New IRS rules demand more info on foreign holdings (Reuters)

(Reuters) – Hundreds of thousands of U.S. taxpayers must reveal for the first time detailed information about foreign stock holdings, pensions and life insurance policies, under new U.S. Internal Revenue Service rules detailed on Monday.

The new requirements may present legal risks for U.S. taxpayers living in countries with broad or vague privacy laws, said international tax experts.

Designed by Congress to snare tax dodgers with funds stashed abroad, the new rules are also likely to hit unsuspecting immigrants and first-generation Americans. Even tax preparers may be caught off guard.

"The days of the secret, offshore trust are over," said Richard Luthmann, a lawyer in New York who said he is working with clients from India and Canada on tax disclosure.

The rules are "really hitting a lot of unsophisticated persons with international ties," he said.

The IRS on Monday published nine pages of instructions for filling out a new form that taxpayers must file with 2011 tax returns due on April 15, 2012. The exact number of taxpayers affected is unclear, but is in the hundreds of thousands.

The new form applies to U.S. taxpayers living in the United States with at least $50,000 in assets abroad as of December 31, and to Americans living abroad with at least $200,000 in assets.

Taxpayers who duck the new reporting requirement could face up to $50,000 in penalties.

U.S. taxpayers have always had to pay tax on foreign income. The new requirements are likely to expose income that in the past has been hidden from IRS view, intentionally or not.

'VIRGIN TERRITORY'

The IRS is "out in virgin territory" with these regulations, said Charles Bruce, an attorney with the Bonnard Lawson International Law Firm.

"The degree of complexity is extraordinary for a form aimed at individuals. Few people will be able to fill out this form without hiring a return preparer or making a lot of mistakes."

The new disclosure rules are part of 2010's Foreign Account Tax Compliance Act, or FATCA.

Under the new rules, taxpayers must disclose foreign stock and bond holdings; foreign pensions that start to pay out when the taxpayer reaches retirement age; and hedge fund and private equity accounts. Foreign assets held by a U.S. institution, like shares of a foreign company managed by a U.S. mutual fund, are not subject to the reporting requirements.

Foreign real estate is also exempt, though taxpayers owning foreign property through a company or a trust must disclose.

Individual reporting requirements will be followed in 2013 by requirements for financial institutions to release account holder information to the IRS. With the two data streams, IRS will be able to cross reference information, said Stanley Ruchelman, a tax-planning lawyer in New York.

The IRS "expects to receive the same information from two difference sources" to "ensure that each one is reporting correctly," he said.

HARSH RECEPTION

FATCA is getting a harsh reception abroad.

Canadian Finance Minister Jim Flaherty, in a September letter to U.S. and Canadian media outlets, said the FATCA requirements "would turn Canadian banks into extensions of the IRS and would raise significant privacy concerns for Canadians."

Foreign banks may decide to drop U.S. customers rather than submit information to the IRS, experts said.

FATCA's individual reporting requirements may be problematic for some U.S. expatriates. Revealing too much information about business associates could break the law in some countries, but that does not mean the IRS will let expatriates off the hook.

"You've got to face this issue of, do I face the U.S. penalty or do I face a criminal sanction in the country where I live? That's pretty harsh," said Laurie Hatten-Boyd, a principal with the Big Four accounting firm KPMG LLP.

Such a scenario could arise, she said, with a swap where the counterparty is a foreign entity. The new IRS form demands disclosure of a swap counterparty's name and mailing address.

(Reporting By Patrick Temple West in Washington; Editing by Steve Orlofsky)

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Federal agents raid Imperial Holdings' Florida offices (Reuters)

(Reuters) – Federal investigators on Tuesday raided the Florida offices of Imperial Holdings Inc (IFT.N), a company that makes lump-sum payments on legal settlements and life insurance policies, the FBI said.

Imperial Holdings confirmed the raid and said it, along with certain employees, including its chairman and chief executive and its president and chief operating officer, were under investigation for matters related to the company's life-insurance business.

No actions had been taken against its structured-settlements business, the company said in a statement.

"Today's action comes as a complete surprise. We are not aware of any wrongdoing and will cooperate fully," Chairman and CEO Antony Mitchell said in the statement.

The company said it would hold a board meeting later on Tuesday and it expected all of its businesses to resume normal operations on Wednesday.

Shares of Imperial were halted for pending news at 1:42 p.m. ET and did not trade the rest of the day. The stock last changed hands at $6.32, down 2.8 percent.

Imperial Holdings became a publicly traded company in February when it raised $179.2 million in an initial public offering. The stock has lost 41 percent of its value since then.

