JohnH

After firing from the hip with my last post, I began to migrate towards the idea that this was what you had in mind.

And I agree completely.

I remember attending a real estate continuing ed seminar dealing with home mortgage financing a few years back. (Maybe more than a few years, since it was shortly after FICO scoring became the norm). The presenter discussed various programs which were coming on line to bridge the gap between the sales price and the first mortgage, essentially enabling people to buy with little or no money down. It covered the range from 80-20 loans to grants & gift programs, combined with ARM's or interest-only loans. The presenter focused on first-time buyers and credit rehabilitation cases, but it was made clear that the rules were pretty loose and that many others, including investors, could get in on many of the programs with a little creative thinking. At the time I kept asking myself "Where's the risk that will encourage the borrower to hang on if times get tough?" One attendee asked if this idea of counting on increases in the value of the underlying property or future ability to refinance at similar or lower rates to take them out of a bad decision wasn't just a classic application of the "greater fool" theory but all he got was a non-answer. I thought this was just an aberration that the lenders would quickly put out of its misery. Wow, was I wrong.

I have to agree with you concerning the ultimate result (derivative & hedge fund failures potentially wiping out pension fund investments), but I disagree with the conclusion that the homeowners buying beyond their means is a lie. That is where the problem originated. Everything else which constructed this financial house of cards was built on shaky borrowing.

One can certainly argue that the poor, financially ignorant borrowers would not have taken out the loans unless the lenders were willing to lend them money, but personal responsibility has to enter into the equation at some point. People need to be responsible for their own decisions, and if I'm foolish enough to jeopardize my financial future just because someone else is foolish enough to lend me more than I can reasonably repay, then we both need to accept responsibility for our actions.

Interesting article and a possible warning of what may be imminent on the international finance scene. Arnaud gets a little worked up at times and I prefer to read him when he's talking about events in the Middle East, but he may be onto something here with his "Neutron Loans" article.. I especially liked this phrase:

"A symbiotic relationship between banks and mortgage companies erected beautiful monetary sand castles on the world's financial beaches, just out of range of high tide. They hadn't reckoned on a subprime mortgage rip tide that flattened them."

Here's the link:

http://www.washingtontimes.com/apps/pbcs.d.../109130001/1012

Same here.

I'm still evaluating other software and have taken steps to convert 2006 to a competitor's software.

Haven't toally made up my mind because ATX has lots of features & benefits I like, but I'm thinking long-term.

>>> BTW, ATX sales said the reason why they stopped the atx community website was because their customers set up their own. Don't you love the logic of politics <<<

Interesting that they would spin it that way.

I don't call that politics - I call it lying to get a sale.

Cancel the question.

I found the answer.

I'm putting up the link so I can find it here if (or when) I forget again.

http://www.irs.gov/retirement/article/0,,id=111419,00.html#8

The year of the contribution does not count in the 5-year qualifying period.

It's 3 out of the 5 PRECEDING years.

In my example the employee is excluded unless the employer wants to shorten the qualifying period.

The article didn't address that question either, but I'm guessing the answer is "no".

This always throws me. I've seen it discussed before (maybe on the old board), but can't find it now.

When using a 3-year qualifying period for a SEP IRA contribution, does the year of the contribution count? For example, if the employee has earnings in 2006, can he be excluded if he had earnings in 2004 & 2005 but no earnings in 2001, 2002, & 2003? (This all assumes the employee was over the age limit and earnings exceeded the applicable amounts for all years in question)

That is an interesting question.

This was a news article and it didn't get into the technicalities, although it did say they were ordered to forfeit property bought with the proceeds and were facing a $100,000 fine, plus jail time. This wasn't a small matter - they got $250,000 in the settlement, which worked out to $150,000 after paying the lawyers.

I was double-checking to be sure a payment to a client under the Fen-Phen/Redux settlement was non-taxable and ran into an unusual set of circumstances. I noticed an article that said two people who lied in claiming they took the drugs and received settlements were charged with failing to report the income on their tax returns. My first reaction was that these payments were non-taxable, so how could the recipients be taxed on the payment? The article went on to explain that the nature of the payment changes to taxable income since it was obtained through fraud. Not really looking for answers here and I don't have any clients filing fraudulent claims as far as I know, but I found it to be an interesting twist.

Pardon my cynicism, but I think this survey is just another one of those feel-good PR stunts that they teach in business school. Probably no real purpose to it other than to make people think they "care", when in fact it's little more than window dressing with maybe a little marketing info being garnered from the responses. I guess it's because I've spent too many years dealing with these wet-behind-the-ears marketing whiz kids who know lots about posturing and almost nothing about their constituents.

Reminds me of the answering machine messages that start out with "Please be assued that your call is very important to me" and then ends with "Leave a message and I'll return your call AT MY EARLIEST CONVENIENCE."

You'll both be in my prayers KC.

Maybe they decided to "redeploy" the $1,000 to a more constructive purpose - namely the last-minute toaster & microwave offer. It breaks down like this:

Toaster..........................................................$ 30.00

Microwave.................................................... $ 89.00

Bonus to marketing-genius executive

who came up with the idea.............................$ 842.00

Would you like to have it?

I'm waiting for a copy of the restitution agreement. I'm also waiting for the copies of the bank statements for the year of the "diversion". I've been told their receipts were under $25K but you know how what we are told tends to escalate once we start getting the actual data. All we need now is to find out that there was a requirement to file in a year when there was an "Excess Benefit Transaction". After the penalty notices come rolling in, it will be a constant stream of apologies to try and get them waived. And don't even talk to me about interest - I certainly hope that isn't in the agreement.

