July/August 2006 Initiative for Private Company Financial Reporting Moves Forward Members are invited to comment on a new proposal from AICPA and FASB that would change FASB’s process for determining whether differences are needed in GAAP standards. Short of creating a second set of GAAP, the new process would incorporate enhancements into existing accounting standards. Overview of Key Aspects of the Accountancy Reform Legislation An easy-to-read chart shows the key provisions of PA 277, PA 278 and PA 279 explains the significance of the changes to accountancy laws, particularly their ramifications for the - Making Relationships - Leaders' Edge public and the profession. Work: Handling Difficult May/June 2006 People - Leaders' Edge March/April - Webinar: Partnership & 2006 LLCs Tax Update - Leaders' Edge It’s Been an Extraordinary Year - CPA's "Four Rs" of January/February 2006 During this year as Chair of the Board of MACPA, I have Communicating: Talking, - E-News Archive enjoyed many opportunities to talk with members of our Listening, Writing & Business Edge Archive Presenting - Money Management Association. As I prepare to pass the gavel to Incoming - CPE Catalog Search Articles Chair Sean Keenan, I’m delighted to share with all of you some of the year’s highlights. Detroit Students Learn Business Basics Through Accounting Blitz National MAP Survey Data Collection Period Begins Retain Staff ... by Rewarding Them! AICPA Gives IRS Suggestions for Priority List Lost Profits Calculations – Avoid Speculation Russian Roulette: Litigating Closely Held Business Disputes Negotiating Buy/Sell Agreements Can Be Taxing Work Member Impact: Legislation Affecting the CPA Ethics Q&A An Opportunity to Share Your Thoughts CPA Declares Candidacy for 20th State House District Primary 29th Annual Small Practitioners Conference Brings Hot Topics to the Forefront Create a Business Plan for Your Company and Learn How to Make it Work The Nine Sins of Marketing: The Common Mistakes Firms Make,and How to Correct Them QuickStudy: Backup Strategies MACPA Sponsors Race for the Cure Don’t Fret About Insurance: MACPA Affinity Partner Offers Affordable Plans Summer Management Information Shows Celebrate 25 Years In Memoriam Top PO Box 5068 Troy, MI 48007-5068 Phone: 248.267.3700 Fax: 248.267.3737 E-mail: email@example.com July / August 2006 Leaders' Edge PRINT Overview of Key Aspects of the Accountancy Reform Legislation Governor Jennifer Granholm signed three bills into law on December 19, 2005 – Public Acts 277, 278 and 279 of 2005. They represented the most substantial accountancy law reform in more than a decade. The legislative changes were based upon recommendations from the State Board of Accountancy, and were endorsed by the MACPA. The chart on the following page summarizes the accountancy reform provisions and explains their significance. See chart on following page. OVERVIEW OF KEY ASPECTS OF THE ACCOUTANCY REFORM LEGISLATION The following description of key provisions of PA 277, PA 278 and PA 279 explain the significance of the changes to accountancy laws, particularly their ramifications for the public and the profession. Key What it does… The change it reflects … Ramifications Effective provisions Date Whistleblower Allows (does not require) This information was previously • Provides an additional vehicle December protection CPAs to report federal, protected under “client for financial crime prevention by 19, 2005 state or local law confidentiality.” allowing CPAs to provide violations to proper otherwise confidential client authorities. information to authorities if they believe a crime has been committed. Mandatory Requires CPA firms and While peer review has been • Enhances the quality of March 1, peer review sole practitioners who required for AICPA accounting, auditing and attest 2007 provide attest services membership, practitioners/firms services provided by CPA firms (audits, reviews and did not previously need a peer and sole practitioners compilations provided to review for licensure or MACPA • Generates new $100 fee to third parties) to membership. Of the 55 state for administrative costs participate in a Peer licensing jurisdictions, 42 have • Adds expense of peer review to Review program in order or will have some sort of peer those firms who currently do not to renew their licenses. review requirements in place. participate (300-400 firms in Michigan) Vigorous Raises offense for Penalties for violations • Protects the public from fakes December enforcement of “copycat CPAs” increased from a one- • Makes it tougher on offenders 19, 2005 unlicensed (someone who says they year/$5000 misdemeanor to a with beefed up fines and prison activity are a licensed CPA, but five-year/$25,000 felony. The terms actually is not) to a MSBA can also assess a • Makes it more “worthwhile” for felony. $10,000 administrative fine. enforcement action by authorities Make-up of Requires one member of While an educator often held a • Benefits MSBA’s decision- December State Board the MSBA to be an seat on the board, it was not making related to curriculum 19, 2005 membership accounting educator. mandated by law. and certification requirements, the exam, etc. by adding the perspective of a current educator Fee increase Increases fees for Fees haven’t been increased in • Funds from increased fees are October 1, individual and firm nearly 30 years. License fees earmarked to help offset costs 2006 licensing and registration, will be $100 for individuals and for enforcement of unlicensed temporary practice firms; they were $40 and $30, activity and other added permits; adds fee for respectively. Other fees will administrative expenses. tracking peer review increase also. compliance. Self-reporting Mandates CPAs to self- Licensees were not previously • Kicks “bad apples” out of the December of criminal report criminal required to disclose violations of basket 19, 2005 convictions & convictions and law of which “dishonesty, fraud • Reinforces integrity of disciplinary disciplinary action and or negligence” is an element. profession action raise the civil fine limit to $25,000 per violation. Update Amends rules so they are Currently, the Administrative • Allows state regulations to December standards updated annually to Rules are not specific and reflect current standards 19, 2005 reference national contain no provision for • Gives MSBA authority to standards of AICPA, automatic updating when sanction CPAs who don’t follow PCAOB, GAO, DOL, etc. professional standards change. appropriate standards and specifies that violations of these standards is a violation of the Occupational Code. July / August 2006 Leaders' Edge PRINT Initiative for Private Company Financial Reporting Moves Forward Do private companies require financial reporting standards that are different, in certain instances, from those used by public companies? The AICPA and FASB aim to find out and together are considering how the standard-setting process at FASB can be enhanced to accommodate the users of financial information produced by for-profit, nonpublic entities. To that end, the two organizations have published a proposal describing specific process changes, including (1) certain improvements to the FASB’s current processes for determining whether differences are needed in GAAP standards and (2) sponsoring and funding a committee that would enhance the private company financial reporting constituents’ views into the standard-setting process. The AICPA and FASB believe the end result would improve the consideration of the potential differences between nonpublic and public entities, not by creating a second set of GAAP but by incorporating enhancements into existing accounting standards. The AICPA and FASB are encouraging everyone who plays a role in private company financial reporting – bank lenders, sureties/bonding companies, owners/preparers, and practitioners – to review the proposal and comment on it. The proposal, released in June, is available at www.PrivateCompanyFinancialReporting.org. The official comment period ends August 15, 2006. MACPA members are asked to send a copy of submitted comments to firstname.lastname@example.org. The proposed model evolved partly out of a recommendation by the AICPA’s Private Company Financial Reporting Task Force, which in 2004 and 2005, studied financial reporting by nonpublic entities. Approximately 3,700 lenders, investors, sureties, business owners, financial managers and public accounting practitioners participated. The survey results identified aspects of GAAP that were useful and others where there should be recognition of the particular needs of users of private company financial reporting. Although it bases standard setting on economic phenomena, FASB understands that there are potential differences in public/nonpublic user needs and cost/benefit decisions. Historically, any differences typically related to disclosures, effective dates and transition methods Supporters of differential GAAP note that the private company environment is distinct from that of public companies. In addition to different capital structures, they cite these factors: the owners of private companies are typically deeply involved in the management of the business; investors, creditors and other stakeholders in private companies generally have much greater access to the top management and information about the company’s finances; certain reporting requirements may not be useful to the private company environment and burdensome to implement. This past spring, the Institute and FASB each reached out to organizations representing private company owners, lenders, sureties and regulators to solicit their support and urge them to inform their membership about the proposal. All the groups were enthusiastic and said they would do their part to spread the word. Clearly, the time for private company financial reporting has arrived. July / August 2006 Leaders' Edge PRINT Coming Soon to Your Computer Screen: Newly Designed, Interactive MACPA Web Site MACPA members, a brand new web site will be at your service coming early this fall. Advanced features will let you track your CPE, access your own personal e-mail account and get timely information to keep you on top of the profession. Based on member feedback and changes in technology, the Access Member-Only Features - Use Your MACPA is creating the site with a new look, simple navigation Member Number to Create a New Account and customized information for members. Once the new MACPA web site is launched, reaching MACPA focus group studies showed that members want new features will be as easy as creating a new interactive tools they can use for their business or personal account. Old member account logon IDs will not use and that are accessible through the web site. Focus work. groups participants have also requested easier access to critical news and information about the profession. The first time you visit the new site you will be given simple instructions on creating your new account. New Features However, you will need your MACPA member A new electronic tracking system called “My CPE Transcript” number. You can find your member number on any will let members store CPE transcripts online. MACPA CPE invoice or confirmation that you receive from the credits will automatically be stored on the system plus you Association. can enter other continuing education credits you have earned. This tool will simplify CPE tracking for members by allowing You can also call the Member Services Department them to track all of their credits in one, easily accessible at 248.267.3700 for your member number. location. Communications with your clients will be as easy as using your new e-mail account on the MACPA web site. As a member, create your own e-mail address with the extension @michigancpas.org. For example, a member may choose to use johndoe as their account name and their e-mail address will then be email@example.com. Your e-mail will be accessible from any Internet-equipped computer. After logging in to the new web site, an additional CPE-related enhancement will show course offerings based on your interest areas and locations. For example, a member with an interest in automotive accounting will see related courses listed on the home page when they are logged-in. Timely News Answering the request for an increased amount of timely news, the MACPA home page will feature expanded news items and feature articles. Access to news and information also will be found through the site’s new link library. The new MACPA web site will also have special sections geared for the general public, including news items and easy access to finding a CPA through the MACPA CPA referral program. Look for news about the new site in your e-mail and in E-News. Once the site is launched, you will create a new account to enter the members’ only pages. Old account logins will not work. The system will walk you through the simple steps to create your account. You will need to have your MACPA member number to create an account. May / June 2006 Leaders' Edge PRINT Honoring Our Members Who Make a Difference by Volunteering While another article in this issue of Leaders’ Edge reports on our recent Members Advisory Forum meeting in Lansing, I want to tell you about one presentation in particular. This presentation wasn’t on the formal agenda – in fact it was a wonderful surprise. Lenore Litwin, vice president of Junior Achievement of Southeastern Michigan, presented the MACPA with the President’s Volunteer Service Award on behalf of the President of the United States. Peggy Haw Jury 2005-2006 MACPA Recognizing our members’ significant efforts with the MACPA Accounting Blitz, Lenore told Chair of the Board the audience, “You allow us to reach many schools we’d never be able to reach otherwise.” Lenore also announced that JA would give its Impact Award to the MACPA, the only Association to receive the honor this year. Through the JA program, hundreds of CPAs reach out to literally thousands of schoolchildren across the state. It’s been an incredible sustained effort, and our members are truly worthy of this high praise. Just last month, members were also recognized for their work on our Hospice initiative. You may recall that late last year, our Financial Literacy Task Force, together with Hospice of Michigan, published a resource booklet that addresses end-of-life financial issues, entitled Financial Affairs at the End of Life. This booklet was recently named to the Honor Roll of the Associations Advance America Awards, sponsored by the American Society of Associations Executives. The effort also won a grant from AmerInst Insurance to fund further expansion of our community outreach program. Again, this is national recognition for our members who volunteer, using their time, talents and compassion to make a difference in the lives of others. The Accounting Blitz and the Hospice initiative are just two of the programs supported by MACPA members. There are many others: Toys for Tots, book collections, Race for the Cure®, and more. Your involvement in these programs demonstrates your true character and compassion. You set a high standard and inspire others to make volunteering an essential part of their lives. Congratulations to all of you who have played such an important role in your communities, showing the public that our profession cares. July / August 2006 Leaders' Edge PRINT Detroit Students Learn Business Basics Through the MACPA Accounting Blitz Nearly 1,500 metro Detroit elementary- and middle-school students were delighted to welcome CPAs into their classrooms this spring for the MACPA Accounting Blitz, held in conjunction with Junior Achievement (JA). Volunteers visited Beckham Elementary, Bennett Elementary and Miller Middle School to spend a day teaching students financial basics and business fundamentals. Students, teachers and volunteers alike raved about the program. “I had a good time at the school,” said a volunteer in a first-grade classroom. “The students really seemed happy to have me there and I believe they truly enjoyed the JA activity.” Each year, the program volunteers give High Praise for JA Blitz positive feedback from their