With over 35 million people filing for unemployment since March, $1,200 stimulus checks are only a Band-Aid for Americans


More than 130 million stimulus checks are already winding their way to millions of Americans. They’re a key part of the government’s $2.2 trillion CARES Act, but furloughed and laid-off workers say a maximum $1,200 payment is not nearly enough to see them through what could be an even bigger economic crisis than the Great Recession.

Approximately 2.4 million unemployed Americans applied for unemployment benefits last week using the traditional method of reporting initial claims, but the real number was almost 1 million higher if applicants made eligible through a new federal relief program are included. Some 35.5 million people have applied for jobless benefits through their states.

Roughly 8.1 million new claims have been filed via a new federal program that has made self-employed workers and independent contractors such as writers or Uber
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drivers eligible for the first time ever. Total new claims since mid-March: almost 44 million. Some of these claims had their applications rejected, while others found a new job and still others returned to work.

LendingTree
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analyzed income data in the 98 cities with the highest number of families per capita to determine their monthly expenses and estimate how much of a household’s monthly expenses $3,400 in economic impact payments would cover. That’s two $1,200 stimulus checks, plus $500 each for two dependents.


There’s growing concern among many Americans that businesses won’t restart in time to save them from paying the rent, their mortgage and going hungry.

That size stimulus check would cover 45% of one month’s average $7,531 budget for two-parent, two-child families, according to the study.

Families in McAllen, Texas, will benefit the most, with the stimulus checks covering 96% of their $3,500 monthly bills. Families in San Francisco, Boston, Bridgeport, Conn. and Washington, D.C. make between $158,000 and $189,000, and would only qualify for a small stimulus payment.

But most households will still struggle to make ends meet if those parents are out of work. “In 8 of the top 10 cities, the economic impact payment only covers between 60% and 71% of the estimated monthly budget for a family of four. The stimulus payment will cover 50% or more of one month’s estimated expenses in just 34 of the top 98 metro areas,” the report found.

The money can’t come soon enough for the nearly 35 million people who are out of work, and others worried about bills and rent due to the coronavirus pandemic. The Internal Revenue Service is sending $1,200 to individuals with annual adjusted gross income below $75,000 and $2,400 to married couples filing taxes jointly who earn under $150,000, plus $500 per qualifying child.

Dispatches from a pandemic: Letter from New York: ‘When I hear an ambulance, I wonder if there’s a coronavirus patient inside. Are there more 911 calls, or do I notice every distant siren?’


Source: LendingTree.com

The payouts — formally dubbed “economic impact payments” — reduce in size above the $75,000 per year/$150,000 per year household income threshold and stop at $99,000 per year for individuals and $198,000 per year for married couples. The money will appear automatically in your bank account if the IRS has your account information on file from previous years’ tax returns.


‘People whose jobs are deemed important enough to risk coronavirus exposure at work are also bringing home less income in the process.’

However, there’s growing concern among many Americans — especially those who are most in need of the checks and already have bills piling up — that the economy won’t restart in time to save them from paying the rent, their mortgage and going hungry. (For those whose information isn’t on file with the IRS, they can submit their details here and here.)

Fast-food and counter workers would need to work 107 hours, or 2.5 weeks of full-time work, to earn $1,200, working at a rate of $11.18 per hour, LendingTree also found in a separate study of the 100 most common occupations in which workers earn less than $75,000 per year, as per 2019 Bureau of Labor Statistics data. Restaurant hosts and hostesses would need to work 104 hours.

Many essential workers, from child-care workers to home-health aides, have to work the longest. “People whose jobs are deemed important enough to risk coronavirus exposure at work are also bringing home less income in the process. Workers in these occupations earn between about $11 and $16 per hour,” the report said. (The federal minimum wage is $7.25 per hour.)

In total, U.S. workers have lost $1.3 trillion in income, amounting to a median of nearly $9,000 per worker, according to research published Tuesday by the Society for Human Resource Management and Oxford Economics. Some 20% of the loss, or $260 billion, represents workers who remained employed. These workers either accepted a lower pay or reduced hours.

