September 1999


Millennium Series Focuses on Commissions

Each year, the September issue of The CPA Journal focuses on high-net-worth individuals. The emphasis is not only on those that give advice to them but also on those who belong to the club or aspire to belong to the club. For discussion purposes, the membership threshold is accumulated wealth that exceeds the amount sheltered by the unified transfer tax system--for 1999, $650,000 rising to $1 million in 2006.

Somewhat complicating the picture is the House version of a major tax reduction bill currently under consideration, which would eliminate Federal transfer taxes for those dying after December 31, 2008. Accompanying the repeal, however, would be the elimination of the step-up in basis at date of death for property held by estates in excess of $1.3 million. In this case, the threshold for the high-net-worth club would be adjusted to the amount at which assets no longer are permitted a step-up
in basis.

In this issue, The CPA Journal Millennium Series takes a slightly different perspective from that of the past three months, exploring the future of commission-based services and the CPA. CPAs have always provided this kind of informal advice to their clients, but no one knows what the future holds for the commission-based practice.

Two articles are featured, both having to do with CPAs entering the world of commission-based practices. The first, "The Commission Commitment: Is It Right For You?" will help a CPA or CPA firm weigh the benefits to be derived from bringing commission-based revenue into the mix. The other, "Financial Service Opportunities: Regulatory and Other Dangers," describes the full range of regulatory requirements when the CPA or firm takes the plunge. In two accompanying sidebars, other authors present their opinions on the risks to the CPA profession's reputation if some CPAs fail to conduct themselves in an objective, independent manner.

The editors chose the two articles for the Millennium Series because CPAs are at a crossroads. The AICPA code of conduct, the latest version of the Uniform Accountancy Act, and many state licensing boards permit CPAs to earn commission-based revenue on behalf of clients for whom no
attest services are provided. In New York, the State Education Department has concluded that, under the existing accountancy law, CPAs are not precluded from deriving commissions from nonattest clients.

The sidebar by Dan Goldwasser on page 27 gives an update on the situation in New York, including the possible effects of two bills now under consideration by the New York legislature. The time is now for CPAs to carefully consider their options and make the decision on how they plan to compete in the new millennium. *

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