experience. Lenore Litwin, vice president of Junior Their commitment offers students an Achievement of Southeastern Michigan, opportunity to learn from experts in the field, bringing awareness of the presented the MACPA with the vast opportunities available through a career in business. President’s Volunteer Service Award on behalf of the President of the United In addition to Detroit, the MACPA and Junior Achievement offer the Blitz in States at the Spring Members Advisory various Michigan cities throughout the year, including: Flint, Grand Rapids, Forum on May 10, 2006 in Lansing. Lansing, Saginaw and Traverse City. Junior Achievement also presented the MACPA with its Impact Award on May Those interested in volunteering for the program in one of these cities can 11, 2006 at the Detroit Yacht Club. The sign up now. Volunteering is easy! JA provides training and classroom MACPA is the only association to materials/lessons. You can even choose the school and grade level. You do receive the honor this year. not have to be a CPA to volunteer, and you are welcome to bring a friend or colleague along to teach with you. As a volunteer, you just may plant the seed for future accounting professionals! Give back to your community by volunteering today for future MACPA Accounting Blitzes! Contact Esther Apt at firstname.lastname@example.org or 248.267.3739. July / August 2006 Leaders' Edge PRINT National MAP Survey Data Collection Period Begins The 2006 National Management of an Accounting Practice (MAP) Survey data collection period is under way. Produced by the AICPA Alliance for CPA Firms – PCPS – and the Texas Society of CPAs, the national MAP survey provides local and regional CPA firms with the most comprehensive information available for benchmarking management policies and financial results against other firms. CPA firms were sent an e-mail invitation to participate in the online survey. Firms that did not receive an invitation can request one at www.aicpa.org/pcps. The deadline for submission is September 1, 2006. The streamlined survey should take about an hour to complete online. In addition to offering benchmarking statistics in key practice management areas, the PCPS/TSCPA National MAP Survey includes detailed information about size-specific and practice-specific areas. It also includes questions tailored to sole practitioners. The survey will provide results in an electronic PDF format according to several respondent and professional classifications, including firm size by revenue and geographic location. Participating firms will have access to an online reporting tool that will allow respondents to filter the data and create customized benchmarks. Survey results will be available in mid-October to all respondents. The results are free to all new and current PCPS members and to Texas Society of CPA member firm respondents. Respondents who are not PCPS members can purchase their results for $100 if they are an AICPA member ($200 for non-AICPA members). Non-respondents and the general public will be able to purchase results beginning in mid-November. The 2006 price for non-PCPS members is $300. A $100 discount is provided to AICPA members with an additional $100 for firms who complete the survey. "The biggest advantage of the survey," said Rich Caturano, PCPS Executive Committee chairman and partner with Vitale, Caturano Inc. in Boston, "is that firms have a way of benchmarking against firms in their geographic area, their size range, and possibly in their service area. Firms can get an idea of whether they're on track financially." John Sharbaugh, TSCPA CEO and Executive Director, echoed Caturano, saying, "It gives firms information to help get a feel for how their practice stacks up against other practices. Hopefully, they can use that information to make changes in their operations. The primary beneficiaries will be small and mid-size firms that don't have access to this type of information." The support of 41 state societies and the Association for Accounting Administration ensure a strong response that leads to each state society being able to obtain a comprehensive report of state and local results. In the last national bi-annual MAP survey, conducted in 2004, 2,373 firms participated. July / August 2006 Leaders' Edge PRINT Retain Staff ... by Rewarding Them! By Sandra L. Wiley, Boomer Consulting Firms across the country echo one common theme again and again, "How can we retain our current staff?" The question is a good one because firms certainly want to keep the talent pool they have, while increasing their level of productivity; however, many firm leaders seem to be clueless as to how to achieve the goal. Rewarding staff is one key aspect of retaining staff. Why look at this one area rather than so many others? If firms would really stop to think and plan the rewards for their current staff, the firm would also be rewarded with lower turnover rates and higher productivity from the very people they have in their staffing pools today. When your firm begins to explore how staff is rewarded, start with the mindset that this is more than just a nice gesture. A reward system will be an effective way to drive performance and reinforce the behaviors that help the firm meet its objectives. The appropriate reward can help you manage staff and connect the performance you desire with the individual staff behavior you are seeking. First, let's stop for a moment and "think" about what your firm is trying to accomplish. A good reward program will develop the objectives for the firm before they start trying to throw "stuff" at the team in a haphazard way. In fact, if the staff perceives there is no thought behind what is being rewarded, it will be viewed as a negative rather than a positive initiative. Some of the possible criteria for reward that should be considered are: productivity customer service superior performance awards (usually for outstanding effort and achievement on a specific project) length of service (usually landmark anniversaries like one, five, 10, and 20 years of service, for example) retirement attendance (six months or a year without an absence is the typically rewarded goal) employee-of-the-month programs When owners think of reward systems, they typically put compensation at the top of the list. There is nothing wrong with that, since few people are willing or able to work for free. But the right strategy should also include mini "rewards" to motivate throughout the year. Once the decision is made about the behaviors to reward, the next step is to decide what you will offer as the reward. That sounds like the easy and fun part… right? Well, not really. Rewards must match the personal preference of the staff member who is receiving the reward or it simply will not be taken as positive. Be keenly aware of what the staff member "wants" and then make the reward one THEY will see as positive – not you. Consider just a few rewards listed below: certificates plaques trophies or ribbons jewelry (pins, pendants) pens or desk accessories watches and clocks cash bonuses savings bonds tickets to sporting or cultural events vacation trips personal notes to employees – handwritten by a superior extra time off a bulletin board to recognize employees through letters, memos and client correspondence surprise celebration a traveling trophy that goes each month to the employee exhibiting the greatest overall performance — behaviors and results — in the business. These are only a few, be creative. The more creative and individualized the reward is, the better it will be received. If it is worth doing, it is worth doing right. Once you have decided what you will give a staff member, you must then decide how to present the reward. This part of the process is almost as important as the reward itself. For the reward or recognition to mean anything it must be given with sincerity and thoughtfulness. It must be treated as special, not as some necessary evil. Recognizing an employee is not an end in and of itself. It is a means to an end — making the employee feel valued and reinforcing desirable behavior. Generally if something is worth recognizing, it is also worth publicizing. Unless you have an employee who is extremely shy and introverted, a little celebration is a good way to bestow recognition, whether it takes the form of a plaque, a bonus, a certificate or just some words of praise and a "thank you." Some suggested ways to bestow recognition are: Bring donuts and coffee, and make the presentation during the morning staff meeting. Set aside some time at a regularly scheduled (weekly, monthly, yearly) meeting to recognize achievements. For more formal presentations, have a dinner. If the employee is shy and likely to feel uncomfortable, you may choose to send an e-mail message or a memo publicizing the achievements of the employee instead of having an in-person gathering. Remember, while all of this sounds very positive – and believe me it is – staff reward programs can be very unrewarding if they are not planned and delivered in a positive way. The plaques with logos and goofy contests can backfire. It is not that they are all bad, but too often they seem like empty gestures supported by upper management, administered by a less-than-enthused middle management, and received by under- whelmed staffers. In other words, it is the thoughtlessness that counts. A majority of the recognition programs in existence today "do more harm than good," says Curt Coffman, global practice leader at the Gallup Organization. His polls show that 71 percent of U.S. workers are "disengaged," essentially clock-watchers who can't wait to go home. "We're operating at one-quarter of the capacity in terms of managing human capital," he says. "It's alarming." The only thing worse than negative recognition, is insincere recognition. Even the most lavish gifts often do not engender the expected employee gratitude after an unceremonious delivery. Take for example, the firm manager that had gone to a seminar on how to reward and motivate his staff. The lesson he thought he learned was that he should take a few minutes everyday to "walk around the office and give the staff some positive adulations." He took the advice seriously and at exactly 4:30 each day put on his calendar, "Walk Around.” He would proceed to walk around the office and tell each person thanks and that he appreciated their effort. Well, you can imagine the effort was less than enthusiastic and the staff soon figured out they were just another "to do" on his daily list. Needless to say, the gesture backfired on the manager! Consider what would happen if this manager had really taken the advice handed out at the seminar and started handing out "praise" for good works throughout the office. Randomly and sincerely. The staff would have started to see the change over time… and would have felt the loyalty building within the team. Take on the challenge today. The formula for staff reward success is simple: THINK about what you want to reward, develop a PLAN for delivery and GROW your firm's staff through rewards that really count! The reward for your firm will be worth the effort. About the Author Sandra Wiley is COO and senior consultant with Boomer Consulting, where she assists clients in hiring and building teams within their management and technology staff. You can reach Ms. Wiley by e-mail at email@example.com. July / August 2006 Leaders' Edge PRINT AICPA Gives IRS Suggestions for Priority List The AICPA has submitted recommendations for the Treasury-IRS 2006-2007 Guidance Priority List. The comments cover a range of areas that affect individual and business taxpayers. While the comments are quite technical, they may be of interest to tax practitioners. In its cover letter transmitting the comments to the U.S. Department of the Treasury and the IRS, the AICPA also emphasized the need for Treasury and the IRS to continue efforts to simplify tax regulations and cited three examples of “simple” guidance released by the IRS. See the following pages for the cover letter and comments. May 31, 2006 The Honorable Eric Solomon The Honorable Donald L. Korb Acting Assistant Secretary (Tax Policy) Chief Counsel Department of the Treasury Internal Revenue Service 1500 Pennsylvania Avenue, NW 1111 Constitution Avenue, NW Room 3120 Room 3026 Washington, DC 20220 Washington, DC 20224 Re: Recommendations for 2006-2007 Guidance Priority List (Notice 2006-36) Dear Messrs. Solomon and Korb: The AICPA is pleased to offer our suggestions regarding the 2006-2007 Guidance Priority List, which were prepared by the AICPA Tax Division’s committees and technical resource panels, and approved by our Tax Executive Committee. The suggestions are listed under the AICPA working group that developed them, and we have indicated the priority order for our comments under each category of the attached document. For your convenience, contact information for each working group’s chair and AICPA staff liaison are listed. Please feel free to contact these individuals directly with your specific questions or concerns. In addition, the AICPA again encourages Treasury and the IRS to continue pursuing tax simplification. We recognize – and very much appreciate – recent steps you have taken, including: (1) The issuance of temporary and proposed regulations addressing 10/50 company dividend open issues (T.D. 9260 and REG-144784-02, released April 20, 2006) under Sections 861, 902, 904, and 964 were very helpful and well-received. These regulations pertain to the application under Section 904(d)(4) of separate foreign tax credit (FTC) limitations to dividends received from noncontrolled Section 902 corporations (10/50 corporations) and implement Section 403 of the American Jobs Creation Act; (2) The guidance issued under Notice 2006-16 which provides a safe harbor from the disclosure requirement otherwise imposed by § 1.6011-4 for taxpayers that have, solely as a result of their direct or indirect interest in a pass-through entity, participated in a transaction that is the same as or substantially similar to the transaction described in Notice 2002-35 (as clarified by section 3.01 of this notice); and (3) The development of global settlement initiatives, such as in the tax shelter area. These initiatives strive to resolve difficult tax cases through the release of clear guidance and settlement terms with respect to tax controversies involving large numbers of similarly situated taxpayers. The Honorable Eric Solomon The Honorable Donald L. Korb May 31, 2006 Page 2 Although we recognize you must balance competing interests and concerns when drafting guidance, we urge you to consider the following as part of the process: Use the simplest approach to accomplish a policy goal; Provide safe harbor alternatives; Offer clear and consistent definitions; Use horizontal drafting (a rule placed in one Code section should apply in all other Code sections) to the greatest extent possible; Build on existing business and industry-standard record-keeping practices; Provide a balance between simple general rules and more complex detailed rules; and Match a rule’s complexity to the sophistication of the targeted taxpayers. Please let us know if we be of further assistance in the business plan process by contacting me at (402) 280-2062, or firstname.lastname@example.org; or Edward S. Karl, AICPA Director at (202) 434-9228, or email@example.com. Sincerely, Thomas J. Purcell, III Chair, Tax Executive Committee Encl. AICPA Tax Division Comments on the 2006-2007 Guidance Priority List (Notice 2006-36) May 31, 2006 Corporations and Shareholders Taxation Technical Resource Panel (Andrew Cordonnier, Chair, (202) 521-1502, firstname.lastname@example.org; or George L. White, AICPA Staff Liaison, (202) 434-9268, email@example.com) NOTE: Comments are listed in priority order. 1. Guidance is needed under section 362(e), including its application in consolidation, its interaction with consolidated regulations (e.g., Treas. Reg. section 1.1502-35T), and its application to transactions in which both section 351 and another nonrecognition provisions apply. 