Friday, April 19, 2019

Canopy Growth CEO bets pot users will pay more for its legal products than go back to street dealers

Canopy Growth CEO Bruce Linton is betting that marijuana consumers will be willing to shell out more cash for his company’s products now that they’re legal for recreational use in Canada, instead of going back to illegal street dealers.

‘Better’ will be a big argument,” Linton told CNBC’s Deirdre Bosa from a Canopy store in Newfoundland on Wednesday as Canada became the world’s largest country with a legal national marijuana marketplace. “People are going to start realizing that the product that they get from the illegal dealer comes from officially, nowhere.”

Linton, whose Canada-based pot firm’s partners include rapper Snoop Dogg and alcohol giant Constellation Brands, said unregulated marijuana products can come with risks, including being sprayed with unnecessary chemicals.

In August, U.S.-based Constellation upped its bet on the cannabis industry, announcing an additional $4 billion stake in Canopy. At the time, the maker of Corona and Modelo beers and top shelf liquors said it does not planning to sell cannabis drinkables in its home country before legalization happens everywhere.

As more governments legalize cannabis, Linton told CNBC earlier this month, cannabis-related products could disrupt $500 billion worth of existing industries, ranging from alcohol, cigarettes and pharmaceuticals.

Marijuana stocks have been booming in advance Canada’s legalization, with Canopy’s U.S. shares soaring more than 400 percent over the past 12 months. But share prices of Canopy and another high-flying Canadian pot company, Tilray, were down 3 and 6 percent, respectively, on Wednesday.






Thursday, April 18, 2019

Japan Still Beats China for Private Equity

Japan lost its position as the world’s second-biggest economy to China awhile ago. But it’s beating out its Asian rival in one area at least: private equity. For restructuring experts such as KKR & Co. LP, whose founders recently declared Japan the company’s “highest priority” outside the U.S., the smaller country offers much more attractive opportunities. And the reasons are as much political as financial. 
That might seem surprising, given that the Chinese market dwarfs Japan’s. (Private equity investment value in greater China, including domestic yuan funds, averaged $72 billion annually in the past five years, compared to just $9 billion in Japan.) The mainland features growth companies galore and easy exit opportunities through initial public offerings in Hong Kong, the U.S. and soon, for tech firms, Shanghai.
Private-equity companies from around the world have raised billions of dollars to invest in China, hoping to take advantage of its domestic consumption story and tech frenzy. Even KKR has bought into Chinese firms such as pork producer Cofco Meat Holdings Ltd. and personal-finance platform Shenzhen Suishou Technology Co. Ltd.
Yet several factors undercut China’s attractiveness. Typically, for instance, most targets aren’t as mature as those in Japan or the U.S.; they’re still in empire-building mode, so only minority stakes are available for purchase. Deals are in the range of a few hundred million dollars on average -- small potatoes compared to Bain’s $18 billion purchase a couple years of ago of Toshiba Corp.’s memory chip business. Valuations, too, are frothy. 
By contrast, as in the U.S., Japan’s dying conglomerates offer rich pickings. They house a slew of underloved or non-core assets: About a quarter of the companies on the Nikkei 400 have 100 or more subsidiaries apiece, and many have more than 300 divisions below the parent company.
There’s a real chance to create global leaders from these assets -- an opportunity that China’s domestic-focused private equity investors don’t enjoy. KKR, which has been in Japan since 2010 and invested in six carve-outs since then, has put this strategy to work with the healthcare business of Panasonic Corp., which it acquired in 2013. Since renamed PHC, the unit bought  Bayer AG's diabetes care unit and is in the midst of acquiring Thermo Fisher Scientific, Inc.’s pathology business. In 2016, KKR also bought auto-parts maker Calsonic Kansei Corp. from Nissan for $4.3 billion. The takeover target then bought Fiat Chrysler’s high-tech parts-making business last year. 
Equally important is the fact that the Japanese government now actively supports such buyouts, a big change from the insular boom years when private equity firms were decried as rapacious foreign raiders. There was remarkably little public backlash after Toshiba sold off its crown jewel, or when Nissan sold Calsonic. At least in part, that’s because Prime Minister Shinzo Abe has pushed for a greater focus on corporate governance and shareholder returns. That means slimming down unwieldy conglomerates and revamping management at underperforming companies. 
Foreign private equity firms can help do both, and then get these essentially mature businesses to expand globally. They can address another problem as well: Thousands of Japanese family-owned firms are facing potential succession crises as founders near retirement. That’s much less of a problem in China, where companies are newer. 
Investors clearly see opportunity. A study by Bain & Company found that private equity firms in Japan are willing to pay 9.7 times Ebitda in the form of enterprise value for their targets, while corporate acquirers and the stock market pay almost 25 percent less.

