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Alimony and Tax deadline for 2018!

The Tax and Job Cuts Act of 2017 permanently repealed the tax deduction for alimony paid under a divorce instrument signed on or after January 1, 2019. The repeal affects the alimony tax deduction currently available to the alimony payor under Internal Revenue Code § 215 and the inclusion of alimony as taxable income to the recipient under § 71. Unlike many of the other provisions affecting individual income taxation under this tax reform act, the repeal of the alimony deduction does not expire in 2025. This means that spousal support, post-separation support or alimony. paid under a divorce instrument (court order or contract/agreement) signed on or before December 31, 2018, will continue to be tax-deductible if all of the § 71 requirements are met.

To take advantage of the tax deduction for alimony, supporting spouses need to schedule a court date before December 31, 2018 to finalize post-separation support and/or alimony. Individuals planning to marry will also need to finalize a contract such as a Prenuptial or Antenptial Agreement with their potential spouse. For separated spouses, a Separation Agreement or Reunification Agreement also needs to be finalized by December 31, 2018. If you are a supporting spouse, either court ordered to pay spousal support or contracted to provide such support, you would receive a tax incentive, or deduction, in the years in which spousal support is payable. Your accountant or tax professional can educate you on how to take advantage of such tax incentives for 2018 before they are repealed. A skilled, experienced family law attorney can provide relevant legal advice regarding the obligation to pay or entitlement to spousal support and how taxes can affect your bargaining power or legal arguments to a Court. Contact a board certified specialist in family law today!

Adoption Credits and Taxes in 2018

The Tax and Job Cuts Act of 2017 threatened adoption credits for families adopting after January 1, 2018. The good news is the non-refundable baseline adoption credit is still valid for 2018 and has increased to $13,840. A tax professional can advise you on the income restrictions, if you have adopted within the last five years and other specific information related to your situation. Only a skilled attorney with experience in Adoption law can assist you in finalizing the legal status for a potentially adoptive minor child. Ashley Michael has over 10 years of experience in all types of adoptions such as stepparent adoptions, relative adoptions, ICWA adoptions (Indian child), interstate adoptions (ICPC), same-sex marriage adoptions, adult adoptions, foreign adoptions or readoptions, and contested litigation.

If you follow the media buzz surrounding the Royal Family and were excited about the wedding and the fairy tale of US celebrity meets British royalty, one thing you won’t find in the tabloids or the Washington Post is that Harry and Meghan have a prenup. The stance from Kensington Palace is prenupts are for celebrities, not royals like the Duke and Duchess of Sussex.

Prenuptial Agreements are not commonplace in the United Kingdom but prenups are on the rise in the US. CNBC reported in 2016 that prenuptials are on the rise with millennials andthat overall prenupts have increased fivefold in the past 20 years.

Why are prenups on the rise in the US and virtually nonexistent in the UK? Mainly because prenuptial contracts cannot be legally enforced in UK courts. Why is this important to non-celebrities and non-royals like me an you? In North Carolina, US citizens are able to contract prior to marriage as to all financial matters, including spousal support/alimony in the event of a separation or later divorce. Prenups can prevent lengthy court battles when the parties separate.

But isn’t a prenup a preface of a marriage destined not to last. No, if the wedding bliss does not last then a prenup is a key document, especially with the rising rate of divorce.

If you are not part of the Royal family and do not reside in the UK, then planning for a wedding may include not only picking out the cake flavor, but also making business-like decisions such as: how to divide the 401(k), how to manage household spending, who keeps the beach house previously deeded to a spouse from a family member, and how to divvy up the wedding china and gun collection in the event of a split. This discussion and a prenup may even save a marriage since potential spouses will discuss how to prepare for their joint financial future Also, you might have a prenupt and not even know it; a napkin with “ideas” about the once impending marriage which can be supported by law later upon separation may act as a prenup! Unless you are a member of the Royal Family, consider a Prenuptial Agreement written and signed by both parties before a notary. Be sure and consult a skilled family law attorney who can provide relevant legal advice to your specific situation and can also educate you on planning for your marriage and joint financial future!

