November 27, 2011
Tax Court: Glam Metal, Hair Bands, Ecdysiasts, and Deciduous CalisthenicsWillson v. Commissioner, T.C. Summ. Op. 2011-132 (Nov. 23, 2011):
Robert Willson opened a bar in 1986, and it gave him nothing but trouble. He’s seen lawsuits, endless repairs, and even a catastrophic fire. One might say the City of Des Moines did him a favor when it finally condemned the land in 2000 to expand its airport--right around the time Willson began serving a federal prison term. But the Commissioner wouldn’t let things be and says that the condemnation triggered a large capital gain that Willson didn’t correctly report. This meant the bar would give him one more headache--because, though Willson represented himself at trial, the facts as he described them would be worthy of an advanced exam problem in tax accounting....
Willson did his best to explain in as plain a way as possible the history of the property and what he spent on it. We will try to return the favor by minimizing taxspeak. . . .
[T]he bar became a local mecca for a type of “rock and roll” called “glam metal.” While the Court took no expert testimony on the nature of such groups, it did allow into the record Willson’s own explanation of this genre of musical entertainment. We also took judicial notice that “hair bands” had lost much of their popularity with the coming of something called “grunge rock” (another type of “rock and roll” music) in the early nineties. This was important to Willson’s business because “hair bands,” with such unlikely names as Head East, Great White, and Saturn Cats could still draw large crowds to a bar on the outskirts of Des Moines but had become affordable providers of live entertainment. Willson even invited one of these “hair bands” to be a sort of artist-in-residence. One night in 1994, a few band members did something to a smoke machine that sparked an enormous fire. This fire engulfed everything except the parking lots, the shed, and the property’s original house. It also forced Willson to make a choice--sell to the City as part of its airport expansion, or rebuild. Willson was unable to sell, so he had to rebuild. He rented out the old house to a tenant who installed minor improvements (e.g., poles) and opened an establishment felicitously--and paronomastically--called the “Landing Strip,” in which young lady ecdysiasts engaged in the deciduous calisthenics of perhaps unwitting First Amendment expression. . . .
Des Moines began moving to condemn the bar and the land sometime in 1999. Willson closed the bar doors by May 5, when he transferred the property to his lawyer for safekeeping until the matter with the City was resolved. His criminal troubles-- something to do with money and drugs and possibly the bar--were reaching the point where Willson was about to begin serving a federal prison term, and he authorized his lawyer to act for him in dealing with the City while he was imprisoned. ...
Despite his legal problems, however, Willson did manage to file his 2000 tax return. The Commissioner determined that he had underreported his income. Willson timely filed a petition to contest the Commissioner’s determination, but trial was postponed for several years while he served out his sentence. The one remaining issue is Willson’s adjusted basis in the property at the time of the condemnation. ...
The Commissioner, however, doesn’t divide the $160,000 cost of the real estate between the land and the buildings. This is a critical mistake. ...
(Hat Tip: Bob Kamman.)
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Tracked on Nov 28, 2011 11:26:23 AM
Posted by: günal şen | Nov 27, 2011 9:35:07 AM