Avoiding Intent to Distribute Mandatory Minimum by Pleading Simple Drug Possession in Pennsylvania

Fingerprinted due to a drug arrest

Many individuals believe that to be convicted of a crime involving illegal drugs, weapons, or any other type of contraband a person must actually possess the item on their person, which is simply not the case. In fact actual possession is not a requirement for a conviction. The prosecution can meet its burden of proof of guilt beyond a reasonable doubt, based on the concept of constructive possession. While constructive and actual possessions are very different, a person is subject to the same criminal penalties if they are convicted including mandatory minimum sentences.

Constructive possession requires that the prosecution show that (1) the individual had the power to exercise control over the item and (2) the individual had the intent to do so. While the mere possession of an item in the area where an individual is arrested is not sufficient, the prosecution can use other factors which could lead to a conviction. For example, items found in an individual’s trunk can be problematic for a defense attorney if the car is registered to the individual or the prosecution can show that the individual was the exclusive user of the car.

The same rule would apply to apartments, bedrooms, or living areas. Evidence helpful to the defense would be equal access or control to the areas in question. However, equal access such as multiple roommates having keys to the apartment is a double edged sword as law enforcement can bring charges against every roommate who had access to the illegal drug. While the mere presence of an illegal item is not enough to convict a person, your defense attorney must make that argument and persuade a judge or jury.

It is important to keep in mind, however, that even if a person is found to constructively possess any illegal drugs the weight itself is not enough to trigger a mandatory minimum sentence. The prosecution must still establish intent to distribute the items. Therefore prosecutors try to focus on the item’s packaging and other paraphernalia found near the items or on the individual’s area of immediate control. However, there is a substantial difference between a conviction for drug distribution and simple possession. In Pennsylvania, simple possession is a misdemeanor whereas intent to distribute is a felony with a mandatory minimum sentence.

Since simple drug possession is a misdemeanor, it is possible to qualify for an intervention program like Veterans Court, Drug Court, Home Confinement or the Accelerated Rehabilitative Disposition Program if it is your first offense and other factors.

If you are arrested for possession or on any drug related charge, please contact Gregory J. Spadea online or at 610-521-0604, of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

Your IRS Taxpayer Bill of Rights

Stop, pay your taxes!

Stop, pay your taxes!

The Internal Revenue Service announced on June 10, 2014, the adoption of a Taxpayer Bill of Rights that will become a cornerstone document to provide the nation’s taxpayers with a better understanding of their rights. The Taxpayer Bill of Rights takes the multiple existing rights embedded in the tax code and groups them into 10 key categories, making them more visible and easier for taxpayers to understand. The rights will be sent to millions of taxpayers this year when they receive IRS notices on issues ranging from audits to collection. The rights will also be publicly visible in all IRS facilities as well as online at IRS.gov.

The IRS released the Taxpayer Bill of Rights following extensive discussions with the Taxpayer Advocate Service, an independent office inside the IRS that represents the interests of U.S. taxpayers. I have given my opinion after each provision of the Taxpayer Bill of Rights on how I feel the IRS is doing with respect to each provision.

The Taxpayer Bill Of Rights are as follows:

