26 U.S. Code § 83 – Property transferred in connection with performance of services
IRS Rulings regarding Property transferred in connection with performance of services
(a) General rule If, in connection with the performance of services, property is transferred to any person other than the person for whom such services are performed, the excess of—
(1) the fair market value of such property (determined without regard to any restriction other than a restriction which by its terms will never lapse) at the first time the rights of the person having the beneficial interest in such property are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, over
(2) the amount (if any) paid for such property,
shall be included in the gross income of the person who performed such services in the first taxable year in which the rights of the person having the beneficial interest in such property are transferable or are not subject to a substantial risk of forfeiture, whichever is applicable. The preceding sentence shall not apply if such person sells or otherwise disposes of such property in an arm’s length transaction before his rights in such property become transferable or not subject to a substantial risk of forfeiture.
(b) Election to include in gross income in year of transfer
(1) In generalAny person who performs services in connection with which property is transferred to any person may elect to include in his gross income for the taxable year in which such property is transferred, the excess of—
(A) the fair market value of such property at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse), over
(B) the amount (if any) paid for such property.
If such election is made, subsection (a) shall not apply with respect to the transfer of such property, and if such property is subsequently forfeited, no deduction shall be allowed in respect of such forfeiture.
An election under paragraph (1) with respect to any transfer of property shall be made in such manner as the Secretary prescribes and shall be made not later than 30 days after the date of such transfer. Such election may not be revoked except with the consent of the Secretary.
(c) Special rulesFor purposes of this section—
(1) Substantial risk of forfeiture
The rights of a person in property are subject to a substantial risk of forfeiture if such person’s rights to full enjoyment of such property are conditioned upon the future performance of substantial services by any individual.
(2) Transferability of property
The rights of a person in property are transferable only if the rights in such property of any transferee are not subject to a substantial risk of forfeiture.
(3) Sales which may give rise to suit under section 16(b) of the Securities Exchange Act of 1934So long as the sale of property at a profit could subject a person to suit under section 16(b) of the Securities Exchange Act of 1934, such person’s rights in such property are—
(A) subject to a substantial risk of forfeiture, and
(B) not transferable.
(4) For purposes of determining an individual’s basis in property transferred in connection with the performance of services, rules similar to the rules of section 72(w) shall apply.
(d) Certain restrictions which will never lapse
In the case of property subject to a restriction which by its terms will never lapse, and which allows the transferee to sell such property only at a price determined under a formula, the price so determined shall be deemed to be the fair market value of the property unless established to the contrary by the Secretary, and the burden of proof shall be on the Secretary with respect to such value.
(2) CancellationIf, in the case of property subject to a restriction which by its terms will never lapse, the restriction is canceled, then, unless the taxpayer establishes—
(A) that such cancellation was not compensatory, and
(B) that the person, if any, who would be allowed a deduction if the cancellation were treated as compensatory, will treat the transaction as not compensatory, as evidenced in such manner as the Secretary shall prescribe by regulations,
the excess of the fair market value of the property (computed without regard to the restrictions) at the time of cancellation over the sum of—
(C) the fair market value of such property (computed by taking the restriction into account) immediately before the cancellation, and
(D) the amount, if any, paid for the cancellation,
shall be treated as compensation for the taxable year in which such cancellation occurs.
(e) Applicability of sectionThis section shall not apply to—
(1) a transaction to which section 421 applies,
(2) a transfer to or from a trust described in section 401(a) or a transfer under an annuity plan which meets the requirements of section 404(a)(2),
(3) the transfer of an option without a readily ascertainable fair market value,
(4) the transfer of property pursuant to the exercise of an option with a readily ascertainable fair market value at the date of grant, or
(5) group-term life insurance to which section 79 applies.
(f) Holding period
In determining the period for which the taxpayer has held property to which subsection (a) applies, there shall be included only the period beginning at the first time his rights in such property are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier.
(g) Certain exchangesIf property to which subsection (a) applies is exchanged for property subject to restrictions and conditions substantially similar to those to which the property given in such exchange was subject, and if section 354, 355, 356, or 1036 (or so much of section 1031 as relates to section 1036) applied to such exchange, or if such exchange was pursuant to the exercise of a conversion privilege—
(1) such exchange shall be disregarded for purposes of subsection (a), and
(2) the property received shall be treated as property to which subsection (a) applies.
