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Commentary and Analysis Regarding Colorado Law

Pass Through to Savings- a new deduction in the "Tax Cuts and Jobs Act"

Anton Dworak

There is a significant new tax deduction taking effect in 2018 under the new tax law, the Tax Cuts and Jobs Act (the Act). It should provide a substantial tax benefit to individuals with “qualified business income” from a partnership, S corporation, LLC, or sole proprietorship. This income is sometimes referred to as “pass-through” income.

The deduction is generally equal to 20% of your “qualified business income” (QBI) from a partnership, S corporation, or sole proprietorship, defined as the net amount of items of income, gain, deduction, and loss with respect to your trade or business. The business must be conducted within the U.S. to qualify, and specified investment-related items are not included, e.g., capital gains or losses, dividends, and interest income (unless the interest is properly allocable to the business). The trade or business of being an employee does not qualify. Also, QBI does not include reasonable compensation received from an S corporation, or a guaranteed payment received from a partnership for services provided to a partnership's business.

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Back from Russia

RNL

Dick Lyons (third from left) was one of 40 U.S. observers who joined 400 other international observers for the March 18 Russian presidential election.  After two days of training and briefing in Moscow by the O.S.C.E., Dick and his international  team from Armenia and Finland were flown further east to observe polling, counting, and tabulation procedures in rural areas outside of Perm, Russia near the Ural Mountains where they endured three days of bitter cold, wind, and snow.  The adverse weather did not deter the turnout!

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Water for Daffodils and Dreams

Madoline Wallace Gross

When daffodils pop up, so do the “for sale” signs on the ranch and mountain properties.  Whether you are buying your forever property or your just-for-now property, be sure to conduct water rights due diligence.   Water rights are complicated, and you need to protect your investment with the following steps.

Initially, ponder “What do I want to do with the property?”  Do you want a sprawling mansion or a quaint cabin?  Do you want a luscious lawn and a fish pond?  Have you always wanted horses and chickens? 

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Lyons Gaddis is a proud sponsor for Team Left Hand Bike MS

Team Left Hand Bike MS

June 23-24, 2018

http://ow.ly/f46i30iOMpq

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Firm News Archive

2018 BOCO Paralegals Valentine cards 004
50yrmembers 4 003
RNL award optimized
Thomas Beckmann
Valentine's Day ProjectThe Paralegal Section of the Boulder County Bar participated in sending out hand written valentines to Boulder County seniors living in nursing homes.  We would like to thank Ginny Hout, Kyna Glover, and Jessica Grover for sending out 80 valentines our behalf of Lyons Gaddis.

50 year Boulder Bar Members                                                                                                                                                                                                   Wally H. Grant was recognized as one of three bar members in attendance at the BCBA lunch meeting with CBA president and Supreme Court Justice Marquez that have practiced law for 50 years.  Congratulations Wally!

SPECIAL DISTRICT ASSOCIATION OF COLORADO CONFERENCE 2017 (SDA)Richard Lyons, II, Adele Reester, Cathy Tallerico, and John Chmil will be speaking at SDA this year. Ms. Reester is on a panel to discuss: Consolidation of Fire Services: A study in Collaboration. Mr. Lyons and Mr. Chmil will be speaking on the legal challenges special districts face when setting fees and offering advice on how special districts can avoid its fees being invalidated as unconstitutional exactions. 

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Oil and Gas Notifications in Colorado Real Estate Contracts

Suzan Fritchel

Colorado real estate practitioners have seen the addition of oil and gas notification provisions in the real estate approved forms for the purchase and sale of real property.  In bold face type, the buyer is warned that the surface estate may be owned separately from the underlying mineral estate and that the purchase of the surface may not include the minerals.  The buyer is further advised so that there may be a surface use agreement in place, that there may be oil and gas activity on the property or on adjacent property and that it is advisable to seek out additional information from the COGCC.  As of January 1, 2016, these disclosures were mandated by statute to be part of all residential purchase and sale contracts, i.e., not only in those approved by the Colorado Real Estate Commission.  For recommended language, see:  http://codes.findlaw.com/co/title-38-property-real-and-personal/co-rev-st-sect-38-35-7-108.html

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Individual Tax Cuts

Anton Dworak

TCJA – take it away!   Highlights and lowlights of the new tax act.

