A great deal has changed in the last year for most families, leaving many to wonder when and if they can retire, and how social security fits into the picture. We will discuss these  concerns and more, including what decisions should be made now for the protection of personal property, business assets, and loved ones in the future and how to choose a trustee.

Speakers:

Michael J. Bragg, Buckley Law P.C.
Ardeth Hollo, Robinswood Financial
Susan L. Peterson, US Trust, Bank of America Private Wealth Management

Wine and light appetizers will be served.

Please RSVP by visiting securingyourretirement.eventbrite.com or by contacting Liz Olsen at eao@buckley-law.com or 503.620.8900.

We will be offering this presentation twice, on Wednesday, March 20, 2013 and Wednesday, March 27, 2013.  Both will be offered at 11:45am- 1:15pm here at our offices at 5300 Meadows Road, Suite 200, Lake Oswego, OR 97035.  To RSVP, please contact Liz Olsen at eao@buckley-law.com or 503.620.8900.

NOTE: We have reached capacity for this presentation, but if you would like to be added to the waiting list you may contact Liz Olsen at 503.620.8900 or eao@buckley-law.com.

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People protect their valuables.  Usually, valuables are protected by security measure available only to the owner. Before the digital age, the most common protection used was safes and safe deposit boxes. These options have one significant advantage: they physically protect what the owner put inside of them by clearly limiting access.[1]

Flash forward to 2013. Now, instead of papers stored in safes, people store valuable information not only on their computers and phones, but on online networks owned by others including “the Cloud.”  A few examples of valuable digital data are:

1. Financial accounts (banks, insurance, brokerage)
2. Email
3. Social Media Accounts (Facebook, Twitter, LinkedIn, etc.)
4. PDFs of valuable documents stored on a computer

If a person dies with digital assets, how can the deceased’s family or legal representatives obtain that data, let alone know if it exists?  Moreover (and this question may come as a shock to some), who actually owns this data – the deceased’s loved ones, or the online source itself? This question is a complicated legal one and is beyond the scope of this article, although it is an interesting one (this article has some interesting thoughts, though).[2]

As of January 2013, Oregon does not have a specific law to allow a deceased person’s legal representative to gain access to digital data, particularly online digital data. This makes many people wonder what they can do to make sure their digital data is accessible to loved ones after death. More specifically, what can you do to give your survivors the best chance of obtaining your digital data (assuming you want this) and allowing your representative access to the information they need to handle your affairs? Until specific legislation is created about this issue, most experts recommend the following:

1. Locate the sources of your digital data. Sources include your email provider, social media sites, and even tax return information stored on a laptop or flash drive.
2. Consider storing password data on an encrypted electronic list.  A few popular software tools that can accomplish this are LastPass and KeePass.
3. Include passwords for your computers, tablets, smart phones and encrypted data storage devises in this list.
4. Write instructions for your survivors to locate this encrypted list and access it if you become incapacitated or die. Store these written instructions in a safe deposit box or safe at your home.

One final suggestion is to take the time to read the terms of service for all of your online accounts that are protected by a password. Find out which providers will allow the account to be transferred, reveal passwords, allow access to content without necessarily allowing access to the entire account, and if they will terminate an account at death.

The reality is that most people aren’t motivated to follow the above steps. Most of the population has extensive digital data stored online. It’s important to remember how important access to that information would be to our family and representatives should we die. Not only are there the “important” things like financial data, but also the things of sentimental value like the photos on someone’s Facebook profile. For more information about password and data security, please contact Fixed Fee IT.

Jay Richardson

We will be offering this presentation on December 19, 2012 from 11:45am-1:15pm. Please contact Liz Olsen at eao@buckley-law.com or 503.620.8900 to RSVP.

1. Vineyards are eligible for the Code Sec. 179 expensing deduction.

2. A 1967 revenue ruling that arrived at the opposite conclusion no longer applies for the ’86 Code’s version of Code Sec. 179.

