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New York Markets After Hours

need to know
Apple to host Sept. 9 product event
Business investment stars in GDP report
Wall Street’s missing a closed-end bargain
The best jobs for millennials
CEO pay surged last year
The happiest and least happy countries
Tiffany's slides on weak earnings, outlook
Apple closing in on Fitbit as for wearable crown
Stock rout hits hedge-fund yearly gains hard
6 most shorted NYSE stocks (24/7 Wall St.)
FTSE enjoys triple-digit gain in London

Poll shows Biden running stronger than Clinton
Republican wants more than the sequester

Donald Trump says he’s OK with raising taxes on himself
Trump: I’m OK with raising taxes on myself

Bezos is clear about what Amazon’s culture is

Keep calm and make money in a crazed market
This market swell may be dangerous to ride
Amid chaos, new investors jumped into stocks

Wal-Mart: Demand is reason for its gun decision

Where your
Chinese food is delivered by plane

Sorry, Uber, but this is the end of the IPO party

Star-studded content up Netflix’s sleeve
'Mr. Robot' season finale postponed

Beijing, ‘Loch Ness monster’ in mystery of China rally

China takes unusual action to tame yuan expectations
China’s unusual action to tame yuan views
Analysts dismiss fears of a China hard landing

Jim Rogers: Don’t rule out a commodity bull run
Commodities are ripe for a rebound

How the media just can’t spot economic crisis

6 ‘services’ that help hackers get rich

4 things you didn’t know could be hacked
How vulnerable are U.S. markets to hackers?


$14 to send message-bearing potatoes


How to throw a  birthday party for under $100
Only half of Americans with kids have wills

Millennials are clueless about cellphone etiquette
Millennials realize growing up is hard to do

/conga/frontpage.html 353484

Markets »

171.94MDow Volume:
Avg Vol: 109.98M
Unchanged
150
Decliners
1105
Advancers
5355
Price Chg %Chg 1 Day
Range: 1 Day
  • 1 Day
  • 5 Days
  • 1 Month
  • 3 Months
  • 6 Months
  • 1 Year
  • 2 Years
Dow
/quotes/zigman/627449/realtime 16,655 +369 2.27%
Nasdaq
/quotes/zigman/12633936/realtime 4,813 +115 2.45%
S&P 500
/quotes/zigman/3870025/realtime 1,988 +47 2.43%
GlobalDow
/quotes/zigman/629063/realtime 2,361 +50 2.18%
Gold
/quotes/zigman/662444/delayed 1,123 -1 0.11%
Oil
/quotes/zigman/2331095/delayed 42.67 +4.07 10.54%
FTSE 100
/quotes/zigman/3173262/delayed 6,192 +213 3.56%
DAX
/quotes/zigman/2380246/delayed 10,316 +318 3.18%
CAC 40
/quotes/zigman/3173214/delayed 4,658 +157 3.49%
FTSE MIB
/quotes/zigman/1482176/delayed 22,201 +727 3.39%
IBEX 35
/quotes/zigman/2759620/delayed 10,290 +306 3.06%
Stoxx 600
/quotes/zigman/2380150/delayed 362 +12 3.46%
Asia Dow
/quotes/zigman/6959860/realtime 2,753 +52 1.92%
Nikkei 225
/quotes/zigman/5986735/delayed 18,574 +198 1.08%
Hang Seng
/quotes/zigman/2622475/delayed 21,839 +758 3.60%
Shanghai
/quotes/zigman/1859015/delayed 3,084 +156 5.34%
Sensex
/quotes/zigman/1652085/delayed 26,231 +517 2.01%
Singapore
/quotes/zigman/1709939/delayed 2,945 +72 2.52%
Euro
/quotes/zigman/16008136/realtime/sampled 1.12 -0.01 0.65%
Yen
/quotes/zigman/16008150/realtime/sampled 121.01 +1.08 0.90%
Pound
/quotes/zigman/16008140/realtime/sampled 1.54 -0.01 0.32%
Australia$
/quotes/zigman/16008115/realtime/sampled 0.72 +0.00 0.62%
DXY Index
/quotes/zigman/1652083/delayed 95.79 +0.51 0.53%
WSJ $ Idx
/quotes/zigman/41508961/realtime 88.29 +0.17 0.20%
U.S. 10yr
/quotes/zigman/15866666/realtime 2.19 +0.01 0.57%
German 10y
/quotes/zigman/15866409/realtime 0.75 +0.04 5.49%
Italy 10yr
/quotes/zigman/15866497/realtime 1.93 -0.05 2.73%
Spain 10yr
/quotes/zigman/15866444/realtime 2.06 -0.03 1.54%
U.K. 10yr
/quotes/zigman/15866328/realtime 1.87 +0.02 1.11%
Japan 10yr
/quotes/zigman/15866525/realtime 0.39 +0.02 4.00%
Crude Oil
/quotes/zigman/2331095/delayed 43 +4 10.54%
Gold
/quotes/zigman/662444/delayed 1,123 -1 0.11%
Corn
/quotes/zigman/7599553/delayed 375 +1 0.33%
DJIA F
/quotes/zigman/38649152/delayed 16,641 +392 2.41%
S&P F
/quotes/zigman/30356461/delayed 1,986 +47 2.45%
Silver
/quotes/zigman/3134148/delayed 14 +0 2.46%

