TaxCoach Briefs:    March 26, 2009

Volume 4, Number 15

• Marketing Minute: Bernie Madoff's Real Crime
• Spotlight on Strategy: Tax Strategies for Ponzi Losses
• Member Event: 2009 Roundtable Agenda
• Member Event: Last call for 2009 TAMMYs!

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MARKETING MINUTE (EAL)
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BERNIE MADOFF'S REAL CRIME

The National Association of Realtors recently reported that sales of existing homes were down 4.6% for February, 2008, with prices down 15.5%. The lousy real estate market is trapping Americans in their current homes, frustrating millions who want nothing more than to vacate the bloated McMansions they bought when a wink and a fib were all it took to secure a million-dollar mortgage.

But Keith and I are encouraged to see at least one homeowner make a move this month. That's right, confessed swindler Bernie Madoff moved from New York's Upper East Side (where the "penthouse" comes with a doorman, a terrace, and a view) to the Metropolitan Correctional Center (where the "penthouse" means the top bunk and the "doormen" don't have to play nice for Christmas tips).

By now, we all know how Madoff whored out his reputation as Chairman of the NASDAQ to sucker his marks solicit investors from New York to Palm Beach and across the country. Everyone from The New York Times to Sesame Street has tried to explain how Madoff could fool so many people for so long.

One answer lies in how Madoff focused his efforts on his extended network of Jewish investors and philanthropists. Some observers have even suggested that his real crime was abusing that position in a way that scapegoats the broader Jewish community as a whole. But there's no doubt that Madoff's affinity to his victims helps explain his success. There's even a name for it: "affinity fraud."

Affinity fraud, as its name implies, involves targeting members of an identifiable group, such as religious or ethnic communities, retirees, or professional groups, then exploiting your affinity to that group to gain their confidence. The key is appealing to the "clan." As Amity Shlaes writes in the Wall Street Journal, "Clannishness transcends any specific group. The clan can have value as a cultural or economic institution. It also harbors a unique power to destroy."

Affinity fraud is booming business. The Securities and Exchange Commission even publishes a web page exposing recent scams targeting African-Americans, Latinos, Korean-Americans, Armenian-Americans, Baptists, and Jehovah's Witnesses. (You're nobody until someone targets you for affinity fraud! -- Keith)

Bernie Madoff used the power of the clan to defraud. But you can use that same power to build.

You may not even realize just how many "clans" you belong to:

• your neighborhood
• your town
• your church
• your alumni association
• the charities and nonprofits you support
• fellow parents at your childrens' schools
• your family swim club, country club, or social clubs
• your trade groups or professional associations

How can you use your affinity to those clans to establish rapport with their members? How can you harness those relationships to generate referrals within those clans?

Too many of us think that "marketing" necessarily means elaborate and expensive online, print, or broadcast advertising. The truth is, most of us can accomplish just as much as those "cold" methods can through our existing affinities. We do it by targeting the people who already know us, like us, and trust us -- or who at least are predisposed to do so.

Bernie Madoff's abuse of his network is no reason we shouldn't use the same power, so long as we do so for our clients' real benefit.

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SPOTLIGHT ON STRATEGY (EAL)
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TAX STRATEGIES FOR PONZI LOSSES

I've just spoken with one TaxCoach member about how to handle Madoff fraud losses for a client, and I expect she won't be the only one of you to confront the same issue. The IRS has just published two pieces addressing Ponzi scheme losses.

• Losses from Ponzi schemes and investment frauds are theft losses, not capital losses.

• Losses are deductible as itemized deductions, not subject to the 2% floor on miscellaneous itemized deductions or the phaseout on itemized deductions for AGIs above $159,950.

• Losses are deductible in the year the theft is discovered, provided they're not covered by a claim for reimbursement (such as SIPC insurance) or other claim the taxpayer reasonably expects will result in recovery.

• Deductions are generally limited to "the amount invested in the arrangement, less amounts withdrawn, if any, reduced by reimbursements or recoveries, and reduced by claims as to which there is a reasonable prospect of recovery."

• Theft losses may create or increase net operating losses that can be carried back up to 3 years and forward up to 20 years.

• It defines "qualified investors" who are eligible for relief, "qualified losses" that are eligible for safe-harbor treatment, the "discovery year" for deducting losses.