Why is this CCA so important to Oregon vineyards?  Indulge us with this important background: Vineyards, like most taxpayers, can elect on Form 4562 to expense (deduct in lieu of depreciation) the cost of “section 179 property” when it is placed in service (Code Sec. 179(a), Code Sec. 179(b)(1)). The maximum amount that could be expensed for tax years beginning in 2009 (the tax year at issue in the CCA) was $250,000, and the maximum annual expensing amount was reduced dollar-for-dollar by the amount of section 179 property placed in service during the tax year in excess of $800,000 (the investment ceiling). (Code Sec. 179(b)(1); Code Sec. 179(b)(2), Code Sec. 179(b)(6)).  For tax years beginning in 2010 and 2011, the maximum expensing amount is $500,000. For tax years beginning in 2012, it’s $139,000, and for tax years beginning after 2012, the maximum amount is $25,000. The investment ceiling is $2,000,000 for tax years beginning in 2010 and 2011, $560,000 for tax years beginning in 2012, and $200,000 for tax years beginning after 2012. The deduction amount under Code Sec. 179 is further limited to the amount of taxable income from any of taxpayer’s active trades or businesses. (Code Sec. 179(b)(3); Reg. § 1.179-2(c)(1)).

What property qualifies for section 170 treatment?
In general, section 179 property is property that is:

1.            Tangible property to which Code Sec. 168 applies, or certain computer software if placed in service in a tax year beginning before 2013;

2.            Code Sec. 1245 property (as defined in Code Sec. 1245(a)(3)); and

3.            Acquired by purchase for use in the active conduct of a trade or business.

Under Code Sec. 1245(a)(3), the term “Code Sec. 1245 property” means property which is or has been property of a character subject to the allowance for depreciation under Code Sec. 167, and is (among other things) (A) personal property, or (B) other property (not including a building or its structural components) but only if such other property is tangible and has an adjusted basis in which there are reflected adjustments described in Code Sec. 1245(a)(2), for a period in which such property (or other property) was used as an integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electrical energy, gas, water, or sewage disposal services. Fruit bearing trees and vines aren’t considered placed in service until they have reached an income-producing stage. (Reg. § 1.46-3 (d)(2)(iii))

What did the IRS say in the CCA?
In the CCA, the taxpayers were individuals who attached Schedule F, Profit or Loss From Farming, to their federal income tax return, claiming to operate a vineyard business activity. In 2005, they began planting the vineyard and capitalized over three years the costs of land preparation, labor and rootstock. Land preparation costs claimed did not include any nondepreciable land costs. In 2009, when the plants became viable, Taxpayers placed the vineyard in service and took a Code Sec. 179 deduction for the costs incurred in planting the vineyard.

The issue was whether the taxpayers’ vineyard was section 179 property eligible for expensing. The vineyard is tangible property to which Code Sec. 168 applies (condition (1), above), and was acquired by purchase for use in the active conduct of the taxpayers’ trade or business (condition (2) above). The technical  issue was whether the vineyard was Code Sec. 1245 property (condition (3), above).

What did the IRS conclude?
The CCA says that the vineyard is Code Sec. 1245 property for Code Sec. 179 purposes, whether or not it is an inherently permanent structure. The IRS held that is earlier, contrary ruling is obsolete. Rev Rul 67-51, 1957-1 CB 68, said that certain fruit bearing trees are not section 179 property because they do not qualify as tangible personal property within the meaning of Code Sec. 179 of the ’54 Code.

Does the CCA benefit your vineyard?
If the facts of the CCA apply to your vineyard, you should immediately contact your tax return preparer to see amount amending your tax return and claiming a section 179 deduction, which could result in a significant tax refund. For years after 2010, you may need to obtain the IRS’ consent before filing an amended return.

The Bare Bones of Distributions Under Oregon Probate Law and Federal Income Tax Law

The Bare Bones of Distributions Under Oregon Probate Law and Federal Income Tax Law

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Please join us for this valuable conversation on year-end estate planning opportunities for the taxable estate valued over $1 million.  Buckley Law P.C. Shareholder & Estate Planning Attorney Rob Le Chevallier will lead this presentation and explain how you can maximize your asset potential by taking advantage of gift tax exemptions and opportunities before the New Year.  Come and learn ways to reduce your taxable estate and pass on more assets to beneficiaries.