Quotes

Symbol Price Change % Change
FB /quotes/zigman/9962609/composite 89.64 2.45 2.80%
AAPL /quotes/zigman/68270/composite 112.83 3.14 2.86%
GOOG /quotes/zigman/30194416/composite 637.00 8.38 1.33%
BAC /quotes/zigman/190927/composite 16.42 0.36 2.24%
C /quotes/zigman/5065548/composite 53.43 1.15 2.20%
F /quotes/zigman/264304/composite 13.55 0.34 2.57%
T /quotes/zigman/398198/composite 33.38 0.69 2.10%
BP /quotes/zigman/247026/composite 33.02 1.92 6.17%
GE /quotes/zigman/227468/composite 25.00 0.99 4.10%
Visit the quote page and your most recently viewed stocks will automatically be displayed here.
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MarketWatch Portfolio

World News from MarketWatch

Rates »

5 yr CD
1.5%
2 yr CD
0.8%
1 yr CD
0.6%
MMA $10K+
0.3%
MMA $50K+
0.4%

National averages from Bankrate.com

You Don’t Need Another Credit Card, You Need A Better One.
Avg. APR Last Week 6 Months
Low Interest 11.62% 11.62% 11.53%
Business 12.85% 12.85% 12.85%
Student 13.14% 13.14% 13.14%
Balance Transfer 14.12% 14.12% 14.00%
Airline 15.10% 15.10% 15.15%
Reward 15.14% 15.14% 14.99%
Cash Back 15.27% 15.27% 15.26%
Instant Approval 18.00% 18.00% 17.93%
Bad Credit 22.73% 22.73% 22.48%
Source:CreditCards.com

SPONSORED SECTIONS

Trending Tickers
  • /quotes/zigman/55989606/composite ACI+22.40%
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  • /quotes/zigman/107036/composite ULTA+1.39%
  • /quotes/zigman/9766366/composite AMTD+2.93%
  • /quotes/zigman/3870025/realtime SPX+1.61%
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SmartMoney Blogs

The Tax Blog
The latest news, insights and tips about taxes

The “Edwards Shelter”: Pitfalls Of Low Pay

My latest Tax Report column about the perils of low pay for owner/shareholders of “Subchapter S” firms received a raft of comments and emails. As the column described, it’s a common tax-cutting maneuver available to the owners of millions of closely held businesses; there are nearly 4 million Sub-Ss in the U.S. today.

Several writers wanted to know why the story didn’t mention John Edwards, the former vice-presidential candidate and Senator (D-N.C.), who was accused by opponents of using the same technique described to shrink the payroll tax bill from his lucrative legal practice. It’s such a well-known issue that some people refer to the practice I outlined in my column as the “Edwards shelter.”

