The IRS Stunningly Admits Its Own Mafia Tactics

Submitted by Simon Black of Sovereign Man blog,

In the 3rd century AD, Emperor Caracalla famously remarked of Rome’s tax policy:

“For as long as we have this,” pointing to his sword, “we shall not run out of money.” (Of course, Rome did run out of money. )

At the time, Roman taxation was so extractive that it drove people into poverty and desperation. Yet the government continued to forcibly plunder wealth at the point of a sword.

Not much has changed.

The Taxpayer Advocate Service, which is an independent office within the IRS, has just released a two-volume report describing the mafia tactics that are being employed by the tax collectors in the Land of the Free.

The Executive Summary alone is 76 pages. And believe it or not, it’s a real page turner.

On page 37, for example, the report states that the IRS largely assesses tax penalties improperly.

Specifically, the Office of the Chief Counsel admonished the IRS that it was not legally authorized to impose accuracy related penalties on certain taxpayers, and that the service should abate those penalties already imposed.

Yet the IRS declined to follow its own Chief Counsel’s legal advice, and it has refused to abate penalties for nearly 90,000 taxpayers.

In the words of the agency’s own Taxpayer Advocate Service, “The IRS’s failure to abate inapplicable penalties signals disrespect for the law and a disregard for taxpayer rights.”

Page 34 discusses how the IRS has abandoned its own checks and balances.

When a taxpayer is deemed to owe the US government money, the IRS is supposed to have a “collection due process (CDP) hearing” to verify that the IRS agent followed the law and consider whether the intrusion on the taxpayer was warranted.

Yet the report states that this has become nothing more than a rubber stamp formality, and that current practices “do not provide the taxpayer a fair and impartial hearing.”

In fact, among the most litigated issues at the IRS, the report states that “taxpayers fully prevailed only about two percent of the time.”

Two percent. If you go up against the IRS, you have a 2% chance of winning. Give me a break. You have more than a 2% chance fighting against the mafia.

Moreover, the byzantine US income tax code, which runs to an incredible 72,000+ pages, “disproportionately burdens those who [make] honest mistakes”, especially as it relates to offshore disclosures.

In fact, the report acknowledges that “tax requirements have become so confusing and the compliance burden so great that taxpayers are giving up their U.S. citizenship in record numbers.”

It’s not exactly Emperor Caracalla pointing to his sword… but IRS’s policies and tactics are not so far off from a police agency.

They disregard the law and the advice of their own counsel. They disproportionately burden honest individuals. They flout due process. And they push people to abandon their citizenship.

These are mafia tactics, plain and simple. And like the Romans, Ottoman Empire, and French monarchy before, the tax system in the Land of the Free has become a desperate farce marked by fear and intimidation.

This is one of history’s obvious marks of a nation that has reached its terminal decline. We cannot seriously expect this time to be any different.


    



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Just Three Charts

With today's biggest drop in stocks in over 4 months, we are reminded of three recent charts that raise considerable questions as to the path forward. From Mclellan's 1928 analog to Hussman's bubble trajectory and the extremes of bullish sentiment, this week marks a 'line in the sand' for bulls to take this to the Hendry moon or for it not to be different this time…

 

Mclellan's 1929 Analog…

 

Hussman's Bubble Trajectory…

Based on the fidelity of the recent advance to this price structure, we estimate the “finite-time singularity” of the present log-periodic bubble to occur (or to have occurred) somewhere between December 31, 2013 and January 13, 2014.

 

 

And the Market's Most Bullish Bias On Record…

 

Is it any wonder there are less BFTATH-ers left?

 

Charts: John Hussman, John Mclellan, and @Not_Jim_Cramer


    



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Putin Chosen As World’s Third Most-Admired Person Behind Gates, Obama

After a banner year for the former KGB spy, who first neutralized Prince Bandar, Bibi and John Kerry (not to mention the president of the US), and subsequently reannexed the Ukraine into the Russian sphere of influence now that the second coming of the former USSR is in the works, it should come as no surprise that Russia’s Vladimir Putin has been named the third most admired person in the world. Then again when one considers who is ahead of Putin in the Time poll, perhaps this distinction is nothing to write to the NSA about – third spot is located behind Microsoft founder Bill Gates and US President Barack Obama. Indicatively, this also means that Barack Obama is inexplicably still the second most respected person in the world.

From RIA:

The newspaper reported that Putin’s popularity among Russians helped him secure the third place on the list. The poll conducted in 13 countries around the world revealed that the Russian leader earned more admiration than Pope Francis, who came fourth.

