Weinberg & Company




Following are a few important issues our accounting professionals wanted to briefly share with you. As always, should you desire more in-depth information please feel free to contact us. 

No Harmony:


The King of Pop, Michael Jackson, died in Los Angeles on June 25, 2009. Generally, federal estate tax is calculated on the net asset value of an estate at the date of death. The federal estate tax exemption for decedents dying in 2009 was $3.5 million, so any excess value would be subject to the estate tax. The maximum federal rate was 45% of net assets.

The Jackson estate is said to have filed a federal estate tax return claiming a net asset value of $9 million. The IRS believes that amount is substantially understated and issued a Notice of Deficiency. The IRS is demanding $702 million-$505.1 million in estate taxes and $196.9 million in penalties. The Jackson Estate is contesting the IRS in U.S. Tax Court (017152-13).

Independent appraisers are routinely brought in to determine the value of estates as was done in this instance. But, determining the value of hard assets can be difficult when the decedent is a celebrity. For example, was Jackson’s Neverland Ranch a distressed, neglected property, or was it worth much more because he lived there?

It gets more complicated. How do you calculate at the date of death the value of a decedent’s image, likeness, and legacy? At the time of his death, it was said that Jackson was spending more than he was earning and was hoping a world tour might rekindle his popularity as well as his beleaguered earnings.

No one can say if he would have succeeded. It is now clear, however, that his popularity and earnings soared after his death. His estate collected over $170 million in revenue for 2011 and $140 million in 2012. Those numbers, though unknown at the time of the probate filing, are likely to be used by the IRS to defend its position that the estate was undervalued in 2009. But, keep in mind this is about Estate Tax, not Income Tax.

It can get pretty confusing, but that is why we publish Simply Stated. Hope this helps:

The Jackson Estate says their numbers are easy as ‘ABC’, but the IRS says they’re ‘Bad’. When it comes to the estate tax, the IRS ‘Never Can Say Goodbye’ and adheres to a policy of ‘Don’t Stop Till You Get Enough’. The Estate says the IRS ‘Wanna Be Startn’ Somethin’, but is asking a Tax Court to tell the IRS to ‘Beat it’.

Finally, ‘This Is It’, the real ‘Thriller’: if only Michael had passed just seven months later, in 2010 (the year that the federal estate tax was fully repealed), there would be no dispute at all. His estate would owe nothing.


The Securities and Exchange Commission (SEC) approved the New York Stock Exchange’s (NYSE) proposed rule change to section 303A.07(c) allowing  companies listing on the NYSE  by way of an IPO, carve-out or spinoff transaction a one-year transition period to comply with the NYSE internal audit requirements.

NYSE requires its listed companies to maintain an internal audit function that provides management and their audit committee with assessments of the company’s risk management processes and system of internal control.

The rule change is consistent with the current rule that allows a transition period for companies newly listing with the NYSE after transferring from another national exchange, such as NASDQ.

Other exchanges, such as NASDAQ, do not currently have an internal audit requirement. In earlier issues of Simply Stated it was reported that NASDAQ had proposed adopting a similar proposal, but withdrew it when smaller companies strongly voiced their concerns during the comment period. The costs to implement and maintain such an internal audit function would have greatest impact on smaller listed companies. It is not certain whether NASDAQ will re-submit its internal audit proposal.

Up to $1-billion in tax refund claims at stake

The U.S. Supreme Court will hear arguments to determine whether the payroll tax, commonly known as FICA, applies to certain severance pay, particularly supplemental unemployment benefits (SUB) payments. SUB payments are amounts paid to employees laid off involuntarily due to work force reductions, discontinuation of operations and plant closures.

The IRS maintains that almost all severance payments are wages and subject to FICA tax. In the 2008 case of CSX Corp. v. United States, 518 F.3d (Fed Cir 2008), a U.S. Circuit Court of Appeals supported that IRS position. Late last year, however, in United States v. Quality Stores, 693 F.3d605 (6th Cir.2012), the 6th Circuit Court ruled that SUB payments are not subject to FICA and that the creditors of now defunct Quality Stores and its former employees could file for refunds.

With two Federal Circuit Courts split on the issue, the high court granted certiorari, a decision to hear an appeal from a lower court.

A favorable high court ruling would mean a refund of about $800,000 for Quality Store creditors with an equal amount for their former employees. The government has more at stake. Exposure to other taxpayers could bring total refunds to $1 billion.

Affected taxpayers should preserve employment records and may need to promptly file protective claims to preserve their right to pursue refunds for open tax years.

The Supreme Court term began its term on the first Monday of October. All decisions are announced by the end of June.

Please contact our office if your need further information or assistance.

Governor signs bill:

California Governor Jerry Brown signed SB209 into law, thus reversing the controversial action of the state Franchise Tax Board to retroactively collect taxes. 

As reported in earlier issues of Simply Stated, California has offered a tax deduction for those who start, invest in, and eventually sell California small businesses. This deduction, available since 1993, allowed entrepreneurs and angel investors to exclude 50% of the gain on the sale of qualified small business stock. Last year, based on its interpretation of a state Appeals Court decision (Cutler v. Franchise Tax Board – [2012] 208 Cal. App 4th 1247) the California Franchise Tax Board issued FTB notice 2012-03 canceling this program.Instead of ending the tax incentive going forward, the tax board determined to retroactively collect back taxes from those Californians who had supported those small businesses since 2008. This 5-year retroactive tax, plus interest and penalties on what was re-characterized as “unpaid taxes”, was a punitive disincentive for California’s small business entrepreneurs and investors.
The issue gathered significant state-wide traction as well as national attention. Affected small business owners bandied together and succeeded in getting corrective legislation introduced, passed in both state houses and on the Governor’s desk.



Be sure to read: Investing in China – Has the Perfect Storm Passed?

This Featured Article by Managing Partner Corey Fischer appears in the current issue of Micro-Cap Review.

In the article, Corey discusses the latest developments involving China-based public companies, including the signing of an historic enforcement cooperation agreement that he describes as “a first step in the right direction.”

Will the sun once again shine on Chinese companies? Corey is optimistic, “the U.S.-China relationship is complex, but financial interests have a habit of trumping ideological differences.”

Click below to see Micro-Cap Review- full article is on page 60.



Simply the right choice


Weinberg & Company is a leading, international, full service, multi-office CPA firm serving clients throughout the United States and the Pacific Rim. Founded over two decades ago, the practice groups include: Assurance and Audit, Tax and Accounting, and Advisory Services. Weinberg has a depth of knowledge and experience to meet the needs of both public and privately held companies, high net worth individuals, entrepreneurs, family offices, and can provide customized business management services. www.weinbergla.com

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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related
penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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Corey Fischer
Firm Managing Partner



Bruce Weinberg
Florida Managing Partner


Jeffrey B. Engler

Director of Tax,
Los Angeles 




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