Litigation

Settlement Professionals/SPI seems to have things mixed up concerning constructive receipt as it applies to structured sales (which it dubs the  "Ensured Structured Sale")**

SPI  "The Doctrine of Constructive Receipt taxes income before that income is actually received"

Comment: Governments tax income not tax doctrines. This certainly applies in the United States.

SPI: "It's important to note that Constructive Receipt doctrine only affects your ability to obtain a tax-exempt structured settlement annuity, as part of your settlement plan".

Comments: 

1. It is important to difenetiate between a settlement plan, a financial plan and/or an "exit strategy" plan. A "settlement plan" generally does not apply to structured sales unless the injured party in a law suit, or their attorney, is selling low basis/high value property. A settlement plan, incorporating a structured sale, might well apply in a divorce settlement scenario.

2. A structured sale annuity IS NOT tax exempt. Provided  the characteristics of IRC 453 apply, a structured installment sale should help the business or property seller defer capital gains taxes. Like a regular installment sale, when each installment is made, a portion of it represents return of basis in the property, part represents capital gain and part represents ordinary income.

SPI: "Myths That Do Not Trigger Constructive Receipt (Relating to Structured Sales)

• Negotiating for payment of your full settlement to a QSF, subject to further Court control and oversight.
• You have been awarded a verdict, however the defendants have appealed to a higher court for review.
• Negotiating for multiple annuity issuers to share responsibility for your payments.
• Negotiating for all security interest in any annuities (versus being a general creditor of the annuity issuer)".

Comments:  This appears to just be a cut and paste job from structured settlement annuities. None of these scenarios applies to a structured sale. With respect to the third bullet point only Allstate Life Insurance Company and Allsate Life Insurance Comapny of New York currently offer this product.

Mind the Crack, Jack!

This author believes that the owners of the SPI company do know the tax principle, but you would never know it by reading the web page about constructive receipt. I know financial literacy month has ended! Must we wait another year with this inaccurate information still out there? How about shining up the web page please?**

**as of May 3, 2010 8:00pm EDT