Because Edwards was not available to comment on the issue or supply information regarding it and calls to his attorney weren’t returned, we didn’t include it in the story out of fairness. But for the curious, here’s a summary of past reporting on this issue.

Questions about Edwards’s taxes arose both during his 1998 Senate campaign and his 2004 vice-presidential campaign. In both cases, the question was the same: Had he used a Subchapter S entity and minimized the salary from his highly successful legal practice, lowering his payroll taxes in years before he joined the Senate?

In July 2004, the New York Times reported that the Edwards campaign released documents showing that Mr. Edwards paid $9,353,448 of income tax on income of $26,869,496 before joining the Senate in 1998. However, using the Subchapter S entity allowed him to avoid paying $591,112 in Medicare tax, the paper said.

How? In those years the 2.9% Medicare tax was levied on all salary (as it still is), while the 12.4% Social Security tax applied only on income up to a certain level (as it still does). So income Edwards classified as dividend rather than salary, reported in The Wall Street Journal editorial as $360,000 per year, was not subject to the Medicare tax. Medicare tax on the full $26 million would have come to nearly $780,000.

Vice-President Dick Cheney raised the issue in his 2004 debate with Mr. Edwards, and he responded: “I have paid all the taxes that I owe.”

In addition, the New York Times reported that the campaign released a Jan. 14, 2004 letter from a well-known Washington law firm, Caplin & Drysdale, after the Edwardses asked them to review of ten years of tax filings. The paper quoted the letter as saying, “The structure initiated by the Edwardses’ tax professionals was entirely lawful, ethical, and proper.”

In 2004, there was considerable debate in the tax press about whether, according to the information released, Edwards’s avoidance of the Medicare tax was proper. In the well-regarded journal Tax Notes, one commenter called the move a defensible and legal “tax savings opportunity” while another called it an “abusive tax shelter.”

One defender of the technique did note, however, that the IRS was free to attack Edwards’s compensation as too low—as it did in the David E. Watson case. Watson, who had 20 years experience and a graduate degree in tax, reported far less salary than a typical recent graduate in accounting, prompting the IRS to object that his pay was too low, and an Iowa District Court judge agreed. The problem for the agency, say many experts, is that each case turns on individual facts and circumstances, making the issue cumbersome to fight.

A final note: There is no information about any IRS reaction to Edwards’s compensation.

Comments

We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (5 of 14)

View all Comments »
    • Recent news stories make it clear that there are airrcultugal tax advantages in Florida, but the land must be used airrcultugally. Talk to your county assessors and state tax offices.

    • What’s the statute of limitations on this though? IRS went after the guy for 2002-2003 taxes on the article you wrote.

    • What would be nice is for the government to leave my money alone and to allow me the “choice” of deciding my own retirement future. I don’t want social security and I hate giving money to politicians, who use the money in elaborate vote buying schemes.

    • ******

      It’s a Little off Topic but Anyone Looking for a Job

      Should Check Out this Website!
      They are Hiring People to Work from Home for $77 / hour

      http://www.CNN-Job-Report.com-employment.com

      Getting into the Online Business has
      Really Saved my Family from the Recession!

      And I Can Work from Home with my Kids !

      They are Hiring Today.

      *******

    • Edwards payed himself a reasonable salary of $360,000. The IRS has to be careful because if they aregue that Edwards should have taken all the profits in salary and bonus they are basically saying there is no such thing as unreasonable compensation at the C corp level.

      At audit our client had their pay reduced from 11 million to 7 million as unreasonable comp.

About The Tax Blog

  • The Tax Blog brings together a team of award-winning tax journalists from the Dow Jones network and around the web to examine the tax issues, changes and legislation that affect families, investors and small business owners. Our contributors include Tax Report columnist Laura Saunders (WSJ), Tax Guy columnist Bill Bischoff and senior reporter Jilian Mincer (SmartMoney.com), retirement-focused reporter Anne Tergesen (WSJ), wealth management writer Arden Dale (Dow Jones Newswires), TaxWatch columnist Eva Rosenberg and personal finance reporter Andrea Coombes (MarketWatch), and reporter Alyssa Abkowitz (SmartMoney). They’ll provide the latest news and insight, mine the tax code for tips and loopholes, and answer your questions about tricky tax situations. Contact the The Tax Blog with ideas, suggestions or tax questions at thetaxblog@dowjones.com.