2. Guidance is needed on the application of section 382, including— The application of sections 382(l)(5) and (6) to consolidated groups; The scope of, and exceptions to, section 382(l)(1); and The application of section 382(h)(6) and/or clarification of the application of Notice 2003-65. 3. Guidance is needed regarding the treatment of capitalized transaction costs (Notice 2004-18). 4. Guidance is needed under section 355, including— Satisfaction of business expansion under section 355(b) through stock and asset acquisitions; and Regulations regarding predecessors and successors under section 355(e). 5. Guidance is needed to conform the diversification standards of section 351(e) to those of section 368(a)(2)(F). 6. Final Regulations should be issued under section 1502 regarding liquidations under section 332 into multiple members. 7. Final Regulations should be issued under section 368(a)(1)(F), relating to a mere change in identity, form, or place of organization of one corporation, Employee Benefits Taxation Technical Resource Panel (Sandy Wheeler, Chair, (202) 414-1856, Sandra.firstname.lastname@example.org; or Lisa A. Winton, AICPA Staff Liaison, (202) 434-9234, email@example.com) NOTE: Comments are listed in priority order. 1. Guidance is needed on the use of electronic technology for delivery of safe harbor 401(k) plan notices, qualified joint and survivor annuity/qualified pre-retirement survivor annuity (QJSA/QPSA) notices and waivers, spousal consents under Section 417, and ERISA 204(h) notices. 2. Guidance is needed on how to qualify for self-correction when moving from a document of one service provider to another service provider and changes were unintentionally made to the document during this process. Operational inconsistencies need to be addressed. 3. Guidance is needed on 401(k)/(m) testing for mergers and acquisitions occurring during a plan year; application of the “same desk” rule to non-corporate plan sponsors; and clarification of the successor employer and severance of employment concepts. 4. Final regulations are needed on the 408(q) requirement to establish a separate trust for the deemed IRA contributions. 5. Guidance is needed from the final 401(k) plan regulations regarding timing of amendments when switching from prior to current year testing. Individual Taxation Technical Resource Panel (Lorraine D. Evans, (916) 563-7138, firstname.lastname@example.org; or Lisa A. Winton, AICPA Technical Manager, (202) 434- 9234, email@example.com) NOTE: Comments are listed in priority order. 1. Guidance is needed on the interrelationship of sections 121 and 469 when a rental property that is converted into a personal residence is disposed of without recognizing gain. 2. Guidance is needed on using deferred vacation home losses to offset gains on the sale of the vacation property under section 280A. Section 280A limits the current deductibility of expenses associated with vacation home rentals; excess deductions may be carried over to succeeding years. Guidance must resolve the question of whether gain from the sale of the vacation property is considered gross rental income that would allow the excess deductions to be taken in the year of the sale. 3. Guidance is needed on the interaction of the regular and alternative minimum taxes on the disposition of “incentive stock option” stock which results in capital loss for AMT purposes and capital gain for regular tax purposes. (A basis 2 adjustment on disposition would be a more appropriate result than an AMT capital loss carryforward.) 4. Guidance is needed to assist taxpayers in distinguishing between filing status as an investor vs. treatment as a trader. 5. Guidance is needed regarding the proper handling of exclusion of gain on personal residence as part of installment sale. 6. Guidance is needed relating to the coordination of a tuition payment and the receipt of a distribution from a 529 Plan. Specifically, if a taxpayer makes a tuition payment in 9/06, but receives the 529 distribution in 1/07, assuming no other tuition payments are made, is the 2007 distribution taxable? IRC section 529(c)(3) does not address the question, however IRS Publication 970 states that the tuition payment and the distribution must be in the same year. International Taxation Technical Resource Panel (Kenneth Wood, Chair, (202) 327- 8018, Kenneth.firstname.lastname@example.org; or Eileen R. Sherr, AICPA Technical Manager, (202) 434-9256, email@example.com) NOTE: Under each numbered category, the first three bulleted items are the most important. 1. Guidance is needed in the following areas related to Subpart F/Deferral: Address whether previously taxed income is a corporate-level or shareholder- level attribute in (1) the section 959 successor-in-interest regulations, and (2) the reserved portions of the proposed section 367(b) regulations. Provide regulations under section 954(h) on the subpart F exception for active financial services income, especially with regard to the application of the substantial activity requirement of section 954(h)(3)(C) and the “substantially all the activities” requirement of section 954(h)(3)(A)(ii). Provide regulations under section 954(c) relating to the active rent or royalty exception. Also, consistent with the legislative history of the 2004 American Jobs Creation Act and Notice 2006-48, issue regulations providing exceptions from income inclusions under section 956 and 367(a) for aircraft and vessel leasing that is compliant with section 954(c)(2)(A). Finalize the proposed section 898 regulations on conforming year-ends of certain foreign corporations to the year-ends of their U.S. shareholders. Provide guidance to: (1) explain the application of section 304(b)(5), and (2) implement section 304(b)(6) (regarding the avoidance of multiple inclusions in cross-border section 304 transactions). 3 Provide more complete and definitive guidance under the PFIC regulations. In particular, (1) update the PFIC regulations to take into account the enactment of section 1297(e), which eliminates the overlap of the PFIC and Subpart F regimes under certain circumstances, (2) provide guidance under section 1297(c) regarding the 25 percent ownership look-through rule and its interaction with the section 1297(b)(2)(C) related party income rules, and (3) provide guidance on the application of section 1297(b)(1)’s definition of passive income and in particular on the interaction of section 954(h) and (i) with section 1297(b)(2). Regulations under section 961(c) regarding basis adjustments to the stock of a CFC held by another CFC, including stock held through partnerships. 2. Guidance is needed in the following areas related to inbound transactions: Reissue proposed section 163(j) “earnings stripping” regulations, taking into account taxpayer comments and developments over the past decade. Provide guidance under section 267(a)(3)(B) regarding the timing of deduction for payments to CFCs and PFICs and provide exceptions for appropriate transactions. Provide guidance on the interaction of sections 897(h)(1) and (h)(2) for direct holders of REITs and whether distributions in liquidation of a REIT are covered by section 897(h)(1) or instead section 897(h)(2). Provide guidance on the application of Temp. Reg. section 1.897-6T and section 1445 to nonrecognition transactions involving transfers of USRPIs to partnerships, and dispositions of interests in partnerships that directly and indirectly hold USRPIs. Provide guidance regarding new Form 8804, particularly whether a partnership that must withhold under section 1446 with respect to effectively connected taxable income allocable to foreign partners is entitled to take into account otherwise allowable deductions in the relevant taxable income computations. 3. Guidance is needed in the following areas related to outbound transactions: . Finalize guidance on the treatment of triggered gain recognition agreements (GRA) under section 367(a) including treatment of foreign transferors and foreign transferees upon a section 355 distribution and the application of the substantially all the assets test; issue section 367(a)(5) regulations. [Note: See AICPA comments to IRS on Notice 2005-74, Section 3.02 regarding the effect of certain exchanges on gain recognition agreements under section 367(a) submitted on February 21, 2006, available at: 4 http://tax.aicpa.org/Resources/International/Regulation+and+Administration/ AICPA+Comments+on+Notice+2005- 74+on+the+Effect+of+Exchanges+on+Gain+Recognition+Agreements.htm] Issue guidance on the application of new section 7874 relating to inversion transactions, including the following issues: (1) the determination of whether there has been a direct or indirect acquisition of substantially all the properties; (2) the requirement that such acquisition be pursuant to a plan or a series of related transactions; (3) the requirement, in the ownership percentage test, that ownership of stock be by reason of holding an interest in the domestic corporation or partnership; (4) the treatment of stock sold in a public offering that is related to the acquisition; (5) the requirement that the group's activities in the relevant foreign country are insubstantial when compared to the group's total business activities; (6) whether and to what extent options on stock and other similar interests are treated as stock for the purpose of determining whether a corporation is a surrogate foreign corporation Issue guidance under section 1248 regarding (1) dispositions of certain foreign corporations by foreign partnerships with U.S. partners and (2) dispositions by U.S. persons of foreign partnership interests where the foreign partnership owns stock in a controlled foreign corporation and the U.S. partner is a United States shareholder with respect to the controlled foreign corporation. Issue updated regulations under section 367(d), reflecting changes to the statute since their original issuance. We also suggest interim guidance be issued on the changes to section 367(d) under section 406(a) of the American Jobs Creation Act of 2004, including the retroactive application of that provision. Issue guidance under new section 332(d) regarding its interaction with section 337. Issue new proposed section 987 regulations relating to foreign currency translation gains and losses with respect to branch transactions (taking into account public comments with respect to Notice 2000-20). [Note: See AICPA comments to IRS on this submitted on August 20, 2003, available at: http://tax.aicpa.org/Resources/International/Regulation+and+Administration/ AICPA+Comments+on+Foreign+Currency+Transaction+Regulations.htm] Issue guidance under section 1248(f)(2) addressing certain distributions of stock of foreign corporations to domestic corporations. Issue guidance relating to the carryover of tax attributes in certain reorganizations and section 355 transactions. The IRS has issued proposed regulations under section 367(b) addressing these issues (e.g., Treas. Reg. sections 1.367(b)-3,-7,-8 and -9). These rules also would apply to a foreign 5 corporation that engages in an inbound asset reorganization or inbound section 332 liquidation. 4. Guidance is needed regarding foreign tax credits, in particular: Issue guidance on recharacterization of overall domestic losses under section 904(g). The section 904(f) regulations relating to overall foreign losses should be revised to replace the outdated 1987 regulations and Notice 89-3. Issue guidance under new section 904(f)(3)(D), relating to the application of the overall foreign loss rules to certain dispositions of CFC stock, and, in particular, section 368(a)(1)(B) reorganizations, as well as relating to the provision’s interaction with section 355. Amend the regulations under section 853 to eliminate separate company reporting of the foreign tax credit for mutual funds. In addition, modify Form 1116, Foreign Tax Credit (Individual, Estate, or Trust) to indicate that distributions from regulated investment companies are exempt from per- country reporting. [Note: See AICPA comments to IRS on this submitted on February 26, 2003, available at: http://tax.aicpa.org/Resources/International/Regulation+and+Administration/ AICPA+Recommends+Simplifying+Foreign+Tax+Credit+Reporting+for+Mu tual+Funds.htm] Guidance is needed under section 905(c) regarding taxes paid after a liquidation, stock sale or section 338 election. More complete guidance regarding the application of Treas. Reg. section 1.865-1(a)(2) and Treas. Reg. section 1.865-2(a)(3) under which losses are allocated to reduce foreign source income if gain on the sale of the property (including stock) would have been taxable by a foreign country and the highest marginal rate of tax imposed on such gains in the foreign country is at least 10%. 5. Guidance is needed in the following additional areas: Guidance on the international tax provisions in the Tax Increase Prevention and Reconciliation Act of 2005. Reissue proposed regulations under section 482 reflecting the numerous taxpayer comments and issues raised regarding the simplified cost-based method and other proposed rules governing the arm’s length value of intercompany services. 6 Clarify and relax the double reporting rules under the section 1461 regulations and the treaty-based reporting requirements under section 6114. IRS Practice and Procedures Committee (James E. Brennan, Chair, (212) 773-3209, firstname.lastname@example.org; or Benson S. Goldstein, AICPA Technical Manager, (202) 434-9279, email@example.com) NOTE: Comments are listed in priority order. 1. On February 28, 2003, Treasury released final regulations designed to address “abusive tax avoidance transactions” and disclosure, registration, and list-keeping under sections 6011, 6111, and 6112. On January 6, 2006, Treasury released Notice 2006-6, removing the book-tax difference category of reportable transactions. Treasury should clarify the effective dates in Notice 2006-6 to remove any anomalies and continue to update the guidance involving the regulations, including the remaining five categories of reportable transactions described in the regulations. Further, Treasury should provide guidance on the following penalties. Section 6111(b)(1) defines a “material advisor” as any person who provides “material aid, assistance, or advice” with respect to “organizing, managing, promoting, selling, implementing, insuring, or carrying out” a reportable transaction. Notice 2004-80 provides interim rules implementing the requirements of section 6111 until the Secretary prescribes regulations. In addition, Treasury has released Notice 2005-22, which clarifies and modifies Notice 2004-80 by providing additional guidance for “material advisors.” Despite the release of Notices 2004-80 and 2005-22, further guidance is necessary to clarify the scope of the “material advisor” rules. Sections 6662-6664 describe the circumstances when accuracy-related and fraud penalties would be imposed on underpayments, including underpayments with respect to reportable transactions. For non-corporate taxpayers involved in any reportable transaction, the accuracy-related penalty may be waived for reasonable cause, but only under certain (varying and limited) circumstances. Guidance is necessary with respect to reasonable cause under sections 6662-6664, particularly with respect to reasonable cause for a substantial understatement of income tax penalty under consideration by the Service against a non-corporate taxpayer. Section 6662A and reasonable cause under section 6664(d), including the rules regarding disqualified opinions and disqualified advisors and how those rules will be implemented in light of section 10.33, section 10.35, and section 10.37 of Circular 230. There are instances where an opinion can be relied upon for penalty protection under Circular 230, but cannot be relied upon for penalty protection under section 6664(d). 