Ben Stein spoke at last night’s dinner at the annual meeting of the Association for Advanced Life Underwriters. In addition to adding his unique brand of humor to the event, Stein spoke a bit on the current economic crisis.

“Paying people to dig holes and then fill them up again is not going  to turn the economy around,” said Stein. The actor, professor, writer, and former speechwriter of Nixon and Ford had some very strong thoughts on what got us here and the key to economic recovery. He pointed to the conscious decision of the U.S. Government’s to allow Lehman Brothers to fail as the catalyst for the credit crunch and recession. The key to turning things around, according to Stein, is simple. “Get commercial credit going again.” The economic stimulus package has done and will do very little until there is a renewed flow of money.

Stein was very complimentary of life insurance professionals commenting on how his father’s life insurance policy was quite helpful and how confident he is in the many insurance companies with whom he now has coverage. He holds life insurance agents in high regards as professionals who only get paid when they go out and help people. Stein also made a point to say that in the history of the life insurance industry, there hasn’t been a single claim not paid by a major insurer because of financial reasons (e.g. the company going bankrupt or experiencing some other financial catastrophe).

According to a Harris Interactive survey conducted for CareersBuilder.com, close to 3 out of 5 workers age 50+ intend to look for work elsewhere once they retire from their current jobs. The top 2 reasons given for continuing to work were that they could not afford to retire (44%) and that they needed health insurance benefits (33%).

Among workers age 65+, both men and women at all age breakdowns showed double digit growth in the percentage that were working full-time between 1994 and 2007. The percentage of working women
who were working full-time increased by 35.3% for those ages 65-69 and 17.9% for those age 70+ over this time period. The increase was 27.7% for men age 65-69 and 16% for those age 70+.

Murray Gendell, Georgetown University
Older Workers Increasing Their Labor Force Participation and Hours of WorkEmployee Benefits Monthly Labor Review, Volume 131, Number 1 U.S Department of Labor, Bureau of Labor Statistics January 2008 http://www.bls.gov/opub/mlr/2008/01/art3full.pdf

IRA: PLR 200802008* Inadvertently almost caused the Termination of S Corporation

Background:

An S corporation is a regular corporation that has elected a special tax status for federal income tax purposes. Rather than being taxed at the entity level, all items of income and deduction of S corporation are taxed at the shareholder level. (In effect, these items “flow through” to the shareholders.) “S” status is a privilege, and in order to maintain it, the corporation and shareholders must continue to meet stringent requirements.

In the facts of PLR 200802008*, S corp shares were issued to an individual retirement account (IRA) for the benefit of shareholder A. While certain qualified plans are permissible shareholders of S corps, an IRA is not a permissible shareholder. After a period of time, the shareholder (A) and the corporation realized this error. (The shares were subsequently distributed from the IRA to A.) Technically, the S election was inadvertently terminated at the moment the IRA acquired the shares.

However, under IRC Section 1362(f), the IRS may waive this result if the termination is truly found to be inadvertent. The IRS was willing to treat the corporation as a valid S corp from a stated date going forward, but subject to certain conditions. Two of the conditions were as follows. For the years that the corporation generated a loss, the IRA would be deemed the shareholder. For the years where the corporation generated a gain, A (the individual) would be treated as the shareholder. In short, the IRS was able to impose a kind of “heads I win, tails you lose” tax treatment. The “loss” would not be of significant use to the IRA (because of its tax exempt status) and the “gain” would be attributable to taxable individual (A)!

Significance:

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