ATM LEASEBACK SCHEMES-- any insight?

[Arthur Rubin]

Taxes again:

You recall that I agree with the IRS regulations as to the tax consequences to the investors:

1. The investors may not amend prior year returns* to remove the income that was reported to them on forms 1099, but they reinvested. Losses are "theft losses" in the year of discovery (no later than 2014), and investors can use a "safe harbor" recovery percentage, probably 5%, to calculate the loss. If this brings taxable income negative, it may create a NOL (Net Operating Loss), which can be carried back 2 or 3 years
   * Unless the income was not "constructively received", which means that, in that year, the taxpayer would not have been able to retrieve the funds, based on the knowledge they had at the time.
2. Clawbacks from non-principals are subject to "claim of right" regulations; if under $3000, they are deductible as an itemized deduction subject to the 2% (of AGI) reduction in the year paid; if over $3000, they are deductible as an itemized deduction not subject to the 2% reduction or a credit in the year paid, an amount equal to the tax that was paid at the time on the income. I don't think this deduction can create an NOL, if more than current income. If it could, it would be only 2 years, not 3.
   and now, for something completely different
3. Restitution from principals may be deductible as an expense for preservation of income, not as a business expense. (Fines are not deductible.) This is an itemized deduction, subject to the 2% reduction. This is not likely to do them any good, unless they also have significant legitimate income in that year.

[grimreaper]

and investors can use a "safe harbor" recovery percentage, probably 5%, to calculate the loss.

Did you mean 95%?

[Arthur Rubin]

I meant 5% recovery percentage, 95% loss. So I don't write clearly.

[grimreaper]

I meant 5% recovery percentage, 95% loss. So I don't write clearly.

OK..thanks for all the info.

[Tednewsom]

A little birdie tells me that a law firm which swooped in to help out a big bunch of victimized investors has told all the prospective clients that they are in good hands with the Receiver, and there's no need to waste their money with a law firm. Hell hath frozen over: honest lawyers turning down work because the clients don't need them.

Also, among the people interviewed by the Receiver's investigators are a couple of female employees of NAS, who worked with Wishner and Gillis, respectively. The ladies have both sensibly chosen to totally rat out their bosses in exchange for limited immunity for themselves. "Limited" in that 1) the SEC cannot speak for the Attorney General or the FBI on criminal charges and 2) if they are found to be fibbing, the immunity deal is off.

[itzallgone]

A little birdie tells me that a law firm which swooped in to help out a big bunch of victimized investors has told all the prospective clients that they are in good hands with the Receiver, and there's no need to waste their money with a law firm. Hell hath frozen over: honest lawyers turning down work because the clients don't need them.

Also, among the people interviewed by the Receiver's investigators are a couple of female employees of NAS, who worked with Wishner and Gillis, respectively. The ladies have both sensibly chosen to totally rat out their bosses in exchange for limited immunity for themselves. "Limited" in that 1) the SEC cannot speak for the Attorney General or the FBI on criminal charges and 2) if they are found to be fibbing, the immunity deal is off.

Glad they may be cooperating, but those female workers (not sure their names, but they worked the phones and were secretaries) definitely had every idea what was going on. I'm sure that can be proven. I know when I called to inquire what happened in the July-August-September time range, there was always a new excuse they had. Never consistent from one time to the other I had talked to whatever her name was. Hope she spends some time behind bars still.

[notorial dissent]

That may well be true, and then again it might not. I've worked places where the "furniture" knew a lot more about what was going on than the bosses would have been happy with, or at the very least knew things that if told to the proper people could cause lots of headache without them having a clue about what they'd seen.

[itzallgone]

That may well be true, and then again it might not. I've worked places where the "furniture" knew a lot more about what was going on than the bosses would have been happy with, or at the very least knew things that if told to the proper people could cause lots of headache without them having a clue about what they'd seen.

Very true. And I'd suppose whether truthful or not, their defense should be that. That Joel and Ed took advantage of nice ladies who would repeat whatever they told them, unquestioned and who didn't care one bit to figure out anything else.

[notorial dissent]

Realistically, why should the young ladies in question have known or cared? A lot of places count on the help NOT knowing the real answers.

[Judge Roy Bean]

Realistically, why should the young ladies in question have known or cared? A lot of places count on the help NOT knowing the real answers.