7 Under section 6707A, taxpayers have a penalty for failing to disclose a listed transaction of $100,000 for an individual and $200,000 for any other taxpayer. The IRS may not waive the penalty for reasonable cause and there is no authority for rescission of a listed transaction. Guidance is needed on section 6707A, particularly with respect to the Commissioner’s authority to rescind the penalty. A taxpayer that is an SEC registrant must disclose on its SEC filings any section 6707A penalty. In view of the drastic result if a taxpayer fails to disclose a listed transaction, Treasury and IRS need to give taxpayers adequate time and guidance to determine if a transaction is the same as or substantially similar to a listed transaction. The current regulations require that a taxpayer disclose a listed transaction on a return that reflects tax consequences or a tax strategy described in the listed transaction, or if its return does not reflect the listed transaction on its next filed return if a taxpayer. However, depending on the date the listed transaction is identified by the IRS, it may leave the taxpayer with little or no time to adequately make a proper determination. For example, assume that a calendar-year corporate taxpayer did a transaction in 2002 and all the benefits from that transaction were taken on that return. On September 6, 2005, assume that the IRS “lists” this transaction. When the taxpayer files its 2004 return on September 15, 2005, it must attach a Form 8886 for that listed transaction to avoid the section 6707A penalty. The AICPA recommends that Treasury and IRS issue guidance that would provide a taxpayer with a reasonable time period to determine if it has a reportable transaction. We suggest that Treasury and the IRS adopt a minimum time period for a taxpayer to report a listed transaction after it becomes listed. There is precedence for this. In Temp. Reg. section 301.6011-4T(d), Treasury provided that if a disclosure statement was required to be attached to a federal income tax return that was filed earlier than 180 days after February 28, 2000, the taxpayer may either attach the disclosure statement to the return, or file the disclosure statement as an amendment to the return no later than 180 days after February 28, 2000. Such a rule could avoid many inadvertent failures to disclose penalties and the IRS would still receive the requested information in a timely manner. In addition, we recommend that Treasury and the IRS extend the concept of a qualified amended return to section 6011 disclosures and the penalty under section 6707A. Notwithstanding taxpayers instituting sound policies and practices to capture reportable transaction, we expect that many taxpayers will make inadvertent errors and fail to discover reportable transactions by the time the return is filed. If the taxpayer subsequently discovers the error and reports it to the IRS before the IRS discovers the reportable transaction, then 8 the IRS should consider the late disclosure as timely. The IRS can set special rules to limit taxpayer’s ability to play audit roulette or ignore their disclosure obligations. Such a rule would also free up IRS resources from considering rescission for failure to disclose nonlisted transactions. [See also, item 1 under Trust, Estate, and Gift Tax Technical Resource Panel.] 2. Guidance is needed on the information reporting requirements for payments made following an employee’s death. There are inconsistencies between the Form 1099 instructions and Rev. Rul. 86-109, the current authority on reporting death benefits and compensation paid after death. Guidance is also needed on reporting other post-death payments, such as those from nonqualified deferred compensation and stock option exercise. 3. The American Jobs Creation Act of 2004 clarifies that the IRS is authorized to enter into installment agreements that provides for less than full payment of a taxpayer’s tax liability over the life of the agreement. Additional guidance about “partial pay” installment agreements is important for effective administration of this provision under the 2004 Act. Partnership Taxation Technical Resource Panel (Deborah A. Fields, Chair, (202) 533-4580, firstname.lastname@example.org; or Marc A. Hyman, AICPA Technical Manager, (202) 434-9231, email@example.com) NOTE: Comments are listed in priority order. 1. Regulations are needed with respect to section 704(c)(1)(c). Specifically, where a partner has contributed property with a built-in loss, the regulations should address the impact of the transfer or liquidation of a contributing partner’s interest on the basis of the partnership’s property with respect to any successor partner, including transfers that are subject to section 381 and other nonrecognition transfers. For example, assume that Partnership A and Partnership B merge such that Partnership A is treated as having contributed its assets to Partnership B in exchange for an interest in Partnership B and then distributed such interests in liquidation of Partnership A. If the assets of Partnership B include an asset with a built-in loss, is the loss eliminated as a result of the merger? 2. Guidance is needed with respect to the application of Rev. Rul. 99-6. Specifically, the guidance should address the situations to which Rev. Rul. 99-6 applies and whether or not the liquidation of the partnership can have tax consequences. For example, where a partnership holds section 704(c) property, can the liquidation of the partnership result in the application of section 704(c)(1)(B) or section 737? In addition, where a partnership has an obligation to the person acquiring the interest in the partnership, does the hypothetical liquidation of the partnership under Rev. Rul. 99-6 result in the deemed repayment of the obligation with partnership property such that gain or loss may be recognized. 9 3. Guidance on the methodology of applying section 743 for partnerships using the special aggregation rule for securities partnerships under Treas. Reg. section 1.704-3(e). Guidance would be expected to include a similar aggregation rule for allocating the section 743 adjustment under section 755 and a methodology for determining when the section 743 adjustment is taken into account. 4. Guidance is requested on the treatment of partnership level section 481 adjustments. Several unresolved issues include guidance on (1) allocation of the 481 adjustment where there has been a change in ownership, (2) the impact of the 481 adjustment on a section 754 basis adjustment, and (3) the treatment of a 481 adjustment on a section 708(b)(1)(B) termination. 5. Guidance is needed to address the revaluation of partnership assets where the assets were either contributed to the partnership or previously revalued by the partnership. This guidance should include (1) how the multiple layers under section 704(c) are maintained; (2) the impact on minimum gain calculations under section 704(b); and (3) the impact on nonrecourse debt allocations under section 752. 6. Clarification is needed under section 42 regarding what items (other than impact fees) are included in the eligible low income housing credit basis, such as tap fees, offsite costs, construction loan fees and bond costs. S Corporation Taxation Technical Resource Panel (Gregory A. Porcaro, Chair, (401) 739-9250, firstname.lastname@example.org; or Marc A. Hyman, AICPA Technical Manager, (202) 434-9231, email@example.com) NOTE: Comments are listed in priority order. 1. Guidance is need regarding the inability to utilize certain suspended passive activity losses upon redemption. Section 469(g) generally allows for the utilization of all suspended passive activity losses that have been carried forward when a taxpayer disposes in a taxable transaction of his entire interest in a passive activity. This rule does not apply, however, when the sale is to a related party described in sections 267(b) and 707(b)(1). When the related party exception applies, the loss is deferred until the party acquiring such interest in the passive activity disposes of the interest to a party that is unrelated to the initial selling taxpayer. In the case of a redemption of stock, the second disposition can never be achieved because the stock redeemed no longer exists for federal income tax purposes. It is not possible to trace the redeemed stock to a subsequent disposition. The legislative history to the provision does not appear to contemplate this situation. Although the statute treats redemptions of corporations differently than redemptions of partnership interests with regard to the ability to recognize realized losses on redemption (see section 707(b)(1) allowing for losses on redemption of partnership interests; and see section 267(b) and Revenue Ruling 10 57-387 for disallowance of loss on redemption of corporate stock), we believe it appropriate that all suspended losses be allowable upon a complete redemption of interests in a pass through entity. Suspended passive losses do not result from a sale or exchange of property between related parties, but rather from true economic losses. The sale transaction solely governs the timing of taking the loss into account. If such losses were not allowed upon a complete redemption in a pass through entity, true economic losses would never be recognized as the provisions of section 469(g) could never be satisfied. 2. Clarification is needed about who should sign the final return of a corporation that is the target of a section 338(h)(10) acquisition by an S corporation. 3. Clarification is needed regarding the ordering rule for adjustments to AAA when ordinary and redemption distributions are made in the same year and an ordinary distribution occurs after the redemption distribution. Under Treas. Reg. section 1.1368-2(d)(1)(ii), AAA is adjusted first for ordinary distributions and then for redemptions. The regulations provide an example where the redemption occurs later in the year than the ordinary distribution, but does not provide an example where the redemption occurs prior to the ordinary distribution. Since the redemption distribution is based on the AAA amount as of the date of the redemption, the rule is not clear in the case of a post-redemption ordinary distribution. The regulation simply says to adjust first for ordinary distributions but does not make a distinction for those ordinary distributions that are before or after a redemption. One could interpret the rule either way. Reducing the AAA balance for all ordinary distributions regardless of the timing relative to the redemption provides the best answer in most circumstances. Since a complete redemption is a sale or exchange transaction, the presence of AAA is irrelevant for purposes of determining the shareholder’s gain or loss on the redemption. Allocating more AAA to redemptions by ignoring post redemption distributions doesn’t benefit the redeemed shareholder while it leaves less AAA for the post redemption distribution to be recovered tax free by the recipient shareholders. 4. Guidance is needed on how net unrealized built-in gain (NUBIG) is allocated in a section 355 transaction involving a distributing S corporation. 5. Clarification is needed as to when transitory ownership of S corporation stock will be ignored for built-in gains tax purposes. For example, in Rev. Rul. 2004-59 under a state law formless conversion statute, the events deemed to occur include the transitory ownership of the corporation’s stock by a partnership (a disqualified shareholder). If the corporation elected S corporation status and the transitory ownership is not ignored, there might be a section 1374 built-in gains tax problem for the entity if it has appreciated assets. 6. Guidance is needed regarding the coordination of the Qsub and the consolidated return regulations with respect to the timing of Qsub elections. Under Treas. Reg. section 1.1361-4(b)(3), if an S corporation does not own 100 percent of the stock 11 of the subsidiary on the day before the Qsub election is effective, the liquidation described in Treas. Reg. section 1.1361-4(a)(2) occurs immediately after the time at which the S corporation first owns 100 percent of the stock. When an S corporation acquires a subsidiary from a consolidated group, the timing of the Qsub election may not reconcile with the consolidated return regulations. Treas. Reg. section 1.1502-76(b)(1)(ii) states that the departing member is included in the consolidated group through the end of the day on which it leaves. A departing member, for example, might account for inventory under the LIFO method. It is not clear in this case who recognizes the LIFO recapture. The consolidated regulations have a “next day” rule that generally allocates items that occur on the day of deconsolidation to the next day if they are more properly attributable to activities occurring after the subsidiary has left the group. In the case of a Qsub election, there is no “next day” of the departing member to which items may be allocated. Accordingly, the recapture of the LIFO reserve would appear to be recognized on the selling consolidated group’s return. However, if the S corporation is deemed to acquire the stock of the member after taking into account the consolidated return rule which says the subsidiary remains a member through the day of deconsolidation, then the liquidation might happen on a separate one second return immediately after the target is deemed to leave the consolidated group under Treas. Reg. section 1.1502-76(b)(1)(ii). Guidance should be issued that (1) addresses the interplay between the consolidated return and the Qsub regulations regarding the timing of the deemed liquidation when a member of a consolidated group is acquired by an S corporation and a Qsub election is made for the former member and (2) specifies on which return the LIFO recapture amount is recognized. 7. Guidance is needed to confirm that an S corporation can simultaneously make both pro rata distributions according to current stock ownership and other distributions that meet the varying interest rule of Treas. Reg. section 1.1361- 1(l)(2)(iv) without creating a second class of stock. 8. We recommend that the guidance from PLR 200308035 be incorporated into a revenue ruling. Tax Accounting Technical Resource Panel (Christine Turgeon, Chair, at (646) 471- 1660, firstname.lastname@example.org; or George L. White, AICPA Technical Manager, (202) 434-9268, email@example.com) NOTE: Comments are listed in code section order. 1. Provide guidance under sections 162 and 263 regarding deduction and capitalization of expenditures for tangible property. 2. Guidance is needed under section 199 regarding the new, narrower wage limitation enacted in the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA; P.L. 109-222). [See also, item 14 under Trust, Estate, and Gift Tax Technical Resource Panel.] 12 3. Provide guidance under section 263A regarding “negative” additional section 263A adjustments. 4. Reconsider Rev. Rul. 2005-42 regarding treatment of environmental remediation expenditures under section 263A. 5. Reconsider Rev. Rul. 70-564 to allow the carryover of LIFO layers following section 351 and 721 transactions provided the new entity chooses to use a LIFO method. 6. Provide guidance on the terms and conditions for method changes made pursuant to section 381, including whether LIFO changes should be made on a cut-off basis. 7. Modify accounting method procedural guidance to allow taxpayers under examination more opportunity to file method changes and to expand the method changes eligible for automatic consent. 8. Allow taxpayers to obtain automatic consent to change the treatment of certain transactions as sales instead of as leases, or vice versa, and to implement the change with a section 481(a) adjustment and audit protection in all cases, not only in “unusual and compelling” circumstances. Such method changes could be granted with only “bare consent” where the IRS National Office does not rule as to the proper characterization of the transactions as sales or leases. 9. Guidance is needed to address the application of section 453A to contingent payment installment sales. 10. Provide guidance that section 481(a) and audit protection apply for changes at the percentage of completion method under section 460. 11. Reconsider Rev. Ruls. 71-234 and 77-480 to allow use of the rolling average cost of inventory to the extent it approximates actual cost. 12. Provide guidance on the tax treatment of vendor allowances under section 471. 