H.R. 3548 “Worker, Homeownership, and Business Assistance Act of 2009” Potential Problems with the Act

November 17, 2009

H.R. 3548 “Worker, Homeownership, and Business Assistance Act of 2009”

The “The Worker, Homeownership, and Business Assistance Act of 2009” has some strong economic pluses and some possible technical errors built into the Act. The Act as the title suggests will cover Unemployment Extension, Homeownership stimulation, Additional Military extensions for Homeownership Purchases, changes to the 5-year Carryback of Operating Losses, delay in worldwide allocation of interest, Penalties on S Corp for non-timely filing, Paid Preparers e-filing requirement, FUTA surtax, and increasing estimated payments amounts for Corporations.

Dramatic potential changes to the tax code are from section 13. 5-Year Carryback of Operating Losses.

Section 13(e)(4)(B) any application under section 641(a) of such Code with respect to such loss shall be treated as timely filed if filed before such due date.

The wording “filed before such due date” seems potentially to be awkward. If the requirement is to have this be filed before the due date then in reality the due date would be the day before the due date of the required filing. This wording should rather be stating “filed on or before such due date”. Yes the due date is in reality a specific minute of time which would be minute of the day of but I would have to read this like it actually reads and seeing the date and the work before would require a filing of the previous date so the return could be timely.

Another section which is questionable is in Section 17. Certain tax return preparers required to file returns electronically.

Section 17 (a)(3)(A). In general.- The Secretary shall require than any individual income tax return prepared by a tax return preparer be filed on magnetic media if-

Here in the above section you probably read the sentence and thought that I misspelled the word “than” which is not the case. This when reading the sentence looks like the word should read; “that” of which I have brought up to the attention of Congressman Reichert’s office and they did fax this also to Congressman McDermott’s office.

The above seem to be policy changes or grammatical changes. Another change which I see but I am questioning is the bill is silent as to the number of inclusions in a Purchase and Sale Agreement of Potential Properties which could be purchased. With Section 1031 exchanges the maximum number of properties which can be traded to is three. With 45 days to designate and three properties maximum in the Purchase and Sale Agreement to other properties and 180 days to close the Purchase this does make sense for a 1031 exchange policy. With business or investment property the utility value is in the tax-deferred exchange to other like-kind properties and the functionality of the property nor the utility value of the property may not be the end purpose. If trading a rental house for an apartment this makes sense. But trading from a rental house to a strip of farming land may not make sense except in the case of potentially missing the 1031 exchange dates. A farmer could constructive continue farming which another 1031 exchange for the property is completed. But to meet the deadline and the three year requirement a strict move from one property to another is mandatory. Where I really see the bill exploding on individuals is in the arena of being locked in to a specific property without the luxury of default on terms. Default on terms can come from the seller and the buyers side, real property line disputes, assessments, fires, casualty damages, earthquakes, real estate agent/broker disputes, permit delinquencies both present and past, non-timely completion of current construction new home developments and occupancy permits, mortgage bankers turn-downs, inspection refusals, and the list goes on and on. The bill does not leave the taxpayer an out based upon the “May 1, 2011” signing of the Purchase and Sale Agreement. This is further complicated by the closing due date of by “July 1, 2011”.

 

I can see from both of these due dates real estate brokers and agents will be required to sign two, three, four or five different Purchase and Sale Agreements with option to drop out by the Purchasers near the end of the dates in the Act. Will this treatment artificially inflate prices on the real estate market. I would say it definitely will and then after the due date the prices will drop. This is indeed a dangerous macro-economic phenomenon to put a country in and the mechanism for correcting this situation needs to be updated before any potential catastrophes’ happen due to this “Act”.

Frustration on the part of the taxpayer or at least who is self filing may come when mathematical errors are assessed for not providing the additional forms which are also being required with the current new “Act”. See Section 12. Provisions to enhance the Administration of the First-Time Homebuyer Tax Credit.

Section 12(d) (i-iii). Particularly focusing on (iii) the taxpayer fails to attach to the return the form described in section 36(d)(4). This should be the HUD document or similar document for indication of a real estate closing. A delay in supplying this document will further frustrate the taxpayer and potentially cause undue hardship on RAL (Refund Anticipation Loan) providers who could potentially be waiting too long for their reimbursements. This could also cause a restriction in the advance refund check from RAL Bank providers by their non-inclusion of refunds or discounting of the refund portion based upon the First-time Homebuyers Credit credit amount.

