Knowing Your Bottom Line in a Negotiation

Event: ProVisors Panel on Negotiation
Venue: Calabasas Country Club
Location: Calabasas, Los Angeles, Ca
Speaker: Attorney Douglas Schreiber of Anker, Hymes & Schreiber, LLP

Transcription:

You need to know your bottom line.  Nowadays everybody has their heads full of all kinds of acronyms, so I am going to throw one out there:

BATNA = Best Alternative To a Negotiated Agreement

To me it is a fancy way of saying “bottom line”. That is really what it is talking about. The concept of the best agreement; what alternatives do I have?  If I am a supplier and negotiating with a distributor, do I have other people in my distribution line? Do I have to take this deal, or do I have other places to go if I don’t take this deal?

In the context of litigation (which I deal a lot with), what are my alternatives? Typically in a lawsuit if I don’t settle, I go to trial. Try to evaluate what are your options in terms of going to trial. What is your likelihood of success?

For more information about our law firm and please contact with our Real Estate Attorney in Los Angeles.

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Attorney Larry Hymes Recognized as a Martindale-Hubbell Top Rated Lawyer

AV Preeminent AwardMartindale-Hubbell®  has designated our Estate Planning Attorney in Woodland Hills, Larry Hymes with an AV Preeminent® rating which serves as an objective indicator that a lawyer has demonstrated ethical standards and professional ability and is used by buyers of legal services to justify their hiring decisions. Attorney Larry Hymes of Anker, Hymes & Schreiber, LLP is one of a select group of Southern California lawyers to receive this well-earned distinction.

About Martindale-Hubbell® Peer Review Ratings™:
Martindale-Hubbell® Peer Review Ratings™ reflect a combination of achieving a Very High General Ethical Standards rating and a Legal Ability numerical rating. A threshold number of responses is required to achieve a rating.

The General Ethical Standards rating denotes adherence to professional standards of conduct and ethics, reliability, diligence and other criteria relevant to the discharge of professional responsibilities. Those lawyers who meet the “Very High” criteria of General Ethical Standards can proceed to the next step in the ratings process – Legal Ability.

Legal Ability ratings are based on performance in five key areas, rated on a scale of 1 to 5 (with 1 being the lowest and 5 being the highest). These areas are:

  • Legal Knowledge – Lawyer’s familiarity with the laws governing his/her specific area of practice(s)
  • Analytical Capabilities – Lawyer’s creativity in analyzing legal issues and applying technical knowledge
  • Judgment – Lawyer’s demonstration of the salient factors that drive the outcome of a given case or issue.
  • Communication Ability – Lawyer’s capability to communicate persuasively and credibly
  • Legal Experience – Lawyer’s degree of experience in his/her specific area of practice(s)

The numeric ratings range may coincide with the appropriate Certification Mark:

  • AV Preeminent® (4.5-5.0) – AV Preeminent® is a significant rating accomplishment – a testament to the fact that a lawyer’s peers rank him or her at the highest level of professional excellence.
  • BV Distinguished® (3.0-4.4) – BV Distinguished® is an excellent rating for a lawyer with some experience. A widely respected mark of achievement, it differentiates a lawyer from his or her competition.
  • Rated (1.0-2.9) – The Peer Review Rated designation demonstrates that the lawyer has met the very high criteria of General Ethical Standing.

For more information about our Woodland Hills Estate Planning Attorney, please contact us at (818) 501-5800.

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Is Your Agreement Worth the Paper it is Written On?

California Supreme Court logoThe California Supreme Court recently answered that question with a resounding “No”.  In one of its early decisions in 2013, Riverisland Cold Storage vs. Fresno-Madera Production Credit Association, the Court rejected what had previously been a long standing exception (since 1935) to what is known as the “parol evidence rule”.  In brief, the parol evidence rule restricts one’s ability to present evidence, in certain situations, that would contradict, alter or add to the terms of a written agreement.

The situation involved a couple who feel behind on their loan payments.  They entered into an agreement which involved the lender agreeing not to take any enforcement action provided they continued to make the newly agreed upon payments.  A representative of the lender told the couple, among other things,  they would have a two year extension on the loan.  When the couple was presented with the mountain of paperwork for them to sign which documented the agreement (which they, not uncommonly, did not read), the actual additional term was three months.

