TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Wednesday, June 29, 2016

WSJ:  Judge Hands Entrepreneur Sam Wyly $1.1 Billion Tax Bill

WylyWall Street Journal, Judge Hands Entrepreneur Sam Wyly a $1.1 Billion Tax Bill:

A federal judge has ordered Texas entrepreneur Sam Wyly to pay $1.1 billion in taxes and penalties for committing tax fraud using offshore accounts, even though the former billionaire’s net worth has fallen to a fraction of that amount.

The payment demand from Judge Barbara Houser on Monday was made for federal taxes due as far back as 1992. In a court opinion filed last month, she admitted that the money “may now be more difficult for the government to collect given the passage of time and the dissipation of Sam’s wealth.”

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June 29, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Monday, June 27, 2016

NY Times:  A Noah’s Ark in Kentucky, Dinosaurs Included — But No Taxes

ArkNew York Times: A Noah’s Ark in Kentucky, Dinosaurs Included, by Laurie Goodstein:

In the beginning, Ken Ham made the Creation Museum in northern Kentucky. And he saw that it was good at spreading his belief that the Bible is a book of history, the universe is only 6,000 years old, and evolution is wrong and is leading to our moral downfall.

And Mr. Ham said, let us build a gargantuan Noah’s ark only 45 minutes away to draw millions more visitors. And let it be constructed by Amish woodworkers, and financed with donations, junk bonds and tax rebates from the state of Kentucky. And let it hold an animatronic Noah and lifelike models of some of the creatures that came on board two-by-two, such as bears, short-necked giraffes — and juvenile Tyrannosaurus rexes.

And it was so.

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June 27, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (3)

Monday, June 13, 2016

Former Qwest CEO Nacchio Denied Tax Deduction For $45 Million Forfeiture Of Insider Trading Profits

Insider TradingNacchio v. United States, Nos. 2015-5114 & 2015-5115 (Fed. Cir. June 10, 2016):

This is a tax case arising out of a criminal conviction for insider trading. Joseph P. Nacchio and Anne M. Esker (“Nacchio”) filed this action in the Court of Federal Claims seeking an income tax credit of $17,974,832 for taxes paid on trading profits of $44,632,464.38, which Nacchio was later ordered to forfeit to the United States following his conviction for insider trading with respect to those profits. The government opposed Nacchio’s request, contending that his forfeiture payment was a nondeductible penalty or fine and that he was estopped from seeking tax relief because of his criminal conviction. The parties filed cross-motions for summary judgment.

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June 13, 2016 in Celebrity Tax Lore, New Cases, Tax | Permalink | Comments (0)

Sunday, June 12, 2016

The Story Of Tonight:  With Billion-Dollar Hamilton Poised To Sweep Tony Awards, Broadway Pushes For Tax Break Extension

Hamilton 2Bloomberg, As ‘Hamilton’ Enriches Backers, Broadway Wants Tax Break Extended:

Alexander Hamilton introduced the idea of federal taxes. Broadway producers enjoying a record season buoyed by his namesake musical are lobbying Congress to limit what they owe.

The industry, which will celebrate its success tonight at the Tony Awards, is fighting to keep a provision that allows live-theater backers deductions in a show’s first year. That means they’d pay tax on income only after turning a profit. The provision passed in 2015, yet needs to be extended by Congress this year to survive.

In an industry where four of five performances close without recouping startup costs, producers say such a sweetener will keep the hits coming. While the provision was tacked onto a list of tax breaks last year at the behest of Sen. Chuck Schumer, D-N.Y., there’s no guarantee it will be continued, producers and their lobbyists say. Some lawmakers don’t like the idea. Nor do advocates of tax cuts, who say such breaks make it more difficult to reduce the burden on everyone else. ...

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June 12, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

Saturday, June 11, 2016

Taxes Could Wipe Out Half Of Prince's $250 Million Estate

Following up on my previous posts (links below) on the estate planning aspects of Prince's death: People Magazine, Taxes Could Wipe Out Half of Prince's $250 Million Estate and Force Early Sale of His Unreleased Songs, Trustee Says:

Prince's estate is getting hit with a hefty tax bill that could end up taking half of his estimated $250 million fortune – and force the early sale of some of the vast troves of unreleased music that the Purple One had locked up in his vault, the trustee for the estate revealed.

