News & Views

HIGH-NET-WORTH ISSUE

For the fourth year, the September issue of The CPA Journal is dedicated to topics relating to high-net-worth individuals. As with the other high-net-worth issues, the basic theme of the articles is the same: preserving and increasing the net worth of individuals.

Preserving net worth involves protection from the various forms of taxation, mainly estate taxation. Increasing net worth is a riskier endeavor, requiring sound investment strategies. Both rely heavily on sensible personal financial planning.

The articles in this month's special issue deal with both the preservation and expansion of net worth using a variety of strategies. From life insurance and trusts to the tax aspects of retirement and relocation, this month's high-net-worth issue will benefit those seeking to advise on these matters or to strategize their own efforts toward wealth accumulation. *

SOME LENDING INSTITUTIONS SEEK TO MAKE AN END RUN AROUND NEW JERSEY'S NEW PRIVITY STANDARD

The New Jersey legislature recently passed a statute that adopts a strict privity standard for lawsuits involving accountants. Under this statute, negligence suits can only be brought by the client or by those third parties with whom the accountant has a relationship similar to that of accountant/client. Moreover, the law requires that with respect to banks and similar lending institutions that the accountant acknowledge in writing that the institution will be relying on his or her report.

Lending institutions in New Jersey are, for the first time, facing this obstacle to their right to sue their customers' accountants. In response, some New Jersey banks have requested that their customers request their accountant to send letters in a prescribed form to the lending institution acknowledging that the accountant is aware that the lending institution intends to rely on the accountant's report on the financial statements for credit granting and evaluation purposes.

The lending institutions have also indicated that the renewal of a customer's line of credit is, in part, contingent upon the customer's accountant signing the letter acknowledging the lending institutions' reliance on all financial statements reported on by the accountant, whether the service rendered by the accountant was an audit, review, or compilation.

Dan L. Goldwasser, a partner of the law firm, Vedder Price Kaufman Kammholz & Day, gives the following advice to accountants asked to sign such letters:

* In no situation should the letter developed by the lending institution be signed.

* If the client insists upon some type of letter, such letter should be developed to describe the unique circumstances and aspects of the client/accountant relationship. For example, if the engagement is a review or compilation, the letter might state that reliance by a lending institution for credit purposes may be misplaced based upon the level of assurance given by a review or compilation report. Even in those engagements for which reliance may be warranted, the letter should emphasize the more important risk aspects of the client's business and point out that the financial statements alone are not a sufficient basis for making a credit decision.

The objective of the letter is to clearly put the lending institution on notice that reliance upon the accountant's report on the financial statements can never be a substitute for compliance with all of the bank's internal guidelines and the performance of ongoing inspections and analyses in the risk-sensitive areas in which the client operates.

* Retain knowledgeable legal counsel to review and approve any letter to be signed.

Because New Jersey enacted a privity statute to protect accountants from unreasonable attack from third parties, it makes no sense to surrender that protection by signing a form letter prepared by a lending institution. *

AICPA SPECIAL COMMITTEE ON STRUCTURE AND REGULATION OF THE PROFESSION

Chairman of the AICPA, Robert Israeloff, has established a special committee to study the structure and regulation of the accounting profession which Israeloff has been quoted as saying is "out of sync." Chaired by Curt Mingle of Peoria, Illinois, the 12-person committee will be making recommendations to modify the structure and regulation of the profession to better match the profession's current activities and the type of services being performed. Issues such as national licensing, non-CPA ownership of licensed CPA firms, and the intrusion of commercial organizations such as American Express Tax & Business Services into traditionally CPA territory will be reviewed by the committee.

It is expected that the work of the committee will extend over a two-year period. Israeloff is quoted as saying there are no preconceived notions as to the ultimate outcome of the committee's work. *

OVERSIGHT REPORT ON GASB RELEASED

The Financial Accounting Foundation, the parent organization of both the GASB and the FASB, has a permanent oversight committee whose role is to see that both boards are operating effectively and serving their constituencies. A GASB subcommittee of the oversight committee recently issued a report on a survey conducted of the work of GASB over the past five years. The recommendations of the subcommittee have been approved by the Board of Trustees of the Foundation.

