A grieving daughter is fighting against a system that was designed to protect her dad.
SARASOTA, Fla. - A grieving daughter is fighting against a system that was designed to protect her dad. She regrets the decision of turning to Florida's professional guardian system for help. She says that decision cost her father's estate a million dollars, and as the I-Team found out, the guardian was racking up those bills, when her father was living thousands of miles away. “He was an immigrant, came here with one little suitcase and worked himself into millions of dollars,” said Mercedes Gyorgy, describing her father Akos Gyorgy. He earned millions as a Sarasota real estate broker, eventually owning 8 homes in three countries.. But his family says his estranged wife exploited him when he got alzheimer's disease.
They asked for the court to appoint a guardian to protect him and his assets, but now believe that was bad decision. “We turned to the courts to stop the financial abuse, and after that, over a million dollars has been spent on this guardianship,” Mercedes Gyorgy said. On Wednesday, she asked the court to release her late father's remaining assets to his estate, but the guardian and the guardian’s attorney are fighting against that. “In the first two months of the case, one attorney billed $30,000,” Mercedes said. And some of those bills came while her father was not even around. He had disappeared while his Emergency Temporary Guardian was supposed to be protecting him. “I Called the police. They never called the police. They never called the police and said this man was missing,” Mercedes said. In a court document filed weeks later, it was revealed that Akos Gyorgy, who was incapacitated, managed to catch a cab from Sarasota to Orlando, then flew to Frankfort, before catching another flight to Budapest Hungary. Gyorgy was originally from Hungary, as was his estranged wife.
Mercedes says her father met her when his friend placed an ad in a Hungarian newspaper seeking a new bride for him, after his first wife died of cancer. He lived there for five years, which family members contend was out of the Sarasota court-appointed guardian’s jurisdiction. While the guardian supposed to protect him from his estranged wife, she made multiple trips to Hungary to visit him. So did the guardian. On one visit, he billed his ward nearly $24,000 for a first class plane ticket, lodging at a 5-star hotel, and other expenses. “It was a vacation for sure,” Mercedes said. And that's not all. The court allowed the guardian to use the ward’s money to buy him a $200,000 home in Hungary just weeks before he died. “It's a crazy case, but unfortunately, it's not that out of the norm with what's been going on in guardianship in the state of Florida,” said Marc Soss, who represents Gyorgy’s family. The judge says he's taking all of the testimony under advisement and will rule in the near future when the remainder of the ward's assets will be transferred back to the ward's family.
April 28, 2016
SARASOTA, Fla. -- It's something that experts say you don't want to have running away from you. If you pass away without a will in the state of Florida, the state statutes would decide where your assets go. "Everyone should have a will, because what it does, it shows the court and all the beneficiaries how you want your assets to pass," said Marc Soss, a Sarasota attorney. According to estate planning attorneys, around two-thirds of people don't have a living will. Many folks we talked with at Bayfront Park on Thursday are in the same boat. "At this point we do not have a will and it's something we do need to take care of," said Shannon Ashburn. "We just haven't gotten around to it yet." "I have had a will and it was up to date," said Donna Wilson, "but I divorced and that's null and void now, so I need a new one but you know you put that kind of thing off." It's a little bit of smoother ride for Joe Giannetti. Several years ago he had an attorney put together his will. "We have two children, they're both married and we have grandchildren," said Giannetti. "I feel we're in great shape if something should happen." Attorneys say the will process is typically quick and easy with costs running as low as $100 for an attorney to do it. "Creating a will is actually a very simple process," said Soss. "In most cases, a simple will can take less than 15 minutes." Following the death of Prince, because it's reported he had no will, a bank has officially been appointed to handle his assets said to be worth hundreds of millions of dollars. Marc Soss says this a lesson everyone can learn from. "Whether you have minimal assets or multi-millions of dollars people fail to plan for the important things in life," said Soss.
Sarasota Herald Tribune
February 6, 2015
All the rights that most adults take for granted — to spend their own money, to travel, to vote, to marry, to enjoy dinner out at a Red Lobster — once again belong to Linda Bous. Bous, 67, did not hesitate today when 12th Judicial Circuit Judge Charles Williams asked her if she wanted to say anything at the hearing to restore her rights and terminate a full adult guardianship of more than nine months. A small and soft-voiced woman born in Scotland, she spoke out clearly and briefly about the injustices she believes were done to her.
Distraught from her husband's death in January 2014, Bous had been found by a medical team to be lacking capacity to make her own decisions and was placed by her emergency temporary guardian in an assisted-living facility. In October, her desperate phone call to the Herald-Tribune set in motion the legal process that led to her freedom today.
“It was a terrible loss, to lose my husband and best friend of almost 30 years,” Bous told the judge. “But if I had had my rights at that time, none of this would have happened.”