(h) Deduction by employer
In the case of a transfer of property to which this section applies or a cancellation of a restriction described in subsection (d), there shall be allowed as a deduction under section 162, to the person for whom were performed the services in connection with which such property was transferred, an amount equal to the amount included under subsection (a), (b), or (d)(2) in the gross income of the person who performed such services. Such deduction shall be allowed for the taxable year of such person in which or with which ends the taxable year in which such amount is included in the gross income of the person who performed such services.
(i) Qualified equity grants
(1) In generalFor purposes of this subtitle—
(A) Timing of inclusion
If qualified stock is transferred to a qualified employee who makes an election with respect to such stock under this subsection, subsection (a) shall be applied by including the amount determined under such subsection with respect to such stock in income of the employee in the taxable year determined under subparagraph (B) in lieu of the taxable year described in subsection (a).
(B) Taxable year determinedThe taxable year determined under this subparagraph is the taxable year of the employee which includes the earliest of—
(i) the first date such qualified stock becomes transferable (including, solely for purposes of this clause, becoming transferable to the employer),
(ii) the date the employee first becomes an excluded employee,
(iii) the first date on which any stock of the corporation which issued the qualified stock becomes readily tradable on an established securities market (as determined by the Secretary, but not including any market unless such market is recognized as an established securities market by the Secretary for purposes of a provision of this title other than this subsection),
(iv) the date that is 5 years after the first date the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, or
(v) the date on which the employee revokes (at such time and in such manner as the Secretary provides) the election under this subsection with respect to such stock.
(2) Qualified stock
(A) In generalFor purposes of this subsection, the term “qualified stock” means, with respect to any qualified employee, any stock in a corporation which is the employer of such employee, if—
(i) such stock is received—
(I) in connection with the exercise of an option, or
(II) in settlement of a restricted stock unit, and
(ii) such option or restricted stock unit was granted by the corporation—
(I) in connection with the performance of services as an employee, and
(II) during a calendar year in which such corporation was an eligible corporation.
The term “qualified stock” shall not include any stock if the employee may sell such stock to, or otherwise receive cash in lieu of stock from, the corporation at the time that the rights of the employee in such stock first become transferable or not subject to a substantial risk of forfeiture.
(C) Eligible corporationFor purposes of subparagraph (A)(ii)(II)—
(i) In generalThe term “eligible corporation” means, with respect to any calendar year, any corporation if—
(I) no stock of such corporation (or any predecessor of such corporation) is readily tradable on an established securities market (as determined under paragraph (1)(B)(iii)) during any preceding calendar year, and
(II) such corporation has a written plan under which, in such calendar year, not less than 80 percent of all employees who provide services to such corporation in the United States (or any possession of the United States) are granted stock options, or are granted restricted stock units, with the same rights and privileges to receive qualified stock.
(ii) Same rights and privilegesFor purposes of clause (i)(II)—
(I) except as provided in subclauses (II) and (III), the determination of rights and privileges with respect to stock shall be made in a similar manner as under section 423(b)(5),
(II) employees shall not fail to be treated as having the same rights and privileges to receive qualified stock solely because the number of shares available to all employees is not equal in amount, so long as the number of shares available to each employee is more than a de minimis amount, and
(III) rights and privileges with respect to the exercise of an option shall not be treated as the same as rights and privileges with respect to the settlement of a restricted stock unit.
For purposes of clause (i)(II), the term “employee” shall not include any employee described in section 4980E(d)(4) or any excluded employee.
(iv) Special rule for calendar years before 2018
In the case of any calendar year beginning before January 1, 2018, clause (i)(II) shall be applied without regard to whether the rights and privileges with respect to the qualified stock are the same.
(3) Qualified employee; excluded employeeFor purposes of this subsection—
(A) In generalThe term “qualified employee” means any individual who—
(i) is not an excluded employee, and
(ii) agrees in the election made under this subsection to meet such requirements as are determined by the Secretary to be necessary to ensure that the withholding requirements of the corporation under chapter 24 with respect to the qualified stock are met.
