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707(b) income questions
The uste's position strikes me a extreme if they extend it out to return of principal. The uste position would make a great deal more sense if the means test had a corresponding expense line to back out the return of principal, like the line for business expenses (even if the line should be moved down to an expense line item rather than a deduction from income.) If the uste position is correct then any debtor who sells any asset of any reasonably significant value (even without a gain), be it home, car, investments, loses a home in foreclosure, even trades in or has a more expensive car repossessed within 6 months of filing is guaranteed, because of that revenue, to be an above median income debtor and then is almost guaranteed to have a presumption of abuse arise. This seems an absurd result. The Means Test calculation is bit removed from reality in cases without returns of principal being received by the debtors, this uste interpretation makes the means test a complete farce. I have a difficult time accepting this was the Congressional intent in drafting BAPCPA. Obviously it results in only a presumption of abuse, but what a waste of time for everyone involved.
Mark T. Jessee
Law Offices of Mark T. Jessee
"A Debt Relief Agency"
50 W. Hillcrest Drive, Suite 200
Thousand Oaks, CA 91360
(805) 497-5868
On Fri May 30 17:51 , 'David A. Tilem' sent:
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charset="windows-1251"
I realize that this reply is a little late, but.....
at our last meeting the USTE's office made it clear that, from their
perspective, EVERYTHING is to be included as "income" for means test
purposes except: (1) social security receipts and (2) loan proceeds.
Accordingly, return of principal IS TO BE INCLUDED. As I stated during the
meeting, the confusion stems from the use of the word "income" in the phrase
"current monthly income". In fact it is NOT income. Substitute the word
"receipts" instead of "income" and you will have an easier time of it.
David A. Tilem
Certified Bankruptcy Specialist*
Law Offices of David A. Tilem (a debt relief agency)
206 N. Jackson Street, #201, Glendale, CA 91206
Tel: 818-507-6000 Fax: 818-507-6800
* Bankruptcy specialist cert. by State Bar of CA Bd of Legal
Specialization.
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It seems especially unfair in the IRA scenario, since that money would have been part of the debtor's gross income in the year he made the contribution, so how could the same principal contribution be part of gross income in a later year?
The same holds true for repayment received of a loan, or reimbursement for actual paid out-of-pocket expenses. How can it be included in gross income in two separate time periods?
James R. Selth
Weintraub & Selth, APC
12424 Wilshire Blvd., Suite 1120
Los Angeles, CA 90025
Telephone: (310) 207-1494
Facsimile: (310) 442-0660
E-Mail: jim@wsrlaw.net
NOTICE TO RECIPIENT: THIS E-MAIL IS MEANT FOR ONLY THE INTENDED RECIPIENT OF
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To: cdcbaa@yahoogroups.com
Sent: 5/29/2008 2:07AM
Subject: RE: [cdcbaa] RE: 707(b) income questions
I certainaly hope the uste does not assert debtors are to include cash received which is strictly a return of principle upon sale of an asset in the means test. If uste does not maintain the need include proceeds that are strictly from return of principal in the means test, then it would seem to follow that the portion of funds withdrawn from IRA's or other deferred compensation plans which are a return of the debtor's contributions should not count as income in the means test.
Mark T. Jessee
Law Offices of Mark T. Jessee
"A Debt Relief Agency"
50 W. Hillcrest Drive, Suite 200
Thousand Oaks, CA 91360
(805) 497-5868
On Wed May 28 17:40 , 'David A. Tilem' sent:
according to uste: all cash received except loan proceeds and soc sec must be included in the means test.
David A. Tilem
Certified Bankruptcy Specialist*
Law Offices of David A. Tilem (a debt relief agency)
206 N. Jackson Street, #201, Glendale, CA 91206
Tel: 818-507-6000 Fax: 818-507-6800
Bankruptcy specialist cert. by State Bar of CA Bd of Legal Specialization.
Business bankruptcy specialist cert. by Amer. Bd. of Certification
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A follow-up question on this topic:
Are income tax refunds ever considered income for the means test? Dis this issue come up at the CDCBAA meeting with the UST?
Jim
To: cdcbaa@yahoogroups.com
Sent: 5/28/2008 12:41PM
Subject: [cdcbaa] RE: 707(b) income questions
Several 707(b) income questions for the group regarding a self-employed client:
1) Are business expense reimbursements considered income under 707(b)?
2) Is repayment of a loan from the debtor's company to the debtor considered income under 707(b)?
3) Is money received from cashing in an IRA account considered income under 707(b)?