  1. The Right to Be Informed. The IRS tries really hard to keep taxpayers informed but sometimes stops communicating for various reasons. Therefore, it is very important for you to follow up if you do not hear back from the IRS after 90 days of responding to a notice.
  2. The Right to Quality Service. The IRS is not delivering quality customer service. Whenever I call the IRS on behalf of a client, I am on hold for 30 to 60 minutes due to budget constraints and poor management. The IRS funding and employee headcount has decreased significantly since 2010, while its workload has increased due to health care reform and foreign account reporting rules.
  3. The Right to Pay No More than the Correct Amount of Tax. The IRS does a good job with this right and gives refunds when taxpayers file amended returns as well as billing taxpayers who fail to pay the correct amount of tax.
  4. The Right to Challenge the IRS’s Position and Be Heard. and
  5. The Right to Appeal an IRS Decision in an Independent Forum. Both these rights can be read together. The IRS does a good job giving taxpayers several ways to challenge or appeal its position either through the Taxpayer Advocate service, Appeals including fast track mediation, US Tax Court and the Court for Federal Claims.
  6. The Right to Finality. The IRS does not always provide a written report at the conclusion of a correspondence audit. Therefore, I always request a written report or statement from the IRS at the conclusion of an audit or when payments are applied from different years.
  7. The Right to Privacy. The IRS does a good job of protecting taxpayer privacy.
  8. The Right to Confidentiality. The IRS does a good job keeping your information confidential although it does share information with other federal agencies and state governments.
  9. The Right to Retain Representation. This is your most important right as a taxpayer. I personally know several clients that were not represented at the audit stage and paid more tax than clients I have represented at the audit stage with the same issues. I would never recommend a client go to an IRS audit by themselves.
  10. The Right to a Fair and Just Tax System. I think this right is the responsibility of Congress since they pass all the tax laws which are not always fair.

If you receive an IRS Notice or have any questions about your taxpayer rights feel free to contact Gregory J. Spadea online or at 610-521-0604. Gregory J. Spadea is a tax attorney, former IRS Agent and founding member of the Law Offices of Spadea & Associates, LLC located in Ridley Park, Pennsylvania.

Gifting as an Estate Planning Tool

Person being handed a house

The annual Exclusion for 2014 is $14,000 and is indexed for inflation so it will increase in the future. The person making the gift is the donor and the recipient of the gift is known as the donee. The donee never pays income tax on any gifts received because the Internal Revenue Code Section 102 specifically excludes gifts from income. If you have a large estate and want to use gifting to reduce your estate or inheritance tax you may want to consider one or all of the following strategies:

  • You can gift up to $14,000 in 2014 to any individual or you can make a joint gift with your spouse of $28,000 per year per person without affecting your $5.34 million estate tax exemption or unified credit. Keep in mind if you decide to gift a larger amount than the annual exclusion you can file a form 709 gift tax return and use up some of your $5.34 Million estate exemption.
  • You can also pay a donee’s tuition directly to the school which would not count toward the $14,000 annual exclusion.
  • If you pay a donee’s medical bills directly to the hospital or health care provider which also would not count toward the $14,000 annual exclusion.
  • You can also donate to a donee’s 529 College Savings Plan and give $70,000 individually or $140,000 with your spouse to make a joint gift to reduce your estate. However, if you give the maximum it wipes out your annual exclusion for that specific donee for the next 5 years. You can also change the donee in the future if that donee decides not to attend college. If the donee does attend college the amount withdrawn from the 529 plan to pay for tuition, books and fees are free of income tax.
  • If you have your own corporation or limited liability company (LLC) and you have a child or relative who works in the business, you can gift non-voting shares of the corporation or non- voting units of the LLC to that person over time but maintain control since you own all the voting shares.
  • If you have any questions about any of the gifting strategies listed above, feel free to contact Gregory J. Spadea at 610-521-0604. Gregory is the managing member of Spadea & Associates, LLC located in Ridley Park, Pennsylvania.

What Should I Do if I Receive an IRS CP2000 Notice Stating I have Unreported Income

Sign on IRS Building in Washington, DC, United States

After you file your tax return the Internal Revenue Service (IRS) will match your return information with third parties who issued you W-2’s or 1099’s. If a discrepancy occurs the IRS will issue you a CP2000 notice assessing you additional tax on any unreported income. I always tell my tax clients to email or fax me any IRS correspondence they receive immediately, because the IRS typically gives you 30 days to respond.

However, if you ignore the notice, you receive a 90 day letter to petition the tax court. I always recommend petitioning that tax court to preserve your appeal rights. However in the event you fail to petition the tax court within the 90 days, you can still apply for audit reconsideration.

