The Trail of Tracing and Transmutation

Kristen, a white woman with long brown curly hair, wears a bright blue blouse and is smiling. By Kristen Sherwood

Have you ever had a client ask, “What happens to my inheritance if I decide to separate from my spouse?”

“Is this my separate property?”

“What if I used this for [insert marital purpose here]?”

Clients come in with the often-googled buzzwords “comingling” and “conversion” and think that since these funds were used for a marital purpose or placed in a joint account, then surely, they have been converted to marital funds[1]. However, the buzzword you should introduce your clients to is “tracing.”

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The 2023 Legislative Review CLE Program: Stay Informed and Excel in Your Practice!

Amy, a white woman with blond hair, wears a red and black flowered blouse and a black jacket.By Amy Fitzhugh

Join us on Thursday, November 9, 2023, for an informative and comprehensive event at the Bar Center in Cary. This program, planned by the NCBA Administrative Law Section, offers a deep dive into legislative updates and key legal topics that are essential for administrative and governmental lawyers. Offering 6.00 MCLE hours, including 1.00 Ethics/Professional Responsibility credit hour and 1.00 Technology Training credit hour, this program is an invaluable opportunity to enhance your legal knowledge.

What to Expect:

Legislative Update (9:00-10:00 a.m.): Get insights from leading lawyers as they review legislation from the 2023 Long Session, discussing its impact on administrative and governmental law. Gain a forecast of what to expect in the 2024 Session.

Ethics-AI and Hot Topics (10:10-11:10 a.m.): Discover the latest CLE requirements and important ethics decisions and requirements, including AI. Stay updated on essential information for navigating the current practice of law.

Employment Issues (11:20-12:20 p.m.): This session covers crucial employment-related topics that are relevant to administrative and governmental lawyers.

Rules Review Update (1:20-2:20 p.m.): Learn about recent changes in rules, especially those related to rulemaking, and how they impact your practice.

Local Government Lawyering (2:30-3:30 p.m.): Ideal for both new and seasoned attorneys, this session covers various topics relevant to local government law practice.

IT Presentation (3:40-4:40 p.m.): In today’s world, lawyers must understand and manage IT programs. This session equips you with the knowledge to meet IT challenges effectively.

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Federal Income Tax Update: Part 4

Keith, a white man with brown hair, wears wire-rimmed glasses, a white shirt and black jacket.By Keith A. Wood

I. Termination of S Corporation Status was Inadvertent where Shares were Owned by an IRA.

In PLR 202319003, the IRS again demonstrated its willingness to grant amnesty to inadvertent S corporation terminations. The IRS waived an S termination where shares were issued to an IRA.  The corporation elected to be an S corporation, but the election was invalid because one of its shareholders was an IRA. Apparently, when the S election was filed, the officers of the S corporation and the owner of the IRA did not know an IRA is not an eligible S corporation shareholder.

After the corporation learned the IRA was an ineligible shareholder, the stock was transferred from the IRA to its owner. The IRS waived the inadvertent termination and permitted the S corporation’s status as of its original incorporation date. However, as a condition of the favorable PLR, for all open years in which the S corporation had positive income, the IRA owner had to be treated as the shareholder for all purposes.  Also, for any open years in which the corporation had a net loss, the IRA had to be treated as the owner of the stock.

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Family Law Intensive Seminar: November 2023

Barbara, a woman with short brown hair, wears a white button-down shirt and dark blue blazer.By Barbara Morgenstern

To the best of my recollection, the first Family Law Intensive Seminar was held approximately 25 years ago. It was the brainchild of a Rocky Mount family law attorney named J. Edgar Moore. I believe the first seminar was limited to 50 people and to family law specialists or lawyers who had practiced primarily family law for at least seven years.

It was only offered once. As the seminar became more popular over the years (and more lawyers became specialists), we expanded the seminar to two presentations and expanded the attendance to 85 lawyers and to lawyers who have practiced primarily family law for eight years or more. The idea for the seminar was to provide an advanced program with limited attendance to encourage a lot of dialogue between the speakers and attendees.  The Bar Association decided to offer the seminar every other year for advanced practitioners and to provide what was originally called the “Basics of Family Law” in alternate years for new lawyers and paralegals.

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Checking In: October 24, 2023

New Attorney Joins The Law Offices of James Scott Farrin 

Hannah, a white woman with dark brown hair, wears a white blouse, black jacket, and round maroon glasses.

Hannah Lee Hubbard will practice with the litigation team. She has previous experience serving as a judicial law clerk to former Senior Associate Justice Michael R. Morgan of the Supreme Court of North Carolina. She holds a J.D., cum laude, from Harvard Law School, where she served as president and defense team lead of the Street Justice Coalition and article editor and content editor for the Harvard Journal of Law and Gender. While in law school, she also served as the president of the Consumer Protection Law Students Association and the community partnerships co-chair of Lambda. She graduated magna cum laude from Wellesley College, where she received a B.A. in economics.

Waldrep Wall Babcock & Bailey PLLC Announces New Associate

Josh, a white man with a shaved head and a brown beard, wears a white button-down shirt. Josh Plummer has joined the firm’s Corporate Law Team. Plummer, who was a 2022 summer associate at the firm, is a 2023 graduate of Wake Forest University School of Law, where he served as both a teaching assistant and research assistant. He also was a participant in the Veteran’s Legal Clinic. Before attending law school, Plummer served in the United States Marine Corps and retired as a major in 2019. During his service, he was an intelligence, infantry and reconnaissance officer. He led two academic faculties and served as a liaison with U.S. embassy officials.

