Monthly Archives: July 2014

Reviewing and Obtaining Credit Reports & Scores

Credit ReportReviewing your personal credit report on a regular basis is an important step in preventing and detecting identity theft.  Most people are not aware of the fact that Federal law entitles everyone to a free annual credit report.  The best and simplest way to obtain the credit report is not from one of the many trendy free credit report websites advertised to us via online and television ads.  Instead, you may access your truly free credit report at https://www.annualcreditreport.com/cra/index.jsp. This site gives you access to reports from all three of the consumer credit reporting companies.  You choose whether or not to access all three reports at once, or to spread them out over the course of a year.  From an identity theft standpoint, spreading the reports out is your best bet because it enables you to monitor the reports on a more continuous basis.  Once you obtain the credit report, you should review it to make sure that you recognize all the accounts, loans, and other information (such as places you have lived, etc.) on your report.  If you do find an inaccuracy, you should contact the consumer credit reporting company that provided the credit report.  Unfortunately, although you also have a legal right to obtain your credit score, federal law gives the consumer credit reporting companies the right to charge you a “reasonable fee” for the score.  So, unless you subscribe to one of the few emerging credit card companies that provide your credit score to you for free as part of an additional client service, you will probably be paying for your actual credit score.  At a minimum, be sure to take advantage of the annual opportunity to review your credit report to protect yourself from potential identity theft and other inaccuracies that may be hidden in your credit report.

Kim Murphy, CPA – Packer Thomas
Feel free to contact Kim with your questions:  kmurphy@packerthomas.com
(330) 533-9777

Packer Thomas Is Proud To Support The OFIC’s Ohio Scholars Program

ofic logoFor over 20 years, Packer Thomas has been a proud supporter of the OFIC’s Ohio Scholars Program.  The program is designed to help donors create and fund scholarships, through charitable contributions, for students in their community to attend an independent Ohio college or university.  The Ohio Scholars Program has assisted more than 17,500 students with over $30 million in scholarships and is the largest statewide program of its kind.  To learn more, visit The Ohio Foundation of Independent Colleges’ website at www.ofic.org

 

Fraud and the Trusted Employee

Fraud-2Business owners do not like to hear stories about fraud nor do they believe it could ever happen to them.  However, fraud is very real and very costly. What is even more upsetting is that the majority of employee frauds are committed by the most trusted employees.

Some of our more recent fraud cases involve trusted and long time employees. One involved a manager that was not performing the oversight function he claimed he was doing. The manager’s trusted staff person, of many years, committed fraud by purchasing personal items on the manager’s company credit card. Another case involved someone that had been with an organization for over twenty years and was stealing cash before the funds were taken to the bank. Failure to implement and failure to actually perform strong internal controls are the reasons these frauds were committed and went undetected for a long period of time.

Sound internal controls can help you to prevent or detect fraud. We can assist in combating fraud by 1) reviewing your internal controls and 2) performing data analysis.

Packer Thomas has experienced staff which specializes in reviewing various companies’ internal controls. Even if you are a small business with a limited number of staff, there are still effective controls that can be implemented to help prevent or detect fraud. Our review would help identify the need for added controls and to determine the effectiveness of the controls that are currently in place.

Packer Thomas also has the tools needed in order to perform effective data analysis. We use data extraction software to perform powerful tasks designed to identify high fraud risk areas. For example, we can test for vendor addresses that match employees’ addresses, gaps in numeric sequences, and trend data to identify potential erroneous transactions.

We would be pleased to meet with you to discuss our services as they relate to providing you the additional comfort you need to protect your business against fraud.

Nicole Ferraro, CPA
Principal – Packer Thomas
Feel free to contact Nicole with your questions:  nferraro@packerthomas.com
(330) 533-9777

Bross Trucking, Inc., et al v. Commissioner

truck (18)[1]TC Memo 2014-107

When corporations sell their assets, the sale is taxed twice:  once at the corporate level when the corporation pays tax on any gain on the sale and, again, when the proceeds of the sale are distributed to the owners as taxable dividends.  It is not surprising, then, that when a business sells all of its assets, sellers look for ways to alleviate this tax burden.