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June 11, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

Monday, June 6, 2016

The Tax Consequences Of John Oliver's Forgiveness Of $15 Million Of Medical Debt

Washington Post, John Oliver Just Made Talk Show History by Forgiving Nearly $15 million Worth of Debt:

John Oliver is known for demystifying complicated issues to get his “Last Week Tonight” audience riled up. He’s explained major problems with credit reports and the bizarrely undemocratic side of primaries and caucuses. In that way, last night’s episode devoted to debt buyers wasn’t all that different. He started out, in his entertainingly enraged way, by explaining how banks sell debt to other business for pennies on the dollar. Those companies have little knowledge of those owing money, but they can be terrifyingly predatory, taking advantage of consumers’ fear of legal action. Some of these debts are erroneous; some are “zombie debts” that have already been paid. And yet, debt collectors will persist, even employing dirty tactics to get cash.

But Oliver did more than educate last night. He explained to his viewers that he undertook the surprisingly easy task of starting a debt buying company, Central Asset Recovery Professional, Inc. — “or CARP, for the bottom-feeding fish,” he explained. No sooner had he set up a CARP web site, but another debt buyer was offering to sell Oliver nearly $15 million worth of medical debt for less than $60,000.

So CARP bought the debt of nearly 9,000 people — just so Oliver could forgive it. According to the host, this is the largest one-time giveaway ever on television, beating out Oprah Winfrey’s famous “you get a car! You get a car!” episode, which cost that show $8 million.

(Click on YouTube button on bottom right to view video directly on YouTube to avoid interruption caused by blog's refresh rate. The most relevant discussion begins at 17:15.)

What are the tax consequences?

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June 6, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (3)

Sunday, May 29, 2016

How Will I Know?  IRS Claims Whitney Houston's Estate Undervalued Her Right Of Publicity By $11.5 Million

WhitneyFollowing up on my previous posts (links below) on the IRS's battle with the estate of Michael Jackson over the value of the singer's publicity rights:  Hollywood Reporter, Whitney Houston Estate Challenges $11 Million Tax Bill:

The heirs of late pop star Whitney Houston are now in Tax Court over what the Internal Revenue Service claims is owed in estate taxes.

In a May 23 petition, now sealed and first reported by Bloomberg, the Whitney Houston estate objected to the determination that $22.6 million has been underreported, which the IRS claims means that more than $11 million is owed, including $3 million in penalties.

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May 29, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Wednesday, May 11, 2016

Winston Churchill:  'Serial Tax Avoider'

ChurchillThe Telegraph, Churchill a 'Serial Tax Avoider':

Sir Winston Churchill was a serial tax avoider who exploited loopholes and faked his own retirement in collusion with the chairman of Inland Revenue, his biographer has claimed.

David Lough, a historian and author, said Churchill had learned to use Inland Revenue as a "beast who can be tamed and bent" after finding himself in financial difficulties.

Not only did the politician pretend to retire in order to halve his tax bill, the author claimed, he persuaded the Revenue's young chairman to help him figure out a way to save his earnings for himself. ...

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May 11, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

Monday, May 9, 2016

WSJ:  What Is Prince’s Legacy Worth? The Tax Man Wants To Know.

DovesFollowing up on my previous post, Prince Died Without A Will, According To Court Documents:  Wall Street Journal, What Is Prince’s Legacy Worth? The Tax Man Wants to Know:

After the doves cry, there’s IRS Form 706.

Estate-tax attorneys for Prince, who died [April 21], must attempt to put a precise financial value on his name, image and likeness.

That Prince-ness could make him one of America’s top-earning deceased celebrities, and it may be one of his estate’s largest assets—subject to a 40% federal tax.

The Internal Revenue Service is used to putting price tags on tradeable assets and is well-trained in taking existing revenue streams and capitalizing them into a value. It is much trickier to divine the worth of a unique niche business—marketing Prince’s legacy—that doesn’t really exist yet.

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May 9, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Wednesday, May 4, 2016

NY Times:  AG Dings Developer Aby Rosen For $7 Million In Unpaid Taxes On Art

HurstFollowing up on my previous posts:

New York Times, Developer Aby Rosen to Pay $7 Million in Suit Over Unpaid Taxes on Art:

Aby J. Rosen, the Manhattan real estate developer and art collector, is well known for exhibiting works from his collection at the landmark Seagram Building and at Lever House, both on Park Avenue, as well as at 530 Park Avenue, a 19-story residential condominium. He also has five pieces by Picasso in his Manhattan home, and a controversial, 33-foot-tall bronze sculpture of a pregnant woman with an exposed fetus on the grounds of his estate in Old Westbury, on Long Island.