The Sarasota resident acknowledged that when someone from the Department of Children and Families visited her home, she was ill and needed assistance. But with help, she said, she could have handled the paperwork for her husband's estate and resumed her life without him.
Before today's hearing, Bous' court-appointed attorney, Marc Soss, returned her house keys and some identification cards. Williams ruled that Bous' guardian must provide a full accounting of all her belongings. “The system does have checks and balances, and you have an excellent lawyer in Mr. Soss,” Williams told Bous, adding, “Good luck.”
Bous' former guardian, present with her attorney, also wished her luck when the hearing ended. Bous responded with a wry smile. But then she planted a kiss on the cheek of Soss as he gave her copies of documents in her case file — papers she had never been allowed to see.
Sarasota Herald Tribune
March 28, 2011
Attorney Marc Soss, a reserve officer in the U.S. Navy Supply Corps, has been awarded the Armed Forces Service Medal for the assistance he provided to Haiti after the 2010 earthquake. Soss assisted in the logistical planning of food, water and medical supplies to the country. As an attorney, he practices in the areas of estate and trust planning and probate and elder law. His firm has offices in Sarasota and Lakewood Ranch.
Legal Aid Names Law Firm of of the Year
February 24, 2009 Naples, Fla. - (Business Wire) -
Legal Aid Service of Collier County (LASCC) has named its "Law Firm of the Year" for 2008 in recognition of the many contributions to the program, and dedication to pro bono service to the community. LASCC is a private, non-profit law firm that provides free civil legal assistance to low income clients in Collier County. The Legal Aid programs and initiatives providing crucial support in 2008 included "Wills for Heroes." The "Wills for Heroes" program was launched in 2008 in conjunction with LASCC, largely through the efforts of Marc Soss, Esq. This program aims to provide Wills and other basic estate planning instruments free of charge to lower income Veterans and their spouses. Mr. Soss is a Veteran, having served in Afghanistan in 2006.
A pool party? In Afghanistan? Navy reservist Marc Soss can swing it. Marc Soss sits in a cheerless, bare-walled office, high in a Tampa tower. His necktie is tight, his shirt is starched stiff, and his resume bears the dry loyalties of a tax lawyer: wills, contracts, trusts -- revocable, irrevocable and charitable. Soss drove a Honda to work. He left a suburban home, where he watches HGTV and the History Channel, reads Tom Clancy and plays with his daughter. But as the city moves outside his window, Soss launches a computer slide show that shatters the button-down image of a 41-year-old tax lawyer. The pictures are the color of sand and desert camouflage. They show .50-caliber machine guns and bullets the size of fingers. They show unearthed missiles and bulletproof vests and Lt. Marc J. Soss, in full battle gear, boots planted in Khowst, Afghanistan. Hold that thought. The year is 1998, and Marc Soss, law degree in hand, signs up for the Navy Reserve. "It was just something I always wanted to do," is how he explains it. Nothing more. This was before Sept. 11, before the invasions of Afghanistan and Iraq, before things got so serious. Soss of Bradenton plugged along at bay-area bases, serving his country and piping up from time to time at meetings with the career command. "Can I chime in on this?" he would ask. "Well," they'd say, "who are you?" Now, jump ahead to August 2006, when duty called. He was dispatched to Camp Clark in eastern Afghanistan, a few miles from the Pakistan border. He left the downtown office, swapped starched shirts for fatigues and took a pay cut that would make one wince. At Camp Clark, he came to be saddled with a duty: director of morale, welfare and recreation. Some soldiers call the job "movie night director." Soss, however, had disdain for the "morale suppressors" in leadership. "To say we didn't get along is an understatement," he says. So he sought an honorable retaliation. He'd do his job well. That's when it started. Soss became the Fixer. He coordinated two road races for the runners on base, and pulled strings back home to equip them with new gear. He celebrated the birthdays of homesick soldiers with cake. He got Starbucks coffee to Afghanistan. Some of the soldiers wanted to paint the inside of their wooden cabins. Can you get us some paint? they asked Soss. What kind do you want? he asked. White, they said. He came back with eggshell white. What's that? they asked. Don't worry, Soss said. It's classier. He knew someone who knew someone back home and had delivered head shots autographed by a Playboy centerfold. He built the base DVD collection from scratch to 300. He organized a Caddyshack night, though some of the younger soldiers didn't know what that meant. He orchestrated a pool party with hot dogs and hamburgers and near-beer. What do you mean, pool party? the leadership asked when he pitched the idea. He built the base gymnasium from two treadmills, two elliptical trainers, a bench and a stationary bike to multiple benches, 10 treadmills and six elliptical trainers. He constructed a Chinese rock garden in front of his bare office. The man whose favorite ride at Disney World is the carousel secured copies of the Ultimate Fighting Championship. In the desert. In Afghanistan. "Do you ever watch Ultimate Fighting Championship?" he asks a reporter. "I love that s---." More than that, he loved helping people, seeing them happy. It wasn't just for the young enlistees, but for the village kids near the base. He brought bubble solution for the kids to blow, gave them shoes, clothes and candy from kind folks back home. "It's a third-world country, and they're the future generations," Soss says. When he left after an injury in October, he felt like his trip was worthwhile. When a man back home heard his story, he nominated Soss for an award. In May, SemperComm, a nonprofit group that honors efforts to boost morale at remote military bases, recognized Soss and three others. He flew to Washington, D.C., met the secretary of the Navy, then came home to resume the work of a tax lawyer. When the slide show is finished, the machine guns buried inside the hard drive, Soss sits upright at his desk. "I always wanted to do macho stuff," he says.