13. Guidance is needed under the dollar-value last-in, first-out (LIFO) inventory method for taxpayers that define LIFO items based on components of cost. 14. Guidance is needed on whether a change to the Inventory Price Index Computation (IPIC) method of Treas. Reg. section 1.472-8(e)(3) includes an item definition change. 15. Guidance is needed to clarify the scope of the IPIC pooling rules, including whether purchased for resale items may be contained in the same pool as 13 manufactured items and whether a LIFO election must be expanded to include all items within an IPIC pool. 16. The proposed regulations relating to corporate estimated tax under section 6655 should be finalized. Tax Exempt Organizations Technical Resource Panel, (Mary Rauschenberg, Chair, at (312) 486-9544, firstname.lastname@example.org; or George White, AICPA Staff Liaison, (202) 434-9268, email@example.com) NOTE: Comments are listed in priority order. 1. Guidance is needed under section 512 for a simplified and uniform method of cost allocation for large organizations to use for UBIT activities. 2. Additional guidance is needed under section 512 to determine how to apply rules on UBIT, lobbying expenditures and political intervention to Internet activities of tax-exempt organizations. 3. Guidance is needed to formulate established methods under voluntary compliance programs for exempt organizations to come in and correct improper positions taken with regard to IRS forms and procedures. 4. Guidance is needed to clarify the instructions for Form 990, specifically Line 75c as it pertains to related parties. [Note: See AICPA comments on this matter, available at: http://tax.aicpa.org/NR/rdonlyres/3164ADE6-E641-4A91-9413- 256CB418389A/0/AICPA_Comment_Letter_to_IRS_on_Form_990_Instructions. doc] Tax Practice Responsibilities Committee (Eve Elgin, Chair, (202) 533-4268, firstname.lastname@example.org; or Carol B. Ferguson, AICPA Technical Manager, (202) 434-9235, email@example.com). 1. Guidance is needed under Circular 230’s covered opinion standards (section 10.35), including— Consideration of a principle-based approach within the standards to better support Circular 230’s essential role and to alleviate the unintended consequences that have occurred. Consideration of substantial changes to Circular 230 written tax advice standards to remove current impediments on delivery of tax advice to clients and on the role of tax advice in the administration of the tax system. Additional written guidance on the appropriate application of the aspirational standards of section 10.33 and the binding standards of section 10.35 to clarify 14 the appropriate level of due diligence in situations where either set of rules could apply. [Note: See AICPA comments on Circular 230’s covered opinion standards submitted on March 6, 2006, available at: http://tax.aicpa.org/Resources/Professional+Standards+and+Ethics/Treasury+Dep artment+Circular+No.+230/AICPA+Comments+on+Circular+230+Covered+Opi nion+Standards.htm. See also, item 1 under IRS Practice and Procedures Committee, and item 2 under Trust, Estate, and Gift Tax Technical Resource Panel.] Trust, Estate and Gift Tax Technical Resource Panel (Steven A. Thorne, Chair, (312) 486-9847, firstname.lastname@example.org; or Eileen Sherr, AICPA Technical Manager, (202) 434-9256, email@example.com) NOTE: Comments are listed in priority order as High, Medium, or Low. High Priority Items 1. Guidance is needed on the disclosure rules on listed transactions as applied to estates and trusts under sections 6011, 6111 and 6112 for tax shelters and reportable transactions. IRS Notice 2006-16, Sec. 3.02 (issued February 27, 2006) was useful in eliminating duplicate disclosures by taxpayers; however, additional guidance is still needed on the application of these provisions in the estate and gift tax area. [See also, item 1 under IRS Practice and Procedures Committee.] 2. Guidance is needed regarding Circular 230 and how the requirements relate to estate planning, gift tax planning, etc., for example, what constitutes principal purpose or significant purpose transactions, and whether the statutory exclusion applies to combination strategies like installment sales to defective grantor trusts. [See also, the item under Tax Practice Responsibilities Committee.] 3. Guidance is needed under section 2053 regarding the extent to which post death events may be considered in determining the value of a taxable estate. 4. A change in the due date of Form 3520A is requested from March 15 to April 15 for filers, to coincide with the due date for calendar year filers for related returns. If a change in the due date is not possible, then an extension or penalty relief is requested for taxpayers who file by April 15. [Note: See AICPA comments to IRS on this submitted on June 17, 2003, available at: http://tax.aicpa.org/Resources/Trust+Estate+and+Gift/Regulation+and+Administr ation/AICPA+Comments+on+the+Foreign+Trust+Reporting+Rules+for+Forms+ 3520+and+3520-A.htm.] 15 Medium Priority Items 5. Final regulations should be issued under section 2642 regarding qualified severance. [Note: See AICPA comments on these proposed regulations (REG– 145987-03) under Section 2642(a)(3) submitted on February 9, 2005, available at: http://tax.aicpa.org/Resources/Trust+Estate+and+Gift/Regulation+and+Administr ation/AICPA+Asks+IRS+to+Clarify+Qualified+Severance+Regs.+for+GST+Tru sts.htm.] 6. Guidance is needed on the consequences under various estate, gift, and generation skipping transfer tax provisions of using a family-owned company as the trustee of a trust. [Note: See AICPA pre-release comments on this item, which was on last year’s IRS business plan, submitted on March 29, 2006, available at: http://tax.aicpa.org/Resources/Trust+Estate+and+Gift/Trusts/AICPA+Suggests+P arameters+for+Private+Trust+Company+Guidance.htm.] Low Priority Items 7. Guidance is needed regarding the appropriate means and timing of GST allocations to pour over trusts from GRATs terminations. 8. Guidance is needed on how the GST applies to grandfathered domestic trusts that become foreign trusts. This issue may be analogous to a GST-grandfathered trust which migrates from one state to another; thus, similar rules and safe harbors should be considered. 9. IRS should issue guidance under section 2632(c) regarding the deemed allocation of GST exemption to certain lifetime transfers to GST trusts. In particular, clarification is requested with regard to the exceptions to the definition of a GST trust contained in section 2632(c)(3)(B)(i)-(vi) as well as the exception in the flush language of this section dealing with gift tax annual exclusions. Six types of GST trusts are defined, but there are many gray areas that we would request additional guidance. Finally, until regulations are issued under section 2632(c)(3)(B)(i)(III), as required by such section, we believe this provision has no effect. 10. Guidance is needed under section 2632(c)(5)(A)(i) and examples addressing the application of the GST exemption automatic allocation rules for indirect skips in a situation in which a trust subject to an estate tax inclusion period (ETIP) terminates upon the expiration of the ETIP, at which time the trust assets are distributed to other trusts that may be GST Trusts. 11. Revenue procedures should be issued under sections 2055 and 2052 containing sample charitable lead trust provisions. 12. Guidance is needed under section 642(c) on whether income in respect of a decedent (IRD) that is reported and used in calculating the estate’s charitable deduction on the estate tax return should be treated as “gross income” and 16 allowed as a charitable deduction on the estate’s fiduciary income tax return when the IRD is paid to a charitable organization pursuant to the governing instrument. 13. Guidance is needed under section 645 regarding elections to include revocable trusts in an estate. Will 9100 relief be available on missed elections? 14. Guidance is requested regarding section 199 regulations as they relate to estate and gift tax. [See also, item 2 under Tax Accounting Technical Resource Panel.] 15. Guidance is needed under section 2704 regarding restrictions on the liquidation of an interest in a corporation or partnership. 17 July / August 2006 Leaders' Edge PRINT Lost Profits Calculations – Avoid Speculation By Patrick G. Dunleavy, Partner, Virchow, Krause & Company, LLP CPAs often are engaged as experts to assist the trier of fact in the quantification of lost profits, one type of economic damage. The calculation of lost profits can be required in litigation involving a breach of contract, business tort, patent or copyright infringement, or a breach of fiduciary duty. In order for the lost profits calculation to be admissible, an expert must use acceptable calculation methods and appropriate assumptions based on the facts and evidence of the case. Additionally, the underlying assumptions should not be based on speculation thereby tainting the entire calculation. Depending upon the facts of the case, a past and/or future lost profits calculation may be required. A calculation of past lost profit damages (for damages suffered before the date of a trial) is required when the defendant’s alleged wrongful acts cause a plaintiff’s actual operating results to be lower than they would have been absent the defendant’s acts. Typically, the calculation of past lost profits compares the plaintiff’s actual historical operating results to a forecast of the plaintiff’s operating results assuming that the defendant’s acts had not occurred; the difference is the past lost profits damages. Normally, the actual past operating results of the plaintiff are based on verifiable accounting records; however, the forecast of the plaintiff’s operating results, assuming that the defendant’s acts had not occurred, is based on a hypothetical situation (i.e., absent the defendant’s acts). As such, the forecast may not be readily verifiable and subject to a level of uncertainty. The calculation of future lost profit damages (for damages suffered after the date of the trial) is further complicated by the need to forecast not one, but two sets of operating results for the plaintiff. Future lost profit damages occur when the plaintiff’s expected future operating results are lower than they would have been without the defendant’s acts. In this calculation, the expert is required to forecast the plaintiff’s future operating results given the current operating environment and to forecast the plaintiff’s future operating results assuming that the defendant’s acts had not occurred. The forecasts used in past and future lost profits calculations are based on assumptions about past events that did not occur and future events that may or may not occur and, as such, are subject to a level of uncertainty. It is the responsibility of the expert to reduce the level of uncertainty through the application of principles and practices set forth in authoritative literature promulgated by the courts and leading economic damage experts. Specific to the issue of speculation, in order for the lost profits calculation to be admissible, the expert must comply with the principles of reasonable certainty and best available evidence in the preparation of the underlying forecasts. The ultimate test is whether the item being forecast (revenue, volume, cost or profits) can be predicted with reasonable certainty. Forecasts that are based purely on speculation or the positive outcome of contingencies or possibilities are not acceptable. Whereas all forecasts will contain uncertainties, the authoritative literature indicates that an expert has the responsibility to utilize the best available evidence. The authoritative literature sets forth a number of evidence sources that should be considered by the expert, including prior experience of the company, prior experience and trends of its industry and competitive factors. In order to avoid being considered speculative, the lost profits calculation and its underlying assumptions should be: (1) based on facts and evidence set forth in the case; (2) based on a comprehensive evaluation of the facts and circumstances of the case and the gathering of sufficient, corroborating evidentiary matter; and (3) proximally related to the defendant’s acts. Speculative characteristics of lost profits calculations 1. The assumptions to a lost profits calculation must be based on facts and evidence set forth in the case or they may be considered speculative. All forecasts require the use of assumptions, but assumptions that are not grounded in evidence can be considered speculative. For example, an assumption that a company’s future market share will increase that is unsupported by historical growth trends, additional products or the elimination of a major competitor could be considered speculative. Other revenue assumptions that are often subject to challenge include product pricing trends, product volume and mix trends, and the duration of significant customer purchase orders. Cost assumptions that can be challenged include the duration and history of labor contracts, the terms of major supplier pricing and volume agreements, plant capacity and the way that operating costs fluctuate with changes in volume. For example, reliance on an internally prepared budget indicating significant cost savings in the future may be considered speculative if past budgeted cost reductions were not achieved or if the cost reductions are unsupported by current market data. Forecasts involving an uncertain transaction (such as municipal approval of a special project) or a future unknown event (attracting investors at favorable rates of return) may be considered speculative. Additionally, forecasts that are predicated on the successful conclusion of negotiations that have not yet occurred (such as successful resolution of a customer pricing issue) may be considered speculative. Assumptions involving a risky business opportunity, an untested product, or entry into new or previously non-viable markets may cause speculation in the forecast. In the past, forecasts involving new or start-up business ventures were considered speculative by their very nature and damages were not allowed. However, forecasts for new or start-up businesses are now acceptable if they are based on sufficient evidence and reasonable assumptions. Factors that affect the speculative nature of new or start-up businesses include the experience of the principles in similar undertakings, the maturity of the industry, the experience of others in the industry, and competitive forces in the industry itself. 