J. Michael Cook, chairman and chief executive officer of Deloitte & Touche LLP and chairman of the FAF Oversight Committee, said that "constituents surveyed found that the Board's procedures were well designed and adhered to and that the Board was fulfilling its mission in establishing standards of governmental accounting and reporting. When asked to rate whether the standards issued over the last five years were 'improvements in the usefulness of financial reports based on the needs of financial report users,' most of the constituents surveyed rated the GASB's performance as adequate or better," Mr. Cook continued.

The report notes, however, that some constituents expressed dissatisfaction with the passage and subsequent deferral of Statement 11 on measurement focus and basis of accounting and the rate of progress being made on the reporting model project, which was the basis for the deferral. Disappointment about the rate of progress on those two projects, plus the project on service efforts and accomplishments, were noted by respondents.

Part of the reason for a lack of progress on major projects cited by respondents was the lack of a full-time Board. Mr. Cook said that "there is widespread agreement that a full-time Board would be desirable; however, the problem historically has always been budgetary considerations. One recommendation of the oversight subcommittee is for the trustees of the Foundation to continue to monitor whether the mix of part-time and full-time members can fulfill the GASB's mission."

Other recommendations in the report includeÑ

* the Board should spend some time on strategic analysis that would determine the effect of recent and coming changes, such as new technology, in the reporting environment on standard-setting needs and the Board's priorities.

* the Board should adopt a more proactive approach to determining the needs of financial statement users so that cost-benefit decisions on standards might be more confidently developed.

Members of the subcommittee are Stan Kennedy, president of Kennedy Consulting; Jon C. Madonna, chairman and chief executive officer of KPMG Peat Marwick LLP; and William R. Snodgrass, comptroller of the treasury of Tennessee. The oversight subcommittee sent a questionnaire to more than 100 persons representing a cross section of the GASB's constituency. Additionally, they interviewed 36 individuals with a high level of knowledge about the Board, reviewed records and files on GASB projects, and observed meetings of the Board.

Copies of the report are available from the Financial Accounting Foundation, telephone (203) 847-0700, ext. 555 *

FASB BEGINS SEARCH FOR ANSWERS TO STANDARDS OVERLOAD

One of the recommendations of the AICPA Special Committee on Financial reporting is that standard setters "search for and eliminate less relevant disclosures." On July 31, 1995, the FASB issued a prospectus, Disclosure Effectiveness, which asks readers to consider possible changes to current disclosure requirements and calls for papers and comments on disclosure effectiveness. The papers and comments received by November 30, 1995, will be used as input for a public meeting. The prospectus indicates that the Board is preparing a separate Invitation to Comment that will address additional disclosure issues raised by the AICPA special committee on financial reporting and the Association for Investment Management and Research in a 1993 position paper.

At present, the FASB's conceptual framework does not have a precise theory of disclosure, although the Board published some thoughts on the subject in Statement No. 105 on off-balance-sheet disclosures.

In an effort to reduce disclosures, the Securities and Exchange Commission (SEC) is considering streamlining or otherwise improving disclosures. It has issued proposed rules calling for abbreviating financial statements, proxy statements, and annual reports by dropping or drastically reducing footnote disclosures. The comment deadline on the SEC's proposal is October 10, 1995.

The FASB is addressing some of the concerns of the AICPA special committee in their current projects, while calling for academic and other research on disclosure issues as set forth in the prospectus. The FASB also intends to hold a seminar in late 1995 to bring together a number of interested parties to discuss the topic of disclosures. No formal project has been added to FASB's technical agenda since it does not wish to build up unrealistic expectations. *

BOOK REVIEW: SEC REGULATION OF PUBLIC COMPANIES

Allan B. Afterman, PhD, CPA

Prentice-Hall, Inc. 208 Pages

Review by Alexander A. H. Bohtling, CPA, retired from Deloitte & Touche LLP

The procedures and administration of the Securities Act of 1993 and the Securities Exchange Act of 1934 are well covered and illustrated in this book.

