VOGT | RESNICK | SHERAK LLPATTORNEYS AT LAWBusiness Brief

FALL 2013

VOGT | RESNICK | SHERAK LLPATTORNEYS AT LAW

4400 MacARTHUR BOULEVARD, NINTH FLOORP.O. BOX 7849

NEWPORT BEACH, CALIFORNIA 92658-7849

Return Service Requested

FALL 2013Business Brief

(949) 851-9001 Facsimile (949) 833-3445www.vrslaw.netlaw@vrslaw.net

(Continued from p.3)

(Continued on p.2)

Under existing law the California taxes that were previously deferred will be due when and if taxpayers sell their new properties, wherever located, and elect to take their profits rather than continuing to defer taxes through another 1031Exchange. However, to encourage California tax compliance the addition of Sections 18032 and 24953 mandate that if taxpayers fail to file the newly required annual information return, the FTB is authorized to currently estimate net income “from any available information” and assess tax, interest and penalties due prior to any ultimate disposition of the property. The new law shall apply to exchanges of property that occur in taxable years beginning on or after January 1, 2014. CAN YOUR LOVED ONES INHERIT YOUR DIGITAL ASSETS?

Consider the number of songs people purchase and store in their iTunes libraries, the number of books people purchase and read on their NOOK e-books or Kindle e-books, or the number of cellphone apps people purchase. If you own 15,000 compact discs, have 15,000 hardcover books in your library or 100 board games, you may bequeath them to your loved ones. However, bequeathing digital songs, books and games purchased through iTunes and Kindle is very complicated, and it is unclear whether the law will allow it.

Your computers and other various technology, may affect how you bequeath your digital assets. For example, you may have personal and work e-mail accounts, or personal, family or business websites. You may also have impor-tant records and photographs stored in your computer, online with Facebook or other social media websites, or on hand-held devices.

Many service providers, such as Gmail, Flickr and Yahoo! have policies to close and delete an account after an account holder dies. Facebook puts a decedent’s profile in a state of “memorial,” which hides certain sections from view and prevents anyone from logging into the account. How can you leave any or all of these assets to your loved ones in light of the providers’ policies or lack thereof? If you want your personal representative to access those accounts and/or devices, how will he or she locate them or gain access? If you do not want your personal represen-tative to access those accounts and/or devices, can you prevent him or her from doing so? Planning is necessary in this digital age to address such issues.

Pursuant to the First-Sale Doctrine, codified in the Copyright Act of 1976, the owner of a particular book or com-pact disc is entitled to sell or otherwise dispose of it without the authority of the copyright owner. Thus, you can bequeath your hardcover books, vinyl records or compact discs to loved ones. However, the main issue with trans-ferring digital assets such as songs purchased through iTunes or Google Play Store, books purchased on Amazon.com’s Kindle e-books, and books purchased on Barnes & Noble’s NOOK e-books is that customers do not own the digital assets. Customers have restricted, non-transferable licenses to use the provider’s services as stated in each user agreement.

While the distribution of a decedent’s property is generally governed by state law, the law is relatively undeveloped in the area of digital assets. To date, Connecticut, Rhode Island, Indiana, Oklahoma and Idaho are the few states that have passed laws allowing personal representatives and relatives access to a decedent’s e-mail and social network-ing accounts. These laws, however, only apply to property a decedent owns. Since customers only hold licenses to use digital files, these state laws do not apply to digital files licensed to decedents.

Undeniably, the California Probate Code provides that physical objects, such as hand-held devices and computers will pass to the original owner’s descendants, unless provided otherwise in a testamentary document. Pursuant to Cal. Prob. Code § 62, “property” means anything that may be the subject of ownership, both real and personal, and Cal. Prob. Code §§ 240-241, 245-247 cover the passing of personal property by testate and intestate succession. Therefore, if your digital files are stored on your devices, and your estate’s representative or beneficiaries are capable of accessing the files, they will likely be able to use them until the devices fail, and the files are likely lost.

Vogt, Resnick & Sherak, is going green. Please let us know if you would like to receive our Business Brief by e-mail, please provide your e-mail address to jkovacs@vrslaw.net. Thank you for helping the environment.