The first thing I do when a client calls me is to review the CP2000 notice and make sure it is accurate because the IRS sends lots of inaccurate notices to taxpayers. In addition I verify that is actually from the IRS and not from an identity thief. I typically will file an amended return if my client has additional expenses relating to the unreported income or has basis in securities sold that generated the CP2000 in the first place. If the IRS is disallowing a deduction I will send in the documentation to substantiate it. I always try to get the accuracy related penalty abated and am successful most of the time, especially if only one year is involved.

If you receive a notice from the IRS under-reporter unit do not panic. Just contact Gregory J. Spadea at 610-521-0604 from Spadea & Associates, LLC in Ridley Park.

Understanding Tenancy And Different Ways to Own Property

A paper cutout of a house

When two or more individuals own property whether it’s a home, or a piece of land, the relationship between the owners is known as “tenancy.” There are three common ways that a tenancy can be structured, and how it is done will determine such important considerations as whether an interest in the property will pass freely or by operation of law at an owner’s death and whether creditors can claim the property.

Tenancy comes in three common forms: tenancy in common, joint tenancy and tenancy by the entirety. Each has advantages and disadvantages so it is very important that the deed is properly drafted to accomplish its intended purpose. Otherwise, if the deed is not clear the state default rules will determine which form of tenancy applies and in Pennsylvania the default rule is tenancy in common.

Tenancy in common allows an owner the greatest flexibility to transfer the property. Each co-tenant in a tenancy in common has an interest in the property and is free to transfer this interest during life or through a will. The co-tenants can have different ownership interests; for example, three owners could own 3 percent, 27 percent and 70 percent of the property, respectively, as tenants in common. Each tenant can sever his relationship with the other tenants by conveying his interest to another party. This third party then becomes a tenant in common with the other co-tenants.

Joint tenants, on the other hand, must have equal ownership interests in the property. So, three owners would each have a one-third interest in the property. If one of the joint tenants dies, his interest immediately ceases to exist and the remaining joint tenants own the entire property. The advantage to joint tenancy is that it avoids having an owner’s interest probated upon his death since his interest passes by operation of law. This is why jointly owned property is considered non-probate property.

Another advantage is if a joint tenant needs to apply for Medicaid in Pennsylvania the State will not put a Medicaid lien on the property if it is a primary residence of both joint tenants. A disadvantage to both joint tenancy and tenancy in common, however, is that creditors can attach the tenant’s property to satisfy a debt. For example, if a co-tenant defaults on his debts, his creditors can sue in a “partition proceeding” to have the property interests divided and the property sold, even over the other owners’ objections.

A third form of tenancy is tenancy by the entirety which avoids this problem, but it is available only to married or, where applicable, civilly united couples. Tenancy by the entirety is based on the societal value of protecting the family. One tenant cannot convey his interest on his own, unlike with the other tenancies. Upon the death of one spouse, his interest automatically passes to the other spouse by operation of law, as with joint tenancy, and the creditors of one spouse cannot attach the property or force its sale to recover debts unless both spouses consent.

Creditors may place a lien on property held in tenancy by the entirety, but if the debtor spouse dies before the other spouse, the other spouse will take ownership of the property free and clear of the debt. This is why both husband and wife are required to sign the mortgage on their property for the mortgage to be valid.

If you have any questions about tenancy or need a deed updated or prepared feel free to contact Gregory J. Spadea at 610-521-0604 from Spadea & Associates, LLC in Ridley Park Pennsylvania.

Why Is My Inherited IRA Subject To Both Pennsylvania Inheritance Tax And Federal Income Tax?

Pennsylvania levies inheritance tax on the following classes of beneficiaries:

1. Class A – This class includes grandparents, parents, children including natural children, adopted children and step-children, and an un-remarried spouse of a child. This is the only class that receives a $3,500 family exemption from the Pennsylvania inheritance tax which is 4.5% for Class A Beneficiaries.