• It lets qualified investors deduct 95% of the qualified loss now if they don't plan to pursue any potential third-party recovery.

• It lets them deduct 75% of the loss now if they're pursuing or intend to pursue any potential third-party recovery.

• Finally, it provides procedures for completing Form 4864 and includes a 2-page worksheet and statement for taxpayers to complete, sign, and attach to their return.

Together, these publications help you give your clients a roadmap for minimizing the sting of their loss. These procedures are worth knowing, even if none of your own clients qualify, simply because demonstrating your knowledge enhances your credibility in your market.

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MEMBER EVENT (EAL)
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2009 ROUNDTABLE AGENDA

Last week, we hit "Send" to launch the weekly Briefs and announced the schedule for 2009 TaxCoach Roundtables. Just 18 minutes later we had our first registration -- and they continue to pour in daily.

TaxCoach Roundtables are intensive full-day sessions in hands-on, small-group settings -- hosted at private business clubs, not convention hotels -- dedicated to exploring TaxCoach’s unique combination of tax-planning and business development tools.

There are no outside speakers. No outside sales pitches. Just Keith and I, walking you step-by-step through using TaxCoach to build your business.

This year, we’re back with two sessions. We’ve picked six convenient locations across the country and six dates from April through October.

Last week, we focused our discussion on reviews from last year's events. This week, I want to offer a little more detail on the actual agendas.

Thursday: Basic Roundtables

On Thursdays, we’ll host Basic Roundtables. This is a reprise of last year’s agenda in case you missed it, you want a refresher, or you want to send an associate. It's also a great way to jumpstart your TaxCoach membership:

• 8:30 - 9:00: Breakfast & welcome
• 9:00 - 10:30: How to make tax planning the core of your marketing
• 10:30 - 12:00: How to sell tax-planning services
• 12:00 - 1:00: Lunch & networking
• 1:00 - 2:30: How to deliver tax-planning services
• 2:30 - 3:30: Member hotseats
• 3:45 - 5:00: Mastermind meeting

Friday: Advanced Roundtables

On Fridays, we’ll host Advanced Roundtables for more experienced users. (We suggest you attend the Basic session before joining the Advanced session; however, it's not required):

• 8:30 - 9:00: Breakfast & welcome
• 9:00 - 10:30: Pricing & fee clinic (including client presentations)
• 10:30 - 12:00: Real-world strategies to attract high-value clients
• 12:00 - 1:00: Lunch & networking
• 1:00 - 2:30: Marketing materials clinic (feel free to bring your own!)
• 2:30 - 3:30: Member hotseats
• 3:30 - 5:00: Mastermind meeting

Come to one or come to both and put your tax-planning practice on steroids! Click here for complete details, including full agendas, and a registration form. (All-Stars and Hall of Famers, see the Roundtables link on the left (blue) side of the All-Stars page to register for free.)

Space is limited, so reserve your seat now. And we mean it! These aren't hotel ballrooms with lecterns and microphones. They're small rooms for real back-and-forth discussions, around the table. (Get it?) Just choose which session best meets your needs:

Click here to register. (All-Stars and Hall of Famers, see the Roundtables link on the left (blue) side of the All-Stars page to register for free.) Keith and I look forward to meeting you at a Roundtable in 2009!

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MEMBER EVENT (EAL)
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LAST CALL FOR 2009 TAMMYs

Excitement is building as we move closer to April 16. And it's not because "the season" will be over. It's because that's the day that Keith, Catherine, and I will present the very first annual TAMMYs -- TaxCoach's eagerly-anticipated and highly coveted Tax and Accounting Marketing Awards.

We're looking for your web pages, newspaper ads, direct mail pieces, TV or radio ads, and other marketing materials. (Don't worry about categories -- we're making this up as we go, and if we like it, we'll figure out where to put it.)

This is the last Briefs before the deadline. So get your materials to Catherine by April 1. Don't miss your chance to make tax marketing history!

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We're happy to answer your questions on TaxCoach content, features, or marketing. While we give first priority to our All-Star and Hall of Fame members, we work to answer all questions. For best response, email support@taxcoachsoftware.com. If we think the answer will be useful to all of our members, we'll publish it (anonymously) here in the 'Member Q & A' section of TaxCoach Briefs.

Regards,

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