2. Forecasts must be based on a comprehensive evaluation of the facts and circumstances of the case, and the development of reasoned assumptions. The expert generally obtains the knowledge needed to prepare the lost profits forecasts by first analyzing the company’s historical operating results. Such analysis may include trend analysis of the company’s revenue, cost structure, profitability, and key financial ratios. In addition to the company’s historical financial and operating results, the expert should consider the company’s product mix, product life cycles, market share, competition, business plans, distribution channels, plant capacity, and capital requirements. The expert also should evaluate the industry in which the company operates, including industry growth trends, new product technologies, regulatory changes within the industry, and competitive and economic forces. Finally, the expert should consider the effects on the company of the local, regional and national economy and economic forecasts for the future. Expert opinions or assumptions based solely on the expert’s past experience are no longer sufficient. Rather, the expert’s assumptions must be the result of a comprehensive evaluation of facts of the case, including company research, and based on evidence in the record. For example, lost profits calculations may be considered speculative if the expert simply relies on the testimony of the company’s owner as to key assumptions, or justifies such reliance based solely on his own knowledge and experience in the industry. Instead, wherever possible, the expert should obtain sufficient corroborating documentation for the owner’s testimony based on other facts and evidence presented in the case. 3. The damages claimed must be proximally related to the defendant’s acts. Failure to determine how the defendant’s acts resulted in the damages claimed can result in a speculative lost profits calculation. For example, failing to prove the company’s sales decline was a result of the defendant’s acts could render the calculation speculative. Additionally, use of a forecast period that exceeds three to five years may be considered speculative because beyond that time the proximal link to the event that gave rise to the damages may be lost. A longer forecast period is generally not used unless the company holds special rights such as a long-term contract, a patent or a long-term exclusive marketing agreement. In addition to establishing proximity, the expert must consider whether factors unrelated to the defendant’s acts had a significant effect on the historical operating results or the forecast. For example, consider a past lost profits calculation for a breach of a supply contract where the plaintiff’s profitability declined throughout the five-year damage period. The expert must eliminate outside factors, such as a national recession, competitive forces, technology changes or any other issue unrelated to the defendant’s acts that may have affected the profitability during the five-year period. Failure to do so could render the lost profits calculation speculative. Additional factors Two other factors are worth mentioning: the failure to adjust the calculation for future risk and the failure to perform reasonableness tests on the resultant lost profits calculation. Lost profits calculations generally are adjusted for the uncertainty (or risk) associated with the use of forecasts. The adjustment for uncertainty is normally reflected in the discount rate used to discount the forecasted lost profits to present value. Failure to apply an appropriate discount rate can result in a speculative lost profits calculation. Experts are required to perform certain tests to validate the reasonableness of the damages claimed, often referred to as “sanity tests.” Individually, the assumptions that are required for a lost profits calculation could appear reasonable, but if collectively the resultant damages are not reasonable, the lost profits calculation may be considered speculative. In summary, the forecasts used in past and future lost profits calculations are based on assumptions of hypothetical events and are subject to level of uncertainty. It is the responsibility of the expert to reduce the level of uncertainty through the application of principles and practices promulgated by the courts and leading economic damage experts. The lost profits calculation and its underlying assumptions should be based on facts and evidence set forth in the case and a comprehensive evaluation of such evidence, including the operations of the company, its industry and the competitive and economic forces affecting it. Further, the assumptions to the lost profits calculation must be based on sufficient corroborating evidentiary matter including evidence that the damages claimed are proximally related to the defendant’s acts. Failure to do so could render the lost profits calculation speculative and the expert’s testimony inadmissible. About the Author Patrick G. Dunleavy recently joined Virchow, Krause & Co. as a partner and firm-wide director of commercial litigation support services. Mr. Dunleavy recently spoke on “Basic Economic Damage Calculations: Business Claims,” at MACPA’s Litigation & Business Valuation Conference in Novi. He can be reached at 248.357.2400 X238 or by e-mail at firstname.lastname@example.org. July / August 2006 Leaders' Edge PRINT Russian Roulette: Litigating Closely Held Business Disputes By Mark M. Snitchler Thousands of corporations are established in the United States each year. The majority are closely held, with five or fewer shareholders. Most operate without a formal shareholder agreement, an oversight that can be fatal to businesses that survive their start-up and achieve success worth fighting over. The Curse of Success Success can breed disputes. For example, John Inventor conceives of a widget that he thinks will be hugely popular. Without the resources to develop or market it, Inventor finds Mary Money, a partner to underwrite the project, and James Sales, who will handle marketing and sales. They establish a corporation to collaborate on the project. Cash is limited, and the partners fail to craft a shareholder agreement. As business progresses, Inventor realizes creative differences with his partners. Inventor, Money and Sales each sit on the company’s board of directors. By a board vote, Inventor finds himself kicked off the board and terminated. Without a shareholder agreement, Inventor has no legal right to force the company or his partners to buy him out. Now, he has lost control of his idea. Using this scenario, let’s assume a fourth partner, Betty Friend, exists and is aligned with Inventor. The four partners, equal shareholders, find themselves at an impasse. Two prefer the status quo; the other two seek another direction. Under these circumstances, a deadlock arises. The company becomes paralyzed, and the only ways to resolve the dispute are diplomacy or court. Receivership and Other Formal Consequences As shareholder disputes escalate, eventually one party files in court various claims including, but not limited to, shareholder oppression, breach of fiduciary duty and/or a petition for deadlock and dissolution. Pursuant to circuit courts’ powers, judges can appoint a receiver to marshal assets and manage businesses pending liquidation, order an in-kind distribution of assets or effectuate another resolution. In this situation, the company’s fate lies almost exclusively with the court and its appointed fiduciary. For most small business battles, costs usually exceed the actual amount in dispute and have a catastrophic effect. Prospects are significantly reduced even if the business survives litigation. Matters get worse with deadlock. If authority is unclear, courts can take the company from the shareholders and appoint a receiver. The receiver acts as an extension of the court, and is typically charged with preserving the company’s assets’ value and overseeing the company’s orderly dissolution. In most receivership cases, judges appoint lawyers to serve as the receiver. The potential results of receivership and the company’s future are dependent on the receiver’s background and experience. Good Counsel Accountants approached by clients involved in such disputes should recommend that clients consider alternative dispute resolution to contain the dispute and costs. Alternatively, the clients could engage a neutral third party to help resolve the dispute and operate the business. While shareholders may be unable to agree on certain matters, they should be counseled on the mutual advantages of controlling the dispute resolution process and minimizing litigation costs. Disputes are an inevitable part of business, but heading to court to resolve them is not. Shareholders can retain control of their company during the dispute resolution process by selecting a facilitator instead of relying on the court, which will appoint a lawyer as the company’s de facto CEO. A skilled facilitator will help the shareholders recognize that acts by the majority against a minority shareholder, even if technically legal, are not without consequence. Further, the facilitator can be instrumental in reaching fair and equitable buyouts of a minority shareholder, notwithstanding the fact that a shareholder may not hold the right to be bought out. In a deadlock, the facilitator assists in negotiating an equitable buyout or sale of the company’s resources to maximize shareholder value while avoiding litigation. The facilitator will assist in an orderly resolution of the dispute with minimal disruption and at significantly less cost than through formal court receivership, while maximizing shareholder equity. About the Author Mark M. Snitchler is a partner at Beals Hubbard, PLC, in Farmington Hills, Mich. He practices commercial transaction and litigation, and has served as counsel to numerous corporations. July / August 2006 Leaders' Edge PRINT Negotiating Buy/Sell Agreements Can Be Taxing Work By Scott W. Ellison, Esq., Devine, Millimet & Branch An accountant’s perspective and advice is very useful for a number of decisions made during the consideration of a buy/sell agreement. Buy/sell agreements can be appropriate for small, closely held companies to have in place to provide for the sale of the stock of the principals of the business upon the occurrence of certain events. These agreements serve many purposes including, but not limited to, providing certainty as to the identity of the owners, matching the benefits of ownership with participation in a way that the owners think is fair and providing liquidity for a deceased owner’s estate. The agreements may be called “cross-purchase agreements,” “buy/sell agreements” or “shareholder agreements” and accountants should be brought into the discussion concerning their terms. If you have a client with multiple owners that does not have such an agreement, you may want to broach the topic. One example of an event that may trigger the purchase terms of a buy/sell agreement is when a principal retires or otherwise has his or her employment relationship terminated (whether by the entity or by that individual). The remaining principals may feel it is inequitable to have the departing principal own equity of the entity when he or she is not personally contributing to the growth and success of the entity. For that reason, owners sometimes desire a contract to compel the departing equity owner to sell his or her equity stake upon termination of his or her employment. Other events upon which a buyout may occur can include: (1) the death of a principal; (2) the total and permanent disability of a principal; (3) any voluntary transfer of the equity interest by the principal; and (4) any involuntary transfer of the equity interest by the principal. In all of the scenarios, one large issue to be addressed is how the purchase is to be funded. For this reason, sometimes the transaction is not mandatory, but is executable at the option of the remaining principals. They can then make a decision based upon available financial resources. One triggering event, however, for which the obligation is often mandatory is the death of a principal; for one reason is it is the easiest scenario for which to provide the funding, in addition to the desire of each principal to know his or her estate will be well funded and in receipt of a liquid asset upon his or her death. The funding can most easily be provided for by the purchase of life insurance policies. These life insurance policies present a tax issue, which an accountant should discuss with his or her clients. Upon the death of a principal, any policies owned by the deceased principal naming the other principals as the insureds and naming that deceased principal as the beneficiary are no longer needed, raising the question as to what the disposition of these policies should be. One solution would be to transfer or sell the policies to the individual who is named as the insured. As a result, each principal receives an additional policy for which he or she can name the beneficiary upon death. Alternatively, the policies could be transferred to the surviving equity owners who have the purchase obligation under the agreement to fund the surviving equity owners’ obligations to buy-out the other survivors. Transferring these policies raises issues with regard to the exclusion from income tax of the policy proceeds and transfer for value rules. In general, the proceeds of life insurance policies are taxable to the recipient when the policies are paid out. IRC § 61(a)(10). There is an exception however for amounts paid under certain life insurance contracts if the amounts are paid by reason of the death of the insured. IRC § 101(a)(1). This exclusion does not extend to the situation where the beneficiary purchased the policy from a third party. In such case, the amount to be excluded from income is limited to the amount paid for the policy and any premiums paid by the transferee. There are certain exclusions from this exception including, but not limited to, if the transfer is to a partner of the insured party, to a partnership in which the insured is a partner or to a corporation in which the insured is a shareholder or officer. IRC § 101(a)(2)(B). This, in a scenario of a corporation with multiple shareholders and one shareholder dies at a time during which he owns policies pursuant to which he is the beneficiary and each policy has one of the other shareholders as an insured, if those policies are sold to the other shareholders (who are not the insureds but are rather the “non-insured” shareholders who remain subject to the purchase obligations for the “insured’s” stock), the receipt of those insurance proceeds will be taxable to the beneficiaries. These transfer for value rules are a trap for the unwary if a closely-held corporation arranges for cross-purchase obligations to be imposed upon shareholders and is to be funded by life insurance policies upon the death of a shareholder. Further, these transfer for value rules are a good reason for a small closely-held corporation with multiple shareholders to impose the purchase obligations upon the entity rather than the shareholders. Because limited liability companies and their members are treated like partnerships and partners, this argument in favor of the entity being saddled with the buy-out obligation does not apply to limited liability companies. When discussing buy/sell agreements funded by insurance policies with clients, if the client already has agreements and policies in place, it is a good idea to ask to review the documents. Unfortunately these arrangements are not always implemented correctly, and it is all too common to find insurance policies naming the company as the beneficiary whereas the agreement imposes the buy-out obligation on the other owners. A little due diligence at the start of representing a new client can avoid a lot of headaches later on. This raises another issue about which the accountant’s opinion may be solicited: who should the purchaser be? The entity or the other equity owners? The impact of income taxes is an important factor to discuss with clients concerning this issue. If the entity redeems the equity interest of the departing principal, it is not a tax-deductible expense and it depletes cash without a corresponding reduction in income. However, redemption by the entity is a buy-out with pre-tax dollars, in contrast to the undesirable reality that any purchase by the other equity owners will be funded with post-tax dollars. Obviously situation- specific facts such as the marginal tax rates of the entity and the principals and whether the entity has pass- through taxation are needed to conclude this discussion with clients as to which is the tax-preferred purchaser. A second tax issue related to the identity of the purchaser is the impact upon the equity owners’ tax basis in their equity interests. If the other equity owners are the purchasers, then each will have his or her respective basis increase by the amount of the purchase price. This may be important for reasons such as needing basis to recognize losses. Conversely, if the entity purchases the equity interest of the departing principal, none of the remaining principals will have their basis increased. CPAs may also be called upon to assist in the valuation of the entity, either at the time the agreement is drafted or at the time of a buy-out. At the time of drafting the CPA may be consulted about the appropriate valuation formula. At the time of the transaction, the CPA may be consulted to obtain the data required by the formula. One common method of valuation is a formula to calculate the price of the equity being purchased. For example, the valuation formula may work off of financial information such as earnings before interest, taxes, depreciation and