Amid War's Gloom, He Lightens Mood
Bradenton Herald (May 11, 2007)
Navy Reserve Lt. Marc Soss took it upon himself to bring some fun to the members of his military unit stationed in the remote desert mountains of Afghanistan. Did he ever. The occasional movie night was not enough for the 40 year-old Lakewood Ranch lawyer. Instead, Soss created a library stocked with 300-plus DVDs. And that's not all. The gym was beefed up. Road races were held. Every birthday was a cause for celebration. Thursdays were set aside for poker. "You take away females, alcohol, television and you have a lot of guys together, there's only so much you can do," Soss said Thursday. "I wanted to bring something to look forward to, something to make people happy." Soss' efforts led to his being honored Thursday night by the SemperComm Foundation, a nonprofit that salutes active-duty U.S. servicemen and women stationed at remote locations overseas who go beyond their job descriptions to boost morale. The award winners "find ways to keep their comrades' spirits up while they're stationed so far away from home," said foundation Executive Director Lara Coffee. Soss won the award for his efforts to boost morale while serving in Afghanistan last year. Assigned to a forward operation base at Camp Clark in Khowst, Soss was the unit's "morale, welfare and recreation director" generally considered the person who arranges the traditional movie night. But organizers said Soss "went well above" simply arranging movie-viewing. The group said he secured the DVD library, set up a regular Thursday poker tournament and made sure everyone in the unit got a birthday party. He also arranged for delivery of television service months ahead of schedule so the unit could watch American television. He put together a unit pool party and barbecue complete with hot dogs, hamburgers, steaks and soda a major feat in the mountains of Afghanistan. Soss also beefed up the unit's gym, pulling together enough equipment for 21 people. An avid runner, he arranged for transportation and lodging for unit members to participate in a marathon nearly an hour away, and coordinated two races at Camp Clark itself: a Veterans' Day Run, and last Halloween, a "Boo Run" that simulated the 5K race held locally in Lakewood Ranch. He also held a fundraiser for a program that arranges day trips for wounded soldiers at the military hospital in Landstuhl, Germany. "It's just one of those things. I enjoyed doing it and it compounded upon itself," Soss said. "Kept me busy and kept us entertained." In civilian life, Soss practices estate and tax planning in Sarasota, Manatee and Hillsborough counties. Three other service members who recently returned from duty in Iraq also were honored for their efforts. The awards were presented by Navy Rear Adm. Jay Foley, who called Soss and the other soldiers being honored "the selfless ones ... who have made life better for others with their time and effort." ---------------------------------------------------------
Navy Reservist Receives Award for Boosting his Unit's Morale
Sarasota Herald Tribune (May 26, 2007)
Navy Supply Corps Reservist Lt. Marc J. Soss of Bradenton has won a SemperComm Award for his major efforts to boost unit morale while serving in Afghanistan in 2006. While stationed at to Camp Clark in Khowst, Afghanistan, Soss was assigned the job of unit morale, welfare and recreation director. The military service award was presented by the SemperComm Foundation, a charitable nonprofit organization founded to boost the morale of U.S. service members stationed at overseas remote bases. Soss received his award from U.S. Rep. Vern Buchanan, R-Longboat Key. It was presented to him by retired Rear Adm. Jay Foley during the 2007 SemperComm Gala on May 10 in Arlington, Va. More than 800 people were at the black-tie event, which featured a performance by country singer Chely Wright. Soss returned home to Florida a few weeks ago.