(Jeffry Bartash contributed to this story.)




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Congress could kick China listings off U.S. stock exchanges, but it won’t happen overnight


The bill rushed unanimously through the U.S. Senate and spun into the news cycle as if it were a certainty.

As the thinking goes, the House and then the president will shuffle this legislation into law, forcing Chinese companies listed on U.S. exchanges to play by the same transparency rules as those from other parts of the world.


Senate bill would require Chinese companies to establish that they are not owned or controlled by a foreign government and submit to an audit that the Public Company Accounting Oversight Board can review.

Normally, powerful entities would make the passage of this “anti-China” bill an uphill battle. The Nasdaq
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,
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,
the Securities and Exchange Commission and Wall Street in general largely oppose the move and the yanking of billions of dollars from their pocketbooks. And House Speaker Nancy Pelosi said Thursday that her side of the Capitol was willing to look at the issue, but no vote was promised.

But the legislation comes amid a striking U.S. political competition of sorts to show who is toughest on China — and during the crucial few months before the presidential election.

Also from Tanner Brown:U.S.-China relations are bad and getting worse, with major ramifications for trade and investment — and the U.S.’s presidential election

Even if a variation of the bill does eventually pass, already-listed firms will have three years to comply. That is ample time for China to increase the attractiveness of its own bourses, and for Chinese companies to prepare for a relatively smooth landing back home — likely Hong Kong for larger already-listed companies, and the growth boards for smaller startups, according to Peking University’s Paul Gillis.

China has already opened more attractive doors for public fundraising. After the decade-old Nasdaq-like ChiNext welcomed tech startups in Shenzhen, neighboring Shanghai learned from the pains and successes of that venture and unveiled the Science and Technology Innovation board, or Star Market, last year. Its niche is profit-losing tech-focused startups that show promise and otherwise might list in New York.

As of now, some 200 Chinese companies are listed in the U.S. — some in ways more transparent than others — possess a total market value of more than $1.8 trillion, according to the U.S.-China Economic and Security Review Commission.

Their departure would represent a big flight of capital from U.S. exchanges, a diminution of U.S. tax revenue, a loss to investors and, some would argue, a prestige hit for Wall Street as the center of global finance.

But it would also mean those willing to buy into U.S.-listed firms from China wouldn’t be duped like they were recently by Luckin Coffee, whose shares
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resumed trading this week after a six-week freeze. Luckin’s American depositary receipts tumbled 36% on Wednesday from their closing price on April 6, after which trading was halted by Nasdaq. The stock plummeted 89% in the first quarter of this year. It ended the week at $1.38, against a closing level above $40 as recently as March 6.

Nasdaq has informed the onetime Starbucks
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rival that it faces delisting after it disclosed that some employees fabricated $300 million in sales. Luckin is appealing the decision, but if it’s delisted investors would lose essentially all equity, a “wipeout” for which one analyst warned investors to prepare.

A Luckin Coffee location in Beijing on Jan. 15, before the fast-expanding chain — billed as a potential Starbucks slayer — was engulfed by controversy.


Bloomberg

Opinion:Luckin Coffee shows how risky Chinese IPOs can be, but investors are just not listening

“A lot of these companies, by the way, have already had scandals and cost investors a lot of money, because of their failure to be transparent in their reporting,” White House economic adviser Larry Kudlow told Fox News. “The Chinese government forbids that kind of transparency.”

The painful delisting decision may still be bothering Wall Street and the SEC, but lawmakers appear ready for action.

“We want investors to understand what they’re investing in,” said Sen. John Kennedy, a Louisiana Republican and a co-sponsor of the Senate bill. “And those reports have to be accurate or you get in a lot of trouble.”

Tanner Brown covers China for MarketWatch and Barron’s.