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Summer Experiences: Advice for the 1L

Theresa, a white woman with dark brown hair, wears a black blouse and pale grey jacket.Kerry, a white woman with brown hair, wears an ivory blouse and navy jacket.Zannah, a white woman with brown hair, wears a white shirt and black suit.By Theresa DiCenzo, Kerry Sullivan and Zannah Tyndall

As a first-year law student, it is understandable to feel overwhelmed about securing the “perfect” internship or externship for your first summer. There is so much pressure to get valuable experience and boost your resume. However, it’s important to keep things in perspective. The reality is any legal experience you gain as a 1L will provide learning opportunities and help you develop as an attorney-in-training.

1. Don’t be worried about getting the perfect or most prestigious experience.

Rather than obsessing over landing a prestigious big law internship, keep an open mind about the range of options available. Smaller firms, government agencies, nonprofit legal aid organizations, and even judges’ chambers welcome 1L interns. The day-to-day work may vary, but every position will allow you to gain exposure to the legal field, build your network, improve research and writing skills, and clarify your own interests.

It’s understandable to have high hopes, but don’t beat yourself up if you don’t obtain your top choice right out of the gate. Don’t let the process overwhelm your studies. The most valuable experiences are often unexpected. Over time, you’ll determine what areas interest you the most and what work settings suit you the best. Every position will teach you something useful for the future. The key is to stay open-minded, and don’t worry about checking boxes. Focus on pursuing genuine learning experiences, building skills, and identifying the career paths that excite you. The “perfect” job often comes from unexpected beginnings.

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Summer Experiences: Advice for the 1L

Theresa, a white woman with dark brown hair, wears a black blouse and pale grey jacket.Kerry, a white woman with brown hair, wears an ivory blouse and navy jacket.Zannah, a white woman with brown hair, wears a white shirt and black suit.By Theresa DiCenzo, Kerry Sullivan and Zannah Tyndall

As a first-year law student, it is understandable to feel overwhelmed about securing the “perfect” internship or externship for your first summer. There is so much pressure to get valuable experience and boost your resume. However, it’s important to keep things in perspective. The reality is any legal experience you gain as a 1L will provide learning opportunities and help you develop as an attorney-in-training.

1. Don’t be worried about getting the perfect or most prestigious experience.

Rather than obsessing over landing a prestigious big law internship, keep an open mind about the range of options available. Smaller firms, government agencies, nonprofit legal aid organizations, and even judges’ chambers welcome 1L interns. The day-to-day work may vary, but every position will allow you to gain exposure to the legal field, build your network, improve research and writing skills, and clarify your own interests.

It’s understandable to have high hopes, but don’t beat yourself up if you don’t obtain your top choice right out of the gate. Don’t let the process overwhelm your studies. The most valuable experiences are often unexpected. Over time, you’ll determine what areas interest you the most and what work settings suit you the best. Every position will teach you something useful for the future. The key is to stay open-minded, and don’t worry about checking boxes. Focus on pursuing genuine learning experiences, building skills, and identifying the career paths that excite you. The “perfect” job often comes from unexpected beginnings.

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Empower Pro Bono

Elysia, a woman with auburn hair and brown eyes, wears a white shirt and blue and white jacket.By Elysia Prendergast-Jones

Attorneys hold a unique power to transform the lives of many. It is often funny how lawyers are one of the top hated professions, yet most people will need an attorney at least once in their lives. We have an opportunity to show the softer and more caring side of attorneys through the power of pro bono. You can use your superpower to give back this month. Help me to empower those who simply cannot afford to ask a question that would be simple to us as attorneys. Many people are making the choice between food and bills, so attorney fees are out of their budget. This is something we can do to help empower those who need us the most.

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Recharacterizing Gain on the Sale of Depreciable Property Between Related Parties

John, a white man with brown hair and blue eyes, wears a blue jacket, white shirt, and blue tie. By John G. Hodnette

Section 1239 provides gain on the sale or exchange of certain depreciable property between related taxpayers is taxed at ordinary income rates rather than the more typical capital gain or unrecaptured 1250 gain rates. Section 1239 applies to property that, in the hands of the transferee, is subject to depreciation under Section 167. It includes depreciable real property as well as depreciable intangibles. Section 1239 discourages related taxpayers from taking advantage of the tax arbitrage between depreciation deductions that can offset ordinary income and more favorable capital gains rates that might otherwise be available on the sale of such depreciable property. Without Section 1239, related taxpayers might continuously sell or exchange depreciable property to repeatedly depreciate the property. Section 1239 removes that tax arbitrage strategy.

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Almendarez Nominated for the North Carolina State Bar Board of Paralegal Certification Vacancy

By the Paralegal Division Council

The Paralegal Division nominates Shawana W. Almendarez, NCCP, for consideration for the North Carolina State Bar Board of Paralegal Certification vacancy. Shawana is committed to the paralegal profession, the legal community, and the general public. Shawana has been a paralegal for 23 years. She has held her North Carolina State Bar Paralegal Certification for 18 years and North Carolina Notary Public Commission for 23 years.

Shawana, a woman with black hair, wears a teal shirt and bright green jacket.

Shawana W. Almendarez

She continues to promote the utilization of paralegals and continued legal education of paralegals through her service to the NCBA Paralegal Division, its Communities, and advocacy work. She serves as a proctor for the North Carolina State Bar’s Paralegal Certification exam when needed. She served the North Carolina Bar Association as the Paralegal Division liaison for the Legal Regulatory Reform Task Force in 2016.

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