I am delighted that so many tax professors and students, tax lawyers in private practice and government, accountants, and others in the tax community find this blog useful.  And I am thrilled to welcome Aspen as a sponsor, helping us to keep the blog going for at least another year.

Judge Sotomayor's Law Practice: A Tax Dodge?

New York Times:  Little Information Given About Solo Law Practice Run by Sotomayor in ’80s, by Serge F. Kovaleski:

Judge Sotomayor has explained very little about one facet of her legal life: Sotomayor & Associates, the solo law practice she ran out of her Brooklyn apartment for several years in the 1980s.

In her questionnaire, Judge Sotomayor says she was the “owner” of Sotomayor & Associates, which she described as a consulting business she operated on the side from 1983 to 1986. During this period, she also worked, first for the Manhattan district attorney’s office and then as a member of Pavia & Harcourt, a large firm in Manhattan. ...

White House communications officials said the judge no longer had copies of the tax returns that listed the income, and any deductions, that she attributed to her outside work.  ...

White House spokesman Ben LaBolt ... said that Ms. Sotomayor came up with the name when she was filling out her tax returns. “It was necessary to list a name for the practice on her tax returns,” he said.

Tax experts say there was nothing in the law that requires a lawyer, or any other self-employed person, to create a corporate name to report income, or deductions, on the standard form, known as a Schedule C. Just one’s own name will do. But Mr. LaBolt pointed out that the 1983 copy of the form asked the filer to list his or her “business name.” “Significant time was not spent in choosing a name,” he said.

(Hat Tip:  InstaPundit:  "So maybe that on-the-side private law practice was just some sort of a tax dodge. That would make it okay, right?")

Lawyer Charged With Forging Brother's Will Pleads Guilty to Tax Charges

The Legal Intelligencer: Lawyer Charged With Forging Brother's Will Pleads Guilty to Tax Charges, by Shannon P. Duffy:

Allentown, Pa., attorney John P. Karoly Jr. pleaded guilty Monday to charges of dodging $1.9 million in federal taxes by hiding more than $5 million in income. In return, prosecutors agreed to drop all charges relating to an alleged fraud scheme in which Karoly, 59, was accused of fabricating wills after his brother and sister-in-law died in a plane crash.

But under the terms of the guilty plea, Karoly also promised that he would drop his claims in the state court battle over the couple's estates and renounce any share in those estates.

Assistant U.S. Attorney Seth Weber said Karoly has also agreed to a non-jury trial to resolve a third category of charges in which Karoly is accused of scheming to get a $500,000 tax deduction for charity by laundering money through a church.

See also Philadelphia Inquirer,

DOJ Fights 'Last Minute' Discovery Request From UBS in Tax Case

Blog of The Legal Times, DOJ Fights 'Last Minute' Discovery Motion From UBS in Tax Case, by Mike Scarcella:

Swiss bank UBS AG wants the federal government to give up information it has on U.S. taxpayers who have failed to disclose and pay taxes on foreign accounts in a motion the Justice Department this week called a "last-minute" attempt at discovery before a hearing next week in the high-profile dispute.

The IRS is seeking enforcement of a summons that compels UBS to provide the names of 52,000 accounts of U.S. clients who purportedly evaded taxes on the foreign accounts. A hearing is scheduled for July 13 in U.S. District Court for the Southern District of Florida.

More on Resignation of Villanova Dean Mark Sargent

Following up on Saturday's post, Villanova Dean Resigns, Is Implicated in Prostitution Bust:

• Legal Blog Watch:  The Law Dean and the Prostitute
• Legal Intelligencer:  Questions Arise After Law School Dean's Resignation in Wake of Prostitution Investigation
• Philadelphia Business Journal:  Villanova Dean Resigned Over Prostitution

Michael as Elvis: Post-Death Exploitation of Jackson's Name Will Create "Money-Making Machine" to Pay Off Hefty Estate Tax Bill

I previously blogged some of the estate tax issues to be faced by Michael Jackson's estate:

• Michael Jackson's Looming "Estate Tax Disaster"
• Settling Michael Jackson's Estate May Be a Thriller for the Lawyers

I also previously made available a copy of Jackson's will, which provides that all of his assets pour over to the Michael Jackson Family Trust.  Although details of the trust are not publicly available, Gerry Beyer (Texas Tech) of our sister Wills, Trusts & Estates Blog reports that the trust divides the assets:

• 40% to his mother
• 40% to his children
• 20% to charity.

CNBC reports on the estate tax issues faced by the estate in Michael Jackson: Death And Taxes, by Jane Wells:

There is a mention in Jackson's will of an insurance trust for the estate, at least through 2003. ...  Did Michael Jackson, in fact, have an insurance trust to cover the estate taxes? If so, was the policy large enough to cover what may be a huge tax bill? Sources tell me that is still being investigated.

If there isn't enough money to cover the taxes, [Randy Godshall of Sheppard Mullin] says it's "a virtual certainty" that the executors may be forced to sell assets, including the lucrative Sony/ATV song catalog, to pay the IRS cash. "The worst case scenario is that assets are subject to fire sale types of liquidity events, so that the hundreds of millions of dollars of potential value isn't realized," says Godshall, "which, of course, then leaves a lot less for the children." However, executors could file for an extension with the IRS, and even, perhaps, set up a payment plan over the next ten years to pay the taxes with new revenues coming into the estate. "The IRS would understand that you don't want to kill the golden goose by having to force (the catalog's) sale," Godshall says. "When Elvis died, his estate was also in dire straights, and the date of death value, I understand, wasn't all that substantial. But through good post-death management and commercial exploitation of his public image, it's a money making machine. I would anticipate we'll see the same thing with Mr. Jackson and his estate."

U.S. News Launches Law Firm Rankings

U.S. News & World Report announced today that it will team with Best Lawyers to start ranking law firms:

The venture will kick off with an announcement sent to more than 35,000 lawyers across the United States, followed by a detailed survey that will be conducted this fall.

The U.S. News/Best Lawyers Law Firm rankings will evaluate more than 3,000 law firms across the United States using a wide range of objective data as well as individual assessments from more than 40,000 private practice lawyers, 20,000 clients, and thousands of law firm employees. ...

The law firm rankings will be featured on USNews.com. Starting this fall, the site will also host Best Lawyers' search engine, which contains profiles of 51,315 individual lawyers worldwide, covering 78 legal specialties and based on more than 4.2 million evaluations of leading lawyers by their peers at the top of the legal profession.

Update:

• Above the Law
• WSJ Law Blog