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As 30 public companies vow to keep $100 million in CARES Act loans, here are tax changes America needs right now


The COVID-19 pandemic demanded quick and drastic federal government intervention to save jobs and keep the economy from going into a total tailspin. But the legislative process was quick and dirty — with all the inevitable errors, omissions, and unintended consequences.

You know that’s true when the Los Angeles Lakers and the Ruth’s Chris Steak House chain qualified for potentially forgivable “emergency loans” under the Small Business Administration’s Paycheck Protection Program (PPP). The Lakers got $4.6 million for their “emergency” and Ruth’s Chris got a cool $20 million. While the Lakers and Ruth’s Chris Steak House paid back their PPP loans, it was only after attention from the media. Good grief. We can certainly do better with the next round(s) of COVID-19 relief.

“The Lakers qualified for and received a loan under the Payroll Protection Program,” the Lakers said in a statement last month. “Once we found out the funds from the program had been depleted, we repaid the loan so that financial support would be directed to those most in need. The Lakers remain completely committed to supporting both our employees and our community.”

“We intended to repay this loan in adherence with government guidelines, but as we learned more about the funding limitations of the program and the unintended impact, we have decided to accelerate that repayment,” Cheryl Henry, President and Chief Executive of Ruth’s Hospitality Group, which owns Ruth’s Chris Steak House, said in a statement.

More than 230 received over $1 billion in PPP loans, according to an analysis of public filings through April 27, The Wall Street Journal reported. At least 30 public companies with market capitalizations of between $4.5 million and $560 million have said they’d keep more than $100 million in total, the paper reported. The Treasury Department ruled that companies with access to other sources of capital are not qualified to receive PPP loans.

Since I’m just a tax guy, let’s focus on federal tax changes that would allow us to do better. Here are some suggestions.

Targeted tax relief for businesses

Businesses small and large need more financial relief, including more tax relief. But let’s direct any new tax relief to where it will do the most good. For instance:

Expand family business payroll tax break for hiring your children

Under our current federal payroll tax regime, owners of businesses that are treated as sole proprietorships and spousal partnerships for tax purposes can hire their under-age-18 children, and the children’s wages are exempt from Social Security, Medicare and federal unemployment (FUTA) taxes. For details, see this previous Tax Guy column.

Great. Right now, hiring your kids and keeping money in the family could be a financial life preserver. The no-federal-payroll-taxes break is an added and valuable bonus. And we are looking for more ways to help family businesses. Right? So, let’s temporarily extend the no-federal-payroll taxes deal to cover under-age-25 children. That could help more family business owners and their offspring stay on their feet.

Expand 100% first-year bonus depreciation break for real estate expenditures

Under our current federal income tax regime, businesses that spend money on so-called qualified improvement property (QIP) can write off the entire amount in Year One. That’s because QIP expenditures are eligible for 100% first-year bonus depreciation through the end of 2022. Great. However, the Tax Code currently defines QIP as the cost of an improvement to an interior portion of a nonresidential building — excluding expenditures for the enlargement or internal structural framework of the building. That’s a very limiting definition. Many buildings will need to be re-purposed in response to COVID-19, and many things may need to be done on the outside.

• Think converting square footage formerly occupied by a large retail store into a large food court with multiple family-owned restaurants and adequate spacing to get through the COVID-19 mess and whatever comes next. You might need to enlarge the building, and you might need to make changes to the structural framework to get the project done. Let’s include those expenditures in the definition of QIP so owners and lessees of such buildings can claim 100% first-year bonus depreciation for their expenditures.

• Think converting square footage formerly occupied by a large departed business into hotel-style individual office suites and meeting rooms that can be reserved by employees who now work primarily from home. Adequate spacing would be a very good idea. You might need to enlarge the building, and you might need to make changes to the structural framework. Let’s include those expenditures in the definition of QIP so owners and lessees of such buildings can claim 100% first-year bonus depreciation for their expenditures.

• Creating and expanding outdoor venues with adequate spacing will probably be a huge trend. Think outdoor restaurant dining areas, outdoor bars, outdoor music venues, outdoor wedding venues, and maybe the reemergence of drive-in movie theaters. And more. As the Tax Code currently reads, expenditures for these projects don’t count as QIP, so 100% first-year bonus depreciation cannot be claimed. Let’s fix that.

