TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Sunday, November 19, 2006

OJ Simpson May Have Finally Met His Match: The IRS

Oj_2Theodore 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.

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Tracked on Nov 20, 2006 5:13:50 AM


In my opinion this turn of events is one of the lowest parts of journalism (if one could even call it that) Regan should be banned by every publisher on the face of this planet.

Posted by: Willa | Nov 19, 2006 3:39:15 PM

Wouldnt that be a great irony- that "Y" gets the money, but "O" must pay the taxes. Wow, what-a-world is rooting for the IRS in this case!

What we are wondering is the bookstores that are selling the book. If the boycott works, they will bloodied OJ books but sell less of everything else - a net loss. Win the battle, lose the war. We support the boycott - and now, we root for the IRS!


Posted by: phil | Nov 19, 2006 7:54:41 PM

OJ sucks - hope the irs takes all his money away and sends him to levenworth.

Posted by: sss | Nov 19, 2006 7:57:42 PM

One aspect of the OJ/Judgment Proof story that I did not understand is the exemption of the alleged $400K a year distribution from the NFL pension fund. I am fully aware, of course, that the monies in the pension fund can not be attached and that there is, in essence, a spendthrift provision prohibiting direct attachment of the distributions. However, the distributions go somewhere.

That is, they either go into a bank account or a money market account of some sort and those accounts are subject to attachment. Once the check from the pension fund clears the bank, the assets in the account or accounts can be attached by creditors, including the plaintiffs who hold the OJ judgment.

I do not believe that it would be a violation of the rules prohibiting non-attachment (i.e., non-alienation) of pension benefits to depose the pension plan administrator and attempt to find out where the money goes. I've wondered why the plaintiffs who hold the judgment have not taken this action.

Does anyone know the answer to this question?

Posted by: Stuart Levine | Nov 20, 2006 10:06:13 AM

Everyone misses the point - OJ Simpson is innocent! He went through the legal process and was found not guilty. That's it. People can't just make him guilty. We all need the system to work just like this. The next time it could be one of us and history is full of men and women found not guilty in court yet later dragged out and lynched by good well meaning citizens.

As for wrongful death, it is little more than a joke. It does not mean Simpson is guilty of anything. Personally, 16 years ago I was involved in a vehicle accident. I was ruled not at fault and the other drivers insurance paid me $20,000 .
My attorney cautioned me that I was subject to a wrongful death lawsuit for up to one year. I did not understand how since the accident was not my fault. My attorney said that I could be sued simply because I was there. The other person died in the accident. Exactly one year later this guys mother, from her home country, filed two wrongful death suits against me. One was for the estate while the other was for her. She was asking $7,000,000 + interest, + penalties, + attorneys fees +, +, +.

A wrongful death ruling is civil not criminal. It is the same as if Sears sued you over your account and won a judgement. Would that make you a criminal? No. It just makes you a person with a civil judgement against them. In my state alone there are probably 10's of thousands of civil judgements each year. The system worked. Let it go.

Posted by: Rich | Nov 29, 2006 4:34:22 PM

In my experience as a law enforcement officer, O J most likely is guilty, however, he went through do process and was found not guilty. WE have to live with our court system as it is. It's time to move on. If he is guilty, let a higher power deal with him. But as we know it, he is innocent.

Posted by: James | Jun 27, 2007 8:27:47 AM

No matter how compelling the law is, once the great majority of the public becomes enraged by a criminal's arrogance, his goose is cooked. O.J.'s book was a slap in the face to both the G and the public. They'll find a way of getting him with tax evasion, the good old standard for getting a conviction through the back door. His hubris is beyond the Greek benchmark. His fall is imminent and he will find it much harder than James Brown to receive an early parole at the end of his sentence.

Posted by: Don Lackritz | Sep 19, 2007 3:42:21 AM