 

The world’s richest man, Gates is the most admired person in China and more highly regarded than China’s President Xi Jinping, Obama and Putin, who was named the fourth admired person by the Chinese citizens, according to the poll published Saturday.

 

In Russia, Gates was chosen as the second most admired person, ahead of famous US actress Angelina Jolie and German Chancellor Angela Merkel. US intelligence leaker Edward Snowden, who has been granted temporary asylum in Russia, was named the tenth most admired person by Russians.

 

The YouGov poll surveyed nearly 14,000 people from the UK, France, Germany, Russia, the US, Australia, Pakistan, Indonesia, India, China, Egypt, Nigeria and Brazil.

 

Putin, 61, was named International Person of the Year by The Times in late December for succeeding in his ambition of bringing Moscow back to the international top table.

Here is the full list of the Top 10 most admired people around the world:

1 Bill Gates; 2 Barack Obama; 3 Vladimir Putin; 4 Pope Francis; 5 Sachin Tendulkar; 6 Xi Jinping; 7 Narendra Modi; 8 Warren Buffett; 9 Amitabh Bachchan; 10 Abdul Kalam.

Oddly nobody from Wall Street made the list (which appears to have been overrun by Indian voters).


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/0XGHXAxi0o0/story01.htm Tyler Durden

Putin Chosen As World's Third Most-Admired Person Behind Gates, Obama

After a banner year for the former KGB spy, who first neutralized Prince Bandar, Bibi and John Kerry (not to mention the president of the US), and subsequently reannexed the Ukraine into the Russian sphere of influence now that the second coming of the former USSR is in the works, it should come as no surprise that Russia’s Vladimir Putin has been named the third most admired person in the world. Then again when one considers who is ahead of Putin in the Time poll, perhaps this distinction is nothing to write to the NSA about – third spot is located behind Microsoft founder Bill Gates and US President Barack Obama. Indicatively, this also means that Barack Obama is inexplicably still the second most respected person in the world.

From RIA:

The newspaper reported that Putin’s popularity among Russians helped him secure the third place on the list. The poll conducted in 13 countries around the world revealed that the Russian leader earned more admiration than Pope Francis, who came fourth.

 

The world’s richest man, Gates is the most admired person in China and more highly regarded than China’s President Xi Jinping, Obama and Putin, who was named the fourth admired person by the Chinese citizens, according to the poll published Saturday.

 

In Russia, Gates was chosen as the second most admired person, ahead of famous US actress Angelina Jolie and German Chancellor Angela Merkel. US intelligence leaker Edward Snowden, who has been granted temporary asylum in Russia, was named the tenth most admired person by Russians.

 

The YouGov poll surveyed nearly 14,000 people from the UK, France, Germany, Russia, the US, Australia, Pakistan, Indonesia, India, China, Egypt, Nigeria and Brazil.

 

Putin, 61, was named International Person of the Year by The Times in late December for succeeding in his ambition of bringing Moscow back to the international top table.

Here is the full list of the Top 10 most admired people around the world:

1 Bill Gates; 2 Barack Obama; 3 Vladimir Putin; 4 Pope Francis; 5 Sachin Tendulkar; 6 Xi Jinping; 7 Narendra Modi; 8 Warren Buffett; 9 Amitabh Bachchan; 10 Abdul Kalam.

Oddly nobody from Wall Street made the list (which appears to have been overrun by Indian voters).


    



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Bill Yields Turn Negative On Safe-Haven Un-Rotation

As stocks have vascillated in a worryingly not-straight-up manner for the last few days with today's weakness taking the Dow and S&P 500 pre-holiday lows (with th ebiggest drop in a month), it would appear more than a few 'investors' are greatly unrotating into the very shortest-term Treasuries as a safe-haven from the turbulence. The last few days have seen Treasury-Bill yields swing negative in the less-than-1-month maturity indicating anythng but risk appetite as a scramble for safety is strong enough to warrant paying (albeit marginally) for it. As we noted previously, the driver of Bill Gross' 'bet' on the short-end will not be based on always wrong expectations of what Fed monetary policy does to prices, but the exodus of speculative money from equities into safe havens, call it the Great Unrotation.