(B) Excluded employeeThe term “excluded employee” means, with respect to any corporation, any individual—
(i) who is a 1-percent owner (within the meaning of section 416(i)(1)(B)(ii)) at any time during the calendar year or who was such a 1 percent owner at any time during the 10 preceding calendar years,
(ii) who is or has been at any prior time—
(I) the chief executive officer of such corporation or an individual acting in such a capacity, or
(II) the chief financial officer of such corporation or an individual acting in such a capacity,
(iii) who bears a relationship described in section 318(a)(1) to any individual described in subclause (I) or (II) of clause (ii), or
(iv) who is one of the 4 highest compensated officers of such corporation for the taxable year, or was one of the 4 highest compensated officers of such corporation for any of the 10 preceding taxable years, determined with respect to each such taxable year on the basis of the shareholder disclosure rules for compensation under the Securities Exchange Act of 1934 (as if such rules applied to such corporation).
(A) Time for making election
An election with respect to qualified stock shall be made under this subsection no later than 30 days after the first date the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, and shall be made in a manner similar to the manner in which an election is made under subsection (b).
(B) LimitationsNo election may be made under this section with respect to any qualified stock if—
(i) the qualified employee has made an election under subsection (b) with respect to such qualified stock,
(ii) any stock of the corporation which issued the qualified stock is readily tradable on an established securities market (as determined under paragraph (1)(B)(iii)) at any time before the election is made, or
(iii) such corporation purchased any of its outstanding stock in the calendar year preceding the calendar year which includes the first date the rights of the employee in such stock are transferable or are not subject to a substantial risk of forfeiture, unless—
(I) not less than 25 percent of the total dollar amount of the stock so purchased is deferral stock, and
(II) the determination of which individuals from whom deferral stock is purchased is made on a reasonable basis.
(C) Definitions and special rules related to limitation on stock redemptions
(i) Deferral stock
For purposes of this paragraph, the term “deferral stock” means stock with respect to which an election is in effect under this subsection.
(ii) Deferral stock with respect to any individual not taken into account if individual holds deferral stock with longer deferral period
Stock purchased by a corporation from any individual shall not be treated as deferral stock for purposes of subparagraph (B)(iii) if such individual (immediately after such purchase) holds any deferral stock with respect to which an election has been in effect under this subsection for a longer period than the election with respect to the stock so purchased.
(iii) Purchase of all outstanding deferral stock
The requirements of subclauses (I) and (II) of subparagraph (B)(iii) shall be treated as met if the stock so purchased includes all of the corporation’s outstanding deferral stock.
Any corporation which has outstanding deferral stock as of the beginning of any calendar year and which purchases any of its outstanding stock during such calendar year shall include on its return of tax for the taxable year in which, or with which, such calendar year ends the total dollar amount of its outstanding stock so purchased during such calendar year and such other information as the Secretary requires for purposes of administering this paragraph.
(5) Controlled groups
For purposes of this subsection, all persons treated as a single employer under section 414(b) shall be treated as 1 corporation.
(6) Notice requirementAny corporation which transfers qualified stock to a qualified employee shall, at the time that (or a reasonable period before) an amount attributable to such stock would (but for this subsection) first be includible in the gross income of such employee—
(A) certify to such employee that such stock is qualified stock, and
(B) notify such employee—
(i) that the employee may be eligible to elect to defer income on such stock under this subsection, and
(ii) that, if the employee makes such an election—
(I) the amount of income recognized at the end of the deferral period will be based on the value of the stock at the time at which the rights of the employee in such stock first become transferable or not subject to substantial risk of forfeiture, notwithstanding whether the value of the stock has declined during the deferral period,
(II) the amount of such income recognized at the end of the deferral period will be subject to withholding under section 3401(i) at the rate determined under section 3402(t), and
(III) the responsibilities of the employee (as determined by the Secretary under paragraph (3)(A)(ii)) with respect to such withholding.
(7) Restricted stock units
This section (other than this subsection), including any election under subsection (b), shall not apply to restricted stock units
Date of discharge – Paid in Capital
(1)In general. Solely for purposes of this section, except as provided in paragraph (b)(3) of this section, indebtedness is discharged on the date of the occurrence of an identifiable event specified in paragraph (b)(2) of this section.
