Tax Rates on Capital Gains and Qualified Dividends through 2012

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Pursuant to the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Act”), which was singed into law on December 17, 2010, the tax cuts on capital gains and qualified dividends have been extended through the tax year 2012.

Generally, long-term capital gains of individuals will be taxed at a maximum rate of 15% through the tax year 2012.  The same is true for the qualified dividends received by individuals; this means that these dividends will be taxed at the same rates as long-term capital gains through the tax year 2012 (rather than being taxed as part of a taxpayer’s ordinary income at the relevant tax bracket).

Tax Lawyers Minneapolis | Tax Rates for Individual Taxpayers through 2012

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The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Act”) was singed into law on December 17, 2010. Prior to the Act, the previous tax cuts were scheduled to expire and the marginal federal income tax rates for individuals were scheduled to return to 15%, 28%, 31%, 36% and 39.6%.  Under the Act, however, the marginal federal income tax rates for individuals will remain at the 10%, 15%, 25%, 28%, 33% and 35% graduated rates through the tax year 2012.

Keep in mind that the Act does not in any way alter the taxes that were enacted as part of the recent health care reform, such as 0.9% tax on wage income and 3.8% tax on investment income for higher-income individuals.  These taxes will be imposed in 2013.

Attorney Tax Minneapolis | Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

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On December 17, 2010, the President signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Act”).  The new law preserves the 2001 and 2003 tax cuts through the year 2012, reduces the estate tax to 35 percent and allows a $5 million individual exemption, cuts the  Social Security payroll taxes by 2 percentage points, and renews the alternative minimum tax patch for the tax years 2010 and 2011.  Additional provisions of the Act are devoted to renewing other tax incentives (such as the research and development credit and a 100% exclusion on gain from the sale of small business stock) that either already expired in the tax year 2009 or were scheduled to expire in the tax year 2010.

Look for more detailed explanation of the specific provisions of the Act on this website throughout this week!

Business Lawyers Minneapolis: Legal Fee Issues

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When you are about to hire a business lawyer in Minneapolis, you need to discuss the following top three legal fee issues:

1. Payment Structure

There are three main models of payment that lawyers use: hourly fee, contingency fee, and flat fee. The hourly fee is the most common form of business lawyer compensation in Minneapolis because it is fairly simple and, yet, flexible – the business attorney is paid only based on the time he spends on the case. If you are paying your business lawyer by the hour, the agreement should set out the hourly rates of the business attorney and anyone else in this attorney’s office who might work on the case.

A contingency fee, where a Minneapolis business attorney takes a percentage of the amount the client wins at the end of the case, is very rarely used by business attorneys in Minneapolis. In the unlikely case that this latter type of fee arrangement is used, the most important issue to understand is whether the business lawyer deducts the costs and expenses from the amount won before or after you pay the lawyer’s percentage. Obviously, you will pay more in attorney fees if your business lawyer deducts the litigation costs based on the latter scenario (i.e. after you pay the lawyer’s fee).

Finally, in a flat fee arrangement, you pay an agreed-upon amount of money per job/case. For example, you pay $5,000 to your business attorney to organize your corporation with all of the corresponding corporate documents. While a flat fee arrangement is possible in a small project, it is generally disliked by business lawyers in Minneapolis because it often lacks the necessary flexibility to account for the client’s individual legal situation. Usually, some sort of an additional payment arrangement is built into such fee agreements to make sure that the balance between the client’s legal needs and the business attorney’s fees is maintained.

Remember,out-of-pocket expenses (e.g. long-distance calls, mailing costs, photocopying fees, lodging, etc.) and litigation costs (such as court filing fees) are usually billed to you in addition to your business lawyer’s fees.

2. Retainer

Most business lawyers in Minneapolis require their client to pay a retainer. Retainer can mean two different fee arrangements. First, retainer may be the amount of money a client pays to guarantee the lawyer’s commitment to the case. Under this arrangement, the retainer is not a form of an advance payment for future work, but a non-refundable deposit to secure the lawyer’s availability. Second, a retainer is simply the amount of money a business attorney asks his client to pay in advance. In this scenario, the lawyer usually deposits the retainer in a client trust account and withdraws money from it for the work completed according to the fee agreement. The fee agreement should specify the amount of the retainer and when the lawyer can withdraw money form the client trust account (usually, on a monthly basis).

3. Timing of Billing

Usually, business attorneys in Minneapolis bill their clients on a monthly basis. Sometimes, however, when the project is not large, the fee agreement will specify that you will be billed upon completion of the case. In a flat-fee scenario, it is likely that the client will be obligated to pay either a half or even the whole amount immediately as a retainer. It is wise for a client to insist in paying some part of the fee upon completion of the case to retain a degree of control over the case completion.

Conclusion

Generally, before you sign the fee agreement, business lawyers in Minneapolis will discuss with you many more topics than what is covered in this article. The three issues explained here, however, are crucial to your understanding of how the business relationship with your Minneapolis business attorney will work. Before you sign the fee agreement with your business lawyer in Minneapolis, you should ask at least these three questions and make sure that the answers are complete and to your satisfaction.