Other provisions of the Act may be noticed by others but these are the critical differences which I am seeing at the present time. Both taxpayers and tax preparers and software development preparers should try to address these issues while researching, talking about or programming for this next tax year.

END

 

 

 

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HR 3548 more than a Tax Credit of $6500.

November 15, 2009

HR 3548 more than a Tax Credit of $6500.

New home owners still have the chance to get that little pot of gold out there from Ucle Sam. The $8000 first-time home buyers credit will be extended until on or before June 30, 2010 with a Purchase and Sale Agreement in hand by April 30, 2010. You lucky dogs which can take advantage of this. However, if your home closes after November 30, 2009 do not expect to get a tax credit amended on your 2008 income tax return. You like everyone else will now have to wait until your 2009 income tax return is filed.

This might be good for taxpayers who in 2008 may not have qualified for the credit and been disappointed and not purchased a home. But the annual income limits have risen to $125,000 for individuals and for joint filers the amount has gone up to $225,000 for qualifying for the full credit. But another twist in your favor if you have a slightly higher income level is that the qualifying levels phase out completely at the individual in the $145,000 level and a couple the phase out level is at the $245,000 level.

So if you are above those levels individually but have a sweetheart get the matrymonial ceremony in place by the end of the year. Then again, maybe it might be better not to. Maybe the split level where one would qualify slightly and the other one would not qualify or maybe would qualify completely. You will have to do the math on this one. Or email me and maybe I could figure it out for you.

A one year extension for the military if you as a member of the Armed Services have served outside of the United state for a minimum of 90 days during the January 1, 2009 to May 1, 2010 period.

Include your HUD statement with your Form 1040 or 1040X amended return.

Sorry but you know must be 18 years of age to get this gig.

That second home or vacation home does not count. This must be your primary residence.

First time homebuyers may be eligible for an $8,000 refundable tax credit and other homebuyers who have lived in their current residence for five of the last eight years may qualify for a $6,500 refundable tax credit.

For other restrictions see H.R. 3548 The Worker, Hoemownership and Business Assistance Act of 2009.

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This new residence for former home owners credit may help in you getting what you need and what the economy needs far more than the first-time home ownership credit did.

Prior homeownership usually means you are stable and might have some cash to throw around. Need new drapes. No problem. New rug. No Problem. Check book has the money from the old house. etc. etc. What is really happening here is the government is trying to have you loosen your checking account to stimulate the economy and notably for the benefit of the construction and durable goods industry.

But I would like you to completely fool the IRS. Do buy improvements for your home but make sure they pass the energy star test. Keep in mind you have a limitation of $500 for some of the home improvements and a $1500 limitation on others. Higher limits for specialized solar power should be looked at. But do not dispare the limitations are annual and you can do another project in the next year for another $500 etc. You really should consult your accountant or tax advisor for more specific information on these improvements since they are as I call them “simplistically complex”. The energy star information for your stoves and refrigerators is given to the manufacturer but a credit is given for your heater if replaced and an energy star. The lowest cost is also the best. A tedious task of caulking around the siding gives immense returns. If affording new drapes is out of the question at least buy a caulking gun and “drape” your house to shut the heat from escaping and the heat from coming inside. Loosen up your house once in awhile by opening the doors though for circulation. You can get a tax credit besides for the cost of caulk. Your labor does not count.

The actual next best way would be to invest in some solar panels or some type of wind power. Check with your local taxing district and other authorities first. You may have to get a permit before installation or construction. Also check with your local utility. You may have to get a check from them for producing electricity for them. There are specific requirements which all utilities have and not following them would mean you may be missing out on your rebate check. For instance, you may have to buy a meter to help in determining how much is going back out onto the grid. Some utility companies may have different rates for different hours of the day and you will definitely want to take advantage of these as well. Do not forget to consider your state income tax as an additional credit source. All states vary on this issue. From none for most of the states without a state income tax for substantial amounts. Depending upon your income you may need to know if the credit is available for you as a refundable or is it a non-refundable credit. Also, if you are temporarily in a state or seasonally will you get the credit. All of these considerations are important. What you should not do is guess that you need this done and assume you will get a credit. It is a function of responsibility on your part to assess all aspects of the taxes concerning improvements and solar with your tax advisor before any purchases are made. It is really a “simplistically complex” credit.