 

The mid-Feb bills are so aggressively bid as to push the yield negative…

 

Of course, what is also problematic for those seeking safety is the wall of doubt starting in early March over the debt-ceiling debacle…

 

Charts: Bloomberg


    



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Greenspan Warned Of Housing Bubble… In His PhD Dissertation

Submitted by Robert Murphy via the Ludwig von Mises Institute of Canada,

Sometimes you run across bits of trivia that are too funny to be made up. It is common knowledge that Ben Bernanke’s academic work, before becoming Fed chair, involved studies of the banking crises during the Great Depression. This is somewhat ironic, since many of us blame Bernanke’s policies for perpetuating the financial crisis and contributing to the second Great Depression (through which the world is still suffering).

However, what is not as well known – and which only recently came to my attention–is that Alan Greenspan had an ironic element to his own scholarship. Now many readers might assume that I’m referring to Greenspan’s 1966 essay–written when he was an acolyte of Ayn Rand–in which he sang the praises of the gold standard. Obviously, that early work would later prove awkward for Greenspan, as he held the reins of the fiat money engine known as the Federal Reserve.

But that’s not what I’m talking about. Rather, I’m referring to Greenspan’s NYU doctoral dissertation, which he took great pains to bury. Apparently, a reporter for Barron’s was the only person to unearth a copy. Here are excerpts from the April 28, 2008 Barron’s article by Jim McTague, entitled, “Looking at Greenspan’s Long-Lost Thesis”:

The dissertation, written in 1977 when Greenspan received his coveted degree from New York University, had been tucked away on a professor’s sagging bookshelf for 31 years.

 

…There are only two known copies: the Maestro’s own and the one we viewed. As far as we can tell, Barron’s is the only news organization ever to have seen the thesis since a third and now missing copy was removed from the public shelves of NYU’s Bobst library at Greenspan’s request in 1987, the year that Ronald Reagan appointed him chairman of the Federal Reserve Board. Glancing at the document, we momentarily felt like Indiana Jones at the dramatic moment in which he discovers the Lost Ark of the Covenant.

 

We were tickled to find that the work’s introduction includes a discussion of soaring housing prices and their effect on consumer spending; it even anticipates a bursting housing bubble. Writes Greenspan: “There is no perpetual motion machine which generates an ever-rising path for the prices of homes.”

 

Greenspan, however, didn’t foresee a housing mania spilling into the general economy, toppling banks and brokerage houses and paralyzing key portions of the credit system. The worst he could anticipate was that a sharp “break in prices of existing homes would pull down the prices of new homes to the level of construction costs or below, inducing a sharp contraction in building.” Back then, there were no home-equity lines of credit, derivatives or subprime mortgages. Mortgages were largely concentrated at savings and loans. Credit was harder to come by, too, because conventional mortgage rates were about 8.5% and headed significantly higher. Still, the thesis shows that the former Fed boss was focused on housing very early in his career. Thus, it casts doubt on his recent assertions about being surprised by the Mesozoic-era-size impact of this decade’s housing mania.

Thus it seems that Alan Greenspan, when his professional ambition wasn’t involved, could understand perfectly well  (a) the virtues of a commodity money and (b) the dangers of a housing bubble. If the Austrians are right in laying the blame for the housing bubble on Greenspan’s loose monetary policy following the dot-com crash, then Greenspan can’t plead ignorance: He knew what he was doing.


    



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Check out the IRS’s stunning admission of its own mafia tactics

shutterstock 158874281 150x150 Check out the IRSs stunning admission of its own mafia tactics

January 13, 2014
Santiago, Chile

In the 3rd century AD, Emperor Caracalla famously remarked of Rome’s tax policy:

“For as long as we have this,” pointing to his sword, “we shall not run out of money.” (Of course, Rome did run out of money. )

At the time, Roman taxation was so extractive that it drove people into poverty and desperation. Yet the government continued to forcibly plunder wealth at the point of a sword.

Not much has changed.

The Taxpayer Advocate Service, which is an independent office within the IRS, has just released a two-volume report describing the mafia tactics that are being employed by the tax collectors in the Land of the Free.

The Executive Summary alone is 76 pages. And believe it or not, it’s a real page turner.

On page 37, for example, the report states that the IRS largely assesses tax penalties improperly.

Specifically, the Office of the Chief Counsel admonished the IRS that it was not legally authorized to impose accuracy related penalties on certain taxpayers, and that the service should abate those penalties already imposed.

Yet the IRS declined to follow its own Chief Counsel’s legal advice, and it has refused to abate penalties for nearly 90,000 taxpayers.

In the words of the agency’s own Taxpayer Advocate Service, “The IRS’s failure to abate inapplicable penalties signals disrespect for the law and a disregard for taxpayer rights.”