The recently enacted Tax Cuts and Jobs Act (TCJA) is a sweeping tax package. Here's a look at some of the more important elements of the new law that have an impact on individuals. Unless otherwise noted, the changes are effective for tax years beginning in 2018 through 2025.

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Use it or Lose it

Godbehere Kara small

“Use it or lose it” is often colloquially used to describe the prior appropriation doctrine for water rights in Colorado.  Nowhere is that phrase more accurate than when it comes to the decennial abandonment list.  CRS § 37-92-401(1)(a) requires the Division Engineer to maintain a tabulation of water rights and priorities in their Water Division, but also to “prepare decennially, no later than July 1, 1990, and each tenth anniversary thereafter, a separate abandonment list comprising all absolute water rights that he or she has determined to have been abandoned in whole or in part and that previously have not been adjudged to have been abandoned.”  The next issuance of this decennial abandonment list will happen in 2020, and there are some important considerations of which water users should be aware before that list is issued.

Water rights can be abandoned in whole or in part.  The Division Engineers office may physically inspect diversion structures and/or diversion records, if kept, to determine if water rights have actively been used over the past ten years.  They may be placed on the abandonment list if they haven’t been used at all, but also if they have only been used in amounts less than the decreed amount. In addition to non-use, the water right owner must intend to abandon the right.  See CRS § 37-92-103(2), also Beaver Park Water, Inc. v. City of Victor, 649 P.2d 300 (Colo. 1982). This is a very important element to note in the abandonment process, as the burden is on the water right owner to show they did not have an intent to abandon, if they wish to have their water rights removed from the list. Pursuant to CRS § 37-92-103(5)(a), any water right owner who wishes to protest inclusion of their water rights on the abandonment list must file a protest no later than “June 30, 1992, or the respective tenth anniversary thereafter” (so for the upcoming 2020 abandonment list, no later than June 30, 2022).  The forms for protesting inclusion of water rights on the abandonment list can be found here: https://www.courts.state.co.us/Forms/Forms_List.cfm?Form_Type_ID=10. 

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Did 2017 Tax Code Changes Eliminate 1031 Exchanges of Ditch Stock?

1031 exhange

Since the passage of the 2007 Farm Bill, buyers and sellers of certain water rights have enjoyed the ability to use tax deferred exchanges under Section 1031 of the Internal Revenue Code.  Recent changes to the tax code, however, deleted any reference to mutual ditch or irrigation company stock from the definintion of qualifying “like kind property.”  None the less, the IRS will still allow exchanges involving ditch stock provided that your state’s laws consider such stock as real property.

Following the passage of the 2007 Farm Bill, Internal Revenue Code §1031(i) specifically provided that mutual ditch or irrigation company stock could be used for a tax deferred like kind exchange for real property used in a trade or business or held for investment purposes. As a result, the gain from the sale of eligible mutual ditch company stock could be deferred if the other requirements of §1031 were met.  Eligible stock was defined as any stock in a mutual ditch, reservoir, or irrigation company, as described in Code § 501(c)(12)(A). That section required at least 85% of the revenue into the company be from member assessments.

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Is it your ethics, or your office management?

Tim O Neil 01

For most attorneys, their law school training readied them to counsel clients, draft legal documents, and litigate disputes; it may not have prepared them as well for the practical reality of running a business. At some point in our careers, however, most of us have to come to grips with the nuts and bolts of managing a law practice, especially those of us who are sole practitioners or members of small firms. While running your own business may not have been what drove you to the profession, being thoughtful and skillful about how you manage your law office is critical not only to your financial success, but the ethics of your practice.

The Colorado Rules of Professional Conduct, which govern the ethical and professional conduct of lawyers in the state, may not specify exactly how one must run their law office (although, with respect to certain matters, like what bank accounts to have for your business, they do), many times lawyers find themselves answering to the Office of Attorney Regulation Counsel (OARC) regarding issues that arise from what are primarily office management problems. A lawyer who is remiss in viewing their office management practices through the lens of professional responsibility under the Rules might be unwittingly setting an ethical trap for herself in the future. The time demands of attending to client needs must be balanced with time demands of managing your practice.