END


Oil will be going up. Russia and China ticked off.

September 10, 2009

Russia and China have had it with the United States policies. 

Russian has had a United States Ambassador harassed and stolen from in the last few months.  The United States has not addressed any of these issue and will be retaliating by non-cooperation. 

The Tacoma Ambassador, Sir Bishop Bill Mount, Ph.D. had been ordered in the spring by the city of Tacoma to get rid of his 27 farm animals or to be fined.  He had four turkeys, chickens and rabbits on the farm.  The farm was established in Tacoma in the early twentieth century.  One of the young turkeys was also the ambassadors pet.  The Ambassador decided to not complain but cooperating with the local authorities.

In another earlier episode reports were that the ambassador Bishop Mount was swindle out of $150,000.  Proper notification prior to the theft was given to United States authorities and no action was taken.

In a more recent event a minor amount of goods was taken from the Ambassador. 

Bishop Mount has given notification through www.SCANTV.org local channel 77 on the internet and television show “All Day Live” which broadcasts @ 4:30 p.m. on Wednesday and 10 p.m. on Thursday since May.  Sir Mount has broadcast on such topics as nuclear bomb attacks on the United States by rogue forces inside of the United State in the last few months to patent ingredients of the H1N1 virus and the potential of 25% of the United States citizen dying from the vacation shots due to the ingredients to how Michael Jackson actually died which was from a Satellite attach from the United States from a stolen Russian satellite.

Russia according to Dr. Mount will be not enforcing or propping up the United States dollar any more as a retaliation for non-compliance in acceptable international standards during the Obama Administration.

In other non-related to Dr. Mount the National Park system confiscation pre-revolutionary war guns from a Canadian.  The Canadian flag flies over the Park during the daylight time.  The re-enactors were commemorating the Pig Wars of 1859 and the Park and Canadian flag have flown over the park since then.  A musket according to United States law is considered as a stick.  The alleged confiscation according to Sir Mount occurred because of alleged drug dealers in the park at 10 p.m. and 3 p.m. harassing the re-enactors.  This incident was also attended by Her Magesty Queen Elizabeth’s representative as well as Ambassador Mount and Canadian and United States re-enactment buffs.  

The result of the non-propping up of the dollar by Russia if necessary will drive down the dollar further than normal.  This will establish higher prices for oil futures and thus higher gasoline prices.  Russia does have a huge economy related to oil and is extremely beneficial on higher oil prices.  Although the other industrial and domestic industries will suffer I believe they are thinking that a rouge country is unstable and if they are to be dealt with must be dealt with in a fashion which shows hands off and in a hands off fashion which will also benefit themselves. 

Then China is unhappy about the continual borrowing of funds.  A low interest rate and the eventual prospect of a high inflation rate may curtail their local growth.  Unhappy about United States policy and non-cooperative fiscal policy China will continue to seek oil contracts with other countries to maintain stability and cohesion in their country.  They are also drawing back on including more United States debt in their portfolio.  The buying of United States debt at a low interest rate may not be enough of a return in the future when compared to the future inflation rate.  A more defensive poster on China’s part also seem to be in alignment with Russia’s overall views as well. 

You should be expecting higher inflation and a weaker dollar.  A weaker dollar stimulates higher oil prices do to the overall lower value of the dollar.  Then in the future the United States weaker dollar will stimulate durable goods sold to foreign countries including Russia and China and then the economy will start to recover.  Boeing will probably be the greatest achiever in this scenario.  They will be having stronger sales to countries and by the time the 787 comes out the economy should be starting to recover.  AirBus will be the weaker partner here due to their sales being dependent upon the strong dollar.  AirBus writes its contracts based upon U.S. currency including wages and jets.


CFA and Investment company moving to Seattle

June 19, 2009

CFA Seattle Chapter

Was informed by Seattle Mayor candidate, Elizabeth Campbell, that from the Seattle Times reporter the Current Seattle Mayor Nickells wants to pay Russell Investments from Tacoma to relocate to Seattle. The amount of $250,000 was mentioned. Time frame for this value of money was not indicated.