(2)Identifiable events –
(i)In general. An identifiable event is –
(A) A discharge of indebtedness under title 11 of the United States Code (bankruptcy);
(B) A cancellation or extinguishment of an indebtedness that renders a debt unenforceable in a receivership, foreclosure, or similar proceeding in a federal or State court, as described in section 368(a)(3)(A)(ii) (other than a discharge described in paragraph (b)(2)(i)(A) of this section);
(C) A cancellation or extinguishment of an indebtedness upon the expiration of the statute of limitations for collection of an indebtedness, subject to the limitations described in paragraph (b)(2)(ii) of this section, or upon the expiration of a statutory period for filing a claim or commencing a deficiency judgment proceeding;
(D) A cancellation or extinguishment of an indebtedness pursuant to an election of foreclosure remedies by a creditor that statutorily extinguishes or bars the creditor’s right to pursue collection of the indebtedness;
(E) A cancellation or extinguishment of an indebtedness that renders a debt unenforceable pursuant to a probate or similar proceeding;
(F) A discharge of indebtedness pursuant to an agreement between an applicable entity and a debtor to discharge indebtedness at less than full consideration; or
(G) A discharge of indebtedness pursuant to a decision by the creditor, or the application of a defined policy of the creditor, to discontinue collection activity and discharge debt.
The foregoing information or findings are from a recent foreclosure audit for a judicial foreclosure case brought by SPS attorneys
What we found is least to say unconscionable. The cash to close is amortized at 100 years . The installments appear a ground lease . The note cancelled backdated to 1916 and brought back to the date of the filing
Back-dating appears to defeat certain repealed acts and protections afforded consumers as well as open lucrative tax loopholes . It all falls under the Y2K warnings and that now appears more of a disclosure warning
Y2k Bug – By Y2 K we mean the banks will calculate interest on a per day basis. Its a fact and documented that one day can be converted into 100 years interest, backdated for recapture, negative accrual and actually falls under generation skipping. It has to do with shared computer networks and the formatting of the date
Hearing date is 5/11/2018
Special Thanks to Wikipedia and ACFE , Members sinse 2014
Whether or not there is cancellation of indebtedness income can sometimes be ambiguous and controversial. In Commissioner v. Rail Joint Co., a corporation issued its own bonds as a dividend to its shareholders. When the bonds declined in value, Rail Joint repurchased them for less than their face amount. Ordinarily, retiring bonds for less than the issue price would result in taxable canceled debt. However, in holding that there was no COD for Rail Joint, the court noted that, unlike in a normal issuance of corporate debt for cash consideration, the original issuance of these bonds as dividends did not increase the capital of the corporation and did not create burdened assets to be later freed by the cancellation.
The IRS has formally non-acquiesced to the Rail Joint doctrine, arguing that what really happens in these situations is a constructive dividend and purchase: The corporation constructively issues a cash dividend to shareholders, who then contribute that cash back to the corporation in exchange for the bonds; the burdened asset is thus the constructively re-contributed cash. Rail Joint is nonetheless good law, and has been expanded to encompass other situations where the taxpayer received nothing of value in exchange for the debt, such as when a guarantor of a loan who did not enjoy the benefit of the loan settles it for less than the face amount.
Whether secured debt is recourse or nonrecourse can have significant consequences if the debt is settled in foreclosure of the secured property. Generally, while the net gain or loss is the same regardless of the classification of the debt (it will always be the difference between the basis of the burdened property and the amount of the debt), there are potentially huge tax differences.
When property burdened by nonrecourse debt is foreclosed upon, there is no cancellation of indebtedness even if the amount of the loan exceeds the fair market value of the property. The case of Commissioner v. Tufts holds that in such a situation, the amount realized is the amount of the debt, and the fair market value of the property is irrelevant. That this difference between the adjusted basis of the property and the amount of the debt is simple gain rather than COD has potential upsides and downsides. On the one hand, the gain would be capital gain assuming the property foreclosed upon were a capital asset, unlike COD which is ordinary. On the other hand, COD is potentially excludable, as by insolvency (see below).
