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Glen E. Frost

Attorney at Law *
Certified Public Accountant **
Certified Financial Planner®
Master of Laws in Taxation
Every Tax Problem has a Solution

10480 Little Patuxent Pkwy, Ste. 400
Columbia, MD 21044
Phone:  (410) 497-5947
Fax:      (888) 235-8405

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Permalink 11:48:41 am, by dmerritts Email , 551 words   English (US) latin1
Categories: News

Baltimore Police Commissioner De Sousa Charged With Tax Crime

By Mary Lundstedt, Esq.

On May 10, 2018, the United States Attorney for the District of Maryland announced that new Baltimore Police Commissioner Daryl De Sousa has been charged with three misdemeanor counts of willful failure to file a U.S. individual income tax return. Specifically, the charges allege that Commissioner De Sousa failed to file returns for tax years 2013, 2014 and 2015-each failure a violation of Internal Revenue Code (IRC) §7203.

Under IRC §7203, it is a misdemeanor to willfully fail to "make a return, keep any records, or supply any information" as required under the Code. Unlike other tax crimes requiring an act, IRC §7203 involves the omission of the statutory duty to file a return. If convicted, Commissioner De Sousa could face up to one-year imprisonment per violation, be fined up to $25,000 per violation, and be required to pay the costs of prosecution.

On May 10, 2018, Commissioner De Sousa released the following statement on Twitter:

"I fully admit to failing to file my personal Federal and State taxes for 2013, 2014 and 2015. I did file my 2016 taxes and received an extension for my 2017 taxes. I have been working to satisfy the filing requirements and, to that end, have been working with a registered tax advisor.

To be clear, I have paid Federal, state and local taxes regularly through the salary withholding process.

While there is no excuse for my failure to fulfil my obligations as a citizen and public official, my only explanation is that I failed to sufficiently prioritize my personal affairs. Naturally, this is a source of embarrassment for me and I deeply regret any embarrassment it has caused the Police Department and the City of Baltimore. I accept full responsibility for this mistake and am committed to resolving this situation as quickly as possible."

Many are concerned that Commissioner De Sousa's position is incompatible with such an omission of duty. On May 10, 2018, The Baltimore Sun quoted Del. Luke Clippinger, a Baltimore Democrat, as saying: "It goes directly to his credibility as a police officer, much less as Commissioner, that he took the job knowing he was in violation of federal law. It was a willful omission of a material fact as he applied for a job that demands the public's trust." And on May 11, 2018, Baltimore City Mayor Catherine Pugh placed Commissioner De Sousa on paid leave pending resolution of the matter.

Local newspaper reporter, Sarah Meehan of The Baltimore Sun, interviewed Glen Frost, managing partner of Frost & Associates, LLC, to learn more about why the IRS would press criminal charges for failure to file tax returns. Mr. Frost explained that while it's uncommon for the IRS to pursue criminal charges for misdemeanors, the IRS likes to make examples out of public figures. He further stated that "[m]ost criminal tax violations they charge are felonies, but failure to file is a misdemeanor count. It's rare, I'll say, but it happens."

As you can see from this very public example, failing to file your tax returns can be a serious criminal offense and may result in heavy fines and/or imprisonment.

Update: It was reported on May 15, 2018, that Daryl De Sousa resigned as Baltimore Police Commissioner.

If you have these issues, we can advise you as to how to limit your exposure to criminal and civil liability--please Contact Frost & Associates, LLC today at 410-497-5947.


Permalink 04:42:18 pm, by dmerritts Email , 492 words   English (US) latin1
Categories: News

The Domestic Asset Protection Trust

By Leanne Broyles, Esq.

What if you could take a portion of your hard-earned wealth, lock it up from your creditors, but keep the key for yourself? It sounds too good to be true, but the Domestic Asset Protection Trust provides a very real and very valuable estate planning tool for achieving this objective.

The Domestic Asset Protection Trust, commonly referred to as a DAPT, is a type of spendthrift trust, created by statute, for the benefit of the Trustmaker. A spendthrift trust is an irrevocable trust containing certain legalese that prevents the creditors of a trust beneficiary from accessing the trust assets to satisfy the debts of the beneficiary. Traditionally, spendthrift trusts were a tool used to protect an irresponsible person from spending their inheritance. While this is still a very common use of the spendthrift trust, more and more states are allowing individuals to utilize spendthrift trusts to protect themselves from future creditors.

Of course, there are just a few catches and hoops to jump through to achieve this type of asset protection, but, in many cases, they are well worth the time and hassle. The following information should be considered in your evaluation as to whether or not a DAPT is right for you:

1.First, only some states currently recognize DAPTs. Alaska, Delaware, Nevada, South Dakota are generally considered by practitioners to be the best jurisdictions for individuals to "lock up" their assets. Indeed, Nevada's statute even protects your assets from a divorcing spouse. If you don't live in one of these states, your estate planning attorney can work with a Trust Company or Attorney in one of these other states to set one up for you.