I don't buy into the theory that they, and most employees of companies engaged in questionable activities, could legitimately claim they didn't know their employer was at least dishonest and at worst, they were working for a full-blown criminal enterprise.

Yes, if they had only been there for a few days or weeks, they might not have had the opportunity to overhear a conversation or a voice mail message or may not have seen a letter or email, but even small organizations can't conceal everything from everyone in an office for any length of time.

The hearsay rule works in their favor.

[Tednewsom]

Fair enough. However, it's (probably) not against the law NOT to call the cops or the authorities if you suspect your boss of being a crook. Or even if you've got proof that he (or she) is a crook. It may be ethically reprehensible, morally repugnant and fattening, but unless the two women were actively scamming people themselves, they were just earning a salary in a nest of vipers. And there's a reason they call 'em "secretaries"-- they're there to keep secrets.

In our rugged real world, the authorities will usually make a deal with the Little Fish to catch the Big Fish. And as noted, it's limited immunity. If they're found to actually have broken laws... including hedging their testimony... Gray Bar Hotel, here we come.

[Tednewsom]

Awfully quiet 'round these parts for the last four weeks.

[webhick]

Until there's an arrest or a new receiver's report, there's really not much to say.

[grimreaper]

There are a lot of people wringing their hands an biting their nails waiting for the *other shoe to drop* on the potential claw back.

[Lost Income]

The SEC's claim to have discovered such a high potential for fraud, doesn't seem to be solidifying because Joel & Ed are still walking the streets spending money, and the SEC has stopped answering questions and providing progressive information.

Soon investors/tax accountants will need to know if they should claim money received from NAS in 2014 as income because the IRS & Investor will likely not receive 1099's for 2014, and when its possible that NAS could be convicted of something or nothing for determining which tax rules the losses will be deducted under.

[JamesVincent]

The SEC's claim to have discovered such a high potential for fraud, doesn't seem to be solidifying because Joel & Ed are still walking the streets spending money, and the SEC has stopped answering questions and providing progressive information.

Soon investors/tax accountants will need to know if they should claim money received from NAS in 2014 as income because the IRS & Investor will likely not receive 1099's for 2014, and when its possible that NAS could be convicted of something or nothing for determining which tax rules the losses will be deducted under.

Nothing different from any other Ponzi that went under receivership. At this point the SEC and receiver are still going to be trying to sort out years of accounts, ledgers, what ever records NAS actually kept. We are not even six months into the seizure yet. This is a multiple year process. In many, many cases it is around a year or so before criminal charges are brought against the people on high. In Zeek I think it was almost 2 years, TelexFree about 8 months or so. For them to charge someone and have a chance in court they have to be able to bring facts, exact amounts that were swindled, the process that was used, etc. And things like that take time to sort through and reconstruct.

As far as what to write off, at this point there is no way of knowing. My best guess would be to write off income as income until there is an actual loss awarded. This is the only thing you would want to contact a professional about as it is still dependent on your circumstance and state that you file in. If you do not receive a 1099 from NAS then you are going to have to get your own receipts together and figure out what it is that you earned for 2014 and then talk to a tax professional about where to go from there.

[notorial dissent]

Unless these guys are markedly different from the other receivers I've watched, there probably won't be anything until the next court report is due unless they start taking people to court, and they usually go to the judge first before they do that. This is kind of the watched pot stage where it seems like it is never going to boil.

[grimreaper]

The SEC's claim to have discovered such a high potential for fraud, doesn't seem to be solidifying because Joel & Ed are still walking the streets spending money, and the SEC has stopped answering questions and providing progressive information.

Keep in mind, Gillis is already on record admitting fraud...making up phantom ATMS from the phone book. It's a no brainer on fraud conviction.

[Lost Income]

Thanks all. Sounds unlikely we will see NAS convicted of anything before having to file 2014 taxes, and eventually a fraud conviction is inevitable. Sooner these guys are in jail, sooner they stop spending our money.

[notorial dissent]

Unless the Receiver and the SEC move with more than their usual speed, I doubt seriously that there will be any real court action until well in to 2015 and possibly 2016. The way things are going it is entirely possibly that at least one of the "boys" cut a deal with the Feds and will simply plead guilty to a set of agreed charges and that will be it for him, perhaps they both have, no way of knowing.

My feeling is that the Receiver will be sending out some kind of tax or account statement after year end, but I have no idea how they'll handle this. Since this really isn't within my sphere of experience.