Ultimately the couple sued the lender, claiming that they had been defrauded in that they were told something contrary to what was in the agreement they signed.  The Supreme Court, in a break from precedent that had been in effect for more than 75 years, held the couple could proceed with their claim.  The court did note though that the burden of proving the necessary elements of their claim was significant.

If you have a question regarding this decision or a specific agreement, you can contact our Contract Attorney in Woodland Hills at Anker, Hymes & Schreiber, LLP.

Announcing the Change of Firm Name from Anker Reed HSC to Anker, Hymes & Schreiber, LLP

Anker, Hymes & Schreiber, LLP logoLarry S. Hymes and Douglas K. Schreiber are pleased to announce that Anker Reed HSC has become Anker, Hymes & Schreiber, LLP and will continue the Anker Reed HSC tradition of serving your legal needs in the areas of:

The law firm’s headquarters will remain at its current location:

21333 Oxnard Street, First Floor
Woodland Hills, CA 91367
Phone: (818) 501-5800
Fax: (818) 501-4019

7 Benefits of a Life Insurance Trust

  1. Provides immediate cash to pay estate taxes and other expenses after death.
  2. Reduces estate taxes by removing insurance from your estate.
  3. Inexpensive way to pay estate taxes.
  4. Proceeds avoid probate and are free from income and estate taxes.
  5. Gives you maximum control over insurance policy and how proceeds are used.
  6. Can provide income to spouse without insurance proceeds being included in spouse’s estate.
  7. Prevents court from controlling insurance proceeds if beneficiary is incapacitated.

For more information about Life Insurance Trusts, you can contact our Estate Planning Attorney in Woodland Hills, Los Angeles today.

6 Tips on How to Handle the Responsibility and Potential Liability of Being a Trustee (Part 2) by Rob Cohen

Here are the additional tips continued from “BEING A TRUSTEE IS A THANKLESS JOB: Six Tips on How to Handle the Responsibility and Potential Liability (Part 1)” that might help make your trustee-ship progress more smoothly.

4) Examine the inventory. It is not uncommon for people to set up trusts and then do nothing, assuming that since the documents have been signed the trust is effective. This is not accurate; not only must the trust document be executed, but then the assets must be transferred into the trust, (you must “fund the trust”). Failure to fund the trust is especially common with do-it-yourself websites and computer programs; people mistakenly believe that just having a trust is sufficient. Before a trustee can administer the trust, he or she needs to have assets to administer. When examining the assets, here are some action items to consider.

• If the decedent had a safe deposit box, take possession of it and its contents.
• Consult with banking institutions in the area to find all accounts of the deceased.
• Check for cash and other valuables that may be hidden around the home.
• Locate and inventory all real estate deeds, mortgages, leases, and tax information.
• Provide immediate management for rental properties.
• Locate all household and personal effects and other personal property in order to inventory and protect them.
• Collect all life insurance proceeds payable to the estate.
• Find and safeguard all business interests, valuables, personal property, and important papers.

Ultimately, do your best to make sure that the trust’s assets are actually in the trust. If you identify assets that were not transferred to the trust, ascertain whether they should have been.

5) Take emotion out of the equation.In many situations you can be asked to be a trustee for clients, parents, brothers, sisters, and other family members or friends. When the emotional ties are close, you cannot play favorites. As a trustee you have a huge responsibility and significant exposure. Your actions will be scrutinized and challenged by those beneficiaries who feel they were treated unfairly. Your best bet to avoid personal liability is to be unbiased when dealing with trust matters. If you are not sure about your actions and whether they reflect any bias, ask your attorney.

6) Obtain adequate liability and fidelity insurance. No one is immune to lawsuits, and that includes you in your role as a trustee. To protect yourself, obtain errors and omissions insurance, which protects against claims by beneficiaries that you failed to fulfill your fiduciary duty in the management and administration of the trust. Without the protection of errors and omissions insurance, your personal assets could be “exposed” if a disgruntled beneficiary sues you. It is better to have insurance to protect you and your assets.