Its largest shareholder, with a 9.5 percent stake according to Thomson Reuters data, is Pine Trading Ltd, a Bahamas-registered entity that only holds Imperial shares.

According to Imperial's annual report, Pine Trading is controlled by David Haring, who also controls other entities in partnership with Chairman and CEO Mitchell.

Insiders have recently been buying the company's shares, according to U.S. Securities and Exchange Commission filings.

Director Robert Rosenberg bought 1,000 shares in August, and Chief Financial Officer Rory O'Connell bought 7,500 shares then as well. O'Connell did not own any shares before that purchase, the filing showed.

Imperial lost money every year from 2008 through 2010, but was profitable in the first six months of this year, according to its posted financial statements.

Local media were first to report the raid.

The Palm Beach Post reported that FBI agents appeared to be gathering evidence inside the company's offices, and pictures on its website showed agents leaving the building.

The South Florida Business Journal said an agent leaving the building said he was working for the U.S. Treasury.

The FBI and the company said in statements that the investigation is being run out of New Hampshire.

The U.S. Attorney's Office in New Hampshire declined to comment, while a spokeswoman for the Florida attorney general's office could not immediately comment.

Underwriters on Imperial's IPO were led by FBR Capital Markets. FBR did not return calls for comment.

(Reporting by Clare Baldwin and Ben Berkowitz; Editing by Ted Kerr, Gunna Dickson, Phil Berlowitz, Bernard Orr and Vinu Pilakkott)

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Federal agents raid Imperial Holdings' Florida offices (Reuters)

(Reuters) – Federal investigators on Tuesday raided the Florida offices of Imperial Holdings Inc (IFT.N), a company that makes lump-sum payments on legal settlements and life insurance policies, the FBI said.

Imperial Holdings confirmed the raid and said it, along with certain employees, including its chairman and chief executive and its president and chief operating officer, were under investigation for matters related to the company's life-insurance business.

No actions had been taken against its structured-settlements business, the company said in a statement.

"Today's action comes as a complete surprise. We are not aware of any wrongdoing and will cooperate fully," Chairman and CEO Antony Mitchell said in the statement.

The company said it would hold a board meeting later on Tuesday and it expected all of its businesses to resume normal operations on Wednesday.

Shares of Imperial were halted for pending news at 1:42 p.m. ET and did not trade the rest of the day. The stock last changed hands at $6.32, down 2.8 percent.

Imperial Holdings became a publicly traded company in February when it raised $179.2 million in an initial public offering. The stock has lost 41 percent of its value since then.

Its largest shareholder, with a 9.5 percent stake according to Thomson Reuters data, is Pine Trading Ltd, a Bahamas-registered entity that only holds Imperial shares.

According to Imperial's annual report, Pine Trading is controlled by David Haring, who also controls other entities in partnership with Chairman and CEO Mitchell.

Insiders have recently been buying the company's shares, according to U.S. Securities and Exchange Commission filings.

Director Robert Rosenberg bought 1,000 shares in August, and Chief Financial Officer Rory O'Connell bought 7,500 shares then as well. O'Connell did not own any shares before that purchase, the filing showed.

Imperial lost money every year from 2008 through 2010, but was profitable in the first six months of this year, according to its posted financial statements.

Local media were first to report the raid.

The Palm Beach Post reported that FBI agents appeared to be gathering evidence inside the company's offices, and pictures on its website showed agents leaving the building.

The South Florida Business Journal said an agent leaving the building said he was working for the U.S. Treasury.

The FBI and the company said in statements that the investigation is being run out of New Hampshire.

The U.S. Attorney's Office in New Hampshire declined to comment, while a spokeswoman for the Florida attorney general's office could not immediately comment.

Underwriters on Imperial's IPO were led by FBR Capital Markets. FBR did not return calls for comment.

(Reporting by Clare Baldwin and Ben Berkowitz; Editing by Ted Kerr, Gunna Dickson, Phil Berlowitz, Bernard Orr and Vinu Pilakkott)

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Fed to shift $400B in holdings to boost economy (AP)

By MARTIN CRUTSINGER, AP Economics Writer Martin Crutsinger, Ap Economics Writer – Wed Sep 21, 5:51 pm ET

WASHINGTON – The Federal Reserve will use more than $400 billion to try to drive down long-term interest rates, make home and business loans cheaper and invigorate the economy.

Analysts said the moves would provide only a slight economic benefit.

The action the Fed announced Wednesday is modest compared with previous steps it's taken. The Fed won't expand its $2.9 trillion holdings; it's just rebalancing them.

It will sell $400 billion of its shorter-term Treasurys to buy longer-term Treasurys by June 2012. And it will reinvest principal payments from its mortgage-backed securities, to help keep mortgage rates at super-low levels.