As I understand it, even thought his becomes a balance sheet item once the receivable is booked, the repayments still have to be dragged through line 11 (or line 8 of the EZ), each year. It can't just be posted to the balance sheet account in the same manner as a principal payment in a corporate return. Given the amount of the payments and other issues involved, this thing is going to dog them for years to come, which also means I need to get it right from the outset since I'm guessing someone will just copy my work each year once I get disentangled from this (or IF I get disentangled).

I see that it:

1) "is sent to a small percentage of our population on a rotating basis; "

2) "helps determine how more than $300 billion per year is distributed;"

If they will promise to send me $300 billion, I'll volunteer to fill it out...

Funny how politics is like that.

Two equally valid explanations can be ascribed to a given action.

More or less like the "I voted for it before I voted against it" response.

That actually begins to make perfect sense when one looks at it from the politician's point of view.

You're right. I shouldn't have used the word "populist".

Apparently it's more basic. The assumption must be that there are enough wealthy people not paying their government guaranteed loans to make it worthwhile to buy their votes.

Hmmm ... with all of the cosponsers for the HR & S bills they come out bipartisan.

taxbilly

Any possibility this is because it's such a populist issue and there's an election coming up?

Nah, probably just a coincidence since nobody in the US has noticed the issue until recently.

Thanks for the recommendation. That goes back to jainen's original suggestion in a sense, but the process of justifying the entry to the balance sheet creates a bit of a dilemma. I've now learned that when someone "diverts" money from a tax-exempt, it is supposed to be disclosed on the 990 as an "Excess Benefit Transaction" to a "Disqualified Person". (I don't like to use the "E" word because it's such a loaded term.) Since the organization was not required to file the 990 in the year this occurred, that may give them an out and allow me to just create a balance sheet as of the beginning of the year, but I don't want to jump to that conclusion. Also, there's the question of where exactly to show it on the balance sheet, because there are very specific Asset categories, including an ominous-sounding "Receivables from other disqualified persons". The plot thickens.

My other problem is that the 990 is very strict on accounting for all receipts & expenditures on page 1 and I just sense that bypassing page 1 with an entry directly to the balance sheet might not be kosher. Page 1, Part I is not just a P&L, it's much more. It seems to force you to account for all movements of money into & out of the organization. Line 11 on the 990 (line 8 on the 990-EZ) forces you to account for any Revenue items which don't fall into the other categories, and line 20 on either form is a catch-all which demands an explanation for any other changes in net assets or fund balances. So the front of the 990 requires you to account for revenues, expenses, and asset changes in a fairly comprehensive manner.

Maybe I'm over-analyzing this thing & complicating it way beyond reason, but I'm sure glad I have until Nov 15 to work through it. I appreciate the continued comments.

Thanks for the idea. I had considered doing something similar by just counting it as a "Contribution" in the current year & going forward. However, the PTA guidelines for their financial statements are very specific, with essentially every movement of cash thoroughly reconciled, including beginning & ending cash balances, so the whole issue of a book-tax-difference comes to mind. Not so hard to handle on a simple corporate return, but then I started reading all those warnings about the penatlies for minor deficiencies in a 990 and had second thoughts.

I've done some more reading on this since my first post, and I found one 990 published on-line which showed it on Line 11 and attached an explanatory note defining it as "restitution", so I'm leaning in that direction. But then I don't know for sure that the on-line 990 is prepared properly - I'd feel much better getting some validation on this forum.

The loss was not reported on a tax filing.

I'm told (although I haven't verified this yet) that the total receipts for the year of the loss were less than $18K, so no Form 990 was filed since there would not be a filing requirement even if the $4K is added into gross income of the PTA for the year in which the act occurred. Of course, this also assumes that the $4K is actually the correct amount diverted.

This situation is already validating my refusal over the years to get involved with 990's, but this time around I can't side-step it.

I'm helping a PTA prepare their form 990 and have an unusual situation (well, unusual for me).

A couple of years back a former treasurer "diverted" about $4K of PTA funds to personal use rather than depositing the money into the PTA accounts. Subsequently, the school and the individual agreed to a restitution plan rather than legal action. In the past year about $400 was received by the PTA as a part of this plan, and there are expected to be similar payments in the future. Where on the 990 should this payment be recorded? My first thought would be line 20 or maybe line 11, but since I've never encountered this before I'd like to hear from others more experienced with preparing Form 990. Thanks for any suggestions.

Sounds like your client took to heart something that humorist Lewis Grizzard said years ago after several failed marriages.

"The next time I get the urge to get married, I'll just find a woman I hate & give her my house."

BTW, here's an article that offers some perspective on the overall issue we are discussing (aside from the initial question about the letter itself)

http://biz.yahoo.com/cnnm/070830/083007_fl...2&.pf=loans

I agree with both of you.

Until people are held accountable for their dumb decisions, they will just go right on making them. Unless they are made to feel some pain, there's no incentive to change their behavior.

You're not being too picky. I wouldn't provide any information to a lender that can be obtained from a primary source, especially since he already knows where to go to get the info anyhow. I agree that the lender is just packing his file so he can somehow try to drag you into it if the loan goes south. This is nothing but amateurish CYA on his part, or else the client is desperate and is trying anything he can think of to persuade the lender to give him more money..