2. Class A1 – This class includes brothers, half-brothers, sisters, half-sisters, and persons having at least one parent in common with the decedent, either by blood or by adoption. Pennsylvania inheritance tax is 12% for Class A1 Beneficiaries.

3. Class B – This class includes all other beneficiaries. Pennsylvania inheritance tax is 15% for Class B Beneficiaries.

Generally inheritances are not subject to income tax under Section 102 of the Internal Revenue Code. One exception to that rule is traditional Individual Retirement Accounts (IRA’s) because IRA’s contain tax deferred assets that have never been subject to income tax. Therefore, in addition to paying Pennsylvania inheritance tax a beneficiary also has to pay income tax when they inherit a traditional IRA in the year they withdraw money from the IRA. The good news is that the Traditional IRA is not subject to Pennsylvania income tax.

If you inherit an IRA you should consider all the options the Plan Administrator offers you.

One option would be taking a lump-sum distribution. Another option would be taking distributions over five years to lessen the tax bite. A third option may be rolling the inherited IRA over into your existing traditional IRA if the Plan Administrator allows it.

Keep in mind that no matter which option you select you will not have to pay the 10% premature distribution penalty since inherited IRA’s are always exempt from the penalty regardless of the age you decide to take the distribution.

If you have any questions about inherited IRA’s feel free to call Gregory J. Spadea of Spadea & Associates, LLC at 610-521-0604.

What is a Corporation Supposed to do at the Annual Shareholder Meeting?

Businessman Standing at a Podium and Giving a Speech to a Conference Room Full of Delegates
The simple answer is to reinforce corporate formalities.  The regular observance of corporate formalities is an important aspect of maintaining the protections and advantages of being incorporated, not the least of which is the protection of shareholders against personal liability for the financial obligations of the corporation.   Three of the most important areas of corporate formalities are shareholder decision making, director decision making, and separation of corporate assets from personal assets.  For example the corporation should never pay the shareholders or directors personal expenses from the corporate bank accounts.

Federal and state tax returns, employment tax returns, and annual reports and similar filings are also required, depending on where the corporation is incorporated and qualified to do business.   The shareholders should take action to elect the board of directors of the corporation annually. In addition, certain specified fundamental changes in the corporation require the consent or approval of the shareholders, including, but not limited to:

1. Amendment of the Articles of Incorporation.

2. Sale of all or substantially all of the assets of the corporation.

3. Merger or consolidation of the corporation with or into any other corporation.

4. Winding up and dissolution of the corporation.

Matters of more general operating policy should be considered and authorized by the company’s board of directors. Although there is no statutory requirement with respect to how frequently the board of directors should act, it is typical that the board meets at least annually if not quarterly and calls special meetings in which action is required before the next regular meeting.

Matters appropriate for director action include the following:

1. Annual appointment of officers, setting of salaries, and declaration of bonuses.

2. Corporate borrowing and the giving of security in connection therewith.

3. Contracts for the acquisition or lease of significant assets or services or the disposition of assets, or for the rendition of services outside the ordinary course of the business of the corporation.

4. Policy decisions with respect to the corporation’s operating budget.

5. The adoption of pension, profit-sharing, bonus, and other employee benefit plans.

6. The declaration of dividends or the redemption of shares.

7. Amendment of the bylaws.

8. Review of financial statements of the corporation and appointment of auditors, if any.

9. Any action that requires a shareholder vote.

10. The issuance and sale by the corporation of additional shares or the grant of options to purchase additional shares.

Contact a Ridley Park, PA Business Law Attorney at Spadea & Associates, LLC

At the Law Offices of Spadea & Associates, LLC, in Ridley Park, we represent individuals and businesses throughout southeastern Pennsylvania, including Delaware County, Montgomery County and Camden County. We also work with clients in Philadelphia and Burlington Counties.

For a free initial consultation with an experienced business lawyer, call us at 610-521-0604 or e-mail contact us online today.

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