Ron Stone

Real Property Change for CA Companies Ownership or Change in Control-New Mandatory Self-Reporting with Penalties

admin — Tue, 23 Mar 2010 17:10:44 +0000

California has also put some teeth into rules currently on the books, which require owners of real property to pro-actively evaluate every transaction
involving entities owning real estate in California to determine whether a notice need be filed with the State Board of Equalization. Effective January
1, 2010, there are two circumstances that require the filing of a form BOE-100-B, Statement of Change in Control and Ownership of Legal Entities.

1. Whenever there is a change in control or change in ownership of a legal entity and the legal entity owned an interest in California real property as
of that date, the person or legal entity acquiring ownership control or the legal entity that has undergone a change in ownership must file a statement
with the Board.
2. When an entity is requested by the Board to file regardless of whether or not a change in control or ownership of the legal entity has occurred or
whether the legal entity owned an interest in real property

Form 100-B must be filed with the State Board of Equalization within 45 days after closing any transaction in which a “change of ownership” resulting
from the transfer of an ownership interest by a legal entity that owns real property in California has occurred, or face a penalty of 10% of the real
property taxes due in the next year. A transfer of an ownership interest in an entity occurs when either a person or entity acquires a greater than 50%
ownership interest in that entity.

Failure to file in either circumstance noted above will result in application of the penalty. The filing of a Change in Ownership Statement or a Statement
of Change in Control and Ownership of Legal Entities with the county assessor does not satisfy the filing requirement.

The main change in the law is that the 10% penalty will automatically be applied, whereas in the past, the penalty would be applied upon failure to
respond to a notice by the State Board of Equalization.

Form BOE-100-B is utilized by the Board of Equalization to obtain information to determine whether a transfer of interest in a legal entity has triggered a
change in control or ownership that results in the reassessment of the California real property owned by the entity, and whether an exclusion from
change in ownership applies.

[Note that a “change of ownership” resulting from the direct transfer of an interest in real property in California must be reported to the local
county assessor, and is subject to different rules and penalties.]

FAC Tours

Ron_Stone — Sat, 27 Feb 2010 18:54:33 +0000

As many of you know, I am and I will begin keep a running log of my experience as part of that Committee.

In April 2009, we toured both BV and HM to see what problems the refurbishing of each school presented. The school principals were not notified of our planned visit, which did not make the tours as productive as possible, but they were still informative.

Ronald C. Stone (Ron) is the principal of Profit Planners West and Stone Consulting with over twenty five years of business advisory, accounting and tax experience. Additionally, Ron is the Editor in Chief for Micro Cap Review. Prior to Profit Planners West and Stone Consulting, Ron was the Chief Financial Officer and Operating Officer of Ronco Corp.; a NASDAQ bulletin board traded Public Company. Ron has also been CFO/COO of an entertainment company and CFO of an engineering manufacturer. Ron had his own CPA firm in Beverly Hills and worked there for 15 years. Ron holds a Bachelor’s degree in History from University of California, Los Angeles. Co-chair of the Facility Advisory Committee for the BHUSD.

Estate Planning in Flux

Ron_Stone — Sat, 27 Feb 2010 18:43:34 +0000

The federal estate tax rules for 2010 changed. For this year only, there is no estate tax. Any Estate Plan currently in place should be reviewed promptly to make sure unintended consequences are not lurking within the Plan that may negatively impact the beneficiaries.

The Economic Growth and Tax Relief Reconciliation Act of 2001 (the “2001 Act”) was believed to contain provisions that would repeal the estate and generation skipping transfer (“GST”) tax for future years; in effect, this year, 2010, is the only exempt year. This one-year exemption from estate and GST taxes may now result in capital gains tax for the beneficiaries of an estate.

Elimination of the estate tax means that when an asset transfers to the beneficiary, the asset retains the decedent’s basis. Prior to this year, when assets transferred to a beneficiary there was a “step-up” in basis. A step-up in basis means the beneficiary would have no tax to pay on the asset if sold immediately upon transfer, even if the asset had appreciated in value significantly since its acquisition by the decedent; instead, the new tax basis of the asset is based on the market value of the asset at the time of death, so there is no taxable gain.

In 2010 only a partial step-up in basis is available, limited to $3,000,000 for a spouse and $1,300,000 for a non-spouse beneficiary. Since the entire estate is not “stepped-up,” there is a planning opportunity to identify which asset should receive the step-up treatment. Without planning, the step-up will be allocated pro-rata over all assets. If one asset has appreciated more significantly than others, allocation of the step-up to that particular asset will allow the beneficiary to reduce capital gains taxes. Additionally, in 2010, a complete estate tax plan should include a list of assets and the corresponding tax basis figures for those assets (with documentation), as the beneficiaries may have difficulty finding this back-up information once the decedent is gone.