Key Point: Many businesses will be lucky to break even this year. Many will lose money. Duh. For these businesses, being able to claim 100% first-year bonus depreciation for real estate QIP expenditures can potentially create or increase a net operating loss (NOL) that can then be carried back to earlier tax years. You can then claim refunds for taxes paid in those earlier years. Anything that creates or increases an NOL can be a business life-saver, because taxes paid in earlier can be recovered.

PPP loan forgiveness: expand list of qualified expenditures and allow tax deductions for those expenditures

The current rules for Paycheck Protection Program (PPP) loans stipulate that they can be forgiven only if at least 75% of the loan proceeds are used to cover qualified payroll expenses. That’s misguided. Continuing to pay employees doesn’t help a business that doesn’t need workers until its business model can be recalibrated to survive COVID-19 and whatever might come next. The PPP loan scheme should be renamed and retargeted to allow eligible businesses to spend loan proceeds on whatever is needed to survive.

For instance, a family restaurant might need to reconfigure its interior space, add an outdoor bar and dining pavilion, and replace its entire food inventory. Until those things get done, you don’t need hosts, cooks, servers, and bussers.

Finally, the IRS recently opined that expenses financed by a forgiven PPP loan cannot be deducted for federal income tax purposes. Congress apparently intended the opposite, but a law change may be necessary to fix that glitch. Let’s do it.

Targeted tax relief for individuals

In the COVID-19 era, individuals need financial relief too — including better-targeted tax relief. Here are two suggestions.

Resurrect tax-free moving expense allowances for relocating employees

Before the Tax Cuts and Jobs Act (TCJA), employers could give employees tax-free moving expense allowances or reimbursements (within limits). The TCJA suspended that valuable break for 2018-2025. Under the current rules, if your employer covers relocation expenses, it’s treated as additional wage income subject to federal income and payroll taxes. Ugh. We will surely see many employee relocations in response to COVID-19. Let’s once again allow employers to cover employee moving expenses with tax-free dollars.

Allow home office deductions for employees

For 2018-2025, another TCJA provision suspended federal income tax deductions for an employee’s office in the home used for company business. Even before the TCJA, employee home office expenses were subject to limitations that ensured minimal or no tax-saving benefit in most cases. In light of current realities, let’s allow employees to claim home office deductions whether they itemize or not.

The last word (for now)

These are my thoughts so far. More to come later. Meanwhile, please contribute your own by commenting on this column. There are good ideas out there that I’m not smart enough to ever figure out. Let’s hear them.



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Do you want to work from home post-pandemic? Will you be forced into a pay cut? Read these pros and cons before deciding


Twitter, Square, Shopify and Facebook  employees were told they can work from home even after the pandemic ends.

“As we’ve become accustomed to working outside the office, it’s become clear that we don’t need everyone to be physically present to do great work,” Lori Goler, vice president of people at Facebook said in a post on Thursday “From now on, we are moving toward making remote work a more permanent part of our culture.”

Shopify
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Chief Executive Tobi Lutke echoed Facebook’s
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announcement tweeting later that day that “office centricity is over” and most workers should expect to permanently work from home well after the pandemic.

Twitter, however, was the first major company to announce a permanent work-from-home option. “Opening offices will be our decision, when and if our employees come back, will be theirs,” states a Twitter post from May 12.

The work-from-home options may not be applicable to or, indeed, welcomed by all workers. If you work at Facebook and you move to a cheaper city you may have to take a pay cut, CEO Mark Zuckerberg told employees on Thursday.

For instance, roles related to office security or in-office operations can only be performed in the office, a Square
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spokeswoman told MarketWatch. Similarly, a Twitter spokeswoman said that employees who work in data centers won’t be able to work remotely once it is safe for them to return to work.