Jim
James R. Selth
Weintraub & Selth, APC
12424 Wilshire Blvd., Suite 1120
Los Angeles, CA 90025
Telephone: (310) 207-1494
Facsimile: (310) 442-0660
E-Mail: jim@wsrlaw.net
NOTICE TO RECIPIENT: THIS E-MAIL IS MEANT FOR ONLY THE INTENDED RECIPIENT OF THE TRANSMISSION, AND THIS COMMUNICATION IS INTENDED TO BE PRIVILEGED BY LAW. IF YOU RECEIVED THIS E-MAIL IN ERROR, ANY REVIEW, USE, DISSEMINATION, DISTRIBUTION, OR COPYING OF THIS E-MAIL IS STRICTLY PROHIBITED. PLEASE NOTIFY US IMMEDIATELY OF THE ERROR BY RETURN E-MAIL AND PLEASE DELETE THIS MESSAGE FROM YOUR SYSTEM. THANK YOU IN ADVANCE FOR YOUR COOPERATION.
>>
A follow-up question on this topic:
Are income tax refunds ever considered income for the means test? Dis this issue come up at the CDCBAA meeting with the UST?
Jim
----- Original Message -----
From: "James R. Selth"
To: cdcbaa@yahoogroups.com
Sent: 5/28/2008 12:41PM
Subject: [cdcbaa] RE: 707(b) income questions
Several 707(b) income questions for the group regarding a self-employed client:1) Are business expense reimbursements considered income under 707(b)? 2) Is repayment of a loan from the debtor's company to the debtor considered income under 707(b)?3) Is money received from cashing in an IRA account considered income under 707(b)?JimJames R. SelthWeintraub & Selth, APC12424 Wilshire Blvd., Suite 1120Los Angeles, CA 90025Telephone: (310) 207-1494Facsimile: (310) 442-0660E-Mail: jim@wsrlaw.netNOTICE TO RECIPIENT: THIS E-MAIL IS MEANT FOR ONLY THE INTENDED RECIPIENT OF THE TRANSMISSION, AND THIS COMMUNICATION IS INTENDED TO BE PRIVILEGED BY LAW. IF YOU RECEIVED THIS E-MAIL IN ERROR, ANY REVIEW, USE, DISSEMINATION, DISTRIBUTION, OR COPYING OF THIS E-MAIL IS STRICTLY PROHIBITED. PLEASE NOTIFY US IMMEDIATELY OF THE ERROR BY RETURN E-MAIL AND PLEASE DELETE THIS MESSAGE FROM YOUR SYSTEM. THANK YOU IN ADVANCE FOR YOUR COOPERATION.>>
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I certainaly hope the uste does not assert debtors are to include cash received which is strictly a return of principle upon sale of an asset in the means test. If uste does not maintain the need include proceeds that are strictly from return of principal in the means test, then it would seem to follow that the portion of funds withdrawn from IRA's or other deferred compensation plans which are a return of the debtor's contributions should not count as income in the means test.
Mark T. Jessee
Law Offices of Mark T. Jessee
"A Debt Relief Agency"
50 W. Hillcrest Drive, Suite 200
Thousand Oaks, CA 91360
(805) 497-5868
On Wed May 28 17:40 , 'David A. Tilem' sent:
The post was migrated from Yahoo.
according to uste: all cash received except loan proceeds and soc sec must
be included in the means test.
David A. Tilem
Certified Bankruptcy Specialist*
Law Offices of David A. Tilem (a debt relief agency)
206 N. Jackson Street, #201, Glendale, CA 91206
Tel: 818-507-6000 Fax: 818-507-6800
* Bankruptcy specialist cert. by State Bar of CA Bd of Legal
Specialization.
The post was migrated from Yahoo.
My responses in bold.
To:
Sent: Wednesday, May 28, 2008 12:41 PM
Subject: [cdcbaa] RE: 707(b) income questions
> Several 707(b) income questions for the group regarding a self-employed client:
>
> 1) Are business expense reimbursements considered income under 707(b)?
If the client is self-employed, who is reimbursing him/her? In any event, if it is truly an expense reimbursement it is NOT income. One of two things will be true: Either you include the reimbursement as part of the gross income then subtract out the actual corresponding expenses, or you don't include it at all (assuming that the expenses are exactly reimbursed in the amount expended). Either way, the net result is the same for 707(b) but MAY make a difference on the means test as to whether the debtor is above median or below median. I asked this question at the meeting we had with the OUST staff and didn't get a straight answer from them on it. I believe they deferred to their default position which is that it's ALL income to be included, but netted out in a self-employment case above the line (in a Chapter 7 anyway--there's a recent opinion about the Chapter 13 Form 22C requiring the expenses to be subtracted below the line). The bigger question is in a regular wage-earner case that receives reimbursements since there is no place "below the line" to subtract it (except in the "other" section).
> 2) Is repayment of a loan from the debtor's company to the debtor considered income under 707(b)?
I don't think so, but I'll abstain on this one.