In 2003, the North Carolina Legislature extended alternative dispute resolution for divorce by providing Collaborative Law as a legal substitute to the adversarial court system model.  Since that time, separating/divorcing spouses and/or parents of minor children may choose collaboration instead of fighting in a courtroom. With a Collaborative Divorce, the parties take matters into their own hands and work together to reach decisions rather than depending on courtrooms and Judges to reach verdicts about their future.

The Collaborative Divorce Process

Collaborative Divorce attorneys and other specialists (financial and mental health) are trained in a paradigm shift of non-adversarial and interest-based negotiation.  Parties sit down together with their attorneys and engage in cooperative decision-making.  Each person signs a legal contract (pledge) which provides a safe space and time to settle their legal matters without court involvement while also preserving any statutory time frames. 

Each spouse has their own collaborative law trained attorney and the 4 individuals meet together in a series of sessions to shape the process.  The legal needs, budget and time concerns of each party are discussed in a series of sessions that work towards a collaborative resolution and identify the matters in dispute.  For example, the parties may reach an immediate agreement regarding the children’s schedules, certain  financial needs, or what professionals they need to assist them, be  it financial advisors, appraisers, counselors, etc.  They might need additional data or need to brainstorm a specific topic in order to reach compromise or final result.  The communication leads to a comprehensive Separation Agreement which contain provisions that fit the parties, their children, and/or their businesses’ needs, not just what family law statutes dictate or a Judge’s discretion ultimately provides. 

Benefits of Collaborative Divorce

With Collaborative Divorce, the parties retain more control over their case outcome and can reduce legal fees and costs than litigation. 

Collaborative law uses “positive” communication strategies.  For example, interest-based negotiation emphasizes the explanation of “why” an individual wants what they are requesting instead of just focusing on an immovable hard line “position.”  The attorneys and parties shared communication creates synergy and more effective problem solving as they are in the same room to collect, discuss, and understand information from their marriage.  Clients may also benefit by learning communication skills that help divorced couples maintain or create a future of peace and consistency for their families.  During the collaborative process, the attorneys are the guides, educators and facilitators along the way.  Each party retains attorney-client privilege and confidential time to receive legal education, strategize and finalize decision-making outside of sessions with the other spouse and their attorney.

Collaborative Law Attorneys Can Help

A spouse facing a divorce, separation or family dispute should consider speaking with a trained Collaborative Divorce attorney who will analyze all legal paths to identify what shall best meet the needs for the party before filing a lawsuit. 

Ashley Michael is a founding member of Coastal Collaborative Colleagues (CCC), the only collaborative divorce practice group in Eastern North Carolina.  CCC is a non-profit organization established with the North Carolina Secretary of State in 2012 consisting of attorney, mental health and financial specialist members.  Learn more about Collaborative Divorce at www.coastalcollaborativedivorce.com

Ashley Michael is a Board Certified Specialist in the area of Family Law.  She is 1 of 3 practicing attorneys in New Hanover County to hold this distinction and 1 of 254* family law specialists state-wide, out of more than 20,000 licensed attorneys in North Carolina.  (*data as of February 2018)

What are the different types of Adoption?:

  • Direct placement
  • Relative
  • Adult and Incompetency
  • Stepparent
  • International/Foreign/Readoption
  • Agency
  • (ICPC) Interstate

(including same-sex couples if validly married; ICWA matters)

  • Termination of Parental Rights (to clear the path to Adoption)

Ashley Michael is one of few attorneys in Eastern North Carolina who has significant experience in  Artificial Reproduction Technology (ART) Litigation, Prebirth Orders, Name changes, and Gestational Carrier/Surrogacy Agreements.

Working with an Attorney during Adoption

Not all Family law attorneys provide Adoption services.  It is important to locate an attorney knowledgeable and skilled in North Carolina’s Adoption laws to assist you during this exciting and sensitive time in your family’s journey.

Ashley has built strong and consistent relationships with local courts, hospitals, Department of Social Services-Adoption and CPS divisions, and medical providers in New Hanover, Pender, Brunswick and Onslow counties.  Families in the adoption process should expect a prepared, experienced attorney and effective communication in order to meet the goals of a successful adoption and physical transfer of the adoptee. If you have questions about adoption services, please give Ashley a call at (910) 815-0085.