If the same property had been burdened by recourse debt, and, as above, that property were foreclosed upon in full satisfaction of the debt, you would get a different result. The gain or loss would be determined with reference to the fair market value of the property, and the difference between the fair market value and the debt would be COD. (This intuitively makes sense because with recourse debt, any cancellation of the outstanding balance of the debt, after it has been satisfied to the extent of the FMV of the property given up, really is a termination of personal liability to pay that amount, unlike in a situation where the debt is nonrecourse). If the property has a value lower than its basis, then in the case of recourse debt you could get a capital loss and COD ordinary income on the same transaction, netting to the same dollar figure as with nonrecourse debt but potentially much worse for the taxpayer: The taxpayer would not only be burdened with ordinary rather than potentially capital gains, but may have more total income to report, offset only by a capital loss that would be unusable (except to a nominal extent in the case of individuals) if the taxpayer had no other capital transactions for the year. Only in the case of a taxpayer able to utilize one of the COD exclusions, such as insolvency, could this result be better.
Disputed Debt Doctrine
The Disputed Debt Doctrine (also known as the Contested Liability Doctrine), is yet another exception to including COD income in gross income. This doctrine can be found in a Third Circuit Court of Appeals case, Zarin v. Commissioner. In order for this exception to apply, the amount of debt must actually be disputed. This can happen if the two parties actually have a good faith dispute over the amount owed. A written instrument containing the amount of debt will probably not satisfy this requirement. However, as the court decided in Zarin, the Disputed Debt Doctrine can also apply if the debt is not legally enforceable.
1099 C NOTICE – This is important information and being furnished to the IRS .
If you are required to file a return a negligence penalty or other sanction may be imposed on you if taxable income results from this transaction and the IRS determines it has not been reported
Now we attack the foreclosure
If you own stock (ATM LLC) that became worthless last year. Is this a bad debt? How do I report my loss?
Answer: If you own securities, including stocks, and they become totally worthless, you have a capital loss but not a deduction for bad debt. Worthless securities also include securities that you abandon. To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it.
Treat worthless securities as though they were capital assets sold or exchanged on the last day of the tax year. You must determine the holding period to determine if the capital loss is short term (one year or less) or long term (more than one year).
Report worthless securities on Form 8949, Part I or Part II, whichever applies. Indicate as a worthless security deduction by writing Worthless in the applicable column of Form 8949.
– Tax Topic 453 – Bad Debt Deduction
– Publication 550, Investment Income and Expenses (Including Capital Gains and Losses)
– Losses (Homes, Stocks, Other Property)
– Capital Gains, Losses, and Sale of Home
See the IRS website for more information
It’s a tax matter issue for God’s sake
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COME NOW THE AUDITOR AS EXPERT engaged by DEFENDANT __________________, making a special appearance in the above entitled matter for the Defendant “Upper Case” entity who files in motion the following order to dismiss:
Whereas the court to date has heard arguments for Plaintiffs/ purported creditors request to enforce its power of sale under the Case number 2016 CA -009109 in District of Columbia Superior Court filed by petitioners on 12/15/16 and entered onto docket on 12/16/2016 and where such was entered as of the 11 year anniversary of the contracts orgination
Defendant for above entitled case files this request in motion seeking DISMISSAL and to strike earlier order for summary judgement granting the anticipated sale scheduled for 9-11-2017 AND 5-11-2018 as follows:
Discovery revealed the court erred in order granting sale for interest sold in an abusive tax matter partnership whereas the instrument the plaintiffs enforces is affirmed a transfer instrument “SECURITY DEED” for
TRANSFER OF RIGHTS IN “THE” PROPERTY.
Therein the instrument states “… For this purpose, Borrower does hereby mortgage, grant and convey to Lender, with power of sale, the following described property . . .
Furthermore, it states as BORROWER COVENANTS “. . . . that Borrower is lawfully seized of the estate meaning always named herein for purposes known or unknown, conveyed and has the right to mortgage, grant and convey the Property and that the Property is unencumbered, except for encumbrances of record.” .
Petitioning party pursues the title conveyed into trust to a fiduciary as trustee as tax deferred transfer and sale for contracts TRANSFER RIGHTS IN PROPERTY whereas the election for the cancellation of debt resulted and is causal to the involuntary conversion of title.