SemperComm Cites Troops for Efforts Overseas
American Forces Press Service
WASHINGTON, May 13, 2007
Four servicemembers who recently returned from deployments to remote sites in Iraq and Afghanistan were recognized May 10 for their efforts in boosting their fellow troops’ morale.SemperComm, a nonprofit group founded to boost the morale of troops deployed to remote duty posts, presented its SemperComm Award to four servicemembers who promoted morale, welfare and recreation projects at their posts. This year’s winners were: Navy Lt. Marc Soss, a reservist who recently returned from a seven-month deployment to Camp Clark, Afghanistan, where he served as morale, welfare and recreation program manager. Retired Navy Rear Adm. Jay Foley, former commander of Naval Surface Force, U.S. Atlantic Fleet, and a member of the awards selection committee, praised the troops for helping improve the quality of life at their bases. Many, he noted, lacked basic communications, entertainment and recreation support that larger military facilities enjoy. Soss, a reservist from Bradenton, Fla., “worked double-time” to ensure troops at his post had access to recreational opportunities, Foley said. He organized marathons and pool parties, set up a 20-person gymnasium, arranged safe transport, food and lodging to take troops to road races at other bases, set up weekly power tournament nights and developed a base communications system so troops could contact home. Soss also coordinated a fundraiser for the Landstuhl Regional Medical Center’s Wounded Warrior Program that enables wounded troops to leave the hospital periodically for recreation and entertainment, Foley said. Foley said this year’s SemperComm Award winners worked “tirelessly above and beyond the scope of the regular assignment” to help improve conditions at their posts. “These are the selfless ones, nominated by their units and peers,” he said. “Their contributions have inspired and encouraged those with whom they served in Iraq and Afghanistan.” SemperComm Foundation Executive Director Lara Coffee praised the winners’ efforts to boost morale for deployed troops in remote sites. “The SemperComm Award winners find ways to keep their comrades’ spirits up while they’re stationed so far away from home,” she said. “They exemplify service – the kind of service SemperComm itself provides,” she said. “Our award winners work hard to keep unit morale up, which is essential for our uniformed men and women, especially as duty tours continue to get longer.” Lara called good morale a key to ensuring troops stay safe and the mission gets accomplished. “Keeping spirits high helps military personnel stay focused on the job at hand and get home safely,” she said. SemperComm is a partner in the Defense Department’s America Supports You program. The program showcases the myriad efforts of private citizens, schools, churches, corporations and other groups to show support for the men and women in uniform.
The Florida Bar News (June 15, 2007)
Lt. Marc J. Soss, a lawyer from Bradenton and a U.S. Navy supply corps reservist, won a SemperComm Award, which is presented each year to active duty personnel serving at remote overseas military bases. The award is given by the SemperComm Foundation, a charitable nonprofit founded to boost the morale of U.S. service members stationed at bases. Soss won the award for his major efforts to boost unit morale while serving in Afghanistan in 2006. Assigned to Camp Clark in Khowst, Afghanistan, Soss was assigned the job of unit morale, welfare, and recreation director, something often thought of as the unit’s “movie night director.”
Boo! 5K Run Heads to Afghanistan
Bradenton Herald (Sept. 13, 2006)
For the safety of the runners involved, armored Humvees will protect against any possible surprise attacks on the premises. It's not your ordinary 5 kilometer run. And it's not in your average location. The forward operation base at Camp Clark in Afghanistan this Halloween will simulate Lakewood Ranch's Boo Run, a 5K race held locally in late October. U.S. Navy Reservist Lt. Marc Soss, who arrived in Afghanistan on May 18, has created his own version overseas after having participated as a Lakewood Ranch resident for a few years.
The Florida Bar Journal - June 2006
The Florida Bar Military Affairs committee was proud to present the 2006 Clayton B. Burton Award of Excellence to Marc J. Soss, Esquire, a senior attorney and a member of the Naval Reserve, where he is the supply officer for Special Operations Command (Central). During the past year he has volunteered to prepare over 50 wills and powers of attorney for deploying members of the U.S. military, provided advice on taxes, guardianships, probate, and reemployment rights issues, published articles advising reservists and guardsmen of their legal rights, and lectured to local businesses and human resource departments about reserve and guard reemployment rights issues. As well, Mr. Soss has collected and sent monthly care packages to deployed troops in Kuwait, Qatar, Iraq, and Afghanistan. This award, established in 1990, is given annually to an attorney who demonstrated character and leadership promoting the quality of legal services furnished to military personnel serving in Florida.
June 3, 2011
Two new laws passed this week in Florida are a boon to Florida debtors with inherited retirement accounts and interests in LLCs. “Florida has always been a very debtor-friendly state and these new laws enhance its reputation,” says Marc Soss, a tax lawyer in Sarasota, Fla. The first law, which overturns the 2009 Fla. Second District Court of Appeals ruling in Robertson v. Deeb, basically tells creditors that inherited individual retirement accounts are out of their reach. Before when dad died, if his IRA went to his son who had creditor problems, the son’s creditors could have seized the inherited IRA. Now under the new law in Florida, they can’t. Knowing that you can leave your IRA to your kids and it’s automatically creditor-protected simplifies planning. Estate lawyers would draft complicated trusts for IRA assets, allowing discretionary distributions to beneficiaries, to keep the assets out of the hands of creditors. The use of trusts is still necessary in other states as there is a split in how courts have been interpreting the issue of creditor protection when it comes to inherited IRAs. For more on the divide. The law making inherited IRAs creditor-proof in Florida is retroactive, applying without regard to the date an account was created. “It’s good news for folks who got bad news earlier,” Soss says.