VOGT, RESNICK, SHERAK RECEIVES AN EXCELLENCE IN EMPLOYMENT AWARD

On September 18, 2013, Henry Michaels of Elwyn California awarded Vogt, Resnick & Sherak LLP for a state-level Excellence in Employment Award given by the California Disability Services Association. Only 12 of these were awarded this year. Vogt, Resnick & Sherak LLP, thanks Elwyn California for recognizing its service to the disabled community of Orange County.

FALL 2013BUSINESS BRIEF

(Continued from p.1)

DOING BUSINESS IN FRANCE; THE KEYS OF SUCCESSFrance is the largest country in Western Europe with a broad maritime zone, and diverse landscapes. It is a top tourist destination on the planet, which more than 83 million people visit each year. France is also well-known for its history, culture and lifestyle. It’s a land so diverse that many see no reason to holiday abroad. Its cuisine and wine are celebrated throughout the world. France is the fifth largest exporter of goods, especially farm products, aircraft, chemicals, pharmaceuticals, and the fourth largest of services. The major imported goods are petroleum, crude oil, machinery and equipment. Once you get away from the established clichés, as the “baguette” and “béret”, France has great opportunities to do business.

France is a leading economic player in the world. With a GDP (Gross Domestic Product) of approximately $2.6 trillion, it is the world’s sixth-largest economy and the second in the European Union. The reasons to invest in France are many. Foreign investors say they are attracted to France by its advanced standard of research, the skills of French workers, the productive labor force, the level of high technology; the stable currency, the strong rail and road network and its central location in Europe. In addition, France’s Euro-pean Union membership and usage of the euro facilitate the easy movement of people, services, capital and goods.

Doing business in France is a stimulating and challenging issue. However, it requires that one be aware of the cultural differences and have an open-mind as to the approach of the etiquette and business practice. Public life in France is rather formal. This is manifested

in the language and manners. The formal means of communication and protocol can appear quite cold or unfriendly. Maybe, no other culture in Europe is so proud of their history and regards their culture and language as a symbol of itself. In addition, the French love and are passionate about food, so when you are doing business in France, lunch is the norm.

There is a clearer distinction between private life and business in France than in the United States. This means that you can expect a certain distance and formality with your French contacts. Hierarchy should be kept in mind when you approach a French company. Make sure that you get your message at the right level if you want to be understood. The French are most sensible to rational presentations and arguments that clearly highlight the issues and solutions. The French communication style is direct and based on discussion and debate. You will be judged on your ability to present your arguments coherently, with assurance and persuasion. Punctuality is a relaxed issue. Being fifteen minutes late is perfectly normal. When in meetings; remain formal most of the time. Avoid personal questions except if your host invites you. Do not appear over friendly as it can be embarrassing and suspicious.

The French market is complex and your entry should be well planned. To succeed, you need to know the market and invest in customer relationships. For your investment to pay off, you must keep your commitments and be patient before the investment begins to pay off. The French market has important opportunities and the business environment is favor-able for sales of U.S. goods and services.

Regarding all these factors, investing in France is undoubtedly an excellent choice. Don’t be afraid of investing in France! It is a very business-friendly environment and provide a gateway to Europe.

Prepare your future; choose France!

This article was written by Maxime Leoni. Max is a lawyer in training from Nantes, France, and has always been inter-ested in American law. A quote most remembered by Max is by Alexis de Tocqueville which says, “ I know of no country in which there is so little independence of mind and real freedom of discussion as in America.” This quote peaked his interest in American Law. He studied at the Cardiff Law School and he has also done a dissertation about American law. Max met Managing Partner Barry Resnick at the Law Europe International annual conference this year in Nantes, France. Barry learned of Max’s interest in American law and offered Max an internship at his firm. Vogt, Resnick and Sherak, LLP are pleased to have Max intern at our law firm.

(Continued on p.3) (Continued on p.4)

Ideally, a decedent should have a testamentary document that provides who would inherit his or her iTunes or Amazon.com account upon death and would ensure his or her personal representative has all of the necessary passwords. Ultimately, this would likely require transferring the account; however, this does not appear to be permissible according to the user agreements.

The iTunes Store Terms and Conditions provide that a user must not attempt to access an account that the user is not authorized to access, which seemingly implies that, by some means, a person, such as a beneficiary, could gain authoriza-tion to access another user’s account. One must be very careful in light of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, which appears broad enough to allow the government to charge a person with a crime for “exceeding authorized access” by violating a service provider’s user agreement.