amortization. Some agreements delegate to the CPA the calculation of the entity’s value at the time of the transaction, but an accountant should be sure he or she is competent to render a valuation that will withstand a challenge before agreeing to undertake this obligation. Many small businesses will benefit from having a buy/sell agreement in place. A CPA’s opinion or advice is indispensable for many decisions to be made by equity owners implementing a buy/sell agreement. About the Author Scott W. Ellison is a shareholder in the Business and Tax Planning Practice Group of Devine, Millimet & Branch, PA, where his practice focuses on assisting closely-held companies with their business, transactional and commercial related legal needs. Article reprinted with permission from the New Hampshire Society of CPAs. July / August 2006 Leaders' Edge PRINT Member Impact: Legislation Affecting the CPA On behalf of its members, the MACPA monitors and analyzes proposed legislation to determine its potential effect the CPA profession. Sometimes proposed legislation – totally unrelated to the profession – could have adverse effects or unintended consequences for CPAs. The following bills and resolutions of interest are tracked on the MACPA’s web site. House Bill 4124, introduced at the beginning of 2005, proposes revisions to restrictions on persons to whom CPAs are liable for malpractice. These changes would include returning to a “reasonable forseeability” standard and create liabilities for supplying information that can be considered professional advice. Senate Bill 632, having made its way through the Senate with amendments developed and championed by the MACPA, is now awaiting committee debate in the State House. The original bill language would have altered unlicensed activity provisions set forth by recent accountancy reform legislation signed into law. Along with the efforts of MACPA members, the Association was able to negotiate amending language to prevent these “unintended consequences” from being put to a full-Senate vote. House Joint Resolution M, a measure to amend the State’s Constitution, would adversely affect the CPA profession, as well. Another example of “unintended consequences,” this resolution language would require that all intermediate and public school districts have their post audits of financial transactions and accounts conducted by the Michigan Auditor General, disallowing accounting firms that currently perform these engagements from continuing to provide such services. Additional legislation of interest to MACPA members can be viewed on the Association’s web site. Specific questions regarding MACPA advocacy efforts can be directed to the Government Relations Department at 248.267.3710 or email@example.com. July / August 2006 Leaders' Edge PRINT Ethics Q&A Following is a transcript of a question and answer highlighting frequent inquiries sent to the MACPA Professional Ethics Task Force. Responses to the inquiries have been tailored to specific questions presented and may not consider all of the unique circumstances that are part of an ethical inquiry. Attempt your own answer before reading the “unofficial” opinion of the Task Force. My biggest audit client is a lumber company. I have to photograph (from a rented Cessna) and later count the inventory of uncut logs as it floats down the river. I am taking both photography courses and flying lessons. Because this is a necessary audit procedure, I am sure that these classes (all taught by CPAs) qualify as “A & A” CPE credits. During the flight back, the pilot, an ordained minister, lectured me for 30 minutes about what she believes is a general societal weakening of business ethics. Will this qualify as MACPA Ethics CPE or would she have to be a CPA as well? Sorry. Neither minister-led nor CPA-led courses will qualify for CPE unless the topics are Qualifying Continuing Education Subjects, as determined by the State Board of Accountancy, not by the MACPA. In addition, CPE classes must be 50-minutes minimum with formal attendance taking. In general, offerings from the AICPA and state societies will qualify; designated business and accounting classes from universities will probably qualify; seminars hosted by CPA firms, law firms, insurance agents and stockbrokers may or may not qualify; and yoga, pottery, motorcycle repair and needlepoint classes (regardless of the relevance you perceive to your particular practice) will not qualify. When in doubt, contact the State Board at 517.241.9249. July / August 2006 Leaders' Edge PRINT An Opportunity to Share Your Thoughts Michigan’s Department of Treasury wants your help to create the best possible new system for the people and businesses of Michigan. Treasury is undertaking a three-year project to revamp its aging Business Registration and Sales, Use and Withholding (SUW) systems. The current systems (built more than 25 years ago) are slow, cumbersome and incompatible with technology used by many tax preparers and payers. Treasury is seeking taxpayers’ ideas up front. MACPA members, experienced in using Treasury’s systems and processes to register businesses, file taxes and resolve issues, are in a unique position to provide feedback on improvements. Your thoughts and suggestions are welcomed. Contact the MACPA Government Relations & Regulatory Affairs Department at firstname.lastname@example.org or fax 248.267.3792, and they will pass your comments along to Treasury. July / August 2006 Leaders' Edge PRINT CPA Declares Candidacy for 20th State House District Primary CPAs continue to impact the political scene in Michigan. The MACPA is pleased to provide information on members who have filed candidacy for elected office. The following candidate will be on the Michigan House of district ballot in the Tuesday, August 8, 2006 primary. Representatives Other CPAs running for office should contact the MACPA Mark Abbo, CPA (R) – Government Relations Department Northville by e-mail or phone 248-267-3710. Candidate for: 20th House District (Northville Twp. and City, Plymouth Twp. and City, City of Wayne and part of Canton) Professional Experience Six years; Northville Township Supervisor (elected position) One year; Northville Township Treasurer (appointed to fill vacancy) Nine years; Northville Township Trustee (elected position) Vice President (and Treasurer); STM Power in Ann Arbor, MI Accountant; PricewaterhouseCoopers, CPA Education Bachelor's Degree in Business Administration, Accounting, Eastern Michigan University Certified Public Accountant MACPA members interested in supporting the Abbo campaign can contact Matt Frendewey, Mark’s campaign manager, at 248.842.7002 or the MACPA Government Relations Department at 248.267.3710 or email@example.com. July / August 2006 Leaders' Edge PRINT 29th Annual Small Practitioners Conference Brings Hot Topics to the Forefront Returning to Mt. Pleasant, the three-day Small Practitioners Conference is sure to be a hit with an excellent line-up of speakers and sessions. Join us in Mt. Pleasant from August 16 – 18 to hear from James Metzler, vice president – Small Firm Interests, AICPA and Elizabeth Almer, associate professor of accounting at Portland State University. They, among a whole line-up of great speakers, will address the most current topics for the small/sole practitioner. You will also experience several networking opportunities at the event as well as an evening of entertainment! The Conference offers up to 20 hours of credit. Register today! July / August 2006 Leaders' Edge PRINT Create a Business Plan for Your Company and Learn How to Make it Work Learn the process for creating an effective business plan – one that envisions your company’s future and develops the required plans and procedures to accomplish that vision. Attend Planning for Profits: How to Develop & EXECUTE an Effective Business Plan on August 29 in Plymouth to learn how to create a plan and achieve it. Developing a unified sense of direction is essential for success, yet for most organizations it’s frequently overlooked. This seminar focuses on the execution and implementation of the business plan, as too many excellent plans are never achieved. You’ll earn eight general hours as you cover objectives including financial leadership, strategic thinking, strategic planning and operations planning. Register online today! July / August 2006 Leaders' Edge PRINT The Nine Sins of Marketing The Common Mistakes Firms Make, and How to Correct Them By Allan Boress Although firms often wonder why their marketing efforts fail, it is usually readily apparent once I spend some time with them. Let's take a look at the most frequent blunders, and how they can be avoided. 1. Lack of Firm's Goals Visit the online CPA Marketing Toolkit complied by AICPA An established, 150-professional firm was flat in revenue and losing some of to access free articles its best associates to competitors. When asked about revenue goals, the firm and resources. replied they had none. Without growth goals for the next three years, any positive change would be accidental. Their result of zero growth was predetermined the day they decided they didn't need goals. And without growth goals communicated to the rest of the firm, how could associates be expected to participate in business development? I insisted the partners of this firm sit down as a group with me to plot out the next three years. Their goal for the following fiscal year was a stretch: 15 percent growth in quality client revenue after experiencing zero growth for years. They reached their goal in six months. Does your firm have growth goals for the next three years? Are the firm's goals publicized within the firm so that all who might influence the marketing of the firm are made aware of them regularly? 2. Absence of Personal Goals Everyone expected to participate in the revenue generation must have personal goals. These goals must exceed the stated group goal for cushioning purposes (for example, the firm goal is $1 million of new revenue, the goals of the individual partners and associates has to be greater than one million to allow for those who are not going to do much of anything). A California firm conducts a year-end retreat where a speaker is brought in to discuss specific ideas to accomplish marketing objectives. At this retreat, all attendees create their personal goal for new business for the following fiscal year. These personal goals are presented to the group, discussed and agreed upon. Does every person in your firm have personal goals for their part of reaching the firm's growth goals? 3. No Action Plans How will your partners and associates reach their goals? If these people are reminded of their goals for new business on a regular basis, this very emphasis will cause them to think about accomplishing their goals. But you also need to help them set their plan based on who they are and what they are selling. Sale of the professional service comes from individuals, partners and associates; the product does not sell itself. As you will not be able to accomplish action plans with all your professionals, concentrate on the ones willing to be coached and guided. Offer it to them, and set regular appointments to monitor progress towards goals. The California firm mentioned above has all participants begin the process of creating their personal plan of action for the following year in order to reach their goals. Attendees are separated into groups, and the results of this individual planning are presented, discussed and reinforced. Ideas are offered, and participants are allowed to change their plans based on suggestions offered. A copy of the finalized personal goal and action plan is forwarded to the managing partner, director of marketing and all of the partners of the firm. The marketing director then contacts each person for whom a plan exists and offers to set an appointment to review their plan and to set bi-monthly meetings to review progress and offer suggestions. What are you doing to help your partners and associates plan their personal marketing actions and then keep them on track throughout the year? 4. Hampering Personal Motivation Professional service firms often believe they are exempt from people management issues. People are given tasks to do and are expected to carry them out. Often, there is little of the positive feedback that managers in real businesses dispense daily. I did a program for a large firm last year and was approached by a young woman on the first break. She brought in one of the firm's largest clients when she'd joined seven years before, a friend of the family who was the in-house counsel at a Fortune 1000 company. This resulted in an engagement and billing of over $1 million the first year. This woman also reported that not one partner commented on her helping land this client. She was not compensated, thanked or acknowledged. "I haven't done any marketing since then," she added. Although most associates will never be in a position to make this kind of golden introduction, the vast majority of associates, and even partners, who go out of their way to market their firm are rarely acknowledged. Lack of psychological reinforcement leads to lack of participation in the marketing process, and to lack of marketing results. What does your firm do to encourage, motivate, and reward non-partners for participating in and excelling at the firm's marketing effort? 5. Not Providing Effective Training The majority of professionals who work for professional service firms possess a technical mentality. To expect professional people to embrace a process that employs sophisticated skills is absurd and unreasonable. Smart firms provide the training necessary for their professionals to succeed at personal marketing, referral network building, face-to-face selling and presentations. An Ohio firm uses a two-pronged approach to imparting the skills and knowledge necessary to succeed at rainmaking. They bring in a nationally acknowledged professional trainer three times a year for their associate group (young partners and those who are poor at marketing are encouraged to attend). The firm also runs monthly "lunch and learn" meetings, where a speaker is brought in every month over lunch to impart ideas or offer real-life examples of marketing success. These speakers can come from within the firm (a rainmaking partner) or from friends of the firm. By keeping marketing and selling skill building in front of the associates on a regular basis, building one's referral network and identifying and capitalizing on opportunities at clients (and outside as well) is kept front- of-mind, and marketing activities are tracked, encouraged and reviewed. 6. Failure in Management Business development is a process. And it is one that needs to be controlled. Control of this process includes: reviewing marketing progress; evaluation of personal involvement of the partners and associates; and realization of goals and marketing successes on a monthly (preferably) or quarterly basis. This management control effort should involve the director of marketing and a partner, most likely the managing partner. Also, the marketing director and the CEO facilitate separate monthly partner marketing meetings. This keeps business development in the front of the mind of the partners, and further involves them with the marketing director, who has the opportunity to explain what the marketing department is doing and what they have accomplished, as well as ask for help on certain marketing projects. A New Jersey firm has its marketing professional and the managing partner meet once a month over breakfast to discuss exactly what has happened on a firm-wide basis over the previous month and where improvements can be made. The marketing person gets ideas, suggestions and buy-in from the managing partner to help accomplish the growth goals the firm has decided upon. Because the managing partner probably knows the partners on a personal level, he is able to share insights with the marketing director into the personality and working style of each partner. Partners and associates hold a monthly, regularly scheduled breakfast meeting to only discuss their successes, activities and requests for assistance with their peers and the marketing director (who facilitates the meeting). 