Tax Law

What must it be like right now to be working at Dewey & LeBoeuf? One imagines a lot of whispered conversations, furrowed brows, and closed office doors. It’s a difficult and stressful time at D&L. To our friends at Dewey, keep your chins up (but, at the same time, do what you need to do to protect yourself and your career).

The anxiety at Dewey is increased by the firm’s cash crunch. Lawyers and staff at the firm are having a harder time doing their jobs because certain resources aren’t available to them.

Even in the digital age, with so many documents transmitted electronically rather than physically, FedEx is still a mainstay at major law firms — but not at Dewey. “We are restricted from using the account and now have to rely on UPS or express mail for overnights,” a source at Dewey told us. “Even if a package is labeled to go out via FedEx, when it goes down to mailroom it is relabeled for one of our new shipping methods. Do you know any other company that can stay afloat without FedEx?”

Will Dewey be staying afloat? Let’s hear the latest about other services that D&L lawyers and staff can’t use, some possible partner departures, and the firm’s ambitious plan for saving itself — via bankruptcy….

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(Plus more potential defections, and bankruptcy planning.)”

It’s time for your daily dose of Dewey & LeBoeuf news. There’s a lot to cover, including updates about incoming associates, overseas offices, and contingency planning.

Word on the street is that Dewey is deferring incoming associates to January 2013. We reached out to the firm for comment, and they haven’t gotten back to us yet. But it seems logical for the firm to defer associates to early 2013, given how the situation at D&L remains in flux. By next year, Dewey will have a better sense of its ultimate size and its long-term associate needs.

Of course, incoming associates at Dewey might want to make some backup plans. Which brings us to the other D&L news….

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Ladies, Ryan Gosling feels your pain.

* Apparently, it is illegal to father a second illegitimate child in Mississippi. I guess the first one is a freebie or a Mulligan, or whatever. If for some reason I ever have a personal need to know this tidbit, please shoot me in the face immediately. [Legal Juice]

* A class-action lawsuit will be filed tomorrow against the producers of The Bachelor, alleging race discrimination. I’m more concerned about the show’s overall crimes against good taste. (Zing!) [Legal Blog Watch]

* Just like a certain Biglaw firm, Goldman Sachs is dealing with a large number of partner defections. Goldman has a pretty good PR spin though: jumping ship is actually a sign of loyalty to the company. Right, just like the crew of the Titanic. [Dealbreaker]

* Today is #EqualPayDay. If you’re like me and didn’t know what that means, all you need to know is that the fairer sex is still not paid as much as big dumb oafs like myself. If you want to do something to fix this, Ms. JD has some ideas. [Ms. JD]

* Bigotry and prejudice are never okay. UNLESS you want to hate on a new-ish (yet exceedingly popular) religion that is also conveniently in opposition to your liberal political motives. In that case, right this way, sir… [Instapundit]

* If you don’t pay your taxes, the government wants to be able to take away your passport. So, hypothetically, if I were planning to flee the U.S. for, say, Spain, to avoid paying my taxes… I should leave, well, now. Umm, IwillseeyoulaterIhavetorunOKbye. [The Atlantic]

Today, as you probably know, is the deadline for filing your taxes. As was the case last year, the combination of April 15 falling on a weekend and the little-known holiday of Emancipation Day pushed the filing deadline back a bit.

Did you appreciate the extra time to fill out your tax return? Partners at Dewey & LeBoeuf probably did, due to some problems with their K-1 forms.

And speaking of partners at Dewey, their numbers continue to decline. Let’s look at the latest defections, as well as the tax issue.

UPDATE (10:30 AM): The game of musical chairs continues. Six more Dewey departures, which we learned about shortly after publishing this post, after the jump.

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Chris Christie has an idea for Warren Buffett.

* How can you tout your achievements in a cover letter without sounding like a tool? Here are some pointers from Professor Eugene Volokh. [Volokh Conspiracy]

* The “unbundling” of legal services is a big buzzword when talking about the direction of the profession. But Jordan Furlong has a question: should lawyers and law firms start thinking about “rebundling”? [Law21.ca]

* Benchslap of the day earlier this month: the Fourth Circuit smacks around some saucy AUSAs. [Legal Blog Watch]

* “[P]ublic drunkenness is not illegal in NYC.” (Elie will be glad to hear this.) [Gothamist]

* How will SCOTUS rule on the Stolen Valor Act? Mike Sacks reads the oral argument tea leaves. [Huffington Post]

* Chris Christie to Warren Buffett: if you want to pay more in taxes, “just write a check and shut up.” [Dealbreaker]

* A Harvard Law School student, Matthew Schoenfeld, stands up for a good cause. [Harvard Law School News]

Of all the routines in judicial gymnastics, few have a higher degree of difficulty than the reverse benchslap, and we’re trying for a combination double with our Opinion today.