 

Ashley Michael is a Board Certified Specialist in the area of Family Law.  She is 1 of 3 practicing attorneys in New Hanover County to hold this distinction and 1 of 254* family law specialists state-wide, out of more than 20,000 licensed attorneys in North Carolina.  (*data as of February 2018)

Wills & Estate Administration

When a loved one dies leaving a Will, the question of who will administer the Estate is usually contained in the document. Letters of Testamentary are granted to the person named as the Executor in the Will. If the named Executor or named successor Executor is unable or unwilling to serve and no successor executor is named, the Court will follow the order of priority for qualification utilized for intestate Decedent’s estates. An intestate estate is the legal term for individuals who die leaving no Will. The order of priority for who will serve when there is no named Executor willing or able to serve or when there is no will is set forth in North Carolina General Statute § 28A-4- 1(b).

N.C.G.S. § 28A-4- 1(b) provides a prioritized list, subject to the Clerk’s discretion and what is best for the Estate, of who shall be granted Letters of Administration:


a. surviving spouse;
b. any devisee of the testator;
c. any heir of the Decedent;
d. any next of kin of the Decedent, with a person who is of a closer kinship under N.C.G.S.
§ 104A-1 having priority;
e. any creditor of the Decedent;
f. any person of good character residing in the county who applies for Letters; then
g. any other person of good character who is not disqualified to serve as personal
representative under N.C.G.S. § 28A-4- 2.

Who Cannot Be Named an Executor of a Will

There are some circumstances when the person named in the Will as the Executor or the person listed above is not authorized to serve as a matter of law. Specifically, N.C.G.S § 28A-4- 2 sets forth a list of persons who would not be able to qualify as a personal representative. No person is qualified to serve as personal representative who:


1. Is under 18 years of age;
2. Has been adjudged incompetent in a formal proceeding and remains under such
disability;
3. Is a convicted felon and whose citizenship has not been restored;
4. Is a nonresident of North Carolina and has not appointed a resident process agent;
5. Is a corporation not authorized to act as a personal representative in North Carolina;
6. Has lost that person’s rights as provided by N.C.G.S. §31A;
7. Is illiterate;
8. Is a person that the Clerk of Court finds otherwise unsuitable; or
9. Is a person who has renounced their right.

Estate Planning Attorneys Can Help Name Executors of Wills

Administering an Estate can involve a significant amount of work. Individuals named as an Executor in a Will should seek legal counsel prior to attempting to qualify. A meeting with an attorney who routinely practices estate administration will assist a named Executor in understanding, prior to qualification, what type of administration will be necessary and the steps required to complete the administration of the Estate. If you have any questions about estate administration or need help naming an Executor to your will, we would be glad to help. Just give us a call at (910) 815-0085 to set up a consultation with our expert Estate Planning attorneys here in Wilmington, NC.

Why can’t I paint my house green, pink, or yellow: Architectural Restrictions in a Community Association

A common complaint among those unhappy with their community association, or disdainful of community associations in general, often sounds something like: “I don’t want to be told what color to paint my house or what kind of shed I can build in my backyard.” Putting aside the discussion of the pros and cons of community associations, the obstinate homeowner raises some important questions regarding the definition of architectural restrictions, the basis of the architectural review committee’s authority, and the architectural review committee’s options for enforcing its guidelines and decisions.

What Are Architectural Restrictions?

Architectural restrictions are guidelines, standards, or rules that set forth requirements for the size, color, location, and materials of construction and improvements within the neighborhood. Such restrictions serve the purpose of maintaining aesthetic quality and conformity within the community, and of increasing the value of the homes in the community. They are usually promulgated by the developer, the board of directors, or a committee of directors of association.

Where Do Architectural Committees Attain Power and What Rules Must They Follow?

Most often, the board of directors of the planned community will appoint the architectural review committee. The declaration of covenants or the bylaws of the planned community usually provide this power. If the governing documents do not state otherwise, the board of directors may appoint itself as the architectural committee. As with any committee in a community association, the architectural review committee must follow the rules set out in the governing documents as well as the requirements of the Planned Community Act (N.C.G.S. §47F) and the Nonprofit Corporation Act (N.C.G.S. §55A).

How Are Architectural Committees Appointed?

