Interesting articles in today’s Wall Street Journal:
- Ex-Andersen Partners Come Under IRS Audit; Write-Offs Tied to Collapse Draw Scrutiny Into Moves Made on 2002 Tax Returns, by David Reilly:
Talk about rubbing salt in a wound. First the federal government prosecuted Arthur Andersen LLP on work related to a client, Enron Corp., and won a conviction on a single obstruction of justice charge that led to the accounting firm collapsing in 2002. Then, last year, the Supreme Court overturned that conviction. Some former Andersen employees felt vindicated, even if the highest court’s decision didn’t resurrect the firm or get them their jobs back.
Now the Internal Revenue Service is auditing some former Andersen partners, querying their decision to write off the value of capital they had in the accounting firm, according to a copy of an audit letter sent by the IRS to a former partner and seen by The Wall Street Journal. The seven-page letter asks former partners to answer 45 questions, in many cases requesting extensive documentation for decisions the partners made on their 2002 tax return. At issue: whether partners were justified in using a write-off of their capital in Andersen as a deduction that could offset taxes owed in 2002, or in some cases, in subsequent years.
- Judge Reverses No-Bail Ruling For Former Partner at KPMG, by Paul Davies:
A federal judge in Manhattan reversed course and granted bail to a former KPMG LLP partner indicted last fall for his role in creating questionable tax shelters that enabled wealthy individuals to evade $2.5 billion in taxes. U.S. District Judge Lewis A. Kaplan, who denied a bail request in November, continued to express concern that David Greenberg is a flight risk. The judge imposed restrictions and required a $25 million bond signed by the defendant and three family members. The judge said if Mr. Greenberg did flee, his ex-wife, father, brother and children would "be financially ruined and stripped of every asset they have." As part of the bail conditions, Mr. Greenberg, who is from Los Angeles, must live in New York under electronic surveillance until the trial, which is scheduled for September. Family members were required to put up their homes as part of Mr. Greenberg’s bond.
One response to “WSJ Tax News”
I read the Andersen article. I am not sure what was going on. When I was a member of law firm that collapsed, I deducted the vaporised capital account. As I recall we had done some thinking about the issue and decided that there was no capital asset or bad debt involved, just the write off of deferred business expenses.