If it is possible for a personal representative to gain authorization to access a decedent’s accounts, a will is not a suitable instrument to contain passwords or other critical information needed to access on-line accounts. The information could change before a new will can be executed, and wills become public information as they are lodged with a court. Trusts are more desirable because they do not become part of the public record.

The Uniform Law Commission has formed a committee to study issues related to digital assets and estate planning and to develop consistent laws regarding these issues. However, until such laws exist that provide a framework for the succession of digital assets, estate planning attorneys should recommend that their clients have a digital estate plan that begins with a comprehensive inventory of their digital assets. The plan should provide the decedent’s estate with some type of authority to administer the person’s digital accounts and files. Care must be given to each provider’s user agreement when giving account access to beneficiaries or agents because accessing another’s account may violate the law.

While it is true that technology has significantly changed our lives in the last thirty years, and will continue to change our lives in the future, technology has also left us with much uncertainty. We should not remain idle while waiting for ques-tions to be answered. Every individual should have a digital estate plan, stating what should happen to his or her digital assets upon death and designate a representative to carry out those wishes. Please contact Vogt, Resnick & Sherak, LLP if you have any questions regarding this topic.

SECTION 1031 & CALIFORNIA’S “CLAWBACK” STATUTEIf you own California real estate and are planning on deferring taxes when you sell your investment by purchasing property in another state using a 1031 Exchange, be aware that California will soon be tracking your future real estate transactions to determine if you owe California tax on a previously deferred exchange. Real estate investors have increasingly looked to minimize their exposure to the steep tax rates that the State of California has imposed on real estate transactions. Many investors have utilized Section 1031 exchanges to move their investments, tax deferred, out of California and into states with no state taxes or more favorable tax rates. Subsequently, at a future date the investors will sell these new “non-California” properties and recognize their profits in the low tax jurisdiction.

To address this perceived abuse the California Legislature recently passed AB 92 which added new Sections 18032 for individuals and 24953 for other entities to the California Tax & Revenue Code. These sections provide that taxpay-ers in a 1031 Exchange that sell California Property and purchase Non-California Replacement Property will be required to file an annual information return with the California Franchise Tax Board (“FTB”), reporting the exchange into Non-California property.

(Continued from p.2)

FALL 2013BUSINESS BRIEF

(Continued from p.1)

DOING BUSINESS IN FRANCE; THE KEYS OF SUCCESSFrance is the largest country in Western Europe with a broad maritime zone, and diverse landscapes. It is a top tourist destination on the planet, which more than 83 million people visit each year. France is also well-known for its history, culture and lifestyle. It’s a land so diverse that many see no reason to holiday abroad. Its cuisine and wine are celebrated throughout the world. France is the fifth largest exporter of goods, especially farm products, aircraft, chemicals, pharmaceuticals, and the fourth largest of services. The major imported goods are petroleum, crude oil, machinery and equipment. Once you get away from the established clichés, as the “baguette” and “béret”, France has great opportunities to do business.

France is a leading economic player in the world. With a GDP (Gross Domestic Product) of approximately $2.6 trillion, it is the world’s sixth-largest economy and the second in the European Union. The reasons to invest in France are many. Foreign investors say they are attracted to France by its advanced standard of research, the skills of French workers, the productive labor force, the level of high technology; the stable currency, the strong rail and road network and its central location in Europe. In addition, France’s Euro-pean Union membership and usage of the euro facilitate the easy movement of people, services, capital and goods.

Doing business in France is a stimulating and challenging issue. However, it requires that one be aware of the cultural differences and have an open-mind as to the approach of the etiquette and business practice. Public life in France is rather formal. This is manifested

in the language and manners. The formal means of communication and protocol can appear quite cold or unfriendly. Maybe, no other culture in Europe is so proud of their history and regards their culture and language as a symbol of itself. In addition, the French love and are passionate about food, so when you are doing business in France, lunch is the norm.

There is a clearer distinction between private life and business in France than in the United States. This means that you can expect a certain distance and formality with your French contacts. Hierarchy should be kept in mind when you approach a French company. Make sure that you get your message at the right level if you want to be understood. The French are most sensible to rational presentations and arguments that clearly highlight the issues and solutions. The French communication style is direct and based on discussion and debate. You will be judged on your ability to present your arguments coherently, with assurance and persuasion. Punctuality is a relaxed issue. Being fifteen minutes late is perfectly normal. When in meetings; remain formal most of the time. Avoid personal questions except if your host invites you. Do not appear over friendly as it can be embarrassing and suspicious.