2.Second, the trust is generally ineffective as to creditors of a Trustmaker that exist at the creation of the DAPT. The DAPT becomes effective as to future creditors within a period defined by the law of the state in which it was created (generally 2-4 years). If a creditor becomes a creditor of the Trustmaker after the Trust is established, but before the period expires, they can make a valid claim against the trust assets until the time period expires.

3.Third, unlike with the commonly used Revocable Living Trust, the Trustmaker should not serve as the Trustee of a DAPT. Typically, you will want an independent or institutional Trustee to serve as Trustee, and there will be an annual management fee. The Trustee will distribute to the Trustmaker and other named beneficiaries with discretion.

Because DAPTs are a relatively new estate planning tool, there have only been a very limited number of cases where creditors have attempted to reach the assets of the Trustmaker of the DAPT, and they have generally related to fraudulent transfers and statutes of limitations. We look forward to seeing how this trend can benefit our clients in the future.

If you would like to consider creating a Domestic Asset Protection Trust, please contact Frost & Associates, LLC today.
Permalink 04:38:49 pm, by dmerritts Email , 623 words   English (US) latin1
Categories: News

Celebrities Initial Coin Offering Endorsements Under SEC Scrutiny

By Mary Lundstedt, Esq.

Cryptocurrency start-up firms sometimes attempt to raise funding for an original cryptocurrency venture through Initial Coin Offerings (ICOs). Typically, the firm presents a whitepaper plan detailing the: (1) project requiring funding, (2) amount of funding needed, (3) amount of cryptocurrency that investors will retain, (4) specific currency accepted, and (5) timeline for the ICO campaign. Once the campaign is underway, the early project supporters purchase some of the cryptocurrency with legal tender or other cryptocurrencies. The cryptocurrencies distributed in this manner is often referred to as "tokens" and are analogous to company shares that are issued to investors in an Initial Public Offering (IPO). Assuming the money raised in this process is sufficient to meet the firm's needs, the funds are used to complete the project. If the funds are insufficient, the money is returned to the investors and the ICO is considered unsuccessful. Obviously, the motivation for early investors is the potential for the plan's success, which could result in a higher value of the cryptocurrency than the amount for which they purchased it.

Recently, celebrities have been using social media platforms to encourage the public to invest in ICOs. For instance, in September 2017, CBS news reported that boxer Floyd Mayweather encouraged his Facebook followers to invest in Centra Token's ICO. Even more recently, in February of 2018, actor Steven Seagal tweeted an endorsement of the Bitcoiin 2nd Generation. Just weeks later, New Jersey's Office of the Attorney General announced that the New Jersey Bureau of Securities issued "an emergency order to stop Bitcoiin, an online cryptocurrency-related investment entity, from fraudulently offering unregistered securities in the state."

Although some social media platforms are equipped with notifications that sufficiently indicate that a post is a paid endorsement, there are a number of widely used platforms with notifications clearly falling short of the expectation of the Federal Trade Commission (FTC). This expectation, summed up in the FTC's April 19, 2017, press release discussing a review of Instagram posts, provides that "influencers should clearly and conspicuously disclose their relationships to brands when promoting or endorsing products through social media." The FTC continued, stating that "when multiple tags, hashtags, or links are used, readers may just skip over them, especially when they appear at the end of a long post - meaning that a disclosure placed in such a string is not likely to be conspicuous."

On November 1, 2017, the US Securities and Exchange Commission (SEC) issued a public statement warning that celebrity endorsements on social media networks that promote ICOs may be unlawful. In the statement, the SEC reminded the public of its position in a 2017 SEC Report of Investigation. In that report, the SEC indicated that cryptocurrencies sold in ICOs are potentially securities, and that individuals offering and selling securities in the U.S. must abide by federal securities laws. Thus, in its public statement, the SEC emphasized that "any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion." The SEC continued, stating that "a failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws. Persons making these endorsements may also be liable for potential violations of the anti-fraud provisions of the federal securities laws, for participating in an unregistered offer and sale of securities, and for acting as unregistered brokers."

The SEC statement further cautioned the public to consider that while celebrity endorsements may present as unbiased, a paid promotion may actually be involved. As such, the SEC advised the public not to blindly rely on a celebrity endorsement, but to carefully conduct appropriate research before investing in ICOs.

If you have questions regarding cryptocurrency matters, please contact Frost & Associates, LLC.

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* Licensed to practice in Maryland, Florida, and the District of Columbia. May represent taxpayers nationwide in IRS disputes.
** Licensed in Maryland

10480 Little Patuxent Pkwy, Ste. 400
Columbia, MD 21044
(410) 497-5947
© 2018 Glen E. Frost