Boeing Nears Completion - Software Fix

Boeing Co. is working through the final steps before asking U.S. regulators to review an update for anti-stall software linked to two fatal 737 Max accidents, an early milestone to lifting a global grounding of its best-selling jet.


But there are many steps in the Federal Aviation Administration’sassessment of the proposed fix, and that process could stretch well into June even if there are no complications, said a person familiar with the matter. Boeing must also convince authorities from Beijing to Brussels that the plane is safe. Canada has already signaled it won’t follow an FAA panel’s recommendation against requiring additional simulator training for pilots.
Boeing has completed its engineering trial of the updated software, and its technical and engineering leaders were on board the final flight test earlier this week, Chief Executive Officer Dennis Muilenburg said in a video message late Wednesday. Up next is what he described as a “certification flight,” as Boeing prepares to submit the final paperwork to U.S. regulators.
For that flight, Boeing will hand over the controls of a 737 Max to FAA pilots to test design enhancements that the company says ensure the system won’t ever again overwhelm flight crews -- as it did in two crashes that killed a total of 346 people. The regulator will determine when the certification flight takes place.
“We’re making steady progress toward certification,” Muilenburg said, with a Max aircraft and Boeing Field, an airport south of Seattle, as backdrops. Earlier in the day, he had been a passenger on a demonstration flight, watching the final update to the so-called MCAS software “operating as designed across a range of flight conditions.”
Muilenburg has stepped up Boeing’s campaign to boost public confidence in the safety of the 737 Max, and the company’s airplane designs, after two of the jets crashed within five months. The Max, which debuted in May 2017, is the newest version of a single-aisle jetliner family that is Boeing’s biggest source of profit.
In all, Chicago-based Boeing has conducted 120 flights, spending 203 hours in the air testing the new system, Muilenburg said. The campaign has included a 737 Max 7 outfitted with flight-testing instrumentation, as well as aircraft that have rolled out of a Boeing factory south of Seattle with the updated software already installed.
The upgrade is designed to make the anti-stall system less aggressive and prevent the repeated nose-down commands that overwhelmed flight crews for Lion Air and Ethiopian Airlines. In addition, MCAS -- it stands for Maneuvering Characteristics Augmentation System -- would no longer be triggered by a single erroneous sensor reading.
Boeing’s ultimate goal is “to make the 737 Max one of the safest airplanes to ever fly,” Muilenburg said.

Tuesday, April 16, 2019

Three questions you may have after you file your return


Once your 2018 tax return has been successfully filed with the IRS, you may still have some questions. Here are brief answers to three questions that we’re frequently asked at this time of year.

Question #1: What tax records can I throw away now?
At a minimum, keep tax records related to your return for as long as the IRS can audit your return or assess additional taxes. In general, the statute of limitations is three years after you file your return. So you can generally get rid of most records related to tax returns for 2015 and earlier years. (If you filed an extension for your 2015 return, hold on to your records until at least three years from when you filed the extended return.)
However, the statute of limitations extends to six years for taxpayers who understate their gross income by more than 25%.
You’ll need to hang on to certain tax-related records longer. For example, keep the actual tax returns indefinitely, so you can prove to the IRS that you filed a legitimate return. (There’s no statute of limitations for an audit if you didn’t file a return or you filed a fraudulent one.)
When it comes to retirement accounts, keep records associated with them until you’ve depleted the account and reported the last withdrawal on your tax return, plus three (or six) years. And retain records related to real estate or investments for as long as you own the asset, plus at least three years after you sell it and report the sale on your tax return. (You can keep these records for six years if you want to be extra safe.)

Question #2: Where’s my refund?
The IRS has an online tool that can tell you the status of your refund. Go to irs.gov and click on “Refund Status” to find out about yours. You’ll need your Social Security number, filing status and the exact refund amount.

Question #3: Can I still collect a refund if I forgot to report something?
In general, you can file an amended tax return and claim a refund within three years after the date you filed your original return or within two years of the date you paid the tax, whichever is later. So for a 2018 tax return that you filed on April 15 of 2019, you can generally file an amended return until April 15, 2022.
However, there are a few opportunities when you have longer to file an amended return. For example, the statute of limitations for bad debts is longer than the usual three-year time limit for most items on your tax return. In general, you can amend your tax return to claim a bad debt for seven years from the due date of the tax return for the year that the debt became worthless.

We can help
Contact us if you have questions about tax record retention, your refund or filing an amended return. We’re available all year long — not just at tax filing time!
© 2019





Stocks Mixed as Earnings Diverge; Treasuries Slump: Markets Wrap


U.S. stocks were mixed as a group of high-profile earnings offered disparate clues on the strength of the American economy. The 10-year Treasury yield reached its Investors are spending the holiday-shortened week assessing the chances that stocks will sustain their rally even as similar gains in global investment-grade bonds have ebbed since late March. Optimism over earnings appears to be boosting bullish sentiment in equities, though volumes have been muted.
Central banks are also in the frame, with Chicago Fed President Charles Evans, who currently sees rates on hold until the fall of 2020, saying that the nation’s central bank may need to cut them if inflation falls. Officials from Australia, New Zealand and Japan also indicated appetite to support growth through monetary policy.
Elsewhere, oil held near the lowest in a week in New York on estimates that U.S. crude inventories increased again. Emerging-market stocks climbed, though the currencies weakened.
Here are some notable events coming up:
  • Earnings season rolls on this week, with reports due from: Morgan Stanley, American Express, Netflix, IBM, United Continental, PepsiCo, Honeywell, Alcoa and Taiwan Semiconductor.
  • Wednesday brings China GDP, industrial production and retail sales data.
  • Stock markets will be closed for the Good Friday holiday in countries including the U.S., U.K. and Germany.
These are the main moves in markets:

Stocks

  • The S&P 500 rose 0.1 percent to 2,908.21 as of 2:49 p.m. in New York.
  • The Dow was up 0.3 percent and the Nasdaq 100 Index climbed 0.4 percent.
  • The Stoxx Europe 600 Index increased 0.3 percent.
  • The MSCI Emerging Market Index rose 0.7 percent, the largest advance in two weeks.
  • The MSCI Asia Pacific Index climbed 0.3 percent to the highest in more than six months.

Currencies

  • The Bloomberg Dollar Spot Index increased 0.2 percent to the highest in more than a week.
  • The euro was little changed at $1.1290.
  • The British pound declined 0.3 percent to $1.3059.
  • The Japanese yen climbed 0.1 percent to 111.97 per dollar.

Bonds

  • The yield on 10-year Treasuries increased three basis points to 2.59 percent, the highest in four weeks.
  • Germany’s 10-year yield climbed one basis point to 0.066 percent, the highest in almost four weeks.

Commodities

  • West Texas Intermediate crude climbed 1.1 percent to $64.11 a barrel.
  • Gold futures fell 0.9 percent to $1,279.20 an ounce.
  • highest level since the March Federal Reserve meeting.

The S&P 500 held near a six-month high, while the Nasdaq 100 Index flirted with an all-time closing record. Financial firms paced gains after BlackRock Inc.’s results offset weakness at Bank of America Corp. UnitedHealth Group Inc. tumbled on renewed concern that future health-care policy will harm its business, while Johnson & Johnsonadvanced after strong earnings. JB Hunt Transport Services Inc. dragged trucking companies lower after its profit disappointed. Netflix reports after the close.
Treasuries continued to slump, with rates reclaiming levels last seen before the Fed’s dovish tilt a month ago. In Europe, equities climbed for a fifth day, driven by insurance and financial services firms. In Asia, shares in China and Hong Kong outperformed markets in Japan and South Korea. The euro pared a decline after Bloomberg reported that European Central Bank officials are said to lack enthusiasm for any revamp of their negative-interest rate tool.
“You’re seeing some fairly significant companies -- last Friday, JPMorgan, a few others here this week, BlackRock today -- a lot of these financials that had gotten pummeled this quarter seem to be doing pretty well in beating earnings.” said Wayne Wicker, CIO at Vantagepoint Investment Advisers, which has about $28 billion in assets under management as of the end of March. “It’s starting to give investors a little encouragement that maybe we have not breached the lower end of expectations.”