The French market is complex and your entry should be well planned. To succeed, you need to know the market and invest in customer relationships. For your investment to pay off, you must keep your commitments and be patient before the investment begins to pay off. The French market has important opportunities and the business environment is favor-able for sales of U.S. goods and services.

Regarding all these factors, investing in France is undoubtedly an excellent choice. Don’t be afraid of investing in France! It is a very business-friendly environment and provide a gateway to Europe.

Prepare your future; choose France!

This article was written by Maxime Leoni. Max is a lawyer in training from Nantes, France, and has always been inter-ested in American law. A quote most remembered by Max is by Alexis de Tocqueville which says, “ I know of no country in which there is so little independence of mind and real freedom of discussion as in America.” This quote peaked his interest in American Law. He studied at the Cardiff Law School and he has also done a dissertation about American law. Max met Managing Partner Barry Resnick at the Law Europe International annual conference this year in Nantes, France. Barry learned of Max’s interest in American law and offered Max an internship at his firm. Vogt, Resnick and Sherak, LLP are pleased to have Max intern at our law firm.

(Continued on p.3) (Continued on p.4)

Ideally, a decedent should have a testamentary document that provides who would inherit his or her iTunes or Amazon.com account upon death and would ensure his or her personal representative has all of the necessary passwords. Ultimately, this would likely require transferring the account; however, this does not appear to be permissible according to the user agreements.

The iTunes Store Terms and Conditions provide that a user must not attempt to access an account that the user is not authorized to access, which seemingly implies that, by some means, a person, such as a beneficiary, could gain authoriza-tion to access another user’s account. One must be very careful in light of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, which appears broad enough to allow the government to charge a person with a crime for “exceeding authorized access” by violating a service provider’s user agreement.

If it is possible for a personal representative to gain authorization to access a decedent’s accounts, a will is not a suitable instrument to contain passwords or other critical information needed to access on-line accounts. The information could change before a new will can be executed, and wills become public information as they are lodged with a court. Trusts are more desirable because they do not become part of the public record.

The Uniform Law Commission has formed a committee to study issues related to digital assets and estate planning and to develop consistent laws regarding these issues. However, until such laws exist that provide a framework for the succession of digital assets, estate planning attorneys should recommend that their clients have a digital estate plan that begins with a comprehensive inventory of their digital assets. The plan should provide the decedent’s estate with some type of authority to administer the person’s digital accounts and files. Care must be given to each provider’s user agreement when giving account access to beneficiaries or agents because accessing another’s account may violate the law.

While it is true that technology has significantly changed our lives in the last thirty years, and will continue to change our lives in the future, technology has also left us with much uncertainty. We should not remain idle while waiting for ques-tions to be answered. Every individual should have a digital estate plan, stating what should happen to his or her digital assets upon death and designate a representative to carry out those wishes. Please contact Vogt, Resnick & Sherak, LLP if you have any questions regarding this topic.

SECTION 1031 & CALIFORNIA’S “CLAWBACK” STATUTEIf you own California real estate and are planning on deferring taxes when you sell your investment by purchasing property in another state using a 1031 Exchange, be aware that California will soon be tracking your future real estate transactions to determine if you owe California tax on a previously deferred exchange. Real estate investors have increasingly looked to minimize their exposure to the steep tax rates that the State of California has imposed on real estate transactions. Many investors have utilized Section 1031 exchanges to move their investments, tax deferred, out of California and into states with no state taxes or more favorable tax rates. Subsequently, at a future date the investors will sell these new “non-California” properties and recognize their profits in the low tax jurisdiction.

To address this perceived abuse the California Legislature recently passed AB 92 which added new Sections 18032 for individuals and 24953 for other entities to the California Tax & Revenue Code. These sections provide that taxpay-ers in a 1031 Exchange that sell California Property and purchase Non-California Replacement Property will be required to file an annual information return with the California Franchise Tax Board (“FTB”), reporting the exchange into Non-California property.

