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Grafter

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  1. Some of the other posters have hit upon some of the things that Enron did and some of the questions that should have been asked. However, if you are really curious, I would highly suggest reading Financial Shenanigans: How to detect accounting gimmicks & frauds in financial reports, as they have sections about each of the companies you mentioned.
  2. PTP/LPs, like others have pointed out, can cause a lot of headaches: 1) Gains and losses in multiple states, that may require filing multiple state tax returns. Especially if there is a large sale or it produces a lot of ordinary income (Stonemar did that a few times, and I know that PA went after unitholders; I wouldn't be surprised if OK goes after MMP holders this year, due to the capital gain associated with the sale of a plant there). 2) State level bonus depreciation adjustments, which impact both the annual losses and gain when sold. 3) Most PTPs are passive to the unitholder, so losses are not deductible until there is offseting income or you dispose of the shares. But, you also need to be tracking and reporting the suspended losses (and if you change accounting firms or software, it is very easy for this info to be lost). 4) You generally need to track your own basis, both to make sure that the K-1s report the right beginning balance and for whatever you purchased or sold during the year; as well as to see if you have distributions in excess of basis (which are capital gain). In addition, when you sell, as the sale of a partnership is treated as selling the underlying assets, some of the gain will most likely be ordinary (as depreciation recaputure). You will also be hit with basis adjustments (to reflect the various partnership distributions you've received over time). 5) If you hold in an IRA, you have to be on the look out for UBIT income. And it does appear that in some cases, the IRS is treating the ordinary gain on sale of a PTP as UBIT income, which requires a 990-T to be filed (which most custodians will charge you for) and you will need to pay the appropriate tax from the IRA assets. Other than that, there are: 1) The issues with mutual funds, such as if they have a number of redemption0, they will need to sell, which very well may result in capital gains (which isn't an issue for ETFs). In addition, due to the mutual fund structure, if you buy right before the ex-dividend date, you will be hit with the full impact of the year's tax attributes that are distributed (vs buying right after, at the lower share price). 2) All of the foreign asset filings, if you hold foreign assets (and especially so with PFICs). This can range from the FBAR and Form 8938, to needing to read the tax treaty with that country to determine what your foreign filing requirement is. As the penalties for not filing when you need to file are significant (easily in the 5 digits and up).
  3. So, functionally, what are you proposing? That if the auditor finds fraud, they need to publicly disclose it or disclose it to certain parties? As if you want to make it public disclosure, you will need to fundamentally change the current regulatory regime, as that isn't really allowed. Though, currently, auditors should be bringing findings about fraud or suspected fraud to the appropriate level of management (per AU 316.79). In addition, the PCAOB recently passed AS 3101, which will change the wording on auditor's reports for public companies when the standard becomes effective (which will help close the expectation gap of what the public thinks a financial statement audit is and what is actually required by accounting and auditing standards). But, look at it from a service company model as well. Most public company audits cost millions of dollars. The big 4 accounting firms do the majority of these audits (I've seen estimates that the percentage is in the mid to high 90s). And unfortunately, for a lot of businesses, an audit is just a cost of doing business and viewed as a commodity. So, often times the business will attempt to go with a lower cost provider (and if you start cost cutting, when pressured, people will cut corners or do the bare minimum). I mean, you can do fraud risk audits (or forensic audits after the fact), but that is an additional set of procedures that is not really encompassed in the current regulations for a financial statement audit. I've heard at least one suggestion that the SEC, and not the company's board, should be the one hiring the outside auditing firm. But if you entertain that thought, how is the SEC going to pay for it (as their current budget is in the range of $1.6 billion)? In theory, they could charge all public companies additional fees to cover it. But then, how would the economics of non-public audits be impacted? Would all bankers and granters (which are the most likely reasons reasons why non-public entities have audits) have to set up similar pools? Or would the client still be the company's board (which would probably create different audit models)?
  4. For me, it isn't necessarily the brand (though I do like that I'm supporting the local economy by keeping my money at a community bank), but the stickiness of the relationship. As others have pointed out, moving the number of billpays contacts and re-linking 10s of outside accounts (utilities, CCs, etc) is a major pain, and they would have to do a major fubar at this point to get me to change. As it is easy enough to move funds elsewhere for better rates, and I don't have any special needs (such as wires, currency, etc). Of course, my experience may be a bit colored by having to go through the process a few years ago (and I still occasionally come across a linked account that I need to update to the new account number).
  5. Picked up some more CMCSA on Friday and am thinking about adding yet more.
  6. I'm not an international expert, so this is all just my understanding and not tax advice. In addition, this is only US reporting, and doesn't deal with any reporting in non-US countries. My understanding is that gifts from a foreign individual are potentially reportable to the IRS via Form 3520 by the donee (for #1), if the amount is more than $100k (either in cash or property). If it is a gift of RE from a US resident to a US resident, of property located in a foreign country, I know that the donor will have to file a gift tax return (form 709) if its value is more than the annual gift tax exclusion amount (of $14k). There may be additional requirements on top of this, depending on a number of factors (though I'm not 100% sure). As for #2, it will depend on a number of factors, as to how it is held (directly or in some legal entity), how it was funded (as the funding may be subject to reporting), etc. I'm unsure about #3 and #4, and am unsure what you are talking about in #5. In the case of 6 and 7, if you have a foreign account, it most likely reportable on schedule B with a checkbox (see the instructions for that form). Depending on the type of the gift and amount, it may be reportable on other forms and you would want to look at the instructions for Fincen 114 (aka FBAR) and form 8938. The following is a link to an IRS comparison of these forms: https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements The rules around reporting these accounts and transactions these are complex (and this is a limited brief overview), but the penalties of not reporting can be significant (which you can see at the link for Fincen 114 and 8938 and at https://www.cpajournal.com/2017/12/19/irs-form-3520-penalties-whether-make-protective-filing/ for Form 3520). The filing of these forms is not things to mess around with if you don't have experience doing so. The IRS has information sharing agreements with a number of countries/entities (so they have ways of gathering information and matching it to what is filed and then questioning you if something isn't filed). If you have received such a gift currently or have previously and not reported such information, and need to file for multiple gifts or years, I would strongly recommend that you seek out experienced tax or legal assistance (if you need to search, look for mentions of OVDP and streamlined filing compliance along with the form numbers).
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