It's possible for transfers to a trust to be completed gifts for gift and estate tax purposes, even though that trust may still be treated as a grantor trust for income tax purposes, so that the income of the trust is taxable to the grantor even though retained in the trust or distributed to beneficiaries of the trust.

E&Y SHEDS INVESTMENT BANKING ARM: Big Four firm Ernst & Young has shed its investment banking arm by selling the practice to the consulting firm run by former New York City Mayor Rudolph W. Giuliani.Giuliani Partners LLC bought Ernst & Young Corporate Finance LLC, an affiliate of the Big Four accounting firm, and simultaneously launched Giuliani Capital Advisors LLC, which will advise companies on acquisitions, restructurings and other deals.

The U.S. Supreme Court said that it would review the conviction of shuttered accounting firm Arthur Andersen for obstruction of justice for destroying documents related to its audits of bankrupt energy giant Enron Corp., according to published reports.

H&R Block Inc. announced that Brian L. Nygaard, president and chief executive officer of H&R Block Financial Advisors Inc., has decided to leave the company.

Nearly a decade has passed since IBM purchased Lotus Development Corp. and attracted widespread attention to the potentially large write-offs that were possible on financial statements for purchased in-process research and development.

GOP lawmakers okayed a move to give the House Financial Services Committee oversight of accounting standard-setting and electronic trading, an area that includes the Financial Accounting Standards Board, according to the Congressional Record.

In a move triggered by lawmaker's concerns over the marketing of abusive tax shelters by some accounting firms, the Public Company Accounting Oversight Board has proposed new rules restricting the ability of accountants to provide tax services to their audit clients.

What four words cause public accountants to cringe more than, "Where were the auditors?"

FASB hands down final options rule

Brussels - Europe is bracing for two major accounting reforms in the insurance industry, but most fear that the schedules could extend to at least 2007 and possibly to 2010.One of the reforms currently in the pipeline will consist of IFRS4 Phase II, or "Insurance Phase II." This will eventually replace the Phase I version - a measure currently in place that has not radically shaken up traditional regulations.

With the tax law becoming increasingly complex, it is no surprise that there often can be several well-intentioned interpretations of a particular provision. Also no surprise is the expectation of many clients that a fee for planning advice should almost always result in an exponential decrease in overall tax liability.

While 2004 brought convictions in such high-profile cases as Adelphia, Dynergy and others, with implementation of Sarbanes-Oxley requirements well underway and new federal sentencing guidelines in place, expect to see more corporate scandals unearthed in 2005, according to FirstGlobal Investigations.

Two weeks after ousting former auditor KPMG LLP, beleaguered mortgage giant Fannie Mae has hired Deloitte & Touche LLP to perform its 2004 audit and to re-audit prior period financial statements that it will restate.

The head of Big Four accounting firm Deloitte defended his firm's work and reportedly suggested that Grant Thornton's former Italian affiliate may have withheld information during audit work on Parmalat, the Italian dairy giant that imploded amid allegations of widespread accounting fraud.

The Public Company Accounting Oversight Board is falling behind in its plan to recruit a small army of veteran auditors for the coming year -- a development that led it to trim its budget for the year and that could lead to frustrating delays in the Sarbanes-Oxley-mandated inspections of the more than 1,400 public accounting firms that have registered to audit the financial statements of publicly traded U.S. corporations.

The Governmental Accounting Standards Board has released Statement No. 46, Net Assets Restricted by Enabling Legislation, an amendment to its Statement No. 34.Statement 46 was drafted to help government entities determine when net assets have been restricted by the passage of enabling legislation, and to specify how those net assets should be reported in financial statements when there are changes in the circumstances surrounding said legislation. Enabling legislation is defined as a specific type of legislation that both authorizes the raising of new resources and imposes legally enforceable limits on how they may be used.

The AARP, the high-profile lobbying group for 36 million Americans over 50, plans to launch a two-week advertising campaign to battle President Bush's proposal to privatize Social Security via the rollout of ownership accounts. The group headquartered here, plans to spend some $5 million on the advertising push to fight the creation of the proposed accounts, which would be funded through payroll taxes. According to reports, the full-page ads are scheduled to appear in roughly 50 newspapers across the country. One of the ads displays a picture of stock traders with the tagline, "Winners and losers are stock market terms. Do you really want them to become retirement terms?" Another shows a couple saying, "If we feel like gambling, we'll play the slots."

National electronics retailer Best Buy Co. said it would dismiss its auditor, Big Four firm Ernst & Young, following the completion of the fiscal 2005 audit -- which ends Feb. 26 -- due to a conflict of interest with a company director. According to a federal filing, Best Buy said the decision to jettison E&Y as its independent accountant stemmed from the May resignation of Mark C. Thompson, a former board and audit committee member. Thompson resigned his post earlier this year after it was revealed that he had an arrangement with E&Y to provide services for $377,500, plus expenses. Best Buy has not named a successor to Ernst and is currently seeking proposals.

The Internal Revenue Service has issued Notice 2005-5 providing guidance on the new automatic (or default) rollover rules for qualified retirement plans. These new rules were added to the Internal Revenue Code as part of the Economic Growth and Tax Relief Reconciliation Act of 2001, but they will not be effective until March 28, 2005, which is the effective date of related final regulations published by the Department of Labor. The guidance answers questions regarding the application of the new requirement and will make it easier for plan sponsors to comply in a timely manner. The new automatic rollover rule requires that mandatory distributions of more than $1,000 from a qualified retirement plan be paid in a direct rollover to an Individual Retirement Account unless the distributee elects to have the amount rolled over to another retirement plan or to receive the distribution directly. EGTRRA also requires that the plan administrator notify the distributee in writing that the distribution may be paid in a direct rollover to an IRA. The guidance responds to comments received by the Department of Labor, Treasury, and the IRS. For example, the guidance clarifies that the automatic rollover requirement applies to governmental and church plans although a transition rule is provided for these plans to comply. The guidance provides that all plans have until the end of 2005 to establish administrative procedures for processing the automatic rollovers and clarifies that rollover IRAs can be set up without the participant's participation. Finally, the guidance includes a sample amendment that plan sponsors can use to amend their plans to comply with the new rule.

Mortgage financing concern Fannie Mae revealed that its former auditor, Big Four firm KPMG, had notified the embattled company that it had discovered indications of weaknesses in its internal controls. In an SEC filing, Fannie Mae disclosed that the Big Four audit firm unearthed deficiencies with regard to its quarterly closing processes and that entries had been made after the books had been closed for the quarter that ended Sept. 30. Last week, Fannie Mae dismissed KPMG as its independent accountant, and on the same day, the board also ousted chief executive Franklin D. Raines and chief financial officer J. Timothy Howard. Currently, the Office of Federal Housing Enterprise Oversight, the entity that regulates Fannie Mae, and its smaller mortgage sibling, Freddie Mac, is investigating the exorbitant severance packages for both Raines and Howard. In September, the OFHEO released a report calling into question the company's accounting practices and charging it with earnings manipulation. As a result, in early December, the SEC ordered Fannie Mae to restate its earnings from 2001-2004, which could potentially erase some $9 billion in profits. Fannie Mae said that in order to help blunt the effect of lost earnings, it is mulling a private stock sale that could be as much as $4 billion.