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§ Rising profits boost dividend and cash but not hiring
Profits are increasing for many U.S. companies, but the benefit isn’t flowing through to the labor market or the broader economy, economists said. The strengthening profit comes from cost cutting, and the money is being paid out as dividends or held on the company’s books as cash, rather than being invested. Profit increased 40% between the end of 2008 and the first quarter of 2010, but wages are close to their recession low. The New York Times (free registration) (7/25) 
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§ Goldman depended on banks for protection against an AIG failure
Documents show that Goldman Sachs relied on Citigroup, Lehman Bros. and other banks to protect it against a possible failure of American International Group. Citigroup had provided the most credit default swaps on AIG to Goldman Sachs as of mid-September 2008, according to the documents. Bloomberg (7/25)
§ Expansion-minded companies get the cold shoulder from investors
The stocks of companies talking optimistically about their expansion plans took a beating in the stock market last week. Analysts said a lot of investors expect the economy to trip into a double-dip recession. CEOs’ cheerfully discussing their intentions to boost spending and increase capacity makes these investors quite nervous, they said. The Wall Street Journal (7/26)
§ Analysis: U.S. labor market remains in serious trouble
Recent congressional action to extend unemployment benefits for 2.5 million people is a reminder that although the recession probably ended in June 2009, something is still wrong with the U.S. labor market, according to The Economist. The prolonged downturn and a slow recovery have led to an unprecedented number of long-term unemployed workers, and nothing seems to be helping. "Sadly, no quick fix is available," The Economist notes. "But the failure to change tack may prove costly, leading to slower growth and larger fiscal burdens." The Economist (7/22)
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§ The argument over expiring tax cuts for the wealthy intensifies
With the expiration of the Bush administration’s tax cuts for the wealthy looming, critics and proponents of the tax measure are lining up arguments whether they should be extended. Critics say the country’s debt requires the missing tax dollars. Proponents say the country’s economy needs the spending that will surely decline if the cuts are allowed to expire. CNNMoney.com (7/26) , The Hill/On The Money blog (7/25)
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§ Government should retain a mortgage guarantee, Geithner says
Treasury Secretary Timothy Geithner addressed questions pertaining to the future of Fannie Mae and Freddie Mac, saying a federal guarantee of "some type" should be retained to ensure consumers can finance mortgages. But Geithner also said the administration does not plan to "preserve Fannie and Freddie in anything like their current form" but noted that "there’s going to be a good case for taking a look at preserving or putting in place a carefully designed guarantee so, again, homeowners have the ability to borrow to finance a home even in a very difficult recession." The Wall Street Journal (7/25)
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§ A backup software program that’s powerful and free
The value of backing up data cannot be overstressed — it’s a necessity. A new backup product from Microsoft synchronizes different directories and multiple sets of folders, and now works in XP, Vista and Windows 7. Journal of Accountancy (7/2010) 
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Top five news stories selected by CPA Letter Daily readers in the past week.
§ IRS announces proposed PTIN requirements (JournalofAccountancy.com)
§ Obama signs financial regulatory-reform act (JournalofAccountancy.com)
§ Tax cuts for the most affluent will expire, Geithner says (The Wall Street Journal)
§ Young workers can’t afford to ignore retirement savings (The Washington Post)
§ Panel on private company financial reporting narrows down alternative models (JournalofAccountancy.com)
· Results based on number of times each story was clicked by readers.
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§ Attestation interpretation is issued regarding inclusion of description of tests of controls in an examination report
Issued by the Auditing Standards Board, Interpretation No. 8, "Including a Description of Tests of Controls or Other Procedures, and the Results Thereof, in an Examination Report," of AT section 101, Attest Engagements, in AICPA Professional Standards, addresses whether a practitioner performing an examination engagement under AT section 101 may include a description of tests of controls or other procedures, and the results thereof, in a separate section of the examination report, and includes relevant considerations in determining whether to do so.
The Office of Management and Budget (OMB) released its Mid-Session Review on July 23, showing that the economy is still struggling despite marked improvements in the nation’s fiscal health since President Obama took office 18 months ago.
The nation is on an unsustainable fiscal course, the OMB review states, and the federal budget deficit is projected to reach 10 percent of the nation’s gross domestic product (GDP), or about $1.471 trillion in 2010. For 2011, the deficit is projected to decline to $1.416 trillion, or 9.2 percent of GDP.
Senate Budget Committee Chairman Kent Conrad, D-N.D., said the budget deficit is a direct response to federal spending to stave off economic disaster caused by the policies of former President Bush. "Although the economy remains fragile and the unemployment rate is still far too high, economic and job growth have begun to return," Conrad said.
The economic forecast drew immediate criticism from Washington-based Committee for a Responsible Federal Budget President Maya MacGuineas. "We have got to do something about the coming tide of red ink before our creditors force us to make changes under their terms, instead of under our own. How many more terrible budget projections do we need before we decide enough is enough?"
By Stephen K. Cooper, CCH News Staff
Office of Management and Budget Mid-Session Review, Fiscal Year 2011
Individual taxpayers were granted an extension of time in which to make an election to include net capital gain and qualified dividend income in net investment income.
The taxpayers relied on a tax preparation firm to prepare their return. The second firm the couple hired discovered that the first firm had failed to report some investment interest expense paid and it advised the taxpayers to request the extension.
A married couple was granted an extension of time in which to make the election under Code Sec. 469(c)(7) to treat all of their interests in real estate as a single real estate activity.
The taxpayers failed to include the statement required by Reg. §1.469-9(g)(3) with their joint return for the relevant tax year. The taxpayers established that they had acted reasonably and in good faith, and that granting the extension did not prejudice the interests of the government.
For purposes of the passive activity loss rules of Code Sec. 469, a trust may materially participate in activities if its trustee is involved in the operations of the activities on a regular, continuous and substantial basis.
A trustee performs its duties on behalf of the beneficial owners. The sole means for a trust to establish material participation is if its fiduciary is involved in an activity’s operations on a regular, continuous and substantial basis.
CCH Comment. Here, the trust in question was a complex trust which sought guidance on whether it could materially participate in the activities of an entity that was wholly owned by another entity, which itself was wholly owned by a third entity in which the trust held a partnership interest. The trustee of the trust was also its beneficiary.
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People will forget what you said, people will forget what you did, but people will never forget how you made them feel."
–Maya Angelou, |