– Judge Mark V. Holmes of the United States Tax Court, dissenting in Tigers Eye Trading, LLC v. Commissioner.

(The background behind this judicial invocation of the term “reverse benchslap,” after the jump.)

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I get that to lay people, the tax code seems incredibly complicated. It is complicated, and years of both parties legislating through the tax code has made it that way. I understand that the sepia-toned relief of an American being able to puzzle out his taxes on the hood of his pick-up truck before he goes fishing is a powerful image.

But honestly, the mainstream media has to stop acting like Mitt Romney is beset on all sides by byzantine forces that only our greatest theoretical physicists can understand. Taxes are governed by laws. As I’ve said before, we have professionals who deal with those laws; they are called tax lawyers. In fact, if you have modest investments and intelligence, you probably could do your taxes on the hood of your pick-up truck, provided you had a Macbook and downloaded TurboTax.

If, on the other hand, you want to make millions of dollars a year, enjoy the benefits of sophisticated investments, and keep money offshore to avoid paying American taxes on it, then you’re going to have to hire a freaking professional to help you. We’re going to cry over this? We’re going to be sad that we live in a world where people who make extraordinary amounts of money have to rely on trained professionals to help them make just a little bit more?

I guess the Times isn’t exactly crying over it (Fox News has been carrying most of the water on poor Mr. Romney and his complicated taxes), but they are smacking around one of the Biglaw professionals Romney hired. Let’s see which firm…

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Romney shows what he thinks the ideal effective tax rate should be for people who have good hair.

If you are a wealthy American who pays the top regular income tax rate of 35%, you have terrible, awful lawyers.

Mitt Romney does not have terrible lawyers.

The news of the day is that GOP frontrunner Romney released the previous two years of his tax returns. Romney’s 2010 adjusted gross income was $21,661,344. His estimated AGI for 2011 is $20,901,075. If all of that income was taxed at the highest tax rate, Romney would be paying around $7 million in federal taxes. But only true idiots and Republicans trying to scare people in election years actually believe that wealthy people pay anything approaching a 35% income tax in this country. Instead, Romney’s effective tax rate was about 14% in 2010 and is estimated to be around 15% in 2011. My effective tax rate was higher than Mitt Romney’s in 2010, and I don’t even get to like firing people.

But Romney is trying to spin his tax returns as an example of how “complicated” that tax code is. And the mainstream media is overwhelmed and helping to push that line. But these taxes are not complicated for a tax lawyer — and when you make $20 million a year, you can afford some good ones, so doing your taxes is about as complicated as writing a check for legal fees…

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John J. O'Brien

Last August, John J. O’Brien, who was once a highly regarded and well-liked partner in the celebrated M&A practice of Sullivan & Cromwell, pleaded guilty to four misdemeanor tax offenses. The charges of conviction were mere misdemeanors, but the amounts involved were large, as you’d expect from a well-paid partner at S&C.

O’Brien was accused of failing to file income-tax returns for tax years 2001 to 2008, on almost $11 million in partnership income. In the end, he pleaded guilty to failing to file taxes relating to $9.2 million in partnership income, for tax years 2003 to 2008.

Earlier today, John O’Brien was sentenced. The sentencing hearing provided some interesting additional information about why O’Brien acted as he did.

So is O’Brien trading Biglaw for the Big House? And if so, how long a sentence did he receive?

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Every so often, people ask us about the “value” of getting an LL.M. degree. Our answer has remained pretty consistent. Is it a tax LL.M. from Georgetown or NYU? No? Then save your money and buy something valuable like gold or drugs. See this graphic (click to enlarge):

Photo credit: some dude on TLS.

But still, people ask: “Is it worth it to get an LL.M. degree?” And obviously, there are a bunch of people who put down good money chasing an extra credential that has little to no impact on their job prospects.

Why? Well, the simplest answer is that LL.M.s are extremely valuable to law school budgets. LL.M.s are so lucrative for law schools that law school deans are willing to lie or become willfully ignorant as to the employment opportunities generated by an expensive post-law school degree.

The National Law Journal made that EXTREMELY OBVIOUS point yesterday (again)….

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