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The Harvey Weinstein Syndrome - Every Company's Needed Response

20171226 Blog

The allegations of abuse have been staggering. The numbers of abused victims are astounding. Are these problems limited to the film and television industries?

Ask any working woman, and the answer to that question is no. Although this is the 21st Century, sexual harassment is still prevalent in many of our work places.

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Planes, Trains and Automobiles (and Dirt) . . . all eligible for a tax deferred 1031 exchange (maybe)

Planes Trains and Automobiles

This photo, which I think is a marketing promo of a happy tax payer and his 1031 Exchange Accommodator, lists three types of property that might lose 1031 exchange protection under the tax bill making its way through the Senate and House chambers this week.  As noted in Retail Real Estate Law, the recent Senate-House compromise removed personal property from like-kind treatment under Section 1031 of the Internal Revenue Code.  So, today, you could complete a 1031 exchange with your plane, your train or even your automobile (provided that you adhere to the strict requirements established in Section 1031 and its associated regulations) but that may not be the case following approval of the revisions to the Tax Code in the coming weeks. 

For most of us, real estate is the like-kind property with which we deal on a regular basis.  That appears to be unaffected by the current tax bill.  Whether or not we lose the ability to exchange personal property, it seems that a refresher on 1031 exchanges is in order. 

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May He Rest in Peace; now give me his football tickets!

Cameron Grant

Frank Lumpkin Jr. loved Georgia football.  As the story goes, one Saturday (over 50 years ago) Mr. Lumpkin walked through downtown Columbus, Georgia with his infant son.  He came upon an Auburn fan and the two ultimately came to blows, with Lumpkin clutching his son’s bassinet in his left hand while he swung at the Auburn fan with his right.

Mr. Lumpkin looked out for his two loves that day – his son and his Georgia Bulldogs.  Unfortunately, he later forgot to take care of his kids when he failed to mention his Georgia football season tickets in his will.  Now, his son, Frank Lumpkin, III, and his daughter, Julia Lumpkin, are embroiled in litigation over their parents’ estate, with ownership of the Georgia tickets as a major sticking point. 

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Water Butts

Eve Canfield
Water Butt

According to http://www.treehugger.com, the UK calls rain barrels “water butts”. I was suspicious, but when I “Googled” water butts, a whole list of sites for rain barrels came up, so yes, rain barrels are really called water butts in the UK. The reason for this article is that until recently, rain barrels were illegal in Colorado. In Wisconsin where I grew up, my grandmother had rain barrels and used the water for flower boxes and also to wash her hair. She said it made her hair soft and slowed down the process of going gray. As I remember her now, she could have been right.

The Colorado Division of Water Resources website tells us that the State of Colorado claims the right to all rain that falls within the state. That is why rain barrels were illegal in Colorado until August 10, 2016. Practically speaking, there was concern that the collection of rain water would have an adverse effect on owners of senior water rights by taking too much water out of the natural water cycle. In 2009, there was Senate Bill 09-080, which allowed the use of rain barrels in limited circumstances, but it wasn’t until this year that the use of rain barrels or “rooftop precipitation collection” systems were made legal for most of homeowners in Colorado.

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Brevity is the Soul of Wit

Chad Kupper

As a litigator, it’s not often that I see a judge begin a District Court order by quoting Shakespeare; but reading the introduction in the Court's Order in Sinclar v. Larson gave me the sneaking suspicion that this judge was about to make an example out of someone. This is not my case (thankfully), nevertheless, soon after the judge issued the order it found its way to my office, and I’m sure countless other attorneys’ offices - not to express a concept of law, but to emphasize an often-overlooked principle of legal writing: Brevity.

In the case, Sinclair’s attorney, who filed multiple briefs exceeding the 10-page limit without asking permission first, provoked Judge Taylor to take extreme action in striking 5 of Sinclair’s pending briefs. On the eve of trial, I can only imagine the impact of this order, which undoubtedly sent shivers down the spine of Sinclair’s lawyer. The order surely resulted in wasted attorney’s fees and court costs, and ultimately an unhappy client; and all because Sinclair’s briefs were not brief.