Other companies like Google
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,
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and American Express
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have gone ahead and told workers they continue to be working from home well into next year. There’s no word on whether they will allow workers to permanently work from home.

“Visa continues to closely monitor COVID-19 and its impact globally, while prioritizing the health and well-being of our employees,” said Will Stickney, a Visa spokesman. “As a result, we expect a majority of Visa’s workforce will continue to work from home through the 2020 calendar year.”

(American Express declined to comment. Google and Shopify did not respond to requests for comment.)

Don’t miss:‘I was told I could never work remotely’: Before coronavirus, workers with disabilities say they implored employers to allow them to work from home

Certainly, there are benefits to working from home — you don’t have to worry about getting caught in traffic and showing up late to a meeting. Perhaps your coworker who leaves the office microwave a mess or who tries to walk over others to get ahead will no longer come into the office.

But that decision may come with some significant costs. Consider these pros and cons:

Pro: You could save up to $5,000 in commuting costs

Depending on what state you’re from, you could spend between $2,000 and $5,000 a year on commuting, according to calculations by Business Insider based on data from the U.S. Census Bureau. You could also save you a total of 9.4 days a year from the time spent commuting, according to an May survey of nearly 3,000 American workers published by Global Workplace Analytics, a San Diego-based workplace consultancy firm.

That means you could wake up later, spend less on gasoline, said Kate Lister, president of Global Workplace Analytics. It may even make sense to get rid of your car altogether, she said. Lister said she sold her car after she began working from home years before coronavirus. She now shares one car with her husband. (To calculate the total amount of money you could save by teleworking check out this employee savings calculator)

Con: You may end up having to pay for your own WiFi and electricity

Employees at Square and Facebook may not be compensated for work-related costs if they choose to work from home on a daily basis. (Both companies declined to comment.) Twitter
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employees, however, will be compensated for the cost of Wi-Fi and receive a stipend for their at-home office setup, a spokeswoman said.

“The costs of potentially upgrading to speedier Wi-Fi, acquiring office supplies and setting up an ergonomic-friendly workspace could add up if your employer is unable to offer additional financial support,” said Sarah Stoddard, a Glassdoor career trends expert. But the amount you’re saving on commuting should make up for that cost, Lister added.

Pro: You could move to a city where rent is cheaper

Typically non-remote workers live in areas close to where they work. That often means a high cost of living, especially in cities like New York or San Francisco. Even if you still plan on going into your office once a week, an hour drive may not be all the bad when you factor in how much you could save, Lister said. Your company, like Facebook, may insist you take a pay cut to compensate for that.

Related: Work-from-home productivity pickup has tech CEOs predicting many employees will never come back to the office

Con: You may miss out on brainstorming or a promotion

If you’re teleworking, it may be harder for you to impress your boss, which may mean losing out on a promotion, Stoddard said. But you can find new ways to demonstrate your involvement and impact at work if you choose to permanently work from home. “Even minor tactics like turning on your video during virtual meetings, providing an additional perspective in email threads and delivering timely status reports to your manager can go a long way,” she said.

Con: You may lose out on social aspects of work

Research that socialization at work can lead to a less stressful work environment. By working from home you may miss out on happy hours, birthday celebrations and casual one-on-one lunches with coworkers. There’s also a lot to be said for office banter and brainstorming over the water cooler, workplace consultants say, and you would be saved from the seemingly endless deluge of daily Slack
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messages.





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Coronavirus stimulus-package tax relief: Withdraw $100K from your IRA — and repay in 3 years with zero tax liability


The $2 trillion coronavirus economic recovery bill is expected to be passed by the House Friday and signed into law by President Trump shortly thereafter. The legislation has been dubbed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

The new law is a daunting 880 pages long, but it contains lots of good news for individuals and businesses, including meaningful tax relief. This column explains one tax-relief measure that can potentially benefit many IRA owners. Here’s what you need to know:

Coronavirus-related distributions (CVDs) from IRAs are tax-favored

IRA owners who are adversely affected by the coronavirus pandemic (and there will be plenty of them) will be eligible to take tax-favored coronavirus-related distributions from their IRAs. To keep things simple, let’s call these distributions CVDs. They can add up to as much as $100,000. You can recontribute a CVD back into your IRA within three years of the withdrawal date and treat the withdrawal and later recontribution as a totally tax-free rollover.