The community association’s governing documents should set forth whether the board of directors has the ability to appoint architectural committees and, if so, the process for appointing such committees. If the governing documents to not set out a procedure for appointing committees, and do not disallow committees, the creation of a committee and appointment of members to it shall be approved by the greater of (1) a majority of all the directors in office when the action is taken, or (2) the number of directors required by the governing documents to take action in a meeting. N.C.G.S. § 55A-8- 25. The association may wish to contact its attorney to ensure the architectural review committee was properly appointed.

How are Violations Enforced?

The most common method of enforcing the architectural restrictions is to impose fines for violations, or to suspend privileges such as access to association amenities. Before imposing any fines or suspending privileges, in most cases the association must provide the homeowner with notice of its intent to impose fines and allow the homeowner an opportunity to be heard to challenge the decision to impose the fines. N.C.G.S. § 47F- 3-107.1. If imposing fines and/or suspending privileges does not compel the homeowner to remedy the violation, the association may consider seeking injunctive relief. Getting the court to require a homeowner to comply with the architectural guidelines or the architectural review committee’s decision requires filing a complaint with the superior court of the county in which the property is located, serving the homeowner with the complaint, and holding a hearing before a superior court judge. It may be wise to contact your association’s attorney to review the governing documents and architectural review guidelines to evaluate enforcement options.

An Easement Crosses My Property – What Are My Responsibilities?

Robert Frost knows that “good fences make good neighbors.” If anything makes a bad neighbor, other than a bad fence, it is a bad easement. Easements can be a significant source of contention among neighbors, causing ill will, hostility, and sometimes costly litigation. Among the issues that may arise between the dominant estate holder (the person whose property is benefited by the easement) and the servient estate holder (the person whose property is burdened by the easement) are questions regarding who must maintain the easement area, what activities are allowed under the easement, and how to enforce each party’s rights under the easement.

Responsibility to Maintain the Easement

The North Carolina Supreme Court has held that the dominant estate holder is responsible for maintaining the easement area. Green v. Duke Power Co., 305 N.C. 603 (N.C. 1982). Unless language in the easement provides otherwise, the servient estate holder has no obligation to maintain the easement area. Id. As a result, "if the character of the easement is such that a failure to keep it in repair will result in injury to the servient estate or to third persons, the owner of the easement will be liable in damages for the injury so caused." Id.

Overburdening the Easement

To determine whether the dominant estate holder is exceeding the rights under the easement, the servient estate holder should look first to the language granting the easement. If the language is unclear (as often will be the case when a dispute arises), then the analysis may turn to the intent of the parties who created the easement. It therefore may be necessary to evaluate the circumstances that existed at the time the easement was created. Depending on the language of the easement and the circumstances existing at the time the easement was created, uses not expressly allowed could be found to be in violation of the servient estate holder’s rights. See Swaim v. Simpson, 120 N.C. App. 863, 463 S.E.2d 785 (1995) and Moore v. Leveris, 128 N.C. App, 276, 495 S.E.2d 153 (1998). In other cases, the seemingly expanded use may be deemed permissible. See Chestnut Branch, LLC v. Public Interest Projects, Inc. (COA04-1406, 2006 N.C. App.). In any case, determining the dominant or servient estate holder’s rights under the easement will require a careful review of the granting language, the surrounding circumstances, and the relevant case law.

Enforcement of Easement Rights

What do you do if the easement holder is overburdening or failing to maintain the easement? A court can issue a mandatory injunction, requiring the easement holder to take certain action (such as maintaining the easement by clearing the easement area), or a prohibitory injunction, requiring the easement holder to refrain from certain action (such as using a utility easement for vehicular access). The same remedies may be available to the dominant estate holder if the servient estate holder is obstructing access to the easement. Obtaining a mandatory or prohibitory injunction against another party requires filing a complaint in the county in which the property is located and holding a hearing before a superior court judge. At the hearing, the judge has the option to impose damages in favor of the aggrieved party. The damages could be calculated to cover compensation for injuries suffered as a result of the violation or the difference in value of the easement before and after the violation.

Bylaws

What are Bylaws? Bylaws outline the organizational structure of the corporation. B. They tell shareholders, directors, and officers the how, the what, the who, and the when in terms of how a corporation functions. Directors, officers, and shareholders should look to the bylaws for guidance on their roles and on how the corporation functions as a legal entity. When forming a North Carolina corporation, the first step is to draft and file articles of incorporation with the NC Secretary of State. “Corporate existence begins when the articles of incorporation become effective.” N.C.G.S. § 55-2- 03(a).