The workings of the acts are presented in a form useful to organizations considering changing their status from private ownership to public ownership, and provide useful reminders to companies already publicly owned. Also, the information provided is useful to the public desiring to learn more of the functions of the two acts.

To quote the authorÑthe book includes numerous examples of information from actual filings with the SEC to illustrate major textual points.

Besides a brief preface, the book consists of nine chaptersÑthe institutional framework of securities regulation, the process of raising capital from the public, registration and reporting under the 1933 and 1934 Acts, accounting and financial reporting under securities laws, liability under the Federal securities laws, the regulation of corporate insiders, proxy rules and takeover regulation, the SEC's small business initiatives, and foreign issues and international offerings.

The above is followed by a detailed and very factual appendixÑ1993 Form 10-K Annual Report of Reynolds Metals Company and Consolidated Subsidiaries filed with the SEC. And, a glossary of terms used in the SEC world follows.

The purposes and contents of other SEC forms are also well covered.

The author, Allan B. Afterman, PhD, CPA, has had many years of experience in public accounting, including having been assistant to the national director of SEC practice and executive office research reporter at major international CPA firms. Currently, he is a member of the adjunct faculty of the Graduate School of Business at the University of Chicago.

In your reviewer's opinion, this book presents the subject of SEC regulation of public companies very clearly. *

GASB BEGINS TO MOVE ON FINANCIAL REPORTING MODELS

On July 12, 1995, the GASB issued two preliminary views publications on financial reporting modelsÑone on the core financial statements of general governmental entities and the other on the core financial statements of governmental colleges and universities. Preliminary views documents explain the Board's current thinking on issues prior to holding public hearings. In announcing the release of the documents, staff of the Board indicated the documents represent a significant departure from the current financial reporting models of these entities.

The documents present a dual approach to financial reporting in general purpose financial statementsÑan entitywide perspective and a fund perspective. The entitywide perspective would use the "flow of economic resources" measurement focus and a full accrual basis of accounting for all activities. Presently some activities of government are on a modified accrual basis and some, principally proprietary funds are on a full accrual basis. Previous attempts at entitywide presentations have resulted in a mixing of apples and oranges. Donald Chapin, Chief Accountant of the U.S. General Accounting Office, in an interview to be presented in the October issue of The CPA Journal discusses why he is a critic of the present system. He uses the example of the financial statements of the District of Columbia just before it declared bankruptcy. A careful analysis would not have led to the conclusion that the District was insolvent, when in fact it was.

The core entitywide financial presentation would include amounts for capital assets (including infrastructure assets) and a charge for capital asset use to operations. Also presented would be all the debt of the entity including that incurred to purchase capital assets.

The fund perspectiveÑthe second level of presentationÑpreserves the more traditional financial reporting with governmental funds on a modified accrual basis and proprietary funds generally on a full accrual basis. Gone will be account groups. Added will be management's discussion and analysis of financial condition and results of operations.

The new approach of the preliminary views documents seems to solve many of the problems raised when GASB Statement No. 11 was first issued many years ago, seeking to establish a new basis of accounting for governments. Implementation of Statement No. 11 would have led to major problems by creating huge deficits in the governmental funds of many large governments. The preliminary views approach solves that by bringing the capital assets, net of capital borrowing, into the equity section.

