Feds Kill Merger Dead

AbbVie-Shire merger is officially dead.

Big inversion deal killed by a letter from the treasury department. The issue here is, how smart is it to get in a fight with someone who buys lawyers the way cops by doughnuts? Or some other more appropriate simile. (This was a difficult simile because I couldn’t think of anything as prevalent as government lawyers.) The answer is not very. The point is that even if you’re in the right and have a solid case, it doesn’t cost the fed real money to fight it out in court, but it costs you out the nose big time.  You’ll be bankrupt before the fed gives up. Hope you never get in the position where you have to choose between what’s right and survival.


Calculated Disarray

Look at the new format. Especially the photo montage right above. I call this calculated disarray, a term I picked up from on old TV show Man From Uncle, a rip off of the James Bond movies. The star’s hairdo was called “calculated disarray.”

The reason I like it for this blog is term provides a good description of being in business. As I described recently, being in business is more complex than even quantum physics because it doesn’t respond to axioms or formulas. Nothing is fixed. Everything is in movement at any time. In other words, calculated disarray fits us like a glove.

I forgot

I just missed a great opportunity to throw this term into the lexicon.

Quiz for the day … what fruit goes best with a ‘double Irish with a Dutch sandwich’?

I intend to put this term on the tongues of every businessman in the country. Spread it around.

Government Response to Tax Inversions

Twofold response.  

More adventures in la la land.



Remember TAX INVERSIONS from a couple days ago? The practice of buying a foreign company and moving your tax base to that country? So far this year, nine TAX INVERSIONS have taken place, and the government is beginning to notice. The logical response would be … “whew, we’d better cut taxes” … but that isn’t the response coming from the political class. The response is more along the lines of … “immediate action is needed … we have to put a stop to this … double up your fists, get your guns, we’re gonna bust some heads.”

The fact that taxes are so high they’re driving business away, doesn’t even enter their mind. Neither does it enter their mind that the ONLY way to solve that is to CUT TAXES. If we have the most expensive taxes in the world, everyone will leave eventually. Outlawing TAX INVERSIONS will not solve the problem. Google, Apple, Amazon, Caterpillar, etc. found other ways to do the same thing. There is always another way. Once a company starts looking for ways to save taxes, they will find ways. If that’s illegal, they’ll leave. Stopping TAX INVERSIONS will not stop the flood of companies abandoning the United States. You can only do that with a tax cut.

Second …

Orin Hatch’s response to TAX INVERSIONS is to REFORM TAXES.

This is another danger sign.
Here are some basic definitions to help you understand government speak about taxes.
TAX REFORM – this is tricky … to the person hearing the phrase, it means CUT TAXES … but to the person saying it, it means INCREASE TAXES.
TAX REFORM is just a tricky way of saying TAX INCREASE.

As I said on my earlier post … will the last person out please turn off the lights?

Bipolar identity disorder ???

This is about a recent Supreme Court decision and the mis-reporting by some news agencies that reported a victory for taxpayers. We explain the case and the reporting first, and then we get to the Big Picture, which is what we’re concerned about, You should be too.

The case itself.

The Supreme Court decided the taxpayer has a right to conduct an examination of IRS officials when he has plausible reason to expect the IRS is acting in bad faith. The case, United States v. Clarke, grew out of an investigation of a partnership called Dynamo Holdings that had unusually high interest deduction claims. The investigation dragged on for several years. The IRS repeatedly asked the target to extend the three-year statute of limitations for assessing tax liability, which it agreed to do three times, presumably in the hopes of resolving the case in its favor. When the fourth request came around, Dynamo Holdings said no. The IRS then issued summonses to four people associated with the partnership. When they didn’t comply, the IRS enforced the summonses through court orders. Instead of quaking in their boots and complying, the four who were summoned fought back. They argued that the timing of the summonses, immediately after Dynamo Holdings refused to grant the extension, was evidence of impropriety. They further claimed that the IRS’s decision to enforce the summonses was to gain an advantage in a lawsuit that Dynamo Holdings had by then filed against the IRS.

In the Accounting Today view, in their first sentence of the final paragraph they reported that Clarke was a taxpayer victory. But in the prior paragraph, they quote Justice Kagan who makes it clear it’s not … “Making allegations of improper purpose are not enough. The taxpayer must show some credible evidence that gives rise to a plausible inference of improper motive. The taxpayer doesn’t have a blanket right to do that or conduct a fishing expedition and automatically get the right to a hearing.”


Update … Another bi-polar issue. Reuters reported a victory before reporting a loss. The two articles came out a paragraph apart. This is truly weird. Apparently few reporters read, and apparently no one double checks if they’re reporting on both sides of an issue. (Par for the course.) I find this same kind of competence runs rampant in the accounting profession.