MarketWatch - Stock Market Quotes, Business News, Financial News

New York Markets After Hours

need to know
Apple to host Sept. 9 product event
Business investment stars in GDP report
Wall Street’s missing a closed-end bargain
The best jobs for millennials
CEO pay surged last year
The happiest and least happy countries
Tiffany's slides on weak earnings, outlook
Apple closing in on Fitbit as for wearable crown
Stock rout hits hedge-fund yearly gains hard
6 most shorted NYSE stocks (24/7 Wall St.)
FTSE enjoys triple-digit gain in London

Poll shows Biden running stronger than Clinton
Republican wants more than the sequester

Donald Trump says he’s OK with raising taxes on himself
Trump: I’m OK with raising taxes on myself

Bezos is clear about what Amazon’s culture is

Keep calm and make money in a crazed market
This market swell may be dangerous to ride
Amid chaos, new investors jumped into stocks

Wal-Mart: Demand is reason for its gun decision

Where your
Chinese food is delivered by plane

Sorry, Uber, but this is the end of the IPO party

Star-studded content up Netflix’s sleeve
'Mr. Robot' season finale postponed

Beijing, ‘Loch Ness monster’ in mystery of China rally

China takes unusual action to tame yuan expectations
China’s unusual action to tame yuan views
Analysts dismiss fears of a China hard landing

Jim Rogers: Don’t rule out a commodity bull run
Commodities are ripe for a rebound

How the media just can’t spot economic crisis

6 ‘services’ that help hackers get rich

4 things you didn’t know could be hacked
How vulnerable are U.S. markets to hackers?


$14 to send message-bearing potatoes


How to throw a  birthday party for under $100
Only half of Americans with kids have wills

Millennials are clueless about cellphone etiquette
Millennials realize growing up is hard to do

/conga/frontpage.html 353484

Markets »

171.94MDow Volume:
Avg Vol: 109.98M
Unchanged
150
Decliners
1105
Advancers
5355
Price Chg %Chg 1 Day
Range: 1 Day
  • 1 Day
  • 5 Days
  • 1 Month
  • 3 Months
  • 6 Months
  • 1 Year
  • 2 Years
Dow
/quotes/zigman/627449/realtime 16,655 +369 2.27%
Nasdaq
/quotes/zigman/12633936/realtime 4,813 +115 2.45%
S&P 500
/quotes/zigman/3870025/realtime 1,988 +47 2.43%
GlobalDow
/quotes/zigman/629063/realtime 2,362 +50 2.18%
Gold
/quotes/zigman/662444/delayed 1,123 -1 0.11%
Oil
/quotes/zigman/2331095/delayed 42.66 +4.06 10.52%
FTSE 100
/quotes/zigman/3173262/delayed 6,192 +213 3.56%
DAX
/quotes/zigman/2380246/delayed 10,316 +318 3.18%
CAC 40
/quotes/zigman/3173214/delayed 4,658 +157 3.49%
FTSE MIB
/quotes/zigman/1482176/delayed 22,201 +727 3.39%
IBEX 35
/quotes/zigman/2759620/delayed 10,290 +306 3.06%
Stoxx 600
/quotes/zigman/2380150/delayed 362 +12 3.46%
Asia Dow
/quotes/zigman/6959860/realtime 2,753 +52 1.92%
Nikkei 225
/quotes/zigman/5986735/delayed 18,574 +198 1.08%
Hang Seng
/quotes/zigman/2622475/delayed 21,839 +758 3.60%
Shanghai
/quotes/zigman/1859015/delayed 3,084 +156 5.34%
Sensex
/quotes/zigman/1652085/delayed 26,231 +517 2.01%
Singapore
/quotes/zigman/1709939/delayed 2,945 +72 2.52%
Euro
/quotes/zigman/16008136/realtime/sampled 1.12 -0.01 0.64%
Yen
/quotes/zigman/16008150/realtime/sampled 121.01 +1.08 0.90%
Pound
/quotes/zigman/16008140/realtime/sampled 1.54 0.00 0.32%
Australia$
/quotes/zigman/16008115/realtime/sampled 0.72 +0.00 0.62%
DXY Index
/quotes/zigman/1652083/delayed 95.78 +0.50 0.53%
WSJ $ Idx
/quotes/zigman/41508961/realtime 88.29 +0.17 0.20%
U.S. 10yr
/quotes/zigman/15866666/realtime 2.19 +0.01 0.57%
German 10y
/quotes/zigman/15866409/realtime 0.75 +0.04 5.49%
Italy 10yr
/quotes/zigman/15866497/realtime 1.93 -0.05 2.73%
Spain 10yr
/quotes/zigman/15866444/realtime 2.06 -0.03 1.54%
U.K. 10yr
/quotes/zigman/15866328/realtime 1.87 +0.02 1.11%
Japan 10yr
/quotes/zigman/15866525/realtime 0.39 +0.02 4.00%
Crude Oil
/quotes/zigman/2331095/delayed 43 +4 10.52%
Gold
/quotes/zigman/662444/delayed 1,123 -1 0.11%
Corn
/quotes/zigman/7599553/delayed 375 +1 0.33%
DJIA F
/quotes/zigman/38649152/delayed 16,645 +396 2.44%
S&P F
/quotes/zigman/30356461/delayed 1,986 +48 2.47%
Silver
/quotes/zigman/3134148/delayed 14 +0 2.50%