One such strategy is to take the position that the goodwill inherent in the transaction is attributable to the business owner’s personal efforts and that the goodwill is “owned” by the business owner.  That way, the business owner can sell the goodwill directly to the buyer and report the gain as long-term capital gain, taxed at lower tax rates, and subject to only one level of tax on the seller’s personal return.

There is an often-quoted case where that very position was taken and successfully argued in court.  It is known as the Martin Ice Cream case and the name has become synonymous with personal goodwill.  However, there have been some more recent cases that have made us feel the foundation was a little wobbly under us to continue thinking this position could be taken.

Then along came Bross Trucking.

The explanation of the decision in Bross Trucking not only refers to the Martin Ice Cream case, it illuminates and expands the reasons for attributing goodwill to the owner of the business.  The case was decided in favor of the taxpayer and I am happy about that.

The IRS tried to allege that Bross Trucking distributed goodwill to Chester Bross, the business owner.  As a distribution of appreciated property, it was a taxable event and the IRS assessed tax and penalties. The IRS also alleged that once Chester Bross received this goodwill from Bross Trucking, he made a gift of it to his sons to allow them to use it in the startup of a new trucking company.  For this, the IRS assessed even more tax and penalties.

The Tax Court determined the IRS failed to identify the specifics of the goodwill that was allegedly distributed to Chester Bross and failed to prove that this goodwill was an asset owned by the corporation in the first place.  It was further decided the goodwill was a personal asset of Chester Bross.  And, finally, it was decided he did not give it to his sons in a taxable gift.

The IRS referred to aspects of goodwill that include an established revenue stream, developed customer base, transparency of the continuing operations between the entities, established workforce including independent contractors, and continuing supplier relationships.

The court decided that the only attribute of goodwill owned by Bross Trucking was a workforce in place and that this was not transferred in the sale.  Nearly all the goodwill used by Bross Trucking was attributed to Chester Bross, as a direct result of his personal efforts and relationships.  Chester did not have an employment contract with the company, nor did he sign a non-compete agreement with it.  His experience and expertise were things he owned personally.

To me, all of this looks like good news for taxpayers.  What do you think?

Karen S. Cohen, CPA
Principal – Packer Thomas
Feel free to contact Karen with your questions:  kcohen@packerthomas.com
(330) 533-9777

 

The Importance of Being Involved in Your Community

CommunityWe hear it all the time that community involvement is important to be successful in life. It helps you connect with others, it improves lives and strengthens communities but most important is the intangible benefits of pride, satisfaction and accomplishment.  It warms your heart in knowing you are giving back. I am involved in various community events, as is our Firm, and I am also on several committees and Boards.

I take care in deciding whether or not to participate on a certain committee or Board so that I am not just saying yes to add the Organization to my list of involvement but rather I make sure it is something I am passionate about and one that I plan to be fully committed to and participate in.

At Packer Thomas, we really stress the importance of community involvement with all of our staff and Principals. This is evidenced by our Facebook page which reveals pictures of our community events. I am happy to join in on the fun and participate in the preparation. I gladly bring my family to support the event and have them share in the feeling of giving back. (Although at their young age they do not quite get it yet but one day they will). A lot of times they ask why we are attending a certain event and I explain to them that it is to help other people.

Sometimes I wish I could see things through my children’s eyes. They do not understand how many people in the world do need help. It is endearing and sometimes funny the comments they make about what I do and the volunteer time I spend. One time I was explaining that I had to go to a Board meeting and in their young minds they thought I meant a “Bored” meeting. Their follow up question was priceless…”But Mommy why would you want to go to a meeting to be BORED?”

I truly enjoy what I do and the fact that I volunteer to help others and Organizations follow their mission. I am very lucky that Packer Thomas understands the importance of giving back and being involved in our community because that allows me the opportunity to do so.

Nicole Ferraro
Principal