That $2.5 million, 13-ton sculpture by Damien Hirst [right] is one of 200 artworks that have put Mr. Rosen at the center of another controversy — this one involving unpaid taxes.

The New York attorney general, Eric T. Schneiderman, announced a $7 million settlement with Mr. Rosen on Tuesday for failing to pay taxes on $80 million in artwork that he had bought or commissioned since 2002.

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May 4, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

Monday, May 2, 2016

LeBron James Pays All Of His Social Security Taxes Before Halftime Of His First Game

Sunday, May 1, 2016

How To Win $17M At Backgammon, Until The IRS Intervenes

IRS BackgammonThe Daily Beast, How To Win $17M At Backgammon, Until The IRS Intervenes:

A legendary Irish gambler took a celebrity-obsessed American private equity honcho to the cleaners, winning over $17 million from him in the course of a 72-hour backgammon session.

Had he been Irish, Alec E. Gores, who nurtures friendship with celebrities such as Sylvester Stallone, Tobey Maguire, and Ben Affleck, and was caught up in the Anthony Pellicano wire-tapping scandal after he apparently set the private dick on his wife who was having an affair with his brother, might have known better than to get into a game of chance and skill with JP McManus. ...

McManus is famous for traveling with a portable backgammon set and, sources acquainted with him tell The Daily Beast, has been known to start games with strangers on airplanes in a (usually successful) attempt to win back his airfare.

But when he sat down with Gores, who is worth $2.1 billion, in November 2012 for what has been described as a “serious backgammon match” he walked away with enough to buy not a plane ticket but a private jet—his winnings were a stunning $17.4 million.

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May 1, 2016 in Celebrity Tax Lore, IRS News, Tax | Permalink | Comments (1)

Tuesday, April 26, 2016

Prince Died Without A Will, According To Court Documents

PrinceNew York Times, Prince Died Without a Will, According to Court Documents:

Prince died without a will, according to court documents filed by his sister, which may cause complications for his financial estate and musical legacy.

In probate documents filed on Tuesday with the court in Carver County, Minn., Tyka Nelson, 55, Prince’s sister, said that her brother died without a spouse, children or surviving parents, and that “I do not know of the existence of a will.” ...

In addition to Ms. Nelson, the document lists five half-siblings of Prince as interested parties: his half-brothers John Nelson, Alfred Jackson and Omar Baker, and his half-sisters Norrine and Sharon Nelson. According to Minnesota law, surviving half-siblings are treated the same as full siblings. ..

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April 26, 2016 in Celebrity Tax Lore, IRS News, Tax | Permalink | Comments (0)

Monday, April 25, 2016

Michael Jackson's $1 Billion Tax Court Thriller: IRS Values His Name At $434,000,000, Estate Says $2,105

ThrillerHollywood Reporter, Michael Jackson Estate Faces Billion-Dollar Tax Court Battle:

Of all the befuddling legal matters in the entertainment business, there's perhaps none that causes attorneys to scratch their heads like the battle between Michael Jackson and the Internal Revenue Service over what the late entertainer should be paying in estate taxes. In the years after his death in 2009 at age 50, Jackson has experienced a commercial rebirth thanks to the savvy executors who have managed his assets. The 2009 documentary This Is It grossed $261 million, a Cirque du Soleil tribute show packs in fans, and there have been albums, video games and other lucrative memorials. Now the IRS wants its share, claiming the value of Jackson's name and image upon death amounted to more than $434 million. The estate's own valuation? Just $2,105.

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April 25, 2016 in Celebrity Tax Lore | Permalink | Comments (5)

Sunday, February 28, 2016

A Taxing Oscars:  $232,000 Swag Bags (40% Increase Over Last Year's), Tax Incentives For Best Picture Nominees

Sunday, February 7, 2016

The Big Winner In Today's Super Bowl: The California Tax Man

SuperBowlForbes, California Taxes Will Eat Up All Of Cam Newton's Super Bowl Earnings:

Remember when Peyton Manning paid New Jersey nearly $47,000 in taxes two years ago on his Super Bowl earnings of $46,000? Manning has nothing on the state taxes facing Carolina Panthers quarterback Cam Newton for Super Bowl 50 in Santa Clara, Calif. Newton is looking at a tax bill more than twice as much, which will swallow up his entire Super Bowl paycheck, win or lose, thanks to California’s tops-in-the-nation tax rate of 13.3%. ...