You Inherited An IRA. Can Creditors Grab It?March 17, 2010
More Americans will be handing down IRAs to their kids. A new decision suggests it might be a creditor proof inheritance. But nothing is certain yet.In what estate planners and bankruptcy lawyers are saying could be a significant case, a federal bankruptcy judge in Minnesota has allowed a bankrupt woman to keep a $63,000 individual retirement account inherited from her father. IRAs inherited from someone other than your spouse have traditionally not been protected in bankruptcy under either federal or state laws, and thus have been available for creditors to grab. "It’s a huge deal if these IRAs are now protected," said Marc Soss, a tax lawyer in Sarasota, Fla. The issue is significant not only because more families are facing creditor problems, but also because more of a typical family's wealth is now in retirement accounts.
Published: October 8, 2009
A new Nevada law allows for the transfer of assets out of an estate anywhere in the country at record-level valuation discounts. On Oct. 1, Nevada SB 350 went into effect, allowing for the creation of two new legal entities: the Nevada Restricted LLC and LP. The new forms of business entities allow for advanced asset protection and estate planning, where assets are moved out of a taxable estate and transferred to a limited liability company or a limited partnership. Marc J. Soss, a sole practitioner in Lakewood Ranch, Fla. with a corporate planning and estate planning practice, said he would also advise clients to take advantage of the new law. “This newlaw is great from an asset protection standpoint,” Soss said.
Ashlea Ebeling, 04.07.09
With unemployment rising, should you lock up your money in a retirement account? So you survived the latest round of layoffs, but your employer froze your salary and suspended its match to your 401(k). Time to ramp up your savings. "I'm telling people now is the time to save even more," says Marc Soss, a tax and estate planning lawyer in Sarasota, Fla. "You're going to need it for tomorrow."
Your Money Matters Monday
November 17, 2008
IRS 'Blue Light Special' May Expire Sooner Than You Think
When is the last time you legally paid 0% tax on income? The problem is, millions of Americans who have the opportunity to do so this year are not even aware of it. Five years ago, in order to jump-start the economy and get us out of the post-9/11 recession, Congress temporarily slashed the tax rate on long-term capital gains. The top rate of 20% was cut to 15%; individuals in the two lowest income tax brackets would pay even less- just 10%. Then, for one year only -- 2008 -- the 10% rate would drop to zero. Furthermore, the same rates would apply to dividends paid on most shares of corporate stock. The party was scheduled to be over at the end of this year, when rates would revert back to their original levels. But in 2006, for reasons too complex to go into here, Congress voted to extend them through 2010. Although you might not be in a low-enough income tax bracket to take advantage of the 0% long-term capital gains rate, odds are you know someone who is. An adult child, for instance. Here’s one scenario, according to attorney Marc Soss in Bonita Springs, Fla.: Assume mom and dad invested $10,000 in a mutual fund 10 years ago. Today it’s worth $20,000. Mom and dad are in the 30% tax bracket, so if they sell the mutual fund shares, they’ll lose 15% of the profit (roughly $1500) to capital gains tax. Instead, they make a joint gift of the shares to their daughter, who just graduated from college in June. ) Because daughter will only be employed half the year and isn’t earning that much in her first job, she’ll fall into the 10% income tax bracket for 2008. As a result, when she sells the mutual fund shares for $20,000, she owes no tax on the gain. Voila! Mom and dad have given their daughter “a $20,000 gift for the price of $10,000,” says Soss. In order for this to work the child must be older than age 19, or at least age 24 if she is a full-time student and still declared a “dependent” on mom and dad’s income tax return. Otherwise, the so-called “kiddie tax” rules apply and the child will be taxed at the same rate that mom and dad would pay. Soss, a navy reservist who’s served multiple tours of duty in Afghanistan, says the same strategy “would substantially benefit people in the military who are deployed” in a combat zone. That’s because income earned in a war zone is tax-free. Even if a spouse back at home worked, there’s a good chance the couple’s joint income would fall into one of the two lowest income tax brackets. “Say I’m deployed,” says Soss. “My parents could gift me stock. I could sell it” and not have to pay any capital gains tax. Retirees are another group whose income might be low enough to allow them to take advantage of the 0% tax rate on long-term capital gains and dividends. Let’s say you routinely send money to help your parents who are retired, living on Social Security, and fall into the 15% tax bracket. “An easy way to help support them is by making a gift of appreciated stock. It’s better than giving them cash,” advises Soss. From a tax standpoint, it not only benefits mom and dad, it benefits you, the child, since you’re probably in one of the higher tax brackets. As a result, if you sold the stock, you’d get hit with a 15% tax on the gain. In contrast, mom and dad can sell the stock and keep the entire amount. The net result is you’re able to get more money into mom and dad’s hands on an after-tax basis. Another strategy for retirees is to reduce the amount of income you’re living on so that you fall into one of the two lowest income tax brackets. You might accomplish this by delaying the onset of Social Security benefits, or (provided you’re not over the age of 70½) by not taking withdrawals from retirement accounts such as a 401(k), IRA, 403(b), etc. Instead, Soss recommends you sell appreciated assets -- stocks, bonds, mutual fund shares -- in taxable accounts. Provided you’ve owned an asset for at least a year, you’d pay no capital gains tax on the profit you make when you cash