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Cypen & Cypen
JANUARY 20, 2005

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001


Many consider home equity as their “nest egg,” so U.S. personal savings have hit a record low of .2%. A large percentage of condominium buyers (40% in South Florida, for example) are obtaining mortgages for investment purposes. It’s no wonder, considering that in South Florida average home prices are rising by as much as 29% annually. By comparison, the benchmark Standard & Poor’s 500 Index has risen less than 10%. Experts hope the market is not overheating: there is a distinct possibility that America’s asset economy is in the midst of yet another bubble-induced blow-off. Obviously, an economic decline in these high-growth pockets might cause investors to dump properties, undermining local housing values. All these goodies come from Bloomberg News.


A working paper from the Center for Retirement Research at Boston College indicates that understanding expenditure patterns in later life is critical to assessing the retirement security of older Americans. Although previous studies have examined the determinants of retirement income/wealth and projected the level of resources that will likely be available to future cohorts of retirees, relatively little is known about consumption needs at older ages and how they vary across different subgroups of the population. Better information about how much income older Americans require to live comfortably in retirement is necessary before analysts can determine how well Social Security, employer-sponsored pensions, post-retirement earnings and private savings meet needs of the elderly population and before they can assess possible impact of potential Social Security reforms and economic well-being. Key findings include the following:

  • Typical married adults ages 65 and older devote 29% of their household expenditures to housing and another 20% to healthcare. For nonmarrieds, the numbers are, respectively, 39% and 16%.
  • Typical married adults ages 65 and older spend 84% of after-tax household income. Nonmarried adults spend 92% of after-tax income.
  • Eight per cent of married adults report after-tax incomes that fall short of the estimated basic-needs threshold, consisting of housing, healthcare, food and clothing.

The study used data from the Health and Retirement Study, including a recently released supplemental survey entitled The Consumption and Activities Mail Survey.


The City of Detroit sent a mailing to individuals concerning their income tax obligation. Unfortunately, the vendor hired by the City to print the mailings included the recipient’s Social Security number on the envelope. An individual filed suit against the City under the Privacy Act of 1974. After the City agreed to include disclosure notices in future requests for Social Security numbers, the Federal District Judge granted declaratory relief under the Privacy Act and dismissed all remaining claims. The individual appealed, contending he was entitled to money damages, attorneys’ fees and costs. The Court of Appeals held that the Privacy Act applies solely to federal agencies, that the individual failed to state a federal claim and that his complaint should have been dismissed in its entirety. Schmitt v. The City of Detroit, Case No. 03-1884 (U.S. 6th Cir., January 14, 2005). For your information, the subject section of the Privacy Act provides that any federal, state or local government agency which requests an individual to disclose his Social Security account number shall inform that individual whether that disclosure is mandatory or voluntary, and by what statutorial or other authority such number is solicited, and what uses will be made of it. A city may, for policy reasons, include disclosure notices when requesting Social Security numbers, but it is not required to do so under the Privacy Act.


Every year, Robert Doll, of Merrill Lynch, makes his “Ten Predictions” for the coming year regarding financial markets and the economy. As reported in, here they are for 2005:

  • Led by a slowdown in consumer spending, United States real Gross Domestic Product growth slows to less than 3.5%.
  • Every major economy in the world slows, but Asia continues to lead and Europe continues to lag.
  • Profits advance less than the 10% consensus forecast as surprises are no longer positive due to slowing demand and some margin pressure.
  • Interest rates continue to move higher as the “bear flattener” takes Fed funds to 3.5% and ten-year Treasury yields to 5%.
  • U.S. stocks struggle, but outperform bonds and cash for the third year in a row.
  • The average stock underperforms the averages for the first time since 1999 as large-cap and high-quality outperform small-cap and low-quality.
  • Strong balance sheet and high excess cash flow generation create an increase in mergers and acquisitions activity along with dividend increases, stock buy-backs and capital spending.
  • Commodities perform well again with oil prices averaging above $40 a barrel.
  • Optimism from Washington regarding passing of market-friendly legislation gives way to intra- and inter-party bickering.
  • While significant structural problems continue, the U.S. federal budget deficit, trade deficit and current-account deficit all improve for the first time in ten years.

And how did Mr. Doll do with his 2004 predictions? Not bad: 7 right, 2 wrong and 1 yet to be determined.


Bauer filed a voluntary bankruptcy petition under Chapter 7, claiming his Individual Retirement Account as exempt. However, the bankruptcy court denied the exemption. While the bankruptcy was pending, Bauer directed the custodian of his IRA to withhold and deposit with IRS for taxes a total of $33,440.00. The trustee in bankruptcy claimed that the transfer to IRS was property of the estate after commencement of the case, not authorized under Title 11 of the U.S. Code or by any order of the court and recoverable from IRS as the initial transferee. IRS argued that it was not the initial transferee but a subsequent transferee, which accepted the transfer for value, in good faith, and without knowledge that the transfer was voidable. In ruling for the trustee and against IRS, the Court held that IRS (as opposed to Bauer) was clearly the initial transferee, thus making moot whether IRS acted in good faith. In Re: Bauer, Case No. BKY02-30738 (Bankr. D. Minn., January 3, 2005).


Well, according to the Associated Press, it’s true. One founder of a group called Americans for Legal Reform, standing in a courthouse line, asked another founder: “How can you tell when a lawyer is lying.” Answering, another founder of the organization said: “His lips are moving.” A lawyer also in line was not amused. He reported the pair to court personnel, who charged them with disorderly conduct, a misdemeanor. Incidentally, Americans for Legal Reform monitors courts and uses confrontational tactics to push for greater access for the public. These two Henny Youngman-wannabes say that for years they have stood outside courthouses and mocked lawyers. We’re going to go out on a big limb here, and predict that the two will never be convicted for exercising their First Amendment right to free speech. One more thing, at press time, there was no word as to whether or not the two wags had retained defense counsel.

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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.

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