Wednesday, March 27, 2019

You can be audited for any reason

Most of us are aware that certain issues are more likely to give rise to an audit than others — and Laurie Kazenoff has seen them all.
A former senior attorney with Internal Revenue Service Chief Counsel and currently a partner at New York-based Moritt Hock & Hamroff LLP, Kazenoff said that the IRS consistently looks for a number of red flags on individual and business returns.
“You can be audited for any reason, but there are common areas that are on the IRS radar,” she said. “The higher your income, the more likely you are to be audited, but the most commonly audited areas are Schedule Cs because of the opportunity to fudge the numbers by understating income or inflating deductions such as home office or other expenses.”
“If the numbers are outside the norm, the computers will pick it up,” Kazenoff cautioned. “Most fields on a return are compared to averages, and outliers will be targeted. Large losses on both individual and business returns will be flagged. If you’re a going concern and have enormous losses, they want to know how you’re supporting yourself, or how you stay in business. If the numbers fall outside the national average, there’s a good chance of being picked up for an examination.”
Missing information is an area sure to trigger a notice, according to Kazenoff. “Many people don’t realize that the IRS matches every piece of third-party reporting with what taxpayers put on their return,” she said. “This includes interest income, dividend income, independent contractor income as well as W-2 income — the issuer is required to report it both to the taxpayer and the IRS. If the taxpayer fails to report the figures on their return — to the penny — the matching system will flag the return and they will receive a letter from the IRS.”
Not every industry is considered an equal risk, according to Kazenoff. “The service issues a list of industries they target, such as the mining industry," she said. “And there are businesses that have historically underreported income. Businesses where cash changes hands, such as restaurants and laundromats, are examples. But although gas stations deal in cash, they have an independent record-keeping system.”
The IRS also targets independent contractor situations, Kazenoff noted: “Are the workers really employees?”
Worker misclassification is an important issue for the IRS and various state taxing authorities because of the perception that many employers are not properly classifying their workers. By avoiding labeling their workers as employees, employers can avoid paying payroll taxes, minimum wages, overtime, health and retirement benefits, and paid leave.
“A lot of companies try to avoid payroll taxes, workers compensation and unemployment withholding,” she said. “They think they can get off the hook, but it’s an issue the IRS will pursue.” Although there is no bright-line test to judge whether a worker is an employee or an independent contractor, “[The IRS] will look to see if certain factors are present to determine if the worker is really an independent contractor,” she said.
Filing a large claim for a refund on an amended return will almost always cause an audit, according to Kazenoff. “They will wonder what you did wrong on the first return,” she said. “It will almost always be picked up.”
“If the original return failed to include an item of income, of course you will want to correct it on an amended return,” she said. “But filing an amended return that claims credits that you didn’t claim on the first return will open up the whole return to scrutiny, so you end up being audited on other things not originally at issue.”
This is particularly true where the amended return raises new issues, she indicated. “As an example, a return might be amended to claim R&D credits that weren’t on the original return. The IRS is likely to audit for that particular issue, but will open up the entire return for questioning,” she said.



You can be audited for any reason

Most of us are aware that certain issues are more likely to give rise to an audit than others — and Laurie Kazenoff has seen them all.
A former senior attorney with Internal Revenue Service Chief Counsel and currently a partner at New York-based Moritt Hock & Hamroff LLP, Kazenoff said that the IRS consistently looks for a number of red flags on individual and business returns.
“You can be audited for any reason, but there are common areas that are on the IRS radar,” she said. “The higher your income, the more likely you are to be audited, but the most commonly audited areas are Schedule Cs because of the opportunity to fudge the numbers by understating income or inflating deductions such as home office or other expenses.”
“If the numbers are outside the norm, the computers will pick it up,” Kazenoff cautioned. “Most fields on a return are compared to averages, and outliers will be targeted. Large losses on both individual and business returns will be flagged. If you’re a going concern and have enormous losses, they want to know how you’re supporting yourself, or how you stay in business. If the numbers fall outside the national average, there’s a good chance of being picked up for an examination.”
Missing information is an area sure to trigger a notice, according to Kazenoff. “Many people don’t realize that the IRS matches every piece of third-party reporting with what taxpayers put on their return,” she said. “This includes interest income, dividend income, independent contractor income as well as W-2 income — the issuer is required to report it both to the taxpayer and the IRS. If the taxpayer fails to report the figures on their return — to the penny — the matching system will flag the return and they will receive a letter from the IRS.”
Not every industry is considered an equal risk, according to Kazenoff. “The service issues a list of industries they target, such as the mining industry," she said. “And there are businesses that have historically underreported income. Businesses where cash changes hands, such as restaurants and laundromats, are examples. But although gas stations deal in cash, they have an independent record-keeping system.”
The IRS also targets independent contractor situations, Kazenoff noted: “Are the workers really employees?”
Worker misclassification is an important issue for the IRS and various state taxing authorities because of the perception that many employers are not properly classifying their workers. By avoiding labeling their workers as employees, employers can avoid paying payroll taxes, minimum wages, overtime, health and retirement benefits, and paid leave.
“A lot of companies try to avoid payroll taxes, workers compensation and unemployment withholding,” she said. “They think they can get off the hook, but it’s an issue the IRS will pursue.” Although there is no bright-line test to judge whether a worker is an employee or an independent contractor, “[The IRS] will look to see if certain factors are present to determine if the worker is really an independent contractor,” she said.
Filing a large claim for a refund on an amended return will almost always cause an audit, according to Kazenoff. “They will wonder what you did wrong on the first return,” she said. “It will almost always be picked up.”
“If the original return failed to include an item of income, of course you will want to correct it on an amended return,” she said. “But filing an amended return that claims credits that you didn’t claim on the first return will open up the whole return to scrutiny, so you end up being audited on other things not originally at issue.”
This is particularly true where the amended return raises new issues, she indicated. “As an example, a return might be amended to claim R&D credits that weren’t on the original return. The IRS is likely to audit for that particular issue, but will open up the entire return for questioning,” she said.