 I am an Enrolled Agent and also have a dormant CFP (due to not being able yet to get around to paying the yearly dues). I prepare income tax returns in Lynnwood, Washington. I did notice the CPE education framework which you have available and I should be taking advantage of this.

Anyways…

Elizabeth Campbell disagrees with the Mayor in giving $250,000 to Russell Investments. She believes that if they would like to move to Seattle they can.

She believes that reducing the cost of operations of government and not increasing them should be the objective of government.

In Seattle, employing the current domestic citizens and other legal immigrants should be the objective of a government. By making things more civilized for the current legal citizenry and residents she believes we can make an environment more conducive to other companies then deciding to move or to make their home base of operations inside of the City of Seattle. The incentives for one company to come to Seattle do not outways the needs and desires of the current residents and citizens.

Knowing that your membership for the Seattle Chapter is 600 members and your base of operations is in Seattle I would agree with Russell Investments that the Pacific Northwest’s financial infrastructure is indeed centered in Seattle and not centered in Tacoma. I believe that Russell Investments should relocate and would relocate on their own free will to Seattle if the cities infrastructure is better than Tacoma’s.

You, the CFA Society of Seattle, I believe, have worked hard and diligently to create a locate certified financial advisors community and society which rivals other national societies. I have also thus noticed that Tacoma does not have by itself a CFA society.

Please inform us if this is not incorrect.

 Are there any members in your chapter who are from Tacoma as well. What is the number of CFA members that work for Russell Investments. Is Russell Investments dislocated from the other society members and thus the strength in professional correspondence is not as readily available.

 I also noted that one of your former Presidents had $2 Billion in Assets under management and this could directly compete with potential employees and capital acquisitions from investors.

Again, Elizabeth Campbell believes that making a government more streamlined and an infrastructure more conducive to the citizenries needs as a whole is the correct and best way to achieve everyones goals and desires. An artificial catapult for one company could weaken the current accomplishments of the current citizens and residents.

I personally believe that this move from Tacoma to Seattle will only be an even swap of $s for all concerned and would not have any Economic Stimulus impact.  The definite non-gainer of economic activity would be the Port of Seattle.  From Tacoma and from Seattle the airfare travel will be equal.  No stimulus here.  The only advantage might be in Seattle’s use of the RTA train from Sea-Tac to downtown Seattle.  The use of Seattle’s downtown conference and hotel community would have an impact.  Seattle would be a better financial climate for Russell Investments but what would we get for $250,000 in exchange.  They probably would come here anyways.

 Please advise,

 Keith Ljunghammar, EA

 Elizabeth Campbell 4 Mayor, Treasurer


Credit Cards Unconstitutional

May 12, 2009

Credit cards today think they can arbitrarily without notice raise interest rates.  This they dowith no notice, no warning, and without recourse from the customer.  This is also true if no late payments have been made.

But I say this is unconstitutional.  If the constitution disallows the govenment to retroactively change a lawthen since the laws of contracts and the order are established by Congress then in the same manner individual contracts cannot be changed midstream.

No Bill or Attainder or ex post facto Law shall be passed.  Article 1, Section 9.

Putting into a contract that at a specific time the interest rates will increase or putting into a contract that the interest rate shall be adjusted as to according to a third party index is still a meeting of the mind.  But inputting that one of the parties can increase the interest rate so they can increase their profit bottom line in essence has no meeting of the minds at the time of the contract being signed nor could it be.

More on this possibly later.

END


The ECONOMY SPRINTS

May 2, 2009

Everyone sees or says there is a recession.  Quite frankly I do not see even a hint of a recession.  I only see a complete accounting debacle which when corrected the economy will be back on the fast track.  Yes, the fast track. 

When the government switched everything to a mark-to-market type of accounting system this instantaneously depressed the financial accounting books.  This is strickly an accounting maneouver and invariable accounting maneouvers correct themselves.  If they do not correct themselves then the CEO, CFO, or the COO will change assets around so the older lighter valued assets change to a more realistic value. 