it in. Caution! You don’t want to go overboard with this. If an individual in the 10% or 15% tax bracket reaps too large a capital gain, it could throw them into a higher tax bracket and negate the whole strategy. Soss recommends you “sit down with a CPA and calculate” how large a capital gain you can safely declare. One final note: Although he admits it’s his personal opinion, Soss thinks that the reduced tax rates on dividends and capital gains might disappear sooner than expected because “one of the positions President-elect Obama ran on is to increase… the tax on the wealthy.” While the political rhetoric is that stock dividends are largely earned by high-income investors, this is far from the case. Millions of individuals own mutual funds that hold stocks and other assets. These folks have enjoyed smaller tax bills on the dividends paid on the stock owned in their funds because these are passed through to investors. They’ve also been paying less tax on the capital gains their mutual funds report as a result of selling bonds, stocks, and other long-term assets. Soss is so convinced the new administration will make raising the capital gains tax a priority, he’s recommending upper-income clients consider selling any capital asset that’s worth more today than what they paid for it “to lock in today’s capital gains rate.” If you really love your stock/bond/mutual fund/etc. and are convinced it’s a good investment, you can buy it back immediately. As Soss explains, as long as the “stock has gone up, there’s no ‘wash sale’ rule. You can buy it back 10 minutes later.” Although you’re “paying capital gains tax of 15%, we don’t know what capital gains tax will be in the future. What you’ve done is lock in a higher cost basis.”
The Last Bush Tax Cut
Ashlea Ebeling , 01.30.08
It sounds like a pitch for a sham tax shelter: Sell stocks for a profit, and pay no capital gains tax. But it's not. It's legal, and it's the last of the capital gains tax cuts President George W. Bush pushed through in 2003 to take effect. Beginning Jan. 1, 2008, taxpayers whose income is low enough to keep them in the 10% or 15% ordinary income tax bracket, will pay a 0% tax rate on gains from the sale of stocks, funds and some other assets (such as a vacation home) they've held a year or more. Like the rest of Bush's tax cuts, the 0% rate expires at the end of 2010--and might disappear sooner if Democrats gain control of both ends of Pennsylvania Avenue in the November elections. So act this year. "For those who can use the 0% rate, there is a sense of urgency," says Clifford Caplan, a financial planner with Neponset Valley Financial Partners in Norwood, Mass. So who can get this freebie? Couples with taxable income--that's income after all exemptions and deductions--of up to $65,100 for 2008 and singles with up to $32,550 in taxable income will get the full benefit of the 0% rate. That taxable income limit includes the capital gains themselves, warns Kaye Thomas, author of "Capital Gains, Minimal Taxes." So you can't pay a 0% rate on $1 million in capital gains just because you have no other income. A couple with only capital gains would have the first $65,100 of their gains taxed at 0% and the rest at 15%. Compared to last year's 5% capital gains tax rate for low-bracket taxpayers, that's a maximum tax cut of $3,255--a lot more than the "stimulus" tax rebate Congress and Bush are talking about giving you. Note that this break works best if your main (or only) source of income is from capital gains. That's because other income is counted first in the income limit. So a couple with $55,100 in other taxable income (say from salary, or from pensions and Social Security) would get only their first $10,000 in gains taxed at the 0% rate. Gains above that would be taxed at 15%. If you want to take advantage of the 0% rate, start thinking of ways to reduce your income this year. A 50-something couple, for example, can cut their 2008 taxable income by $41,000 if they both make the maximum contributions to their 401(k)s. Count in other deductions (mortgage interest, state and local taxes) and their standard exemptions, and a couple earning $100,000-plus might easily take advantage of the 0% rate. Retirees, too, can make good use of this break, particularly if they don't yet have to take required minimum distributions from their pre-tax IRAs. (Required distributions start after age 70 1/2.) A couple could put off taking any distributions from their IRAs and live instead on capital gains realized from their taxable accounts--gains "taxed" at 0%. Adult children, who are out of college, but not yet earning much, may also be able to use the break. Well-off parents or grandparents can give these struggling 20-somethings appreciated stock to sell at the 0% rate, instead of the parents' or grandparents' 15% rate. But watch out for gift tax limits; each parent can give $12,000 a year in stock (cash or other gifts) to each child. Give more in a year, and you'll use up some of your lifetime exemption from gift and estate taxes. Also, don't try this trick with younger kids. New "kiddie tax" rules provide that children are taxed at their parents' higher tax rate through age 18 or age 23, if they're full-time students. What if you qualify for the 0% gains rate but don't want to sell your stock now? Maybe you don't need the cash. Or maybe you think that the stock will go higher? Not to worry, you can sell shares at a profit and buy back the same stock immediately, replacing your old holdings with new stock with a higher basis. (No, the "wash sale" rules, which make you wait 31 days to replace stocks, don't apply if you're selling for a gain.) "It's a great hedge against higher capital gains tax rates in the future, says Marc Soss, a tax lawyer in Tampa, Fla. But don't sell that stock without thinking through all the financial consequences, warns Soss. For younger folks, increasing income by recognizing capital gains could hurt future eligibility for financial aid, say if grad school is in the picture. For older folks, the move could make previously non-taxed Social Security benefits taxable.