> 3) Is money received from cashing in an IRA account considered income under 707(b)?
I've never fully understood the arguments on this, but I believe that for a 401k and IRA it would be, and for a ROTH IRA it would not be (or maybe I got that backwards). Has to do with whether it was ever income received in the first instance (notwithstanding taxability).
______________________
Mark J. Markus
Law Office of Mark J. Markus
11684 Ventura Blvd. PMB #403
Studio City, CA 91604-2652
(818)509-1173 (818)509-1460 (fax)
Toll Free: 1-866-576-6275
web: http://www.bklaw.com/
This Firm is a Qualified Federal Debt Relief Agency
___________
NOTICE: This Electronic Message contains information from the law office of Mark J. Markus that may be privileged. The information is intended for the use of the addressee only. If you are not the addressee, note that any disclosure, copy, distribution or use of the contents of this message is prohibited.
IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communicat>
My responses in bold.
----- Original Message -----
href"mailto:jim@wsrlaw.net">jim@wsrlaw.net>
To: <cdcbaa@yahoogroups.com>
Sent: Wednesday, May 28, 2008 12:41 PM
Subject: [cdcbaa] RE: 707(b) income
questions
> Several 707(b) income questions for the group
regarding a self-employed client:> > 1) Are business expensereimbursements considered income under 707(b)?
If the client is self-employed, who is reimbursing him/her? In any event,
if it is truly an expense reimbursement it is NOT income. One of twothings will be true: Either you include the reimbursement as part of the
gross income then subtract out the actual corresponding expenses, or you don't
include it at all (assuming that the expenses are exactly reimbursed in theamount expended). Either way, the net result is the same for 707(b) but
MAY make a difference on the means test as to whether the debtor is above median
or below median. I asked this question at the meeting we had with the OUST
staff and didn't get a straight answer from them on it. I believe they
deferred to their default position which is that it's ALL income to be included,
but netted out in a self-employment case above the line (in a Chapter
7 anyway--there's a recent opinion about the Chapter 13 Form 22C requiring the
expenses to be subtracted below the line). The bigger question is in a
regular wage-earner case that receives reimbursements since there is no
place "below the line" to subtract it (except in the "other"
section).
> 2) Is repayment of a loan from the
debtor's company to the debtor considered income under 707(b)?
I don't think so, but I'll abstain on this
one.
> 3) Is money received from cashing in an IRA account considered
income under 707(b)?
I've never
fully understood the arguments on this, but I believe that for a 401k and IRA it
would be, and for a ROTH IRA it would not be (or maybe I got that
backwards). Has to do with whether it was ever income received in thefirst instance (notwithstanding taxability).
______________________Mark J. MarkusLaw
Office of Mark J. Markus11684 Ventura Blvd. PMB #403Studio City, CA91604-2652(818)509-1173 (818)509-1460 (fax)Toll Free:
1-866-576-6275web: http://www.bklaw.com/This Firm is aQualified Federal Debt Relief Agency___________NOTICE: This Electronic
Message contains information from the law office of Mark J. Markus that may be
privileged. The information is intended for the use of the addresseeonly. If you are not the addressee, note that any disclosure, copy,
distribution or use of the contents of this message is prohibited.IRS
CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS,
we inform you that any U.S. tax advice contained in this communication (or in
any attachment) is not intended or written to be used, and cannot be used, for
the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii)
promoting, marketing or recommending to another party any transaction or
matter addressed in this communicat>
The post was migrated from Yahoo.
Several 707(b) income questions for the group regarding a self-employed client:
1) Are business expense reimbursements considered income under 707(b)?
2) Is repayment of a loan from the debtor's company to the debtor considered income under 707(b)?
3) Is money received from cashing in an IRA account considered income under 707(b)?
Jim
James R. Selth
Weintraub & Selth, APC
12424 Wilshire Blvd., Suite 1120
Los Angeles, CA 90025
Telephone: (310) 207-1494
Facsimile: (310) 442-0660
E-Mail: jim@wsrlaw.net
NOTICE TO RECIPIENT: THIS E-MAIL IS MEANT FOR ONLY THE INTENDED RECIPIENT OF THE TRANSMISSION, AND THIS COMMUNICATION IS INTENDED TO BE PRIVILEGED BY LAW. IF YOU RECEIVED THIS E-MAIL IN ERROR, ANY REVIEW, USE, DISSEMINATION, DISTRIBUTION, OR COPYING OF THIS E-MAIL IS STRICTLY PROHIBITED. PLEASE NOTIFY US IMMEDIATELY OF THE ERROR BY RETURN E-MAIL AND PLEASE DELETE THIS MESSAGE FROM YOUR SYSTEM. THANK YOU IN ADVANCE FOR YOUR COOPERATION.
>>
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