We will be offering this presentation twice, on Wednesday, November 14, 2012 and on Wednesday, November 28, 2012 at 11:45am – 1:15pm.  Both presentations will take place at our office, located at 5300 Meadows Road, Suite 200, Lake Oswego,OR.

In Oregon, a stepfather may adopt his stepchild without changing his wife’s legal status as the child’s mother (please see footnote below).  Except in cases where the biological father has passed away, an adoption by a stepfather terminates the rights of the biological father.  If the biological father is deceased, both the biological father and stepfather may be considered the child’s legal father for inheritance purposes.

Because an adoption terminates the biological father’s rights to the child (including the right to seek parenting time), he must be given notice of an adoption proceeding unless he has willfully deserted or neglected the child. Oregon law defines this as “willfully deserting or neglecting without just and sufficient cause to provide the proper care and maintenance” for at least one year prior to the adoption filing.   Along with the rights of the biological father, an adoption terminates his responsibilities, including any child support obligation that otherwise would have accrued after the date of the adoption. 

Oregon also allows adoption by same-sex partners.  If the child was born via artificial insemination, the consent of the sperm donor is unnecessary.  Not every state recognizes same-sex partnerships, so adoption is especially important where a move is possible.  There have been cases in other states where a partner who is not the biological parent has been denied contact with a child he or she loves and has helped raise.  However, a valid adoption judgment obtained in Oregon should be recognized in other states. 

If you would like more information regarding family law matters, please contact me at 503-620-8900 or tmm@buckley-law.com.

Definitions:

Deficiency:

A deficiency is the shortfall between the amount of the particular mortgage or trust deed balance owed to the lender and the sum for which the real estate collateral sells on the courthouse steps.  For example, if $200,000 is owed and the property sells for $180,000, the deficiency is $20,000. 

 Deficiency Judgment:

A deficiency judgment is a judgment entered by a court which is equal to the sum of the deficiency and which may be collected from after earnings or assets of the debtor other than the property which is foreclosed.

 Judicial Foreclosure:

This is a foreclosure which results from a lawsuit.  The borrower does not have any right to cure the default after the lawsuit is filed and must pay the full balance of the debt.  The suit is filed in the county where the property is located and the sale is conducted by the sheriff of that county on the courthouse steps.

 Non-Judicial Foreclosure:

A non-judicial foreclosure is done without the formality of a lawsuit or a court oversight.  A trustee gives a notice of default.  The borrower has 120 days to bring all the payments current and reinstate the loan.  If the borrower fails, the property can be sold on the courthouse steps by the trustee upon the expiration of the 120 days.  The foregoing relates to trust deeds.  Foreclosure, or forfeiture, of land sale contracts are slightly different.

 Residential Trust Deed:

A residential trust deed is a trust deed on property, up to and including a four-plex, which is occupied (or in the case of a plex, a portion of which is occupied) by the borrower or members of the borrower’s immediate family as a primary residence.  Whether or not a trust deed is a residential trust deed is determined on the date of the default (typically a missed payment) which gives rise to the foreclosure. 

Foreclosure Law Frequently Asked Questions:

Question: Can there be a deficiency judgment on the non-judicial foreclosure of a trust deed? 

Answer: No.  ORS.86.770(2)

Question: Can there be a deficiency judgment on the judicial foreclosure of a trust deed?

Answer: Yes, unless it is a residential trust deed.  ORS.86.770(2)

Question: So, does that mean that there will be no deficiency judgment if my residential trust deed is foreclosed, whether judicially or non-judicially?

Answer: Yes.  ORS.86.770(2)

Question: So, if the deficiency results from the judicial foreclosure of a non-residential trust deed (for example, a duplex which I own but is not occupied by me or members of my immediate family as of the date the foreclosure commences) can the creditor get a deficiency judgment?

Answer: Yes. 

Question: So, does that mean that, if I have a residential trust deed on my property, I don’t have to worry about simply letting the bank foreclose?