Bloomberg, on the other hand, got it right. They reported  that the 11th circuit opinion that had been a victory for taxpayers was reversed by the Supreme Court. The 11th circuit had held  that a simple allegation of improper purpose was enough to get the IRS agents examined.  But as we’ve just seen, the court, Justice Kagan’s, who wrote the opinion, makes it clear the victory was overturned. Another negative for taxpaying Americans.


Here’s the big picture …

With IRS misdeeds like targeting specific groups of Americans, destroying Lois Lerner’s emails, destroying other emails and probably even lying to Congress about it, with that still in headlines, the Supreme Court can see no need to rein in the IRS.  Bloomberg, which is far from a conservative publication, concedes that the IRS is the closest thing to Dostoevsky’s Grand Inquisitor that our democracy allows.

While I don’t like a lot of things that are going on in our country today, on this particular issue I have some expertise.

The environment in the IRS and the attitude of its agents was once very similar to what it is today. I got so upset about it then that I ran for Congress. I lost, but the person who ran after me won when the sitting Congressman ran for the Senate. Midway through his first term he got hold of a penalty notice that included a late tax payment of a single dollar and penalties of more than $3,000. There are a lot of ways this could conceivably happen legitimately, but the Congressmen took the notice to the floor of Congress and made a rousing speech, and the issue went viral. After the hearings, which were well televised, the IRS apologized for their heavy handed ways and promised to straighten up.  It’s too bad we let them off the hook because I believe the popular sentiment was to hamstring them. But alas and alack, we didn’t do that.

They did as they promised. For years they were the kinder and gentler IRS. But over time they slowly and surely inched their way back to the old heavy handed IRS. That process accelerated around 2008 when the government put the hammer down on tax collections and today we are right back to the old Gestapo-like IRS. In my experience today most agents think every taxpayer is a filthy, lying, cheating scoundrel.

As Bloomberg says … “The court established a reasonable-sounding rule: You can question the agents only if you can point to specific circumstances plausibly raising the inference of bad faith. Iin reality, however, it’ll be hard to pass this bar unless the courts share the skepticism of the IRS that is natural to most taxpayers.

Too bad. Initially I thought we had a good case here. But this is a horrible case.


My thoughts

Another attempt to be the most disrespected person on the internet.

I read this on line today
” … wait, you went to a second-rate university… ”

My thoughts.
People who throw their education in your face have little other ammunition to throw … from my personal experience the last bastion of the people who graduated from the ‘best’ schools is their education, and little else. I recognize the value of intelligence and I recognize the value of a network, but an education is just the first step on a lifetime journey of continual learning and experimenting … your education and $10 will buy you a cup of coffee. Your experience and capabilities may get you somewhere.

Pretty fishy

Federal Tax Revenues Set Record Thru May; Still Running $436 Billion Deficit

Size of Income Tax Drop Surprises U.S. States.

Click to access 2014-06-12-Special_Report.pdf

Can’t be both ways … same taxpayer base. Of course we did have a federal tax increase, but could that set records while the same taxpayer base is surprising the states with a drop in state taxes?

Arming or Disarming?

I’m a little confused by all the conflicting reports about the U.S. Government. Are we arming or disarming, and how much is it going to cost, and what does all this mean?

I guess the answer is yes to both questions, but only toward certain targets. A few days ago I saw a report we were going to destroy a billion dollars worth of military ammunition. So that means we’re disarming the Military just as Putin begins to flex his muscle in the Ukraine. The Power Structure seems to think if we act nicey nice, everyone else will also. But the reports out of Europe and Asia seem to to be saying U.S. weakness is emboldening the bad people who are now actively arming themselves. I really wish they had consulted Putin and China before the threw out the baby with the bath water. But … c’est la vie.

Couple that with the fact that I’ve been reading about how Homeland Security was running stores out of hollow point ammo because they were buying it all. (Hollow point is the ammo that explodes on impact). And as we saw on TV recently, the BLM has already been armed. Good grief; at the Bundy ranch they looked like a swat team. And I’m sure beyond doubt the IRS is similarly armed.

So here’s my innovative idea. Talk about a great revelation … As a tax savings measure, why don’t we just give the military ammunition to Homeland Security and the BLM?

I should get an award for this. I’m surprised none of you thought of it.
(Pats himself on the back.)

Looking At Every Angle

Looking At Every Angle
Most closely held businesses are unwilling to pay for anything but the bare minimum. An example is analytics. Despite the fact that analytics can deliver insights to your business that will drive profits higher, few closely held businesses are willing make the investment necessary.
That’s why the vast majority of closely held businesses will never leave a mark on the universe.
Contrast that to large publicly held businesses. It is not uncommon for publicly held companies to have consultants from two or three firms on their premises every single day of the year. They overspend on this. But they try to be sure they have considered every single angle.  That’s why they’re big and you’re not.
Ellis analytic accounting is not exorbitantly priced. It is well within reach for any closely help business.  
The downside is small, but the upside is large.