Quotes

Symbol Price Change % Change
FB /quotes/zigman/9962609/composite 89.67 2.48 2.84%
AAPL /quotes/zigman/68270/composite 112.82 3.13 2.85%
GOOG /quotes/zigman/30194416/composite 637.80 9.18 1.46%
BAC /quotes/zigman/190927/composite 16.44 0.38 2.37%
C /quotes/zigman/5065548/composite 53.48 1.20 2.30%
F /quotes/zigman/264304/composite 13.56 0.35 2.65%
T /quotes/zigman/398198/composite 33.44 0.75 2.29%
BP /quotes/zigman/247026/composite 33.03 1.93 6.21%
GE /quotes/zigman/227468/composite 25.00 0.99 4.12%
Visit the quote page and your most recently viewed stocks will automatically be displayed here.
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MarketWatch Portfolio

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Rates »

5 yr CD
1.5%
2 yr CD
0.8%
1 yr CD
0.6%
MMA $10K+
0.3%
MMA $50K+
0.4%

National averages from Bankrate.com

You Don’t Need Another Credit Card, You Need A Better One.
Avg. APR Last Week 6 Months
Low Interest 11.62% 11.62% 11.53%
Business 12.85% 12.85% 12.85%
Student 13.14% 13.14% 13.14%
Balance Transfer 14.12% 14.12% 14.00%
Airline 15.10% 15.10% 15.15%
Reward 15.14% 15.14% 14.99%
Cash Back 15.27% 15.27% 15.26%
Instant Approval 18.00% 18.00% 17.93%
Bad Credit 22.73% 22.73% 22.48%
Source:CreditCards.com

SPONSORED SECTIONS

Trending Tickers
  • /quotes/zigman/55989606/composite ACI+22.40%
  • /quotes/zigman/8669138/composite DWTI-27.34%
  • /quotes/zigman/107036/composite ULTA+1.40%
  • /quotes/zigman/9766366/composite AMTD+2.93%
  • /quotes/zigman/3870025/realtime SPX+1.61%
X
Powered by StockTwits
Link to MarketWatch's Slice.

As of July 2, 2013, the SmartMoney content you loved now lives on MarketWatch.

MarketWatch will continue to provide the same important news and information you rely on every day. And, as a MarketWatch user, you will be able to enjoy:

  • Personalized news and quote email alerts
  • Editorial e-newsletters about personal finance, mutual funds and market-specific coverage
  • Premium newsletters by our market experts
  • Games, such as Virtual Stock Exchange and Beat the Darts
  • Free WSJ.com registration

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