----------------------------------------------- Supporting the Troops Employers who offer military differential pay should also offer tips for dealing with the tax rules.
HR MAGAZINE • July 2007• Vol. 52, No. 7
Society for Human Resource Management When U.S. Naval Reserve Lt. Marc J. Soss was called to active duty last year, his employer gave him more than a goodbye. Because Soss earned much more as a tax attorney than as a military officer, his law firm offered him a stipend for six months to help fill the gap between his military pay and his regular salary. The firm also gave Soss money it received from a Florida grant program for private-sector employers who pay workers called to active duty. Soss, who left his family in Sarasota, Fla., to serve in Afghanistan, says that “it was very generous” of his firm to supplement his military pay. He returned to the law firm in May after 14 months of military duty. The payments that Soss received from his employer, called military differential pay, are strictly voluntary. The law that protects the civilian jobs and benefits of employees called to active duty—the Uniformed Services Employment and Reemployment Rights Act of 1994, or USERRA—doesn’t require employers to pay anything to employees called to active duty with the Reserves or the National Guard. But many employers offer military differential pay. Some even continue to pay full salary, whether it’s for two weeks of regular training or two years in a war zone. Employers’ reasons for offering military differential pay can range from patriotism or a wish to ease soldiers’ financial burdens to a desire to retain employees after their military duty ends. “If your human capital strategy is based on recruiting and retaining employees, military differential pay is an effective method for developing loyal employees,” says Air Force Maj. Rob Palmer, spokesman for the National Committee for Employer Support of the Guard and Reserve (ESGR), a Department of Defense agency that promotes cooperation between service members and their civilian employers. Although paying a military differential is generally a minimal administrative task for employers, it can present some unusual circumstances for employees, particularly at tax time. HR can make sure that employees called to active duty understand that they will be taxed on military differential payments. And those taxes can be easy to overlook throughout the year because federal tax withholding is not permitted on military differential pay. A Variety of CalculationsMore than 580,000 Guard and Reserve members have been called to active duty since the terrorist attacks in September 2001. (Each state’s National Guard can be mobilized by a governor in peacetime for state emergencies or by the president in times of war. Each military branch has a Reserve that can be mobilized only by the president.) It’s uncertain how many of the 80,000-plus Reserve and National Guard members on active duty as of late April were receiving differential pay. Soss estimates about 10 percent. In a Society for Human Resource Management Weekly Online Survey conducted in April, 45 percent of the randomly selected HR professionals who responded said their organizations offer military differential pay, 10 percent said they pay full salary and benefits for part of the employee’s time on active duty, 6 percent said they do so for the entire period of activation, and 35 percent said they provide no direct compensation support to employees called to active duty. According to a 2003 Mercer Human Resource Consulting survey, 68 percent of 201 employers provided military differential pay, 8 percent paid full salary, and 23 percent paid nothing. Some employers make military differential payments for a limited time, such as one year, while others pay for the full period of deployment. Generally, private-sector employers pay the difference between civilian and military salaries, while public-sector employers pay the difference between the civilian salary and total military income, which includes pay and allowances for housing, food, clothing, family separation and hazardous duty—reducing the size of the differential, Palmer says. State laws also play a role. In Arizona, for example, public-sector employers are required to pay called-up service members the difference, if any, between their civilian pay just prior to leave and their military pay and allowances for the duration of deployment. Massachusetts requires public sector employers to give 17 days of paid military leave for service in the Reserves and 34 days for service in the Massachusetts National Guard. Other states, including Pennsylvania, pay a bonus to returning Reserve and Guard members. Under USERRA, employees can use accrued vacation and personal time to continue receiving pay during military leave, although employers can’t require them to do so. Employees cannot use sick leave, however, unless the employer allows all employees to use sick leave for other types of absences. Not for EveryoneSince differential pay kicks in only when a civilian salary is higher than a military salary, middle-income professional and technical jobs are most affected, according to the Mercer survey. Two categories of employees are largely outside the scope of differential pay: Executives are rarely members of the Reserves or the Guard, and lower-paid employees typically make more in the military than in civilian life. The military basic-pay grades most likely to trigger military differential pay, according to Soss, are E1 (entry-level Army private, for example) through E4 (Army specialist or corporal), which pay $15,612 to $24,744 annually, and O1 (entry-level officer) and O2 (Army first lieutenant, for example), which pay $29,628 to $47,566 annually. Those figures do not include military allowances, which, if figured into the formula for military differential pay, can substantially reduce or eliminate the spread between civilian and military income. Also part of the calculation is a 2006 federal law that gives Guard and Reserve members various new benefits, including a government-funded pay differential of up to $3,000 per month upon completion of a certain period of involuntary active duty. The Tax ConsiderationsEmployers’ generosity to called-up employees does come with a catch, however. Military differential pay, like military pay (though not allowances or combat pay), is taxable. But the Internal Revenue Service (IRS) has long held that called-up employees are “terminated,” so any payments they get from the employer are not wages—and thus are not subject to withholding for federal income, Social Security and unemployment taxes. With no taxes taken out of military differential pay, an employee who is called to active duty—depending on the amount of differential pay received and his or her tax bracket—could face an unexpectedly large tax bill come April 15. Although deployed employees could save part of their differential pay as it is received, “the last thing on their mind is putting away some of their money for income taxes,” Soss says. HR professionals can help called-up employees deal with this tax anomaly by spelling out their options before they leave for military duty. “The most important thing is to explain that this money is taxable,” says Tom Reeder, benefits tax counsel at the U.S. Treasury Department. HR can also help employees estimate the amount of tax that will be due. The simplest option is to pay the tax in a lump sum when filing annual income tax returns. Soss says he put aside money in a separate account to pay for taxes and emergencies before he left. But not everyone can afford that option. It’s also fairly easy to adjust the withholding on one’s military pay to take out the estimated tax due on differential pay. Withholding can also be adjusted on a spouse’s pay or the service member’s civilian pay upon his or her return. Again, an employer can help an employee consider the options and do the calculations. Another option is to make estimated federal (and state, if applicable) tax payments four times a year, as many selfemployed people do. Many tax experts dismiss this option as impractical, however, especially for Reservists and Guard members stationed overseas. Slightly easier is to arrange, prior to deployment, automatic electronic payments from a bank account to the IRS. Employees must estimate how much each payment should be and make a final adjustment when filing annual income taxes. A Chancier Tactic More controversial than making estimated tax payments are so-called voluntary withholding agreements, in which an employer and an employee agree to have taxes withheld as normal during military leave. Some tax experts say it’s legal; others aren’t so sure. “It might be OK, but I’d skirt away from it,” says Jason Kovac, compensation practice leader at WorldatWork, a compensation trade association based in Scottsdale, Ariz. Reeder of the Treasury Department adds, “It’s not technically allowable with the civilian employer.” Nonetheless, some employers treat employees on military leave as active employees and continue to withhold taxes on their extra pay. “This ensures that when they return they are not faced with a large tax burden, as they might be if employees are terminated or their wages had been paid on [Form] 1099s and not taxed during their activation,” says Verizon spokesman Alberto Canal. Some tax experts say the IRS is unlikely to challenge the practice because it’s receiving tax money. Tax attorney Gary Glenn of the Detroit based law firm Miller, Canfield, Paddock and Stone PLC says, “I don’t see a reason for anyone to get upset as long as both the employer and employee have consented to it.” Off the Job—But How Far Off? The IRS’s ban on withholding taxes from military differential pay stems from a 1969 ruling that considers employees called to active duty as terminated. Any employer payments to these employees are technically not wages and thus not subject to withholding. This interpretation is at odds with USERRA, which says that such employees are on a leave of absence but defers to the IRS on tax issues. Making matters more complicated, the IRS treats military differential pay as wages for pension purposes. “There’s an inherent problem with the IRS theory of this,” says James B. Thelen, in the Lansing, Mich., office of Miller Canfield. However, the IRS is unlikely to change its ruling because it’s not a high priority, attorneys say. “I think any kind of change would have to be legislative,” says Treasury’s Reeder. Pending in Congress is the Active Duty Military Tax Relief Act (S. 455), which would treat differential payments as wages for workers on active duty for more than 30 days. A similar bill died in the last session of Congress. The lack of withholding isn’t necessarily a bad thing, says Patricia McDermott, a tax expert and partner in the Washington, D.C., office of Venable LLP, because “more money ends up in the pocket of the employee” during deployment. “Changing the revenue ruling—many would view that] as a tax increase. … The IRS wants to be sensitive to not raising taxes on people who are fighting a war.”
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Marc J. Soss, Esquire
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