In effect, the CVD drill allows you to borrow up to $100,000 from your IRA(s) and repay the amount(s) any time up to three years later with no federal income tax consequences. And there are no limitations on what you can use CVD funds for during the three-year period.

As long as you recontribute the entire CVD amount within the three-year window, the whole deal is treated as a tax-free IRA rollover transaction or a series of tax-free rollover transactions.

If you’re cash-strapped, you can use the money to pay the bills and recontribute later when your financial situation has improved. You can help your adult kids out. You can pay down your HELOC. You can invest the money in the stock market and hope to collect low-taxed long-term gains. Whatever.

You can take one or more CVDs up to the $100,000 limit, and they can come from different IRAs. The three-year recontribution period for each CVD begins on the day after you receive it. You can make your recontributions in a lump sum, or you can make multiple recontributions. You can recontribute to one or several IRAs, and they don’t have to be the same account(s) you took the CVD(s) from in the first place.

As long as you recontribute the entire CVD amount within the three-year window, the whole deal is treated as a tax-free IRA rollover transaction or a series of tax-free rollover transactions. If you’re under age 59½, the dreaded 10% penalty tax that usually applies to early IRA withdrawals does not apply to CVDs.

If your spouse owns one or more IRAs in his or her own name, your spouse is apparently eligible for the same CVD deal if he or she qualifies.

How do you qualify for CVDs?

Good question. Some IRA owners will clearly qualify while others may have to wait for IRS guidance. For now, here’s what the CARES Act says.

A coronavirus-related distribution is a distribution of up to $100,000 from an eligible retirement plan, including an IRA, that is made on or after 1/1/20 and before 12/31/20 to an individual:

* Who is diagnosed with COVID-19 by a test approved by the Centers for Disease Control and Prevention.

* Whose spouse or dependent (generally a qualifying child or relative who receives more than half of his or her support from you) is diagnosed with COVID-19 by such a test.

* Who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, or having work hours reduced due to COVID-19.

* Who is unable to work because of lack of child care due to COVID-19 and experiences adverse financial consequences as a result.

* Who owns or operates a business that has closed or had operating hours reduced due to COVID-19 and has experienced adverse financial consequences as a result.

* Who has experienced adverse financial consequences due to other COVID-19-related factors to be specified in future IRS guidance.

We need the IRS to weigh in on the last two factors. I hope and trust that the guidance will be liberally skewed in favor of the IRA owners of the world. Fingers crossed.

What if I don’t recontribute the CVD?

Another good question. You will be taxed on the CVD amount that you don’t recontribute within the three-year window, but you don’t have to worry about owing the dreaded 10% early withdrawal penalty if you are under age 59½.

You can choose to spread the taxable amount equally over three years, apparently starting with 2020. But here it gets tricky, because the three-year window won’t close until sometime in 2023. Until then, it won’t be clear that you failed to take advantage of the tax-free CVD rollover deal.

So, you may have to amend a prior-year return and report some additional taxable income from the CVD. Details to follow, because I don’t think our beloved Congress gave much thought to this issue when drafting the CARES Act.

You also have the option of simply reporting the taxable income from the CVD on your 2020 Form 1040. You won’t owe the 10% early withdrawal penalty if you are under age 59½.

Can I take a CVD from my tax-favored company retirement plan?

Yes, if your company allows it under rules similar to those for IRAs. Employers and the IRS have work to do to figure out the details.

The bottom line

The CVD deal can be a helpful tax-favored financial arrangement for eligible IRA owners. Thankfully, the CARES Act includes a bevy of other potentially valuable tax breaks to help get us through this mess. Explaining them will keep us busy for a while. Stay tuned.



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