Borrower as of the date shown _______ and no later than _______transferred title in a tax deferred sale by tax code and rules in part found in sections 1033 and 1031 deferred exchanges as consideration causal to such EXCHANGE FOR THE CANCELLATION OF DEBT AND THE INVOLUNTARY CONVERSION OF TITLE TO DEPOSITS
LET THIS COURT CONSIDER THE MATTER OF REVERSE ROLES where a mortgagee is by its own election the obligor to the Payee as the consumer who inoperative law is established a creditor
COD Income – The creditor converted to a OBLIGOR , and fiduciary holding dominion over all title and thereupon can mortgage, then grant and convey, with power of sale the described property therein a series of events described as from the time the property is placed into service starting as of 04/01/2010
Mortgagor converts to a Payee for receivables held in 26 US COde sections 61 (a) (1) and 108 (i) sections 1031 and 1033; 1038 and thus is the recognized creditor in the transaction lender exists the transaction as a recorded bonafide sale by constructive liquidation .
FOR MORE INFO
Take a second look and you will find that is not a foreclosure trustee. That is an agent for Uncle Sam appointed under the color and badge of authority.
The trustee or referee are called government collateral agents or “Agent to Principal” – the instrumentality of the United States Government pursuant to R&T 11926
What’s a princicpal ? An officer or director of a major member bank.
So whats this all mean?
Well for starters it does not look like a foreclosure to me ! Its the taking of title where you perhaps should have known. Therefore you abandoned all claims by alleging fraud . In other words you lost your rights to condemnation proceeds
My take is you were not a mortgagor but a transferor made into an accredited investor pursuant to R&T 11926 under a state by state uniform instrument .
THE COURT IS REQUESTED TO COMPEL DISCOVERY believed held by plaintiff and or plaintiffs attorney. The foreclosure bought is neither a conventional mortage foreclosure nor of the variety that is described in the state civil code of procedures.
Defendants have reason to believe and from discovery to date state as fact that a recovery of this type with respect to acquiring entity and transferor for mergers and acquisitions by acquiree must retain Substantiation Information.pursuant to the IRS Under §1.6001–1(e), taxpayers are required to retain their permanent records and make such records available to any authorized Internal Revenue Service officers and employees. In connection with the reorganization described in this section, these records should specifically include information regarding the amount, basis, and fair market Mar<15>2010 19:27 May 29, 2013
Furthermore the court cannot proceed nor decide this civl matter barring judicial review of § 1.381(a)–1 26 CFR Ch. I (4–1–13 Edition) value of all transferred property, and relevant facts regarding any liabilities assumed or extinguished as part of
such reorganization. (e) Effective/applicability date. This
section applies to any taxable year beginning on or after May 30, 2006. However, taxpayers may apply this section to any original Federal income tax return (including any amended return filed on or before the due date (including extensions) of such original return) timely filed on or after May 30, 2006.
For taxable years beginning before May 30, 2006, see §1.368–3 as contained in 26 CFR part 1 in effect on April 1,
Petitioning parities shall be barred from further delay, postponement and all argument denying the defendant’s right to discovery Therefore such demand are made pursuant to financial tax payer information related to the above entitled case and referenced operative laws as cited herein
Under §1038. Certain reacquisitions of real property we find (a) General rule
If a sale of real property gives rise to indebtedness to the seller which is secured by the real property sold, and the seller of such property reacquires such property in partial or full satisfaction of such indebtedness.
Define- under operative law a repurchase is where you home is bought back upon which the sale triggers a debt .
- You owed nothing as a renter
- because you owned nothing under a leasehold esate.
You financed the sale of your home to the buyer at foreclosure sale.
The IRS looks at your demographic that includes where you live what you should earn and what you pay as taxes assuming you even filed.
If you cannot support the cost of living for your neighborhood by way of “other” non taxable income (inheritance) your lender gave you 12 years to start packing . Its called the Legacy loan and sale of your home to satisfy your back taxes.
0.05 percent Rate
25,000.00 Annual debt service
55,555.56 Minimum Income
666,666.67 over 12 years = Foreclosure
0.75 LTV Loan to value
500,000.00 Disposable income =Mortgage
Read before you bleed – You need the facts to prevail in a wrongful foreclosure!