7. Need for Accountability There is distinct and vital information that partners and associates need to communicate to make marketing work. One problem firms have is they require or ask for too much data. As a result, personal marketing reporting becomes burdensome, and, eventually, ignored. I have found that a one-page report consisting of the following information is easy, fast and effective at helping manage the personal marketing effort. It should include: Referrals received: Track incoming referrals to see who your true friends of the firm are, the ones doing your marketing for you, to acknowledge their assistance and make sure referrals are sent back. Referrals given: Build complementary professionals' practices, and then have them do the marketing. This function allows one to develop leverage, and to market simultaneously in many places without being there in person. Only by tracking outgoing referrals can you see where you are investing your referral assets. Referrals given and received must be tracked monthly. New business won: See what new clients are brought into the firm and additional business sold on a monthly basis to keep partners and associates focused on marketing. New business lost: If lost opportunities are not tracked, how can those in charge of overseeing the process note who might need coaching or training? One client fought us for two years on this specific reporting. They finally gave up when the director of marketing discovered that a thorough, well thought-out and financed marketing effort for one of the partners was producing a closing percentage of five percent after 10 months of effort. The partner went to the management committee to complain about the marketing department, incorrectly blaming them rather than his own lack of selling skills. If these losses had been tracked monthly, this problem could have been headed off after a couple of months and the partner offered specific sales coaching, or the program could have been ended, saving marketing resources for where they might produce results. Events, meetings and organizations attended: There is a direct relationship with the frequency of time invested in front of those people who can refer business and the amount of business referred. These kinds of efforts tend to not be tracked, and the frequency of occurrence then declines over time, leading to fewer quality referrals. We recommend a simple one-page report that can be filled in online and e-mailed to those watching the business development process. If any additional detail is warranted, those people can go back to the source. These reports should go, at least, to the marketing director and the CEO. Some of our clients smartly have all of these reports disseminated to all of the partners so they can see which of their peers is helping with the marketing process and which are not. 8. Deficient Participation by Leaders Of all of the sins that cause marketing to fail, this might be the most significant. Entrepreneurs who built the firm and then hired technically excellent people as associates and partners to do the work started many firms. As these entrepreneurs age, business development declines unless they have luckily hired and nurtured additional rainmakers. Usually, the firm becomes owned and managed by technicians, not businesspeople, who not only don't understand the importance of marketing, but also do not want to participate in it. Many firms hire outstanding marketing professionals who then fail in the eyes of the partnership, as new quality business doesn't magically appear on the books. The marketing effort fails at all levels, as those inclined to participate actively look to the role models in the firm who do not do much effective personal marketing at all and realize marketing must not be important to their future success in the firm, no matter how much lip service is given to it. This lack of participation by leaders can be changed if they are willing to kick-start the firm's marketing effectiveness by participating much more in personal marketing and marketing events. Associates and the other partners, who then realize they need to change as well, notice this change in behavior. 9. Agreed-Upon Expectations? Exactly what do partners expect the marketing director to achieve? Marketing directors and their firms must agree on what is expected from the marketing director, including specific, attainable goals (agreed to in writing). Every accomplishment must be tracked and documented. The Resulting Payoff The first step is to recognize your firm is committing one of these nine sins. Once that is done, you can then take corrective action. After a short time, you should see an increase in the quantity of your new client work as well as a revenue jump. Then marketing will give you the results you always hoped for. About the Author Allan Boress, CPA, CFE, is president of Allan S. Boress & Associates in Eustis, Fla., and an international consultant to accounting firms. His latest book is Mastering the Art of Marketing Professional Services: A Best Practice Step-by-Step Guide, published by the AICPA. He is also the developer of the "I-Hate-Selling" course and the "I-Hate-Networking" tapes. His web site is allanboress.com, and he can be reached at 954.345.4666. Reprinted with permission from the Massachusetts Society of CPAs. July / August 2006 Leaders' Edge PRINT QuickStudy: Backup Strategies By Russell Kay Backing up computer files is essential for firms interested in preventing business interruption or failure during or after power outages, natural disasters, hardware failures or other events. Backups once consisted of saving data on magnetic tapes, but now, partial backups are the norm, which input changes between the last full backup and the state of files when outages occur.... ...Other techniques often include mirroring and data reduction backup, which reduces file sizes. To read this article in its entirety and much more about developments in technology, access Technology and Productivity Weekly, the MACPA's electronic technology newsletter for industry professionals, sponsored by Information, Inc. July / August 2006 Leaders' Edge PRINT MACPA Sponsors Race for the Cure, 102 Members and Staff Participate Mild weather and a sunny sky added to the enjoyment as the MACPA’s 102-member team participated in the Komen Detroit Race for the Cure® on Saturday, June 10, 2006. The MACPA celebrated its third year of involvement in this community outreach initiative of the New Professionals Task Force, with a 25 percent increase in participation over last year. The team, comprised of both MACPA members and staff, raised more than $2,000 to support the fight against breast cancer. The donations support breast cancer education, research, screening and treatment programs. Seventy-five percent of all proceeds raised from the event remain in the local community, while the other 25 percent is allocated to national breast cancer research grants. “As a survivor, it is very uplifting to participate in the Race for the Cure and actually see the tremendous amount of support there is,” said MACPA member Sharon Hemmen. “At the same time, the displays of signs and banners are evidence that there are way too many who have not survived. This just means that although we are making great progress with curing this disease, we must not stop until we find a prevention!” The MACPA was also an official Bronze and Survivor Café sponsor of the Komen Detroit Race for the Cure®. July / August 2006 Leaders' Edge PRINT Don’t Fret About Insurance: MACPA Affinity Partner Offers Affordable Plans The MACPA's affinity partner, Paul Goebel Group, offers excellent health care coverage provided by Blue Cross Blue Shield of Michigan. As an MACPA member, you can benefit from this opportunity to obtain health insurance for yourself, your family and your employees. Blue Cross Blue Shield of Michigan provides four plans to MACPA members: Traditional Plan - Comprehensive Master Medical (CMM); Community Blue PPO; Blue Care Network (HMO); and Flexible Blue (HSA). All members in good standing and their full-time employees are eligible to apply for the plans offered by Blue Cross Blue Shield of Michigan. A spouse and unmarried dependents (to age 25) may be added to the member or employee's policy and Michigan residency is required. Download the group roster to get a customized quote for your office on one of the plans listed below. Or, call 616.454.8257 for more information about these plans or to enroll. July / August 2006 Leaders' Edge PRINT Summer Management Information Shows Celebrate 25 Years This year marked the 25th anniversary of the MACPA Summer Management Information Shows (MIS). The Shows, held on June 28 and 29 at the Rock Financial Showplace in Novi, represented Michigan’s largest educational event for accounting professionals and attracted nearly 2,000 attendees! MIS attendees heard updates from top-notch presenters in sessions on accounting and auditing, ethics, financial planning, practice management, tax and technology. The event also hosted more than 80 exhibitors featuring the latest products and support services for the accounting profession. Fun Facts About the First Summer MIS Show Date: Monday, June 29, 1981 Location: Sheraton Inn in Southfield Time: 11 am – 8 pm Admission Price: $3.00 – pre-registration; $5.00 – registration at door Exhibit Highlights: Mini-computers, dictaphones and recorders, word processors, copy machines, calculators, etc! Average Price of Gas: $1.39 per gallon Median Household Income: $19,074 Popular Movies: Raiders of the Lost Ark, Chariots of Fire, On Golden Pond, Reds, and Atlantic City July / August 2006 Leaders' Edge PRINT In Memoriam We sincerely regret the loss of our fellow members and extend deepest sympathies to their families and friends. Gerson B. Bernstein Edward N. Naperalsky May 14, 2006, Boca Raton, Fla. May 22, 2006, Muskegon Joined MACPA: 12/21/1939 Joined MACPA: 04/30/1958 Certified: 06/30/1936 Certified: 02/11/1958 Robert S. Delong Marvin Novick August 14, 2005, Saint Joseph February 5, 2006, Oak Park Joined MACPA: 07/31/1972 Joined MACPA: 04/30/1970 Certified: 05/25/1972 Certified: 07/26/1973 Kirby D. Dilworth Frederick A. Pelloni November 29, 2005, Westland April 15, 2006, Bloomfield Hills Joined MACPA: 01/31/1955 Joined MACPA: 05/31/1977 Certified: 07/29/1954 Certified: 08/26/1976 Jay C. Drewett Sarkes Sam Tootalian April 16, 2006, Fenton May 7, 2006, West Bloomfield Joined MACPA: 09/30/1953 Joined MACPA: 04/30/1961 Certified: 07/29/1953 Certified: 01/25/1961 Albert P. Gollob Orville H. Weir Jr. October 16, 2005, Farmington Hills May 17, 2006, Farmington Hills Joined MACPA: 04/30/1968 Joined MACPA: 10/31/1957 Certified: 01/31/1968 Certified: 08/08/1957 Donald C. Johnson Ronald W. Young August 16, 2005, Grand Rapids May 9, 2006, Novi Joined MACPA: 04/30/1954 Joined MACPA: 06/15/2003 Certified: 01/28/1954 Certified: 01/08/2003 George P. Luckow January 19, 2005, Wausau, Wis. Joined MACPA: 03/31/1956 Certified: 05/05/1954 Association Brief articles brought to you by MACPA Corporate Sponsor, Human Capital. GOLLOB ALBERT P October 18, 2005 October 16, 2005, age 63. Beloved husband of Joyce. Dearest father of Lenore White and Melissa (fiance Jeffrey Allsteadt). Loving grandfather of Deryk and Naomi. Dear brother of John (Marijoan) and Arthur (Patricia). Dear son-in-law of Janet Dyki. Also survived by many loving nieces, nephew, and friends. Visitation Wednesday 2-9 p.m. at the McCabe Funeral Home, 31950 West 12 Mile Rd., Farmington Hills. Rosary Wednesday evening. In state Thursday 9:30 a.m. until Mass at 10 a.m. St. Fabian Church, Farmington Hills. Use your web browser's print button to print this notice. NOVICK MARVIN February 07, 2006 Beloved husband of Peggy Novick, dear father of Jeffrey Novick, Stuart Novick and fiancee Anne Burress, and Barry (Hannah) Novick. Loving grandfather of Emily, Joe and Max Novick, Lauren Spencer and Jack Novick. Also survived by Anne Burress's children Jessica and Blake. Brother of Eleanor Lincoln and Florence Filler. Brother in law of Beverly and Merton Segal, the late Sol Lincoln, and the late Leo Filler. SERVICES 10:30 WEDNESDAY MORNING AT TEMPLE BETH EL 7400 TELEGRAPH ROAD, BLOOMFIELD HILLS. ARRANGEMENTS BY THE IRA KAUFMAN CHAPEL 248-569-0020. INTERMENT BETH EL MEMORIAL PARK. www.irakaufman.com Use your web browser's print button to print this notice. PELLONI FREDERICK A JR April 17, 2006 Age 63, April 15, 2006. Loving fiancee of Marie Jenkins. Devoted father of Brian Pelloni. Beloved son of Virginia and the late Frederick A. Pelloni Sr. Adored brother of Virginia (Donald) Goldie, Gregory (Linda) Pelloni, Christopher (Laura) Pelloni, and the late Marianne and Gary Garwood and Noella. Also survived by many cousins, nieces, nephews and friends. Visitation at the Sawyer-Fuller Funeral Home, 2125 West Twelve Mile Road (two blocks west of Woodward Avenue) in Berkley, 6-9 p.m. Tuesday, and 1-4 and 6-9 p.m. Wednesday. Rosary 7 p.m. Wednesday. In state at Our Lady of La Salette Catholic Church, 2600 Harvard Road-Berkley, Thursday from 10:30 a.m. until time of Mass at 11 a.m. Memorial contributions may be made to Monestary of the Blessed Sacrement and 700 Club of the Christian Broadcast Network. Use your web browser's print button to print this notice. TOOTALIAN SARKES SAM May 09, 2006 May 7, 2006. Mr. Tootalian was the managing partner of Purdy, Donovan & Beal L.L.P. Beloved husband of Louise. Dearest father of Sandra Tootalian, Michael (Carol) Tootalian, Mark (Lynda) Tootalian, Deborah (Kevin) Sanford, Paul Tootalian. Loving grandfather of Michael Eric, Matthew, Megan, Kari Lynn, Nicholas. Devoted brother of Mark Z. (Susan) Tootalian. Also many other relatives, friends and associates. Visiting Tuesday 6 p.m. to 9 p.m. and Wednesday 3 p.m. to 9 p.m., with prayers Wednesday 7 p.m. in Wm. R. Hamilton Funeral Home, 820 E. Maple Rd, (East of Woodward Ave) in Birmingham. In state Thursday 10 a.m. in Prince of Peace Church, 5300 Green Rd (corner of Walnut Lake Road - West of Orchard Lake Rd) until time of service 10:30 a.m. Interment Pine Lake Cemetery, West Bloomfield. In lieu of flowers memorial tributes to Dr. Jakubowiak Multiple Myeloma Gift Fund c/o UofM Cancer Center. Arrangements by SIMON JAVIZIAN FUNERAL HOME 248-626-7815. Internet Condolences to the family may be sent to SJavizian@msn.com Use your web browser's print button to print this notice. WEIR ORVILLE H JR May 21, 2006 84 of Farmington Hills. May 17, 2006. Orville is survived by Olga, his beloved wife of 64 years. Loving father of Madelyn Weir, Nancy Hertz (Timothy), Janet Weir (Stephen Horelick), and Lorraine Caron (Gilles). Cherished grandfather of seven grandchildren and one great-grandson. Dear brother of Donald, Charlene, Robert, Lillian Smith, June Malinak, and the late Ralph. Also surviving are many loving nieces and nephews. Orville started his career as a C.P.A. with Ernst & Ernst; then worked for Holloway Construction before establishing his own C.P.A. practice. He led the field nationally in construction accounting and was considered an innovative pioneer in this field. He loved music and good food; and was a WWII Army Veteran. We will mourn his loss and celebrate his life at a memorial in August. Arrangements entrusted to the Heeney- Sundquist Funeral Home, downtown Farmington (248-474-5200 or heeney- sundquist.com). Memorial tributes suggested to Angela Hospice. Use your web browser's print button to print this notice. YOUNG RONALD WILLIAM May 11, 2006 Age 36, May 9, 2006. Beloved husband of Colleen. Loving son of Arthur William Young and Carol and Jerry Blue. Dear brother of Nathan Blue. Son-in-law of John H. and Martha Logan. Brother-in-law of John and Cindy Logan. Visitation at the O'Brien/Sullivan Funeral Home, 41555 Grand River, Novi, 248-348-1800 Thursday 4-9 p.m. Instate Friday 10 a.m. at the Good Shepherd Evangelical Lutheran Church, 41415 W. Nine Mile Road, Novi, until time of funeral service 11 a.m. Online sympathy messages: www.obriensullivanfuneralhome.com. Use your web browser's print button to print this notice.
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