Answer:  It depends.  If there is a second trust deed on the property payable to a different bank, foreclosure of the first trust deed will wipe out the lien of the second trust deed but it will not eliminate the debt.  Once the first trust deed is foreclosed, the bank which held the second trust deed still will hold your promissory note and will sue you personally for the balance of the second.  If there is no second trust deed, there will not be a deficiency or collection action on a foreclosure of a first trust deed. 

Question: Is there some special rule if the same bank created both the first and second?

Answer: Yes.  If the same bank created both the first and second at the same time even if they are owned by different banks at the time of foreclosure, the debt of the other trust deed is also uncollectible by statute.  ORS.86.770(2)

Question: So, what if I am buying my home on a land sale contract and there is a default which gives rise to a deficiency.  Will there be a deficiency judgment?

Answer:  In Oregon, a land sale contract (regardless of whether the property is your primary residence or not) can be foreclosed judicially or non-judicially.  If the contract is foreclosed judicially, one of several results may occur.  Some judicial foreclosures result in a courthouse sale, some do not.  If your contract is foreclosed judicially and it results in a courthouse sale, there will be a deficiency judgment if there are not sufficient proceeds to pay off the purchase price plus the attorney’s fees and costs.  Likewise, if there is a specific performance decree which results from a judicial foreclosure of a land sale contract (whether the property is your primary residence or not) there will be a judgment for the short fall if the debtor is unable to pay off the contract.  There may be circumstances where the court simply directs the property be delivered to the seller without a sale or a decree of specific performance, in which case there will be no deficiency, and therefore, no deficiency judgment.

When a land sale contract is foreclosed non-judicially, the result is that there is no sale on the courthouse steps.  Rather, the property is forfeited to the contract vendor.  In that case, there is no deficiency, and consequently, no deficiency judgment.

 Tax Consequences of a Short Sale or Foreclosure:

The Internal Revenue Code treats relief from indebtedness as taxable income.  There is an exception if the debt relief comes from forgiveness in the form of a gift – clearly not the case with institutional mortgage lenders.

The general principle is that, if the bank agrees to forgive some debt as part of the short sale negotiation or if the bank is barred from collecting some of the debt by reason of foreclosure, that portion of the debt obligation is taxable.  The income from relief of indebtedness is recognized in the year of debt forgiveness as ordinary income.  If the property is investment property or property held for productive use in trade or business so that a capital loss arises by treating the foreclosure as a sale or exchange, the loss may be recovered $3,000 per year against ordinary income or dollar for dollar for capital gains. 

A SPECIAL EXCEPTION ARISES FOR PROPERTY WHICH THE DEBTOR HAS OCCUPIED AS A PRIMARY RESIDENCE FOR 2 OF THE LAST 5 YEARS.  A similar exception, not addressed here, applies to real property used in trade or business.   In that case of a qualified residence, the debtor does not have to recognize any debt relief up to the amount of the debtor’s original purchase money loan and/or improvement loan, as amortized on the date of foreclosure or short sale.  If the original loan(s) is (are) refinanced, the same rule applies based on actual amortization.  For example, assume debtor buys the property for $200,000 and gets 100% financing and he pays the loan down to $195,000.  As the result of a short sale for $180,000, the unrecovered amount is forgiven or, because of a foreclosure sale, the property goes for $180,000 andOregonlaw precludes a deficiency judgment.  The debt relief is $15,000 but, since the amount realized by the lender plus the amount of debt forgiveness combined do not exceed the debtor’s purchase money loan balance, as amortized, the debtor is excused from recognizing the debt relief as taxable income.  On the same facts where the property has not been occupied as the debtor’s primary residence for two of the last five years, the $15,000 is taxable.  The same rule would apply if the debtor refinanced (but did not take money out) the debt midstream.

            Assume, however, that the debt relief results in a greater recovery to the debtor than the purchase money loan balance (for example, if the debtor borrowed additional funds which were not used to improve the property).  Assume that the debtor purchased the property for $200,000 and, either as part of the purchase or on a subsequent refinance, debtor borrowed $230,000 against the property.  Assume that the property that qualifies on the 2 of the last 5 years rule.  Further assume that, as a result of the short sale or foreclosure, everything over $180,000 is forgiven.  In this case, the debtor gets to exclude the $15,000 but must pay ordinary income tax on the $35,000 surplus. 