If the Panthers win the Super Bowl, Newton will earn another $102,000 in playoff bonuses, but if they lose he will only net another $51,000. ... Win on Sunday, and Newton will pay California a total of $159,560 in taxes in 2016. Lose, and he will pay $159,200, based on an income reduction of $51,000.

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February 7, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (3)

Monday, February 1, 2016

David Bowie: A Tax Oddity

BowieNew York Post Page Six, David Bowie Leaves Iman Roughly Half of His Fortune:

David Bowie’s dying wish was to have his ashes scattered on Bali — in line with the island’s Buddhist customs — and his riches sprinkled on his wife and kids, according to his will filed Friday in Manhattan court. ...

Bowie also directed that his property and money be divided among his model wife Iman, his two children, Duncan Jones and Lexi Zahra Jones, a personal assistant and a former nanny.

The music icon was worth around $100 million when he died this month of cancer at 69, according to court papers.

Iman will receive roughly half of his fortune, plus the couple’s apartment on Lafayette Street in Manhattan. ...

By rock standards, David Bowie was a real tax oddity — because he was so savvy with his money.

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February 1, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

Monday, January 18, 2016

Martin Luther King, Jr. And The IRS

In honor of Martin Luther King, Jr. Day:  Tallahassee Democrat, Dr. Martin Luther King Jr. and the IRS:

This past year, much ado was made about the so-called “IRS-Gate” and concerns that the Obama administration may have used the agency to target Tea Party and other right wing groups. ... [W]hat often is not stated during the Martin Luther King Holiday weekend is that King, early in his leadership of the Southern Christian Leadership Conference (SCLC), was routinely subjected to IRS audits of his individual accounts, SCLC accounts as well as accounts of his lawyers, first starting during the administration of President Dwight Eisenhower and continuing through the Kennedy administration. ...

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January 18, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Monday, January 4, 2016

Tax Exempt San Francisco Super Bowl Committee Raises Millions, With Little Transparency

Super BowlSan Francisco Chronicle, Tax Exempt Super Bowl Committee Raising Millions, With Little Transparency:

The Super Bowl 50 Host Committee — the organization charged with raising money to produce events around the Bay Area leading up to and including February’s big game — has already raised $50 million from leading Bay Area corporations.

It also has pledged $12 million to more than 100 Bay Area nonprofits, a major step toward its goal of being “the most philanthropic Super Bowl ever.”

But because the NFL requires its host committees to be structured as nonprofit organizations — claiming the same tax-exempt status that the National Football League enjoyed for decades — it doesn’t have to reveal its contributors or how much each donor gave.

That opacity is raising concerns in an era of “dark money,” where politicians use the tax code to hide contributions. Watchdog groups, which also question why wealthy professional sports leagues get to classify themselves as nonprofits, say any entity that’s raising and spending millions — with little transparency — needs to be monitored closely.

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January 4, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

Wednesday, December 30, 2015

5th Circuit:  Texas Can Deny Tax Breaks To Films It Doesn’t Like

MacheteWall Street Journal Law Blog:  Texas Can Deny Tax Breaks to Films it Doesn’t Like, Appeals Court Rules, by Jacob Gershman:

Texas has leeway under the First Amendment to deny tax breaks to films deemed insulting to the state, a federal appeals court ruled [Machete Prooductions LLC v. Page, No. 15-50120 (5th Cir. Dec. 28, 2015)] ...

Last year the producers behind the sequel to the 2010 gory action comedy “Machete” sued Texas for denying them tax breaks under a state program that encourages film production in the state. ...

The state denied it infringed on any constitutional speech rights. And a lower court agreed in a ruling handed down earlier this year. On Monday the Louisiana-based Fifth U.S. Circuit Court of Appeals affirmed that decision.

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December 30, 2015 in Celebrity Tax Lore, New Cases, Tax | Permalink | Comments (1)

Wednesday, December 16, 2015

Tax Court:  92 Year Old Sumner Redstone Liable For Gift Tax On 1972 Gift

Hollywood Reporter, Sumner Redstone Loses to IRS in Tax Case Four Decades in the Making:

As the 92-year-old billionaire Sumner Redstone witnesses a vicious court fight over his mental condition, the U.S. Tax Court has released a decision [Redstone v. Commissioner, T.C. Memo. 2015-237 (Dec. 9, 2015)] that delves into the beginnings of his media empire, his connection to the early-1970s Watergate scandal and four decades of in-fighting in the Redstone family.