Bylaws, though, are not typically filed with the Secretary of State. This can lead some incorporators to assume that bylaws are not necessary to conduct business as a corporation. Indeed, there is North Carolina case law suggesting that the absence of bylaws will not necessarily invalidate the corporation. Conversely, the North Carolina Business Corporation Act (the “Act”) provides that “the incorporators or board of directors of a corporation shall adopt initial bylaws for the corporation.” N.C.G.S. § 55-2- 06(a). The Act further provides that, after incorporation, either the initial directors or the incorporator shall hold an organizational meeting to, among other things, adopt the bylaws. N.C.G.S. § 55-2- 05. It is therefore highly advisable for a corporation to adopt bylaws.

Should We Adopt Bylaws

North Carolina corporations should adopt bylaws not only because of the aforementioned provisions of the Act, but also because of the organizational clarity and procedural predictability that comes with having a clear and comprehensive set of bylaws. All bylaws should set forth the roles, authority, and duties of the officers, the number and manner of electing directors, and the time and date of the annual shareholders’ meeting. In addition, bylaws may contain “any provision for managing the business and regulating the affairs of the corporation that is not inconsistent with law or the articles of incorporation.” N.C.G.S. § 55-2- 06(b). These additional provisions may include, but need not be limited to, the quorum required for meetings of the shareholders or directors, the time and place of the annual shareholders’ and directors’ meetings, the vote and notice required to call meetings, the requirements for use of proxies in meetings, and the procedure for taking action without a meeting.

Amendments to Bylaws

To amend the bylaws, the first question to ask is whether the provision to be amended was adopted by the shareholders or the directors. If adopted by the shareholders, the shareholders must approve the amendment unless the bylaws or articles of incorporation specifically state that the directors may amend that particular provision. N.C.G.S § 55-10- 22(a). If the provision to be amended was initially adopted by the directors, then in most cases either the shareholders or the directors may amend that provision.

Contact your corporation’s attorney to discuss preparing, adopting, or amending your corporation’s bylaws.

Can a Board of Directors Take Action Without Meeting In Person?

 Anyone serving on a board of directors (whether for a business, for a charitable organization, or for a homeowner’s association) knows the situation: just a week after the last board meeting, the board needs to take a certain action, and half of the board is not available to meet in person before it is too late.  Fortunately, the North Carolina Business Corporation Act (the “Business Corporation Act”) and the North Carolina Nonprofit Act (the “Nonprofit Act”) allow board of directors to take action outside of a formal, in-person meeting.  Unfortunately, many individuals serving on boards of directors do not understand the requirements for taking such action.

The Business Corporation Act and the Nonprofit Act allow directors to “participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting.”  N.C.G.S. § 55-8-20(b) and 55A-8-20(b) (emphasis added).  The board of directors may take action during a regular or special meeting in which some directors are not physically present as long as all directors participating in the meeting can be heard simultaneously, for instance, through a conference call or videoconference.  Since directors cannot hear each other simultaneously using written communication or email, such communication cannot qualify as an acceptable means of conducting a regular or special meeting.

Alternative Actions for Board Meetings

As an alternative to holding a regular or special meeting through a conference call or videoconference, the Business Corporation Act and Nonprofit Act allow a board of directors to take action by unanimous written consent.  Action by written consent outside of a formal meeting is only effective if the board of directors unanimously approves the action.  N.C.G.S. §§ 55-8-21(a) and 55A-8-21(a).  The action must be accompanied by a written consent “signed by each director, describing the action taken, and included in the minutes or filed with the corporate records reflecting the action taken.”  Id.  “The action is effective when the last director signs the consent, unless the consent specifies a different effective date.”  N.C.G.S. §§ 55-8-21(b) and 55A-8-21(b).  

Obtaining a written consent signed by all directors may be more efficient than holding a special meeting, but it could still be insufficient for timely action when one or more directors is unable to sign the consent.  As a potential solution, both Acts allow the written consents to be in electronic format, including e-mail, if authorized by the articles of incorporation, bylaws, or by action of the board of directors.  N.C.G.S. §§ 55-1-50 and 55A-1-70.  To ensure that the board of directors can act as efficiently as possible for the benefit of the corporation, it may be in the corporation’s best interest to amend its bylaws to allow written consents to board action to be in electronic form and delivered by electronic means.