It would appear that the preliminary views documents are a breakthrough that can lead to a new, meaningful model for governments. It will be interesting to see how those affected will like the idea of keeping their accounting records on two different bases of accounting. *

SECPS TASK FORCE TO RESPOND

A task force of the SEC Practice Section has been formed under the leadership of Barry W. Huff of Deloitte & Touche LLP to respond to the recommendations of the Kirk advisory panel on auditor independence. The recommendations of the panel are contained in a report, Strengthening the Professionalism of the Independent Auditor. A major recommendation of the Kirk panel is that the independent auditor treat the board of directors as the client and not management. The report of the task force will be widely disseminated, with the members of the SECPS the primary recipients. The question was raised at the April 1995 AICPA Board of Directors meeting whether the Barry Huff task force should take a position on the recommendation that the Board of Directors be viewed as "the client." It would appear that not all commentators on the recommendations are in agreement with that premise. *

ACAUS ANNOUNCES NEW PRESIDENT

BDO Seidman, LLP, and the Association of Chartered Accountants in the U.S. (ACAUS) announced that Mark I. Merryweather, senior associate and secretary of the BDO International Accounting and Auditing Committee, has been appointed president of ACAUS. ACAUS is a professional not-for-profit organization representing over 4,000 U.S.-based chartered accountants from Australia, Canada, England, Wales, Scotland, Ireland, New Zealand, and South Africa.

In addition to serving as president of ACAUS for 1995, Mr. Merryweather serves as its education director and sits on the panels of judges for the organization's three annual awards for academic projects on international accounting issues. He is the U.S. representative of the Chartered Accountants Joint International Committee of the U.K. and Irish Institutes of Chartered Accountants and is involved in the negotiations between the "G7" Institutes of Chartered Accountants and the U.S. accounting bodies on advancing mutual recognition and reciprocity under GATT/GATS. *

WITHHOLDING NO LONGER NECESSARY FOR IN-KIND PAYMENTS TO SERVICE PROVIDERS

The IRC delayed deduction of property payments for services until the service provider included the payment in income. Regulations under this provision required employers to withhold income tax on in-kind payments to employees, a rule with which employers have struggled to comply.

New regulations have relaxed this rule and permit employers to deduct the payments if they properly report the income on the appropriate Form W-2 or 1099.

Source: IRC Sec. 83(h) and Treas. Reg. Sec. 1.83-6. *

TWO REPORTS ISSUED DETAILING GLOBAL IMPLICATIONS OF AUDITORS' LIABILITY AND CORPORATE GOVERNANCE

The International Federation of Accountants (IFAC), the worldwide organization for the accountancy profession, announced the issuance of two reports. The first, Auditor's Legal Liability in the Global Market Place: A Case for Limitation, is the result of a survey undertaken by IFAC member bodies. Forty-seven member organizations representing over one million accountants in public practice, the private sector, government, and education responded to the survey. The second, Who Holds the Reins?, was prepared by the International Task Force on Corporate Governance of the International Capital Markets Group, a cooperative venture of IFAC, the Section on Business Law of the International Bar Association, and the Federation Internationale des Bourses des Valeurs. It details how the important corporate governance issues are being dealt with in Japan, Germany, France, the U.S., Canada, and the United Kingdom.

Auditors' Liability

The IFAC survey concluded that unlimited and unwarranted liability is a worldwide problem having a detrimental effect on the accounting profession, business development efforts, and the growth of capital markets. While recognizing that unlimited auditor liability exists in only a handful of the developed countries, including Australia, Canada, and the U.S., the IFAC report goes on to say that the publicity of the large claims made possible by judicial systems in these countries has resulted in public misconceptions of auditor responsibilities and increased the likelihood of unwarranted claims in many other countries.

Additionally the report points out that in those countries in which auditor liability is limited, the courts are not clogged with frivolous lawsuits, auditors can operate more efficiently, and the public interest is effectively protected through professional standards and various public and private sector enforcement mechanisms.

Copies of the IFAC report can be obtained by contacting John W. Gruner, at the IFAC Secretariat, 114 West 47th Street, New York NY 10036. (212) 302-5952.