The case is extraordinary, to say the least. The core question in Redstone's dispute with the Internal Revenue Service pertains to whether his 1972 transfer of stock to his children was a taxable "gift" or not. Ultimately, the Tax Court affirms a tax deficiency of $737,625, but lets him off the hook for fraud. ...

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December 16, 2015 in Celebrity Tax Lore, New Cases, Tax | Permalink | Comments (2)

Thursday, December 10, 2015

Herzig:  Why We Should Stop Slamming Mark Zuckerberg And Priscilla Chan’s Philanthropic Plans

CZWashington Post op-ed:  Why We Should Stop Slamming Mark Zuckerberg and Priscilla Chan’s Philanthropic Plans, by David Herzig (Valparaiso):

For people who voluntarily decided to part with some $45 billion, Mark Zuckerberg and Priscilla Chan are getting absolutely skewered in the press. ... The promised donation has been questioned by both the conservative and liberal press. Both seemingly demonizing their decision to give 99 percent of their wealth to an entity engaged in charitable giving. Much of the vitriol directed toward them focuses on the preconceived notion of what charitable giving should look like. ...

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December 10, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (5)

Thursday, December 3, 2015

NY Times Debate: Mark Zuckerberg's Use Of A LLC Rather Than A Foundation For His $45 Billion Charitable Giving

NY Times Room for DebateFollowing up on yesterday's post, The Tax (And Insider Trading) Benefits Of Mark Zuckerberg's Pledge To Donate 99% Of His Facebook Shares (Worth $45 Billion) To Charity:  New York Times Room for Debate, Welcome or Wariness for Zuckerberg’s Legacy Plan?:

Facebook's founder pledged 99 percent of his stock to a corporation for charitable giving. But he'd avoid taxes on it, and he'd call the shots.

Additional press and blogosphere coverage:

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December 3, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

The Tax Origins Of Star Wars

Star WarsSyd Gernstein (Bloomberg BNA), We Have Taxes to Thank For Star Wars:

Before there could be a clone war, a Skywalker losing some limbs in a light saber duel, a Death Star, a Death Star blowing up, another Skywalker losing a limb in a light saber duel and another Death Star blowing up, there was—and, believe me, the Star Wars fan in me wishes I was making this up—a tax controversy. ...

This first episode of Star Wars started with a tax dispute. The “trade federation” did not like the fact that the republic had imposed a tax on its trade routes, and protested the tax by staging a blockade, and ultimately an invasion, of the peaceful planet of Naboo.

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December 3, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

Wednesday, December 2, 2015

The Tax (And Insider Trading) Benefits Of Mark Zuckerberg's Pledge To Donate 99% Of His Facebook Shares (Worth $45 Billion) To Charity

FacebookThe Daily Beast, Mark Zuckerberg’s Charity Windfall:

In a Securities and Exchange Commission filing on Tuesday, Facebook founder and chief executive officer Mark Zuckerberg announced that he would gift “substantially all of his shares of Facebook stock” to “further the mission of advancing human potential and promoting equality by means of philanthropic, public advocacy and other activities for the public good.” The vehicle for his beneficence will be the Chan Zuckerberg Initiative LLC, a charity that he controls and through which he will maintain control of Facebook for “the foreseeable future.”

Like great capitalists before him, including Bill Gates, Warren Buffett, John D. Rockefeller, and Andrew Carnegie, Zuckerberg is saving a lot of money by intending to do a lot of good. But there’s plenty in it for him.

Back in 2008, David Yermack a professor of finance at the NYU Stern School of Business, published a paper called Deductio Ad Absurdum: CEOs Donating Stock to Their Own Family Foundations. In it, Yermack questions the value of public subsidies for CEO stock gifts. He even points to such gifts as a mechanism for executives with highly appreciated stock to dispose of their holdings without running afoul of insider trading laws. It also allows those CEOs to maintain control of their companies in the future, but through their newfangled organizations.

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December 2, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Tuesday, December 1, 2015

Cris Collinsworth: 'The NFL Rulebook Is As Complicated As The Tax Code'

Codes 2Opportunity Live, Collinsworth: NFL Rule Book Is As Complicated as the IRS Tax Code:

NBC’s Sunday Night Football color commentator Cris Collinsworth expressed how complicated the National Football League’s rulebook is by comparing it to the tax code of the IRS, saying, “you just have no idea what’s in there.”