If the correction in the valuations due to mark-to-market were instantaneoous then the downward push while the market is correcting will be miniscule.  Yes, that means small.  Consider this in a large capitalize stock and a small capitalized stock.  If you are a chartist like I am not you will understand that the resistance point at a specific level is harder to penetrate in a large capitalized stock then a smaller capitalize stock.  I believe part of the reason is due to product or market penetration and the aspects which many products from a single companywill show.  One thing which gets a market moving is the greater demand which one product gets.  The most recent example would be when the swine flu became apparent to everyone just this last week then a very specific and specialized company who had a product which possible could address the swine flu increased in value by 80% overnight.  This really should be of no surprise to anyone.  But if the same company were in a much larger company which might be on the big board and the product would be one of maybe 6000 product the stock may have increased 1% or 5%. 

The product is houses which depressed the United States economy.  Real Estate agents are getting busier.  Slowly the markets are moving.  The real estate market can act quickly and with a positive fever.  (Sorry but I could not resist.)  Buyers have been pent up and the idea of multiple bids on one house could push the markets higher in a very short period of time.  Quite a few houses which previously were on the market were taken off the market.  When the market starts to heat up then those former houses which are off the market may or may not be put back on the market.  If I am a seller then I want the highest price.  If I am mildly optimistic and not particularly motivated and the market gains by $10,000 in one month for the average home sale then my inclinations is to withhold the house until this would absolutely be necessary. 

If the problem is mark-to-market in real estate then really how does this affect business owners without real estate.  Now is the time to look at development and growth.  What you do not need to be caught in is trying to develop a new market when others also have the funds to develop.  Make your presence known and get that early share.  Real estate has its greatest sales in the month of April and this continues for the summer.  The weather brings out a positive extraction of money.  Go for it. 

As sales increase and from my above example they will grow dramatically then if you have not put in the appropriate groundwork then where can you harvest.  If some other company has already done the sewing and you are just planting you will miss out. 

Get to that convention.  Sign up for more contacts.  Press the issue.  I could fire up a sales crew.  Least costs but the greatest impact.  Remember that as your marketing becomes more indirect the costs per individual decrease.  But as your per individual contacts increase your sales are more current.  Weigh the possibilty of that current sale with how long it take to bring that lead to a sale.  TV or radio advertising may be your first step again.  Marketing mailers need to be sent out to help in regaining old accounts and pushing to get new ones. 

I remember my fathers approach to marketing.  He had a printing company and made a catalog of wedding invitation folders to stationery stores, print shops, department stores, flower shops, wedding gown retailers, etc.  Every time he presented a new catalog there was a 20% increase in sales.  He travelled around the region and talked with all of the shop owners.  Once he had an exclusive in a small town with one shop owner.  Another shop owner also wanted the wedding invitation book.  He reluctantly place a catalog their also.   Astonishingly the other store sales were the same and the new store eventually had about the same sales as the other store.  In essence sales doubled.  Cultivate, cultivate, cultivate.  This is what the theme needs to be for your sales people. 

After our competitor bought my dad’s company out they said they could not penetrate the market he had and then tried and tried hard.  So they just bought him out.  This was easier.   

Push the envelope.  Dig deeper.  Listen longer.  But of course, pray longer as well.

Work it and get the plants in the sod so when the weather turns and the water starts to fall you will see an over abundance of plants to harvest.

DO IT!!!


To buy a car or to wait to buy a car

March 13, 2009
To buy a car or to wait to buy a car

That definitely is the question.

This is concerning the American Recovery and Reinvestment Act of 2009 (ARRA) as related to the Deduction of Sales Tax on the Purchase of New Vehicles. I am getting my basic information from an email from my employer Larry R. French and Associates which they received from UltraTax CS an income tax program developers which we use at the office who received the information from Thomson Reuters under user bulletin 4351.

To my friends from http://www.coldron.us and all of the other taxpayers who live in Washington State and other states which do have a sales tax and not an income tax your strategy for buying a car is explained here. To the other taxpayers in states where they only have an income tax like Oregon and no sales tax only part of this blog may be of importance to you. I will explain your situation first.

Below is the wording which I am looking at:

“Deduction for Sales Tax on Purchase of New Vehicle – ARRA allows state and local sales and excise taxes paid on the purchase of a qualified motor vehicle as a deduction. A qualified vehicle must meet the following conditions:

* Purchased after February 17, 2009, and before january 1, 2010

* New not used

* May be passenger car, minivan, light truck, motorcycle, motor home

The Motor Vehicle Tax deduction is limited to a purchase price of $49,500 and is phased out beginning with modified adjusted gross income of $125,000 ($250,000 jointly filed returns). The deduction is allowed as an additional standard deduction when not itemizing on Schedule A and when not electing to deduct state and local sales taxes in lieu of state and local income taxes. The new Tax Projection Worksheet – American Recovery Act (ARRA) includes a worksheet for the Motor Vehicle Tax Deduction and new Screen TPW-3 contains a data entry section for motor vehicle purchase information.”