(Continued from p.2)

VOGT | RESNICK | SHERAK LLPATTORNEYS AT LAWBusiness Brief

FALL 2013

VOGT | RESNICK | SHERAK LLPATTORNEYS AT LAW

4400 MacARTHUR BOULEVARD, NINTH FLOORP.O. BOX 7849

NEWPORT BEACH, CALIFORNIA 92658-7849

Return Service Requested

FALL 2013Business Brief

(949) 851-9001 Facsimile (949) 833-3445www.vrslaw.netlaw@vrslaw.net

(Continued from p.3)

(Continued on p.2)

Under existing law the California taxes that were previously deferred will be due when and if taxpayers sell their new properties, wherever located, and elect to take their profits rather than continuing to defer taxes through another 1031Exchange. However, to encourage California tax compliance the addition of Sections 18032 and 24953 mandate that if taxpayers fail to file the newly required annual information return, the FTB is authorized to currently estimate net income “from any available information” and assess tax, interest and penalties due prior to any ultimate disposition of the property. The new law shall apply to exchanges of property that occur in taxable years beginning on or after January 1, 2014. CAN YOUR LOVED ONES INHERIT YOUR DIGITAL ASSETS?

Consider the number of songs people purchase and store in their iTunes libraries, the number of books people purchase and read on their NOOK e-books or Kindle e-books, or the number of cellphone apps people purchase. If you own 15,000 compact discs, have 15,000 hardcover books in your library or 100 board games, you may bequeath them to your loved ones. However, bequeathing digital songs, books and games purchased through iTunes and Kindle is very complicated, and it is unclear whether the law will allow it.

Your computers and other various technology, may affect how you bequeath your digital assets. For example, you may have personal and work e-mail accounts, or personal, family or business websites. You may also have impor-tant records and photographs stored in your computer, online with Facebook or other social media websites, or on hand-held devices.

Many service providers, such as Gmail, Flickr and Yahoo! have policies to close and delete an account after an account holder dies. Facebook puts a decedent’s profile in a state of “memorial,” which hides certain sections from view and prevents anyone from logging into the account. How can you leave any or all of these assets to your loved ones in light of the providers’ policies or lack thereof? If you want your personal representative to access those accounts and/or devices, how will he or she locate them or gain access? If you do not want your personal represen-tative to access those accounts and/or devices, can you prevent him or her from doing so? Planning is necessary in this digital age to address such issues.

Pursuant to the First-Sale Doctrine, codified in the Copyright Act of 1976, the owner of a particular book or com-pact disc is entitled to sell or otherwise dispose of it without the authority of the copyright owner. Thus, you can bequeath your hardcover books, vinyl records or compact discs to loved ones. However, the main issue with trans-ferring digital assets such as songs purchased through iTunes or Google Play Store, books purchased on Amazon.com’s Kindle e-books, and books purchased on Barnes & Noble’s NOOK e-books is that customers do not own the digital assets. Customers have restricted, non-transferable licenses to use the provider’s services as stated in each user agreement.

While the distribution of a decedent’s property is generally governed by state law, the law is relatively undeveloped in the area of digital assets. To date, Connecticut, Rhode Island, Indiana, Oklahoma and Idaho are the few states that have passed laws allowing personal representatives and relatives access to a decedent’s e-mail and social network-ing accounts. These laws, however, only apply to property a decedent owns. Since customers only hold licenses to use digital files, these state laws do not apply to digital files licensed to decedents.

Undeniably, the California Probate Code provides that physical objects, such as hand-held devices and computers will pass to the original owner’s descendants, unless provided otherwise in a testamentary document. Pursuant to Cal. Prob. Code § 62, “property” means anything that may be the subject of ownership, both real and personal, and Cal. Prob. Code §§ 240-241, 245-247 cover the passing of personal property by testate and intestate succession. Therefore, if your digital files are stored on your devices, and your estate’s representative or beneficiaries are capable of accessing the files, they will likely be able to use them until the devices fail, and the files are likely lost.

Vogt, Resnick & Sherak, is going green. Please let us know if you would like to receive our Business Brief by e-mail, please provide your e-mail address to jkovacs@vrslaw.net. Thank you for helping the environment.

VOGT, RESNICK, SHERAK RECEIVES AN EXCELLENCE IN EMPLOYMENT AWARD

On September 18, 2013, Henry Michaels of Elwyn California awarded Vogt, Resnick & Sherak LLP for a state-level Excellence in Employment Award given by the California Disability Services Association. Only 12 of these were awarded this year. Vogt, Resnick & Sherak LLP, thanks Elwyn California for recognizing its service to the disabled community of Orange County.