Page 34 discusses how the IRS has abandoned its own checks and balances.

When a taxpayer is deemed to owe the US government money, the IRS is supposed to have a “collection due process (CDP) hearing” to verify that the IRS agent followed the law and consider whether the intrusion on the taxpayer was warranted.

Yet the report states that this has become nothing more than a rubber stamp formality, and that current practices “do not provide the taxpayer a fair and impartial hearing.”

In fact, among the most litigated issues at the IRS, the report states that “taxpayers fully prevailed only about two percent of the time.”

Two percent. If you go up against the IRS, you have a 2% chance of winning. Give me a break. You have more than a 2% chance fighting against the mafia.

Moreover, the byzantine US income tax code, which runs to an incredible 72,000+ pages, “disproportionately burdens those who [make] honest mistakes”, especially as it relates to offshore disclosures.

In fact, the report acknowledges that “tax requirements have become so confusing and the compliance burden so great that taxpayers are giving up their U.S. citizenship in record numbers.”

It’s not exactly Emperor Caracalla pointing to his sword… but IRS’s policies and tactics are not so far off from a police agency.

They disregard the law and the advice of their own counsel. They disproportionately burden honest individuals. They flout due process. And they push people to abandon their citizenship.

These are mafia tactics, plain and simple. And like the Romans, Ottoman Empire, and French monarchy before, the tax system in the Land of the Free has become a desperate farce marked by fear and intimidation.

This is one of history’s obvious marks of a nation that has reached its terminal decline. We cannot seriously expect this time to be any different.

from SOVErEIGN MAN http://www.sovereignman.com/tax/check-out-the-irss-stunning-admission-of-its-own-mafia-tactics-13381/
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Spot The Idiotic Central Banker Statement

With the wild world of central bankers full of double-speak, counter-factuals and well-chosen anecdotes, statements of questionable sanity are not difficult to find. However, Dennis Lockhart, who has already done his optimistic economic damage to stocks this morning just outdid himself. Speaking in his home town, the Atlanta Fed President stated confidently in the Q&A after his speech:

“One of the stupidest things a central banker could do is comment on the stock market.”

Then added:

The stock market is not “a bubble in any way”

“Stupid” indeed, Mr Lockhart…

 


    



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Merger Monday – Suntory Buys Beam for 25% Premium ($16Bn)

By Phil of Phil’s Stock World

Mergers are great market boosters.  

They make investors think everything is undervalued in a sector when one company gets bought for high cash premiums and BEAM (Jim Beam) is one of those companies many of us know and love but not, apparently, as much as the Japanese who will be taking over this 110 year-old American Icon. BEAM did not rise 30% last year, making it “cheap” vs other S&P choices and, of couse, the only thing in the World more plentiful than Free Dollars is Free Yen – so why not gobble up some assets while the gobbling’s good? 

The company’s combined portfolio of brands will include Beam’s Jim Beam, Maker’s Mark and Knob Creek bourbons; Courvoisier cognac and Sauza tequila; plus Suntory’s Japanese whiskies Yamazaki, Hakushu, Hibiki and Kakubin; Bowmore Scotch whisky; and Midori liqueur and, if you went from “yeah, I know those” to “who?” while reading that list, then you can see why Suntory values Beam’s distribution network and brand recognition as much as they do the product. 

Suntory is a 1 TRILLION Yen Company and a steady, 4% dividend payer in Japan. A move like this is another bullish signal for the markets as this is the proverbial money coming off the sidelines, when foreign companies begin buying up US companies and Japan is a prime candidate as the Nikkei was up 45% last year – making the S&P look pretty cheap to them. 

If you want to find other companies that look cheap, I suggest the S&P’s 20 Most Concentrated Hedge Fund Holdings, where BEAM was number 7. These are the companies most favored by hedge funds and it’s not the usual suspects:

The Free Money is still out there, as long as you can service a 10-year loan at 3%, any of these companies can be yours and refinancing a decade from now is the next CEOs job – especially if you are a CEO already over 55 and looking to put your stamp on your company with a big move.  

STZ, for example, is a $15Bn company at $80 a share (expect it to move higher on this news) and a series of acquisitions has run it up 110% in the last 12 months. AN is another roll-up story and JCP may seem an odd choice there but, like SHLD, their 1,104 stores are probably worth more than their $2.2Bn market cap (I still prefer SHLD, which is 50% owned by a hedge fund!). 

Following table by Baker Street Capital Management. 

