Accounting education

In just-released Revenue Ruling 2005-40, the Internal Revenue Service has underscored the fact that risk distribution must be present for smaller arrangements to qualify as insurance for federal income tax purposes. The ruling does not call into question the vast majority of insurance contracts issued by commercial insurance companies in the ordinary course of business. Since the Supreme Court's 1941 decision in Helvering v. LeGierse, both risk shifting and risk distribution have been required for an arrangement to constitute insurance for federal income tax purposes. The ruling concludes that an arrangement with an entity that "insures" the risks of only one policyholder does not qualify as insurance for tax purposes, because the risks are not distributed among other policyholders. The ruling also explains how this conclusion applies to single-member limited liability companies, which in some cases are treated as entities separate from their owners and in other cases are disregarded. Qualification of an arrangement as insurance may affect whether the issuer is taxed as an insurance company and whether or when amounts paid under the arrangement may be deductible. If an arrangement does not qualify as insurance, it may instead be characterized as a deposit, a loan, a contribution to capital or an indemnity arrangement other than an insurance contract. The ruling was accompanied by Notice 2005-49, soliciting comments from the public on additional standards relating to what constitutes insurance.

In May 2005, a U.S. House of Representatives Energy and Commerce subcommittee on health concluded that the rising cost of long-term health care, coupled with the impending surge of Baby Boomer retirees, could cripple the country financially unless changes are made.Testifying before the subcommittee, Dr. Judy Feder, dean of public policy at Georgetown University, stated that in the years ahead, just 30 percent of post-65-year-olds will die without needing long-term care. Twenty percent of that age group will require more than five years of care.

The recent bid for Ameritrade by rival E*Trade Financial put the online brokerage world on the front page, as two of the largest firms in the business involved in a potential merger might say something about the current state of the brokerage industry.

NASD Fines Raymond James $750K: The NASD has censured and fined Raymond James & Associates Inc. and Raymond James Financial Services Inc. $750,000 for violations related to the firms' fee-based brokerage business.As part of the settlement, the firms will also pay restitution to 190 customers totaling $138,000. The firms neither admitted nor denied the charges.

412(i) plans continue to generate both interest and caution following recent Internal Revenue Service and Treasury Department actions to crack down on a handful of abusive schemes that had cropped up in this marketplace.

Taxpayers are generally allowed to deduct the fair market value of property that they contribute to a charity.

In response to proposed new rules by the National Association of State Boards of Accountancy, two professors at Kansas State University have issued a national call for better business ethics education and better accounting ethics education.

The Virginia Society of CPAs has teamed with professional education and corporate training provider SmartPros Ltd. on online ethics continuing professional education.

Assets in Section 529 college savings plans rose to an estimated $55.4 billion at the end of the first quarter, according to data released by the nonprofit College Savings Foundation.

Eisner Retirement Solutions, a unit of regional CPA and business advisory firm Eisner, unveiled a free turnkey product to assist plan sponsors in complying with the Department of Labor's mandatory individual retirement account rollover requirements that were laid out in the Economic Growth and Tax Relief Act of 2001.

The laws that govern estate and retirement planning do not change much from year to year beyond adjustments to the relevant tax tables. In fact, the most recent major changes stem from the Economic Growth and Tax Relief Reconciliation Act of 2001.

While individuals are allowed to exclude gain of $250,000 ($500,000 by a married couple filing a joint return) on the sale of property owned and used as a principal residence for at least two years in the five-year period ending on the date of the sale, they should still do everything possible to determine their basis in a principal residence.

The U.S. Department of Labor and the Securities and Exchange Commission have published tips to assist fiduciaries of employee benefit plans in reviewing conflicts of interest of pension consultants.

The American Institute of CPAs has expanded upon its 360 Degrees of Financial Literacy program with the launch of a financial literacy program targeted at women.

The American Institute of CPAs bestowed awards upon two members and an accounting firm during its Spring Meeting of Council here this week.

The president's panel studying tax overhaul options isn't expected to recommend major changes to the estate tax, according to published reports.

Legislators and the public should be aware that carry-over basis problems of estate tax repeal could be a nightmare, according to the American Association of Attorney-CPAs.

The College for Financial Planning, based here, is offering advisor training for a financial planning designation that focuses on issues related to working with seniors -- a fast-growing age group that it says will represent 20 percent of the population within the next 25 years.

FPA SEEKS BOARD NOMINATIONS: The Financial Planning Association is currently accepting nominations for its 2006 board of directors.Members of the FPA's 2005 board will elect the 2006 board from candidates nominated by June 30, 2005. The 2006 board of directors will consist of up to 18 members, including three officers. The new members elected in 2005 will each serve three-year terms beginning on Jan. 1, 2006.

With more than 76 million Baby Boomers moving toward retirement, the need to save more money for a secure financial future is clear.These individuals, who currently constitute 29 percent of the U.S. population, are putting away only one third of the estimated amount that they need to retire comfortably.