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April 2017 Archives

Inquiring Minds Want to Know: Is an Attorney a Member of a "Public Body" Under The Whistleblowers' Protection Act?

On April 12, 2017, the Michigan Supreme Court heard oral arguments on an important issue for employees and employers under The Whistleblowers' Protection Act (WPA) in the case of McNeil-Marks v MidMichigan Medical Center-Gratiot. In McNeil-Marks, the Michigan Court of Appeals expanded what constitutes a member of a "public body" under the WPA to include Michigan licensed attorneys. The Court of Appeal's expansion may be short-lived. However, if McNeil-Marks is affirmed, employees will continue to have protection under the WPA if they threaten or actually report to their attorneys a good faith belief that employers violated the law.

Dude - Do I Really Have To Pay The Irs For Medical Marijuana Sales?

With the sale of medical marijuana and recreational cannabis in States that have legalized their sale, I am often asked whether a seller must pay federal tax on its sales proceeds. As a former IRS Agent, I tell them that the sale of marijuana generates taxable income. They respond by saying "how can this be? It is still illegal under federal law to sell marijuana! Do I really have to report those sales to the IRS?" The problem for these sellers is that the Internal Revenue Code (the "Code") taxes all income, even if derived from the "trafficking in controlled substances." Then I tell them the really bad news. Not only do businesses selling marijuana have to pay taxes on their sales revenues, but Section 280E of the Code prohibits tax deductions for ordinary and necessary business expenses such as rent, wages and other such expenses.

Substantiating 401(K) Hardship Distributions - What Do I Have To Prove?

Many 401(k) plans provide that an employee participant can receive a distribution of his or her elective deferrals from the plan on account of a financial hardship. A hardship distribution is only permitted if the employee experiences an immediate and heavy financial need and the distribution is required to satisfy that need. An immediate and heavy financial is defined by the IRS as one or more of the following with respect to the employee or the employee's immediate family:(i) medical expenses; (ii) purchase of a principal residence (employee only); (iii) tuition and related educational expenses; (iv) payment necessary to prevent an eviction or foreclosure of a principal residence; (v) burial expenses; and (vi) repair expenses for damage to the employee's principal residence.

Michigan Abolishes Dower Rights

Effective April 6, 2017, dower rights in Michigan are abolished. Dower is a centuries old legal principle that a wife has an interest in a portion of all real property owned by her husband during their marriage. The common law principal of dower was codified in MCL 558.1, et. seq. It provided a widow with the use, during her lifetime, of 1/3 of all real property owned by her husband during their marriage. It is because of dower rights that a male grantor's marital status appears on deeds in Michigan. It is also the reason a wife must sign a deed when her husband is transferring real property only he owns.

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