SHLD is making the cut for one of my top 3 picks of 2014, now that it dropped almost 50% since Thanksgiving. Valued at $3.9Bn at $36.71 per share, if we give a $2M valuation to the companies 4,000 stores, we have $8Bn right there along with $2.5Bn worth of brands, a home service business worth $2Bn, Land’s End is a standalone at $1.4Bn, Sears Online is new and worth about $1Bn, Sears Canada and Sears Auto are good for another $1Bn and Inventory alone argues for a few Billion on the Retail side (see excellent Baker Street Report). 

At $8Bn, I was hesitant to call Sears a buy but, at $3.9Bn, a Japanese department store could make them an offer next week. We’re having a special Live Webinar today at 1pm, where we will discuss my top 3 Trade Ideas for 2014.  With SHLD, our intent is going to be playing for a buyout at $6Bn or more ($48+ per share) and it has already been placed in our Income Portfolio (from PSW Member Chat) last Friday at $36.71 with 10 of the Jan 2015 $30/45 bull call spreads at net $6. Our intention is to add short puts (IF) they fall further but, if not, then we’re already $6.71 in the money on our $6 spread with a potential gain of $9 more (150%) at $45. 

Source: Zero Hedge

 

Overall, we’re still “Cashy and Cautious” as the Macros are NOT matching up to the markets’ performance.   Mean reversion can be a real bitch, so there’s no harm in us keeping the bulk of our cash on the sidelines, while we wait to see if this discrepancy can hold up through earnings or not (we’re betting not).  

Long-term, you can’t fight the Fed(s) but we’re not really sure how much longer the Fed, the BOJ, the ECB, the PBOC, etc. can keep playing this game.  The Financial Times points out this weekend that peer to peer lending in China rose from $940M in 2012 to over $4Bn last year and is expected to hit $7.8Bn in 2015 and 6% of the P2P companies in China went bust last year, with many more in distress.  

“The main reasons are the intense competition in the P2P industry, the liquidity squeeze at the end of the year and a loss of faith by investors,” said Xu Hongwei, chief executive of Online Lending House.  He estimated that 80 or 90 per cent of the country’s P2P companies might go bust.

The WSJ reports that “China’s government is gearing up for a spike in nonperforming loans, endorsing a range of options to clean up the banks and experimenting with ways for lenders to squeeze value from debts gone bad.”

Write-offs have multiplied in recent months. Over-the-counter asset exchanges have sprung up as a way for banks to find buyers for collateral seized from defaulting borrowers and for bad loans they want to spin off. Provinces have started setting up their own “bad banks,” state-owned institutions that can take over nonperforming loans that threaten banks’ ability to continue lending.

 

China’s banks reported 563.6 billion yuan ($93.15 billion) of nonperforming loans at the end of September. That is up 38% from 407.8 billion yuan, the low point in recent years, two years earlier

 

India Consumer Price Index (CPI)

Fed-fueled inflation in India is likely to cost Prime Minister Singh his job as prices rose 11% in November and 9.87% in December, fueling voter anger in the World’s largest Democracy.  Despite the big boost from rising prices, GDP in India expanded just 5% last year, the slowest rate since 2003, and will probably grow at that pace in the fiscal year ending March 31, according to central bank estimates.

Our own GDP was boosted in July by a clever recalculation of the value of existing intellectual property, mostly TV and Film assets that added $560Bn to our GDP last year (3.6%).  $560Bn is the GDP of Switzerland, ranked 20th in the World.  Seinfeld alone added Billions to our GDP under the new rules and much of this fancy new math was predicated on companies like NFLX paying Billions of recurring Dollars for old TV shows.  So, as long as NFLX itself, with their p/e of 277, isn’t in a bubble – what can go wrong?  

Have I mentioned we’re Cashy and Cautious?

Click on this link to try Phil’s Stock World FREE! 


    



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Japanese Stocks Lose All Post-Taper Gains As USDJPY Dives

The Nikkei 225 is at its ‘cheapest’ relative to the Dow Industrials in the last two months as the behcmark Japanese stock index has now lost all of its gains post the US Taper decision in mid-December. With USDJPY breaking back below 103 and the correlation between it and stocks as high as it has ever been, if BAML is right with its sub-100 target for the FX pair, then the Nikkei could be looking at 14,500 (or an 11% tumble from the highs).

 

Japanese stocks are back below pre-Taper levels… (leaving the NKY the cheapest to the Dow in 2 months)

 

as the correlation between Japanese stocks and the Yen remains as high as ever…

 

Charts: Bloomberg


    



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