Time Limitations on Bringing a Contract Lawsuit and How Laches May Apply

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In previous articles I have discussed a few broad methods for getting out of contract in Minnesota, as well as how an opposing party may be able to stop you from claiming a right under contract by invoking equitable estoppel. This article is closely related with those topics and deals with the timing of claiming a right under contract, and how unreasonable delay can bar an otherwise valid legal claim.

Statute of Limitations and How the Doctrine of Laches Works

It is generally understood that a legal action (or the right to sue someone) is governed by a statute of limitations. For a civil case based on something such as breach of contract, a statute of limitations establishes a time limit for suing someone starting from the time when the right to assert a claim first arose (e.g. when the person harmed first discovered or could have discovered that they were harmed) . The applicable statute of limitations for breach of contract in Minnesota is Minn. Stat. Section 541.05, subd. 1(1) (2010). Section 541.05 provides for a six year statute of limitations for action upon a contract or other obligation, express or implied, unless another limitation is expressly prescribed.

This seems simple enough, but other laws, such as the State Uniform Commercial Code may modify this limit, and the doctrine of laches can confuse things further. Note also that the common law doctrine Quod nullum tempus occurrit regi (or “No time runs against the King) can exempt some government entities from statutes of limitations and/or the application of the doctrine of laches. That is why it is essential to retain an experienced Minnesota contract attorney as soon as possible after your contract issue arises.

As alluded to above, in addition to the statute of limitations, the doctrine of laches plays an important part in determining whether a civil lawsuit was brought in a timely fashion. Laches is an equitable doctrine intended to prevent a party who has not been diligent in asserting a known legal right from recovering at the expense of another party who has been prejudiced by the delay. An example of a situation where laches may apply is where a party waits for essential witnesses that could support an opposing party’s claims or defenses to die before asserting a legal right. However, for the doctrine of laches to be applied in such a case, the prejudice to the party claiming laches must be the result of unreasonable delay. If the essential witnesses died before there is unreasonable delay, the death of those witnesses alone, even if it greatly prejudiced a party, does not mean that laches is applicable.

It is also essential to understand that laches is not an available defense in a contract action where only strict legal rights are in controversy. In those types of cases, only the applicable statute of limitations will bar a claim. This means that if your case depends only upon application of law to the language of the contract, then laches is likely not applicable.

However, if there is more at issue than strict legal rights under a contract and you are seeking equitable relief in addition to laches, then Minnesota law provides that the doctrine of laches may bar the lawsuit, even if the statute of limitations would not! While it may seem strange that a lawsuit brought within the time allowed by the statute of limitations can be untimely, this makes sense if you keep in mind that a delay in asserting the known legal right can be so unreasonable and can so adversely affect a party that it would be inequitable to allow the lawsuit to proceed.

Nevertheless, a couple important issues should be kept in mind. First, claiming only laches will not likely be successful in a contract case. A party must assert that there are other events that occurred that give rise to equitable relief (e.g. estoppel, fraud, duress, etc.) or laches itself is likely to be of little help. Second, laches concerns the question of whether a party has been unreasonable in asserting a known legal right, a broader category than a mere legal claim. To illustrate this, imagine two parties enter a contract where Company A promises to pay Company B in multiple payments for work Company B has done for Company A. Company B also has the right to notify Company A in writing and request Company A to pay in full (i.e. “call the loan” or require Company A to “purchase the loan”). Company A sets up a payment process through a third party that fails, but through no fault of Company A. The third party notifies only Company B of the problem on two occasions. Company B does nothing and waits seven years before realizing during an audit that it has not been paid. Company B then notifies Company A and requests payment in full (including years of accumulated interest) and then sues when Company A refuses. Company A asserts laches (among other equitable claims) and Company B contends that it sued Company A immediately after the refusal to pay in full, thus there was no unreasonable delay in bringing the lawsuit and laches cannot apply. However, the legal right to which laches applies is not the lawsuit (or legal claim), but rather the contract right to require the Company A pay in full after written notice (the legal right). There is no question that Company B delayed in asking Company A to purchase the loan. A court may take this under consideration and allow Company A to use laches as a defense.

Finally, Minnesota courts consider the following factors when deciding whether the doctrine of laches applies to a particular case:
1) Availability of the defense as determined by the nature of the action;
2) Reasons for delay;
3) Prejudice; and
4) Policy considerations.

The court may: find that your case involves a special situation where the doctrine of laches specifically does not apply; accept that there were legitimate reasons for delay; determine that the resulting prejudice was not severe enough support claiming laches; and/or take into account broad policy considerations that may suggest that laches is not appropriate in your case. Additionally, laches is an affirmative defense to a legal claim by another party. This means that the party claiming laches will bear the burden of showing facts and arguments that fulfill the elements of equitable estoppel in that particular jurisdiction. Contract litigation in Minnesota can be complex and you should retain a contract lawyer as soon as possible.

Conclusion

As always, issues such as complicated contract litigation and asserting laches as a defense to another party’s claim involve important legal considerations. It is also important that the consequences of particular actions should be evaluated appropriately. These issues should be analyzed by a skilled contract attorney who will be able to conduct proper legal analysis based on the particular facts of your case. Sherayzen Law Office can help you analyze your case, evaluate your options, and provide specialized advice on how to proceed with your contract litigation.

Call the professional tax law firm of Sherayzen Law Office, Ltd. at (952) 500-8159 to discuss your case with our contract litigation attorney!