BLOCK FINANCIAL ADVISORS SETTLES WITH NASD: H&R Block Financial Advisors, the investment arm of the tax prep giant, agreed to pay a $500,000 fine and to return $325,000 in clients' mutual fund trading profits to settle charges brought against it by the National Association of Securities Dealers related to the market-timing of mutual fund shares by two of its former financial advisors. The company, which did not admit or deny the NASD's allegations, said that the settlement won't have a material effect on its operations.
The NASD said that between October 2002 and July 2003, two brokers in the company's Orlando office allowed a client, a New York-based hedge fund, "to engage in deceptive practices to market-time mutual funds."
Brian Nygaard, president and chief executive of HRBFA, said that the trading in question "was isolated to two former financial advisors who executed unsolicited trades requested by one client," and that the fund transactions "did not involve any late trading or any special arrangements with mutual funds."
Nygaard also said that once the firm learned of the client's trading activity, it moved to restrict trading and closed the client's accounts "months before the NASD issued industry guidance on market timing in November of 2003."
The NASD said that the two brokers opened fee-based accounts charging a flat fee of 1 percent, higher than customary for their size, that allowed customers to engage in market-timing. According to the NASD, HRBFA received 44 restriction letters trying to stop the hedge fund client from market-timing, but the brokers helped the hedge fund get around the restrictions by opening related accounts to continue trading.
IRS ISSUES OPTIONAL SALES TAX TABLES: The Internal Revenue Service has released tax tables to help taxpayers determine whether they would benefit from an optional new sales tax deduction.
Under the American Jobs Creation Act of 2004, for tax years 2004 and 2005, taxpayers who itemize deductions can choose to deduct state and local sales tax instead of state and local income tax. Taxpayers indicate by a checkbox on Line 5 of Schedule A which type of tax they're claiming.
The Optional State Sales Tax Tables, which taxpayers may use for their 2004 returns, are available on the IRS Web site, www.irs.gov. The IRS also will send Pub. 600 to all taxpayers who get a Form 1040 tax package. The AJCA was enacted too late in the year to include the tables in the tax instruction books.
Taxpayers can check the tables to see if they're entitled to a larger sales tax deduction than a state income tax deduction, and use the amount from the tables rather than saving their receipts throughout the year and tabulating the amount actually paid. Taxpayers use their income level and number of exemptions to find the sales tax amount for their state. The table instructions explain how to add an amount for local sales taxes, if appropriate.
Taxpayers also may add to the table amount any sales taxes paid on a motor vehicle, but only up to the amount of tax paid at the general sales tax rate; and an aircraft, boat, home (including mobile or prefabricated), or home-building materials, if the tax rate is the same as the general sales tax rate.
RIA ADDS NEW CONTENT TO CHECKPOINT: RIA has added several new features, including enhancements to its financial reporting and management content, and expanded search capabilities in Tax Alerts, to the latest edition of its Checkpoint research product.
RIA Tax Alerts offers two new features. Form/Line Finder provides users direct entry to a paragraph in the Tax Return Guides based on the line of a tax return form. The Search Tax Alerts by an affected client helps users determine the impact of new developments by individual client.
SECPlus on Checkpoint now offers expanded history of Securities and Exchange Commission filings, so that users can find older filings, such as corporate bylaws, which only need to be filed once. Also included are 11-Ks, and users have the option to restrict the search of SEC filings to a date range.
Primary material from the Committee of Sponsoring Organizations of the Treadway Commission has been added to Checkpoint, including material on business ethics, effective controls and corporate governance. Furthermore, two new tax return guides have been added to the existing Tax Return Guides library. The guides are Form 706 Estate Tax Return Guide for 2004, and Form 709 Gift and Tax Return Guide for 2004.
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