Blog Archives: 2016

Tax Update: New proposed regulations for Internal Revenue Code Section 2704

On August 2, 2016, the IRS issued proposed regulations under Internal Revenue Code Section 2704 that could eliminate or significantly reduce the allowable discounts when valuing interests in family-owned entities for gift, estate and generation-skipping transfer tax purposes.

Background

Historically, taxpayers could reduce the value of their taxable estates or the value of taxable gifts by placing assets in family-owned partnerships, LLCs or closely held corporations and claiming lack of marketability and/or lack of control discounts. The combined discounts typically reduced the value of the ownership interests by 25% to 45%.

For example, under current tax law, by placing $10 million worth of assets inside a closely held entity,

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Big Changes Coming for Financial Reporting of Not-for-Profit Organizations

Are you ready for significant changes to the financial statements of not-for-profit organizations?

On August 18, 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-14 Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities.  ASU 2016-14 requires a number of changes to the financial statements of not-for-profit organizations (NFPs).  This article provides an overview of those key changes.

Why Make Changes?

ASU 2016-14 is the result of a multi-year FASB project conducted to review the current financial reporting model for NFPs that has been in place for approximately 20 years.  As a result of the review,

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Keeping Sight of the Big Picture when it Comes to Fraud

Do you find that you sometimes get so bogged down in the details that you lose sight of the big picture? You know – not being able to see the forest for the trees.

If you find yourself in that situation, one way out would be to borrow a concept from Stephen Covey’s 7 Habits of Highly Effective People: take the time to “sharpen the saw”. Take time out to renew your focus. Don’t get so caught up in the details of a task that you don’t realize that a more important and sustainable solution may be at your fingertips.

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A Lesson in Cleaning Your “Accounting House”

This story, brought to us by irs.gov, illustrates a scheme that doesn’t often get a lot of attention, but it can provide fraudsters with an open door. In this case, the method used to cover up the fraud was to record automotive allowance payments to employees who were still listed as active in the accounting system, but who were no longer actually employed by the company. The payments were actually going to the fraudsters, and the amounts piled up after a while. A similar scheme can be used with vendors that are no longer used by a company, or even customers.

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The Accidental Fraud Detector

It is often said that hope is a wonderful virtue but a terrible strategy. The same can be said for hope as it relates to fraud prevention. I hope we hire the right kind of people.  I hope the controls we have in place are strong enough.  I hope the bank will catch anything unusual.  When hope is the major strategy, then you are leaving fraud detection to luck and happenstance.

In their Report to the Nations on Occupational Fraud and Abuse, the Association of Certified Fraud Examiners has consistently listed “accidents” among the methods that eventually caught an actual fraud. 

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