Concerning those in Oregon and other income tax only states.

Since the buying of a new car is concerning an inclusion of a sales tax amount and your state and a few others only have an income tax this part of the ARRA deduction of sales tax on the purchase of a new vehicle will not affect your federal income tax return. Your choice of purchasing a vehicle would be left to: 1) a new car with no sales tax deduction advantage as with other states who have a sales tax; 2) Buy a used car where the law of being able to deduct the sales tax does not affect any of the states because a used automobile is not an option under the new law for 2009; 3) Buy a car which still has an alternative hybrid tax creditor alternative fuel credit and also tax double advantage if your state include an additional credit so your personal income tax on the federal and state level can be reduced; 4) Wait to buy past the 2010 year a more efficient vehicle due to the announcement of the ion battery discovery/invention by MIT researchers to be able to recharge car batteries in the time it takes to fill up your tank. Thus innovation will make the road quiet and the environment cleaner. You may even think about investing in sources of electric production. Maybe even a windmill from your backyard for the production of your personal vehicle and home usage for recharging and home usage.

Concerning those living in Washington and other states with a sales tax.

Since the buying of a new car may allow you to include the sales tax as an income tax deduction or as an increase to your standard deduction you may need to consider the following items.

1) If you itemize you will be able to use the sales tax as an itemized deduction. But if your state also has an income tax return they you will also have to consider using your income tax withheld or paid to the state as an itemized deduction or the amount paid for sales taxes as a deductible amount. Using the large of the two is usually a behind the scene calculation which appropriately calculated software will automatically determine for you. So including the proper sales tax amount for the sales tax amount on the new automobile purchase will be necessary. The checking of a box or some other feature in the software to indicate a new car purchase will have to be implemented in all software. This then should be a simple process.

2) If instead of itemizing you use the standard deduction there are additional amounts which will increase the standard amount.

a) if you are blind a box needs to be checked.

b) If you are 65 years of age or older you will be getting an additional amount added to your standard deduction. This information is usually picked up by the software based upon your birthday input. So definitely make sure your input of your birthday and your spouse’s birthday is correct.

c) For 2008 and 2009 you will get an extra amount if you are not itemizing and you own real estate and are paying real estate taxes on your domicile. The amount is $500 and for married filing jointly couples this amount is raised to $1000.

d) Finally the amount of the sales tax paid for the state portion and the local portion will be included as an additional amount to be included for the standard deduction increase. In Washington State we also pay in some areas an RTA tax or Regional Transit Tax. The IRS previously when calculating the sales tax does not include the additional RTA amount or the excise tax associated with the continuing tax of a automobile which is paid every year. Sorry but I guess Congress does not want to have everything as being deductible. I did not see specifically any wording to this affect except the wording only to include the state and local sales tax. In previous instruction the IRS does not explain exceptions but only what can be included. If previous instructions have explained that the other taxes beyond local sales tax are not included then I would be assuming the IRS will not be included other sales tax amounts beyond the state and local sales tax basic amount.

And again even if you are able to include the sales tax with the standard deduction I really do question the potential frequency of the use of this provision. Individual income tax preparers who are using the standard deduction quite frequently without doing any research are buying used cars instead of new cars. The individuals who are itemizing would have higher incomes and thus a higher disposable income base and a better capacity to increase their deductions when it comes to purchasing a vehicle.

Another consideration for these individuals able to claim an itemized deduction would be to wait another year a purchase a vehicle which might be green or able to use with a plug-in electric power grid for recharging. The new dynamics of innovation are exploding and current decisions will help in deciding what will be a viable consumer product in a short period of time as well. Five years out in vehicle purchase time is probably about a half-life.

Happy auto purchasing in any situation. New, used or wait your pursuit of happiness is what strengthens our economy.

Then again, what happens if the price of oil goes up again in a crazy fashion.

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