 What is the impact on a credit score of foreclosure versus short sale and how many years before you can get another conventional loan?

            Although I have asked at least a dozen mortgage loan professionals, no one has given me the exact number of credit score points which results from a foreclosure as distinct from those which results from a short sale. 

            Fannie Mae published some guidelines on April 14, 2010 in announcement SEL-2010-05, and those are as follows:

From Fannie Mae’s Announcement SEL-201-05:

Fannie Mae is changing the required waiting period for a borrower to be eligible for a mortgage loan after a preforeclosure event. The waiting period commences on the completion date of the preforeclosure event, and may vary based on the maximum allowable LTV, CLTV, and HCLTV ratios (referred to herein as LTV ratios) and occupancy of the property.  These new policies will be updated in the Selling Guide,  B3-5.3-07, Derogatory Credit Information, and in B3-5.3-10, DU Credit Report Analysis. The following table describes the waiting period policy changes:

¹ The maximum LTV ratios permitted are the lesser of the LTV ratios in this table or the maximum LTV ratios for the transaction per the Eligibility Matrix. 

Benefits of a Short Sale vs. Foreclosure:

            If there is only one trust deed on the property, the only possible benefit of a short sale over a foreclosure is reducing the damage to one’s credit.

            If there are two trust deeds on the same property from the same bank which were taken out at the same time and both are owned by the same bank (even if not the original issuer) at the time of the foreclosure, the only possible benefit of short sale is reducing the negative impact on one’s credit.

            If there are two trust deeds on the same property, each owned by a different lender, the short sale and the related negotiations may result in a less (or no) financial obligation to the second lender after the short sale.  If there is a foreclosure of the first and the second is held by a different lender, the holder of the second will undoubtedly sue for the full amount of the second.

Caveat:

            The foregoing summary is just that – a summary.  It answers general questions.  Special circumstances, for example, bankruptcy or lender errors, may give rise to different answers.  On each case, an experienced real estate lawyer should be consulted.

 Services to Professionals by Dick and the Buckley Law Firm:

            As a professional courtesy, Dick and the Buckley Real Estate Practice Group will, without charge, answer general questions about foreclosure raised by a real estate broker or principal broker.

            If there is a specific case involving actual individuals and lenders, please be prepared to give us the names of all of the parties so we can do a conflicts check before answering your questions.

            We hope, of course, that you will remember us when you and your clients need to hire experienced foreclosure and real estate attorneys.  You can reach us at 503.620.8900 or www.buckley-law.com. 

Thursday, October 25, 2012
Registration & Networking: 7:30 am
Presentation: 8 am – 10 am

Kruse Oaks Conference Center
5300 Meadows Road  •  Lake Oswego, Oregon
Conference Room,  Main Floor

Part One: 401(k) Fee Disclosure Is Here. Now What?
Charles Warren, AIF® with Oswego Crest Financial Group, LLC will discuss the fiduciary requirements of retirement plan sponsors now that the DOL’s fee disclosure regulations are in play and the best practices to protect your plan.

Securities and advisory services offered through Commonwealth Financial Network,
a member FINRA/SIPC, a Registered Investment Adviser.

Part Two: Social Media Practices for Employers
The growing use of social media in the workplace raises new concerns and new legal issues for employers. Defining the issues, practical employer steps to take and learning from the mistakes of others will be addressed by William E. Gaar, Esq., SPHR with Buckley Law P.C. and Mimi Henninger, SPHR with AmeriBen/IEC Group.

Continental Breakfast will be provided.

Please RSVP by October 18th, 2012 by clicking here.

• Making Oregon businesses more competitive
• Improving business and community capacify
• Cultivating a skilled workforce

For more information and to sign up to attend, please visit the Kruse Way Economic Forum website by clicking here.

We will be offering this presentation on Wednesday, October 24, 2012 here at our offices.  Please RSVP to Liz Olsen at eao@buckley-law.com or 503.620.8900.