Fed policymakers announced the moves after a two-day meeting. Three members out of 10 dissented from the decision. The Fed acted despite criticism from Republicans who have warned that such steps could ignite inflation.

"The actions the Fed has taken are helpful," says Josh Feinman, global chief economist at DB Advisors. "They will help hold down long-term rates, but they're no panacea."

The Fed left open the possibility of taking further action to try to strengthen the economy.

Stocks dropped immediately after the announcement around 2:20 p.m. and then continued falling. The Dow Jones industrial average closed down about 283 points.

But the yield on the 10-year Treasury note tumbled to 1.86 — the lowest since the Federal Reserve Bank of St. Louis started keeping daily records in 1962. The 10-year yield is used to peg rates on a variety of loans, including long-term mortgages.

The plan the Fed unveiled Wednesday, dubbed "Operation Twist," resembles a program the Fed used in the early 1960s to "twist" long-term rates lower relative to short-term rates.

In its statement, the Fed noted that the economy is growing slowly, unemployment is high and housing remains in a prolonged slump.

Under its plan, the Fed will extend the average maturity of its holdings from six years to eight years. The Fed has directed the New York Fed to buy Treasurys with remaining maturities of six to 30 years, and to sell an equal amount of securities with maturities of three years or less.

Analysts say the shift in the Fed's portfolio could reduce borrowing costs and perhaps raise stock prices.

"This is a measured response to weak economic conditions," said David Jones, head of DMJ Advisors and the author of four books on the Fed. "The Fed is still trying but it can only do so much."

In June, the Fed completed a $600 billion bond-buying program that many economists have credited with keeping rates low.

He said that just the market anticipation of the Fed's Operation Twist had sent long-term rates down by around 25 basis points for the 10-year bond. He said that without the Fed's move Wednesday, those rates would have risen. With the move, he predicted the 10-year bond would probably fall by another 5 basis points.

Once the Fed announced last month that it would expand its September policy meeting from one to two days, economists anticipated some new action. Chairman Ben Bernanke had said the Fed was considering a range of options.

The Fed's move Wednesday came despite a rift within the central bank. The three members who dissented also did so at the Fed's August meeting — the most negative votes in nearly two decades.

The three dissenters — Richard Fisher, Narayana Kocherlakota and Charles Plosser, all regional Fed bank presidents — have said the Fed's policies may be raising the risk of high inflation. They favor giving the economy more time to heal without further Fed action.

Still, the central bank is under pressure to revive an economy that has limped along for more than two years since the recession officially ended.

In the first six months of this year, the economy grew at an annual rate of just 0.7 percent. The housing market remains depressed. The unemployment rate is 9.1 percent. In August, the economy didn't add any jobs, and consumers didn't increase their spending on retail goods.

Most economists foresee growth of less than 2 percent for the entire year. They say the odds of another recession are about one in three.

The Fed has offered its own bleak outlook. At its August policy meeting, it said the economy would likely struggle for at least two more years. As a result, it said it planned to keep short-term rates near record lows until mid-2013, as long as the economy remained weak.

Historically low mortgage rates, now averaging 4.09 percent on a 30-year fixed loan, have done little to boost either home purchases or refinancings.

Mark Zandi, chief economist at Moody's Analytics, said 30-year rates, should fall further after the Fed's action. Yet many would-be home buyers don't have the required down payments or are reluctant to buy at a time when prices are still falling in many areas. And many homeowners have no equity and can't refinance.

Bernanke's policymaking has incited criticism from congressional Republicans and GOP presidential candidates. Some have argued that the Fed's $600 billion bond-buying program raised inflation pressures, weakened the dollar's value against other currencies and contributed to a spike in oil prices.

On Monday, the four highest-ranking Republicans in Congress sent Bernanke a letter cautioning the Fed against taking further steps to lower interest rates. Their letter suggested that lower rates could escalate the risk of high inflation.

Texas Gov. Rick Perry, who is seeking the GOP nomination for president, has gone so far as to say Bernanke would be "almost treasonous" to launch more bond buying.

The Fed's efforts to stimulate the economy through low rates are occurring at a time when Congress is focused more on shrinking spending.

President Barack Obama has proposed a $447 billion job-creation program made up mainly of tax cuts and public works spending. Obama also wants the richest Americans to pay higher taxes to help cut federal budget deficits.

Obama's proposals face an uncertain fate in Congress. Republicans have dismissed his deficit-reduction plan and have focused on efforts to reduce spending and keep taxes low for everyone.

___

AP Business Writer Derek Kravitz contributed to this report.

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