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Election Spending and Local Government

Adele Reester

Many local governments have determined within the past few weeks to send a ballot issue or question to their voters in the November 2016 election.  This act of setting the ballot language for the issue or question triggers the application of the Colorado Fair Campaign Practices Act (“FCPA”) (§ 1-45-117, C.R.S.)  For the local governments, this means that they are expressly prohibited from expending public funds to support/oppose any candidate for public office and any ballot issue before the voters.  This include a prohibition on contributions of public funds and contributions of “in kind” public services.

However, the FCPA does permit the expenditure of public funds/resources and the use of public employees' time/resources only for the printing of a factual balanced and fair summary which includes arguments both for and against a proposal on any issue of official concern before an electorate.  The summary cannot urge a vote in a particular manner (“VOTE YES”).  It should be noted that unless the matter is referred to your voters by your board, it is not of “official concern” and therefore funds could not be used to prepare arguments for or against a statewide ballot issues.  Of further note is that this is in addition to the TABOR comments which are received from the public in support or opposition to a tax measure.

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Cameron Grant Elected Managing Shareholder

Lyons Gaddis is pleased to announce that Cameron A. Grant has been elected as the firms’ new Managing Shareholder, effective July 1, 2016.  Mr. Grant succeeds Anton V. Dworak, who served as Managing Shareholder for 8 years, and joins his colleague, Catherine A. Tallerico, on the firm’s Management Committee.  During Mr. Dworak’s tenure he oversaw the expansion of the firm’s services, the opening of a Louisville office and the construction of an addition to the firm’s Longmont offices.

Mr. Grant returned to the firm three years ago.  Prior to rejoining Lyons Gaddis, Mr. Grant served as Managing Partner of Grant, Grant & Goiran and of Donelson, Ciancio and Grant, where he built his regional practice focusing on real estate development, transactions and business matters.  His real estate work involves the representation of real estate developers, investors, contractors and owners in connection with the acquisition, development and management of real estate projects, including residential subdivisions, condominiums, master-planned communities and office buildings. Cameron’s business work involves transactions of all sizes, including joint ventures, business structure and strategy, and general corporate counseling.

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TICK-TOCK


TIME FOR EMPLOYER’S TO REVIEW “USE IT OR LOSE IT” VACATION POLICIES

Submitted by Catherine Tallerico.On January 1, 2015, a new Colorado Wage Protection Act (“Act”) went into effect, expanding wage claims under the Colorado Wage Act.  The Act gives the Colorado Department of Labor & Employment, Division of Labor (DOL) new enforcement authority to adjudicate complaints for unpaid wages, including earned vacation time.  The DOL’s authority to adjudicate vacation pay claims arises from the Wage Act’s definition of “wages” to include “vacation pay earned in accordance with the terms of an agreement.” Additionally, “if an employer provides paid vacation for an employee, the employer shall pay upon separation from employment all vacation pay earned and determinable in accordance with the terms of any agreement between the employer and the employee.” Colo. Rev. Stat. § 8-4-101.

Last summer, the DOL made statements indicating an intent to find “use it or lose it” vacation policies in violation of the Act.  Such statement would have constituted a change in the DOL’s prior position in which it had permitted such policies so long as the risk of forfeiture was clearly set forth in an agreement.

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Blizzard? What Blizzard?


Our enterprising (and athletic) attorneys find a variety of ways to keep working despite the major snowstorm to hit the Colorado front range this week.  Some work from home, others test their snow tires, but a brave and healthy few turn the storm into the first official Lyons Gaddis Ski to Work Day.

Photo and snowbound fun courtesy of Madoline Wallace-Gross and Matthew Machado.

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What to Do After You Win POWERBALL!


Cameron Grant

So, Now You Are a Winner?

Submitted by Cameron Grant.

Do not deny it.  You have already thought through (at least briefly) what you would do if you won the estimated $1,500,000,000 PowerBall jackpot.  Yes, that is $1.5 BILLION.  Would you start by buying yourself some new toys?  That Ferrari?  A new house?  Heck, how about an island?  My eldest son is currently working on college scholarship applications and I let him know that if I win PowerBall he can tear up those essays because I will simply buy him Georgetown University.  But, seriously, what should you do if you win?  In his post on the subject, Texas Tech law professor Gerry W. Beyer offers some practical suggestions for What To Do After Winning the Lottery.  Professor Beyer recommends the following:

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515 Kimbark Street, Second Floor
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Phone: 303-776-9900 
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