This one-year relief from the estate and generation skipping tax (“GST”) may justify increasing bequests to grandchildren and reducing bequests to children. In previous years, the GST made it more costly to “skip” a generation, resulting in a larger estate for your children and estate taxes paid by both the grandparent and then the parent. Skipping the parent and giving directly to the grandchildren, results in avoidance of double taxation. If the decedent died without changing her Estate Plan, there may be an opportunity for the children to disclaim their inheritance and have it pass directly to the grandchildren.

Members of Congress have stated that they will reinstate estate taxes retroactively to January 1, 2010, but since Congress has trouble agreeing on anything, the future of estate taxes is unclear at this time. It may be worthwhile to review your estate plan to ensure your goals are being met. Being proactive can ensure that the Estate Plan can be carried out according to the decedent’s wishes.

FAC – 4-17-09

Ron_Stone — Fri, 17 Apr 2009 15:38:39 +0000

Yesterday, we toured both BV and HM to see what problems the refurbishing of each school presented. The school principals were not notified of our planned visit, which did not make the tours as productive as possible, but they were still informative.

Facilites Advisory Committee

Ron_Stone — Tue, 10 Mar 2009 14:52:49 +0000

In November I joined the newly formed Facilities Advisory Committee to help the Board of Education determine how best to spend the proceed of the $300MM bond that recently pasted.

Election Results

Ron_Stone — Wed, 05 Nov 2008 21:12:19 +0000

Last night, the election of 2008 finished and the citizens of the US showed that we continue to approach the “Dream” of Martin Luther King Jr.

“I look forward confidently to the day when all who work for a living will be one with no thought to their separateness as Negroes, Jews, Italians or any other distinctions. This will be the day when we bring into full realization the American dream — a dream yet unfulfilled. A dream of equality of opportunity, of privilege and property widely distributed; a dream of a land where men will not take necessities from the many to give luxuries to the few; a dream of a land where men will not argue that the color of a man’s skin determines the content of his character; a dream of a nation where all our gifts and resources are held not for ourselves alone, but as instruments of service for the rest of humanity; the dream of a country where every man will respect the dignity and worth of the human personality.”

Our country “determined” Barack Obama by the content of his character instead of the color of his skin. This country gives us all a lot to be thankful for and last night proved the essential goodness of our people.

Ron_Stone — Tue, 14 Oct 2008 21:17:22 +0000

Here is an article from the CalCPA magazine from Jan/Feb 2008.

http://www.calcpa.org/Content/24896.aspx

Today’s Uncertain Economy

Ron_Stone — Sun, 12 Oct 2008 17:41:55 +0000

This past week has raised our economy to a level of uncertainty not seen for many generations. Housing, stocks and job markets are all feeling the effects of the global economic downturn and these events require us to become reflective.

Take stock in what you have and what you will need. Since our credit markets have created uncertainty, make certain that if you are dependent on continued credit, you confirm that your credit remains available. Consider the future and plan ahead.

Are your retirement accounts sufficient?

Do you have enough saved for college?

If you loose your job, do I have enough saved until you get a new one?

Should I change how I live, downsize?

Should I change my investment allocation?

These questions are only the beginning. It is time to be proactive, not reactive. If you think about the future and adjust your life plan (if necessary), this downturn can be managed. In the long-term, there may even be opportunities.

Roll-Up

Ron_Stone — Fri, 15 Aug 2008 22:32:17 +0000

One of the most effective techniques for increasing a company’s size and creating value for shareholders is a roll-up to increase the presence of the public company. In a roll-up, a company seeks to acquire multiple small companies in a similar industry at a low earnings multiple. The earning multiple is calculated by multiplying the earning of the company by the market multiple. This calculation gives the buyer a market price for the acquisition target. Since small private companies usually sell for a multiple that is much lower than a public company, there is an arbitrage opportunity. As an example, if a private company is valued at 4 times earnings, but the public company is trading at 20 times earnings; if the acquisition target had $500,000 of earnings, then the company can be purchased for $2MM but create an increased market cap for the stock of $10MM. Thus by using this technique the shareholders’ market value increased by $8MM.

A roll-up is extremely effective in industries where minimal consolidation has occurred or with industries whose market valuation are very low. This technique is also effective in developing economies.

Accounting in China

Ron_Stone — Tue, 05 Aug 2008 10:52:21 +0000

If a company is planning to get listed on a US capital market, it must maintain it books and records according to US GAAP. As part of the reverse merger process, a company will engage an auditor (I will blog on this process later) and have their financial statements attested to by that auditor. In order to do this the company’s records must be accurate. China’s taxing system is quite high and companies are incentivized to maintain two sets of books; one for the Chinese government and the other for what actually occurred. This second set of books usually maintains the cash transactions.

I recommend engaging a Hong Kong accounting firm to help convert the cash books to the actual records. Keep in mind, this conversion will likely create a tax burden as the prior year’s unrecorded income is included. If the tax burden is too great there are other techniques we have used to work around books that cannot be audited. It is important to be flexible when planning to go public as the structure of the deal may change to meet challenges that present themselves.