In summary, the Business Corporation Act and the Nonprofit Act provide only two ways in which directors of a corporation can take action outside of a formal, in-person meeting.  First, the directors can “unanimously take action without a meeting if the action is described in one or more written consents signed by all of the directors. . . .” §§ 55-8-21(a) and 55A-8-21(a).  The written consents may be in electronic format if authorized by the articles of incorporation, bylaws, or action of the board of directors.  Second, the directors “may participate in a regular or special meeting by telephone or any other means of communication by which all participants can simultaneously hear each other during the meeting.”  §§ 55-8-20(b) and 55A-8-20(b).

HOA Conflicts of Interest

Directors owe a duty of loyalty to the Association, meaning they must act in the Association’s best interest.  Doing so requires spotting and properly handling conflicts of interest.  But what, exactly, is a conflict of interest?  Does a director have a conflict of interest if the Board is accepting bids for a new pool facility and the director plays golf with one of the bidding contractors?  What if the contractor is the director’s cousin?  What if the Board member is a 10% owner in the contractor’s business?  Board members frequently face similar quandaries, and HOA Boards often struggle with how to identify and resolve conflicts of interest.  Stated simply, a conflict of interest arises when a director’s financial interests may be affected by the Board’s decision.  The director with the golf buddy is not conflicted out of the vote, and neither is the director whose cousin has submitted a bid.  The director with the ownership interest in the contractor’s company does, somewhat obviously, have a conflict of interest in voting on which contractor to hire.  A more detailed explanation follows.

Under N.C.G.S. 55A-8-31, there are two types of conflicts of interest: direct and indirect.  A direct conflict of interest is not defined in the statute, but occurs when the director may lose or gain money as an immediate result of the Board’s action.  An indirect conflict occurs when another entity in which a director has a “material financial interest” is a party to the transaction, or when another entity of which he is a director, officer, or trustee is a party to the transaction and the transaction is or should be considered by the Board.  For example, a director may own a thirty percent interest in a painting company the Association considers hiring, or the director might be vice president of a company to whom the Association might sell land.

Overcoming Conflicts of Interest

Many potential conflicts of interest can be overcome by disclosing the material facts of the conflict to the Board.  A transaction is not voidable merely because of the conflict of interest if the board knew or the director disclosed to the board the material facts of the transaction and the director’s interest and the board authorized, approved, or ratified the transaction.  Likewise, if members vote on the transaction, they can overcome the director’s conflict if the material facts and the director’s interest were disclosed or known to the members entitled to vote and they authorized, approved, or ratified the transaction.  Finally, a transaction is not voidable solely because of a director’s interest if the transaction was fair to the Association.  In summary, there are three situations in which a director’s conflict of interest is not fatal to a transaction: (1) the board was made aware of the material facts of the transaction and the director’s interest and authorized, approved, or ratified the transaction; (2) the members were made aware of the material facts and the director’s interest and authorized, approved, or ratified the transaction; and (3) the transaction was fair to the Association. 

The Board can authorize, approve, or ratify the conflict of interest transaction with an affirmative vote of a majority of the disinterested directors (those who have no direct or indirect interest in the transaction).  In this case, a quorum will be considered present if a majority of the disinterested directors vote to authorize, approve, or ratify the transaction.  The presence of, or a vote cast by, a director with a direct or indirect interest in the transaction does not affect the validity of any action taken pursuant to that vote if the transaction is otherwise authorized, approved, or ratified in this manner.

HOA Board Member Actions

A Board member who has a direct or indirect conflict of interest should recuse himself from the discussion and vote on the transaction.  The North Carolina General Statutes do not provide a system for forcing an interested Board Member from recusing himself from a vote in which he has a conflict.  If a Board Member refuses to recuse himself from a vote in which he has a direct conflict of interest, it is advisable to remove him from the Board of Directors.  North Carolina law allows the Association to impose additional requirements on conflict of interest transactions, either through its Articles of Incorporation or Bylaws or by a resolution of the Board.  If the Home Owners Association does not already have a conflict of interest policy, the directors would be wise to cause the Association to adopt one.  

 

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