Corporate Governance

Professor Ian Percy, a recent contributor to The CPA Journal (see "The Cadbury Report and Corporate Governance in the U.K.," May 1995) chaired the task force on corporate governance and received staff assistance from Aileen Beattie of the Institute of Chartered Accountants of Scotland.

The report describes the corporate governance practices of the six major industrial countries based in large part upon discussions with industrial leaders. The efforts of the task force were not intended to be a scientific study. Each of the country sections includes a description of the audit regime of the country.

The report does not recommend the establishment of any uniform global practices. It stated a belief that diversity in practice should be respected. Rather the report recommends that corporate governance practices be made more transparent through the disclosure of such things asÑ

* the role, responsibilities, and methods of appointment of the governing body (board of directors, board of supervisors, board of auditors),

* the responsibility for the strategic direction, day-to-day management, and internal controls,

* the control over and disclosure of the compensation of management members of the governing board, and

* the responsibilities and methods of appointment of internal and external auditors in relation to financial reporting and internal controls.

* Copies of Who Holds the Reins? are available from the International Bar Association, 2 Harewood Place, Hanover Square, London W1R 9HB United Kingdom. *

PROSPECTS FOR '95 TAX LEGISLATION STILL GOOD

Despite a notable slowing of pace in Congress following the first-hundred-days marathon in the House of Representatives, the prospects for tax legislation this year still seem likely. The legislation could arise from the portion of the "Contract with America" tax provisions that remains following the conclusion of the budget reconciliation process. Or, tax legislation will take the form of a miscellaneous tax bill resulting from the process begun by Ways and Means Chair Archer.

On the other hand, systemic tax reformÑflat tax, sales tax, etc.Ñis further off. Estimates for the timing of systemic tax reform given to the AICPA Tax Division vary from one to two years (House staff) to four to five years (Senate staff).

The House and Senate have compromised on the tax-cut issue. The House was pushing for a $350 billion tax cut package early in the seven-year march to a balanced budget. The Senate, on the other hand, was willing to go along with $250 billion of cuts four years into the future, contingent on the nation's ability to meet budget goals. The compromise was for $245 billion of current tax cuts now. The House is exploring different ways to approach this trimming of its tax largesse. One approach is to ratably scale back each of the items contained in H.R. 1215, the bill containing the Contract with America tax provisions. Another would be to pick and choose the most important of the provisions, a process requiring the House to go back to the drawing board and decide which of the provisions are the most important. If the latter approach results, the tax cut items most likely to remain are repeal of the capital gains tax, a $500 child credit, and rollback of the 1993 tax increase on Social Security benefits.

Prospects for a miscellaneous tax bill began in earnest with a July 11 and 12 Ways and Means Committee hearing, during which testimony was heard on over 230 legislative tax proposals. Among those testifying was AICPA chairman Robert Israeloff, who spoke about the AICPA's most recent proposal to mitigate workload compression, H.R. 1661. Chairman Israeloff's efforts have at least raised the politician's consciousness of workload compression because Chairman Archer uses workload compression as an example of the type of provision likely to be included in a miscellaneous tax bill if one materializes. Also testifying were proponents of the S corporation reform. Chairman Archer expects the "markup" process for a bill to begin before Congress adjourns for its Labor Day recess. *

MAJOR S CORPORATION CHANGES PROPOSED

By Stanley J. Clark, Charles E. Jordan, and Paul D. Torres, University of Southern Mississippi

Two proposals, both entitled the "S Corporation Reform Act of 1995," (SCRA) have been advanced in Congress to bring S corporations into the new business entity environment of the '90s. The Senate bill, S. 758, was proposed by Senators Hatch (R-UT) and Pryor (D-AR) and has over 30 co-sponsors; the House bill, H.R. 2039 was introduced by E. Clay Shaw, CPA (R-FL) and has over 25 co-sponsors.

Both bills seek to eliminate or reduce many of the restrictions placed on S corporations. They resemble bills introduced in the last Congressional session. Although both bills are believed to be revenue negative, the current pro-business attitude of the Republican Congress seems to raise chances of passage.

The bill makes a number of changes which should facilitate S corporations' abilities to raise capital. For instance, currently, a major limitation on S corporations concerns the number of shareholders allowed. SCRA would increase the number of shareholders. The Senate bill would raise the number from 35 to 50; the House bill from 35 to 75. Both these numbers may actually be higher in the event several family members are shareholders. The bills allow families to elect treatment as one shareholder. This election includes all family members subject to the attribution rules listed and is available to only one family of shareholders for each S corporation. The current law of husband and wife treated as one shareholder is not affected.

SCRA would also dramatically alter who is allowed to be a shareholder by extending shareholder status to nonresident aliens. In addition, tax exempt entities, including pension plans and ESOPs, would be permissible shareholders as would certain new types of trusts.

Current law allows S corporations only one class of stock. SCRA would permit the issuance of preferred stock or an additional class of stock. The Senate bill only anticipates plain vanilla preferred stock. The House bill, on the other hand would allow S corporations to issue convertible preferred stock. Although the Senate bill is unclear on whether preferred stockholders count toward the maximum shareholder limit, the House bill clearly states that preferred shareholders are not to be counted as shareholders because they are not allocated any income or loss and preferred dividends are to be treated as interest paid and received.

The passive investment income rules would be significantly relaxed. Under current law, an S corporation formed from a C corporation with earnings and profits automatically loses its S corporation status if passive investment income exceeds 25% of gross receipts. This automatic termination would be eliminated. Also, S corporations are allowed passive investment income up to 50% of gross receipts before being taxed. One drawback needed to make the bill less costly is that the tax rate levied on excess passive investment income will increase each year after the third consecutive year it exceeds the 50% cutoff. The tax rate could be as high as 85%. These changes are especially significant to S corporations heavily involved in rental activities.

SCRA would permit S corporations to have subsidiaries. The 1993 proposal would have allowed only the subsidiary to be a C corporation. The 1995 version, however, permits a wholly-owned subsidiary of an S corporation to be considered part of the S corporation. This proposal would allow an S corporation to expand its services and areas of operations, while separating its businesses for liability purposes. Also, certain dividends received from investments in C corporations would not be considered passive investment income. These dividends include any paid out of a C corporation's earnings and profits that were not derived primarily from a passive activity.

Proposed changes in charitable contributions, fringe benefits, and liquidation losses could greatly benefit S corporation shareholders. The bills propose treating S corporations like C corporations for purposes of charitable contributions of inventory and scientific property. An S corporation would be allowed a deduction for contributions of these assets equal to the company's basis plus one-half of the assets' appreciation.

Similarly, the proposed treatment of fringe benefits for S corporations parallels the treatment for C corporations. Under current law, S corporations are allowed to deduct payments for fringe benefits provided to their shareholders, and the owners must report the fringe benefits as income. The proposal would treat S corporation shareholders as employees for purposes of fringe benefits. Thus, the S corporation would be allowed a deduction for fringe benefits paid, but the shareholders would not report them as income.

A final major change concerns the treatment of losses on the liquidation of an S corporation. Presently, these losses are almost always treated as capital losses and, therefore, have only limited usefulness to the shareholders. The bills would treat these losses as ordinary to the extent the amounts received by the shareholder do not exceed the ordinary income basis of the stock.

The bill contains many other provisions that would affect S corporations. These provisions include expansion of post-death qualification of certain trusts, expansion of post-termination transition period, and greater leniency for inadvertent errors in electing S corporation status. In general, the changes proposed by this bill greatly enhance the S corporation's viability as an entity choice.

Sources: H.R. 2039 and S. 758, both entitled, "S Corporation Reform Act of 1995." *

FOUR MSSP GUIDES ISSUED

IRS has issued four more guides as part of its Market Segmentation Specialization Program. The guides address how the following market segments do business and likely tax return issues:

* Bars and restaurants

* Entertainment: important 1040 issues

* Mobile food vendors

* Ministers

Taxpayers in these businesses can expect examining agents to be better schooled on how to approach the examination.

MSSP audit guides are frequently reprinted by the major tax services and are contained on some of the tax CD-ROM discs. You may obtain a copy of any of the MSSP guides directly from the IRS by writing: IRS Freedom of Information Reading Room, P.O. Box 795 Ben Franklin Station, Washington DC 20044. Requests of 100 pages or less are filled at no charge. A 15¢ per page charge applies to any excess over 100 pages. The FOI Reading Room telephone number is (202) 622-5164. *

1995 NEW YORK STATE BUDGET BILL

The 1995 New York State budget bill was passed by the New York Assembly and Senate on June 2, 1995, and submitted to the Governor for his approval on June 6, 1995.

Summarized below are some of the more important changes in the New York State tax laws affecting both individual and business taxpayers.

Personal Income Tax

Personal income taxes are reduced over a three-year period. The top rate is reduced from the current 7.59375% effective rate for 1995 to an effective rate of 7.125% for 1996. The tax rate is scheduled to further decrease to 6.85% in 1997. For someone with taxable income (after allowable deductions) of $150,000, the tax rate reduction will result in a savings of about $1,000.

Corporate Income Tax

The temporary 17% Metropolitan Transportation Business Tax Surcharge is extended for two years through 1997. This provision only applies to C corporations.

New York State Real Property Gains Tax

Under current law, a tax incentive is given to builders for new construction or substantial renovations of property that is commenced in 1994 or 1995 and completed by December 31, 1997. To give a boost to construction, gain from the transfer of real property is exempt from tax in an amount equal to certain costs incurred to construct a qualifying capital improvement. In other words, this exemption (sometimes referred to as the "builders' exemption") results in a tax benefit because certain costs are added to the property's original purchase price twice.

The tax incentive to builders for new construction or substantial renovation of property is extended by 18 months. Previously, construction that commenced between January 1, 1994, and December 31, 1995, was eligible for an exemption from the gains tax. Under this extension, construction or substantial renovation of property that commences between January 1, 1996, and July 1, 1997, would also be eligible for the exemption. Construction must be completed by June 30, 1999, to receive the maximum exemption.

Estate Tax

Applicable to estates of decedents dying on or after the date the legislation is approved, a deduction from the estate tax is allowed for a principal with a net value up to $250,000. *

Reprinted with permission of Holtz Rubenstein & Company from Holtz Rubenstein Adviser, June 1995.

NEW GLOSSARY CLARIFIES STANDARDS TERMINOLOGY

The Institute of Internal Auditors (IIA) released an exposure draft of a proposed Statement on Internal Auditing Standards (SIAS) entitled Glossary. The statement aims to include definitions of the key terms used in the standards.

Thomas E. Powell, CIA, IIA's director of certification and standards, commented on the purpose of the document: "The IIA hopes that by consolidating the terminology in one place, everyone will have a better understanding of the most commonly used terms in the standards. The Glossary is also expected to provide additional reference to aid in the translation of the standards for the Institute's international members."

The IIA will release the final version of the Glossary in late 1995. Copies of the exposure draft can be obtained through IIA's customer service center by calling (407) 930-7600, Ext. 1 or by faxing (407) 831-5171. *

REQUESTED IRS BUDGET TRIMMED

The President requested $8.2 billion for the IRS's fiscal year 1996 budget. The final budget will lie somewhere between the $7.5 billion approved by the House and the $7.3 billion approved by the Senate Appropriations Subcommittee on Treasury, Postal Service, and General Government. Components of the budget are for tax law enforcement ($4.097 billion in the House and $4.254 in the Senate), management and returns processing ($1.767 billion in both the House and the Senate), and information processing ($1.441 in the House and $1.575 in the Senate).*

SEPTEMBER 1995 / THE CPA JOURNAL