Tax Foundation, Sorry, Chris Collinsworth: The NFL Rulebook Is Nothing Like the IRC:

NFL Rulebook: 55,000 words
Internal Revenue Code: 3.9 million words. ... [M]uch of the word count is internal citations, appendices, enactment clauses, and the like, but a reasonable estimate with all this stripped away is still over 2.4 million words. Add in case law, guidance, and other supplementary material needed to actually understand the tax code and you wind up with CCH's 74,000 page Standard Federal Tax Reporter. The NFL Rulebook, including tables and diagrams, runs 79 pages.

December 1, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Wednesday, October 28, 2015

Good Tax Hunting: How Robin Williams Restricted The Use Of His Likeness For 25 Years After His Death, Saving Estate Taxes

GoodForbes, Why Robin Williams Won't Be Making Millions Beyond The Grave:

When beloved actor Robin Williams died in August 2014, he left behind a $100 million estate—and a potential fortune in image licensing. But a clause filed in a trust agreement made public this year means his likeness won’t make money for decades to come.

Williams, best-known for films such as Mrs. Doubtfire and Good Morning, Vietnam, filed a deed to put a restriction on the use of his likeness for 25 years after his death. This prevents his name, photograph, voice or signature from being used in any film, advertisement or endorsement until 2039–and limits his future earnings.

The estates of entertainers featured on our list of Top-Earning Dead Celebrities are able to charge upwards of $500,000 for the use of their image in advertisements, with rare deals climbing into the seven figures. Some, such as James Dean and Bettie Page, also earn royalties from clothing sold with their name attached. Busy cultural icons including Dean and Page tally up a number of licensing deals which inch their posthumous paydays into the many millions.

By restricting the exploitation of his right of publicity, Williams, who died by suicide aged 63, has ensured no one cannot profit from his untimely death—at least not yet. ...

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October 28, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Tuesday, October 6, 2015

BP Settlement Generates $15 Billion Tax Deduction

BP LogoFusion, The Gulf Oil Spill Settlement Lets BP Get Away With Not Paying $5.35 Billion in Taxes:

In announcing the final $20.8 billion settlement with BP over the 2010 Deepwater Horizon oil spill, Attorney General Loretta Lynch said on Monday, “BP is receiving the punishment it deserves.”

What she didn’t mention is that BP—which was found grossly negligent for the 2010 disaster, the worst offshore oil spill in U.S. history—will likely only pay about three fourths of that punishment once tax deductions are taken into account.

Just $5.5 billion of the settlement is a penalty under the Clean Water Act. The other $15.3 billion is other damages and payments that BP can treat as a cost of doing business, said Michelle Surka, an analyst with the U.S. Public Interest Research Group. That means that the oil giant can legally deduct 35% of this $15.3 billion from its taxes, for a total windfall of $5.35 billion. ...

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October 6, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

Friday, September 25, 2015

Yogi Berra's Tax Wisdom

YogiForbes:  Yogi Berra's Sayings Worked Their Way Into Tax Decisions, by Peter J. Reilly:

Yogi Berra besides being a great baseball player and manager is also known as something of a common man philosopher for his sayings sometimes called Yogi-isms not all of which he actually said. As is my habit when the prominent pass, I had to check whether he had been involved in tax litigation. I didn’t find anything and my Thomson Reuters Checkpoint is pretty comprehensive and my research skills are pretty good. After all, tax blogging is 90% good research; the other three-quarters is creativity.

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September 25, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Sunday, June 7, 2015

NY Times: The Tax Consequences Of Dennis Hastert's Payments To Alleged Child Abuse Victim

HastertNew York Times:  When It’s a Crime to Withdraw Money From Your Bank, by Josh Barro:

Dennis Hastert has not been indicted on a charge of sexual abuse, nor has he been indicted on a charge of paying money he was not legally allowed to pay. The indictment of Mr. Hastert, a former House speaker, released last week, lays out two counts: taking money out of the bank the wrong way, and then lying to the F.B.I. about what he did with the money. ...

Paul Caron, a tax law professor at Pepperdine University, noted that the person who was paid money by Mr. Hastert may have owed income tax on the payments, whether they constituted a settlement, extortion or something else. Yes, even proceeds from extortion are taxable income; there was a Supreme Court case about the matter in 1952.

New York Times:  If Hastert Was Extorted, He Could Deduct Some Losses From His Taxes, by Josh Barro:

When I was researching my article about Dennis Hastert’s indictment on charges that he improperly withdrew large sums of money from a bank, one question I had was whether any tax was owed on the payments Mr. Hastert was said to have made.

For tax purposes, were the payments gifts? Fees? A settlement? Hush money? