EMAIL DETAILS

Mel,
I spoke with Eric this afternoon. I do not believe the return will be filed today, so we can determine more accurately what deductions Rick claimed.

For example, Hunter ends up with a positive capital account at the end of the year of $162k and Jim negative $148k. (So Jim can not use $148k of the $524k loss allocated to him; no debt coverage for basis.) Hunter is credited with $327k of capital contributions; Jim only $16k.

It appears that Rick is deducting the payments Hunter made (and already deducted for Lotito). I recall Rick and I discussed that he would report the money flowing through the entity and then going out on the First Washington payments, but he would report it more as a "paying agent." I am not sure we discussed both types of payments: the guarantee to the bank and Lotito. Either way, it is probably fine with the entity deducting both types of payments, provided Hunter knows if he needs to amend his other return.

However, Hunter is not getting the benefit of the payments he is making. (And since Jim does not have basis, he can not claim the benefit of the payments either.)
The only way his $162k positive capital account will be utilized is if Jim makes 100% of the contribution for future expenses and 50% is allocated to Hunter (in the amount of $300k or so).

Also, as I understand the business deal, Hunter should be entitled to 100% of the deduction.
So I think it may be best to go back to the paying agent concept, and not have the entity deduct. Hunter is making those payment for his business reputation.

mb


________________________________
From: Mary Elizabeth M. Browder
Sent: Friday, June 03, 2011 11:50 AM
To: 'Rick Rowland'
Cc: 'Sara Biden'; 'Hunter Biden'; Eric Schwerin; 'Jim Biden'
Subject: FW: BG Equity

Rick,
Sara asked us to review the tax return.
We agree on the timing of the worthless deduction. Paradigm was certainly winding down and worthless by 2009.

However, if these deductions include anything Hunter is deducting through his other entity, he needs to know that to avoid deducting something two times. He'll need to amend his other return.

Thanks,
mb


Mary Elizabeth M. Browder
Monzack Mersky McLaughlin and Browder, P.A.
1201 North Orange Street
Suite 400
Wilmington, DE 19801
Phone: (302) 656-8162
Fax: (302) 656-2769
mbrowder@monlaw.com

________________________________
From: Melvyn I. Monzack
Sent: Thursday, May 26, 2011 3:29 PM
To: Mary Elizabeth M. Browder
Subject: FW: BG Equity


Melvyn I. Monzack
Monzack Mersky McLaughlin and Browder, P.A.
1201 North Orange Street
Suite 400
Wilmington, Delaware 19801
Phone: (302) 656-8162
Fax: (302) 656-2769
E-mail: mmonzack@monlaw.com<mailto:mmonzack@monlaw.com>

IRS Circular 230 Notice: Unless otherwise specifically stated, U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication (or in any attachment).


________________________________
From: Sara Biden [mailto:sbiden@lionhallgp.com]
Sent: Thursday, May 26, 2011 3:26 PM
To: Schwerin Eric; Biden Hunter; Melvyn I. Monzack
Subject: Fwd: BG Equity

Yeah! Pls review so we can finalize.

Sent from my iPhone

Begin forwarded message:

From: Rick Rowland <rowland@rowlandjohnson.com<mailto:rowland@rowlandjohnson.com>>
Date: May 26, 2011 3:11:53 PM EDT
To: Sara Biden <sbiden@lionhallgp.com<mailto:sbiden@lionhallgp.com>>
Subject: BG Equity

Attached you will find a draft of the tax return.
The highlights are as follows:

1. The deductible partnership loss comes from the BGPC and Paradigm Companies K-1's.

2. We have treated the Lotito settlement payments as current business deductions.

3. We have written off the remainder of the investment in BGPC based on the tax research that Mary Beth did.
The return is delinquent, so I'd like to get group feedback as soon as possible.
Please be sure to have Hunter and his advisors double check addresses. The ones contained in the draft are those used in the 2008 filing.
Rick
Richard D. Rowland
Rowland, Johnson & Company, P.A.
2 Read's Way, Suite 100
New Castle, DE 19720
(302)324-0780
Fax (302)324-0783
Pursuant to the requirements of IRS Circular 230, any U.S. tax advice contained in the body of this e-mail is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state and local tax law provisions