Sunday, November 19, 2006
Theodore P. Seto (Loyola-L.A.):
I understand that OJ Simpson has assigned all or most of his expected income from his new book to others to avoid having it levied upon by the Goldman family. Is that income compensation income, taxable to him notwithstanding the assignment? Or has he successfully structured the deal to qualify the income as income from property, transferrable so long as he also transfers the underlying property interest?
Of course, how one structures the deal matters a lot. I'm assuming that OJ was well-advised and got around the tax problem. Not being an OJ fan, however, I'm actually hoping that he focused primarily on keeping the money out of the Goldmans' hands, not on tax issues. If so, he may have a nasty tax problem lurking around the bend. This would make me happy.
Suppose, for example, that he sold the copyright to the publisher in exchange for a promise by the publisher to pay $X to Y. Hard for the Goldmans' to attach unless there is a fraudulent conveyance. But the payment may well be taxable to him nevertheless.
Or suppose he precontracted with the publisher to write the book (as is quite common). Now it's probably a work for hire. If so, he becomes taxable on all of the compensation, regardless of the nominal recipient. Lucas v. Earl.
The safe way to go is to write the book, obtain the copyright, transfer the copyright to Y, and have Y sell the copyright to the publisher. As a practical matter, not so easy. If he precommits to the sale, transfers the copyright to Y, and then has Y follow through on his precommitment, he has an Estate of Applestein problem.
Ellen Aprill (Loyola-L.A.):
- MSNBC: OJ plans to avoid satsifying the civil judgment by spending it quickly.
- L.A. Times: The Godlmans were rebuffed two weeks ago by a Santa Monica court when they attempted to gain control of Simpson's name, likeness and image and that the family lawyer does not expect them to get this money.
- Canadian Press: "The families could go after money from the sale of the book to pay off the judgment, but one legal analyst said there are ways to get around that requirement -- such as having money not go directly to Simpson. "Clever lawyering can get you a long way," said Laurie Levenson, a Loyola University law school professor and former federal prosecutor who has followed the case closely."
- The legal right may be there, there may be tax liability and a fraudulent conveyance, but that won't necessarily get the Goldmans the money. Does anyone know whether the Florida law that protects his house and pension from the judgment the Goldman family got in the civil suit would prevent collecting on a liability to the IRS (should there be a tax liability for the amount he was paid if he spent it or assigned it) or does federal law trump state law for that purpose?
Gregory Germain (Syracuse):
- The Supreme Court in United States v. Rodgers, 461 U.S. 677 (1983) said that state-law exemptions don't apply to federal tax liens under the supremacy clause. I also recall a Florida case a few years back (late 1990s) right on point, but I don't have the cite handy. There may be more recent cases too.
- If Simpson just assigned his royalties for no consideration to friends, it would seem to be an easy fraudulent conveyance/transfer. If he sold his rights to friends for "fmv" and spent the money, attacking the sale on fraudulent conveyance/transfer grounds would be harder. I don't think the transaction can be analyzed without knowing exactly what happened.