Being a trustee is not always an appreciated job, but it certainly is a job with tremendous responsibility. Just remember to be mindful of your duties and ask for advice when in doubt. Trusts contain valuable assets, and as dysfunctional families do not get better when someone passes away, trustees easily can become embroiled in nasty litigation. You may not be able to avoid it, but at least you’ll be able to protect yourself.

For more information on trusts, wills, probate, and the role of trustees, contact Rob Cohen at (818) 501-5800 or emal him at rcohen@ahslawyers.com.

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Alternative Minimum Tax: The Effect on Itemized Deductions

 

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This is also part of third section of  Anker Reed HSC’s blog series entitled “To Incorporate or Not to Incorporate? That is the Question” regarding the alternative minimum tax and its effect on medical and miscellaneous itemized deductions.

An additional issue with regard to the deductibility of both medical and miscellaneous itemized deductions is the imposition of the Alternative Minimum Tax. “Congress enacted the alternative minimum tax (AMT) in 1969 to make wealthy taxpayers pay their fair share instead of using tax shelters and other means to reduce, or even eliminate, their federal tax liability.” (Kern, 1999). “The alternative minimum tax generally can be described as a flat tax rate which is imposed on a broader income base than the taxable income yardstick used for the regular corporate tax.” (Lind, supra note 11 at 15).  “The tax is designed to ensure that all taxpayers pay at least a minimum amount of taxes.” (Blacks Law Dictionary, 1990). “Without the alternative minimum tax, some of these taxpayers might be able to escape income taxation entirely. In essence, the AMT functions as a recapture mechanism, reclaiming some of the tax breaks primarily available to high-income taxpayers, and represents an attempt to maintain tax equity.” (Commerce Clearing House, 1999).

The AMT is paid in addition to any other income tax imposed and calculated as the excess of the tentative minimum tax for the taxable year over the regular tax for the taxable year. The definition for tentative minimum tax, though, depends on the status of the taxpayer, whether noncorporate or corporate. The tentative minimum tax for the noncorporate taxpayer is the sum of 26% of so much of the taxable excess as does not exceed $175,000 plus 28% of so much of the taxable excess as exceeds $175,000. The Internal Revenue Code also provides for tax exemption status, evidencing the congressional intent of taxing the high-income taxpayers. If the taxpayer’s taxable income does not exceed $45,000 for taxpayers filing a joint return, $33,750 for the individual taxpayer, or $22,500 for the married taxpayer filing separately, the taxpayer is exempt from alternative minimum tax treatment. This means that, depending on the individual taxpayer, there could be an exemption from AMT for the lower income brackets. After the $33,750 exemption, the next $175,000 will be taxed at a rate of 26%. Taxable income exceeding this will be taxed at 28%. At the corporate level, the first $40,000 of taxable income is exempt from AMT treatment.

As previously discussed, the PSC will have little or no taxable income as a result of “zeroing-out.” Therefore, no discussion of corporate AMT is necessary.

When analyzing the application of AMT to the noncorporate taxpayer, the focus of the discussion turns to the medical and miscellaneous itemized deductions. For Regular Income Tax (“RIT”) purposes, medical expenses are deductible when they exceed 7.5% of adjusted gross income (“AGI“). For AMT purposes, medical expenses are deductible only when they exceed 10% of AGI. With regard to miscellaneous deductions, the difference between RIT and AMT is even more conspicuous. For RIT purposes, miscellaneous itemized deductions (specifically unreimbursed employee business expenses) are deductible to the extent they exceed 2% of AGI. Under AMT, however, miscellaneous itemized deductions are not allowed. This is significant since an employee working in a noncorporate structure will be considered an employee for whom she provides services.

Therefore, any business expenses she incurs will be considered unreimbursed employee business expenses, shown as miscellaneous itemized deductions subject to the 2% of AGI limitation and rendered non-deductible for AMT purposes. Under the PSC, these business expenses escape both the RIT limitation and the AMT exclusion.

* For specific inquiries regarding a business legal matter that you may have, you are welcome to visit our Tax Attorney in Los Angeles.

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The Tax Benefits of Incorporation to the Entertainer (Part 1)

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This is the second section of Anker Reed HSC’s blog series entitled “To Incorporate or Not to Incorporate? That is the Question” regarding the tax benefits of incorporation to the entertainer.

“In general, the tax benefits available to loan-out corporations compare favorably with those available to individuals under their two unincorporated alternatives:

  1. providing services as a direct employee of the unrelated party consuming the services
  2. providing services as a sole proprietor

“(La France, 1995)

The concepts employed to determine a corporation’s tax liability are the same broad principles of gross income, deductions, assignment of income, timing, and characterization of the income employed by the individual taxpayer. Taxable income is gross income less certain authorized deductions. Gross income is all income from whatever source derived. Internal Revenue Code § 61 provides a non-exclusive list of sources of income which qualify as gross income under that section, including compensation for services, gains derived from dealings in property interest, and dividends.

From gross income, deductions are made if specifically allowed by the Internal Revenue Code as properly deductible. Such deductions include those ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, deductions on interest paid during the taxable year and ordinary and necessary expenses paid or incurred during the taxable year for the production of income.

* For specific inquiries regarding a tax planning legal matter that you may have, you are welcome to visit our Los Angeles Tax Planning Attorney services page.

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To Incorporate or Not to Incorporate? THAT is the Question (Part 6)

This is part 6 of Anker Reed HSC’s blog series entitled “To Incorporate or Not to Incorporate? That is the Question”.

The tax implications for an LLC (limited liability corporation) are identical to that of a partnership. ” For federal income tax purposes, the LLC is not a separate taxpaying entity and is not subject to tax at the entity level. Instead, the LLC’s members report their respective distributive shares of LLC income, gain, loss, and deduction and credit on their individual federal income tax returns.” (Continuing Education of the Bar of California, 1999)

The tax treatment of an LLC by the state of California may also be problematic to the entertainer. Whereas the LLC and partnership will pay the same annual franchise tax that a corporation pays ($800), an LLC will be charged, pursuant to California Revenue & Taxation Code § 17942(a)-(b), an additional fee if there is net income exceeding $250,000. The additional fee is specified in the California Revenue and Tax Code and provides for the fee to be graduated at specified levels of income. Taking our earlier example of the partnership that has $1,000,000o taxable income, should this partnership be an LLC, there would be an additional fee of $5,190 assessed.

Other popular business entities include sole proprietorships, general partnerships, limited partnerships, and limited liability partnerships. It is not important that we analyze each of these entities with regard to the tax effects. What is important, though, is that we note that over time these entities have been regarded as being inappropriate for application to the entertainer. For example, the sole proprietorship provides no tax benefit insofar as taxes are assessed on the sole proprietor at the individual rate.

Furthermore, the purpose of this blog series is to assess the benefits and detriments of incorporation to the entertainer. An examination of all of the business entities and their utility to the entertainer would be of no use, for attorneys and accountants have long-held that an entertainer’s decision is solely whether to incorporate or remain a non-taxpayer. Therefore, the main consideration will be whether incorporation is beneficial to the entertainer as taxpayer.

* For specific inquiries regarding a business legal matter that you may have, you are welcome to visit our Los Angeles Business Attorney services page.

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To Incorporate or Not to Incorporate? THAT is the Question (Part 4)

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This is part 4 of Anker Reed HSC’s blog series entitled “To Incorporate or Not to Incorporate? That is the Question”.

“The desire to avoid employee classification, and to obtain the benefits of the corporate form and independent contractor status, often motivates workers to create an employee loan-out corporation.” (La France, 1995)

Primarily, though, an entertainer will be considering the formation of a business entity for the purpose of creating a more beneficial tax structure. By filtering income through a business entity and with proper Tax Planning advice, different tax advantages arise. Yet, the structures of a limited liability company (“LLC“) and a partnership will not provide the desired tax benefit to an entertainer.

A partnership includes a syndicate, group, pool, joint venture, or other unincorporated organization through or by means of which any business, financial operation, or venture is carried on, and which is not, within the meaning of this title, a corporation or a trust or estate.

* For specific inquiries regarding a business legal matter that you may have, you are welcome to visit our Business Organization and Business Formation legal services page.

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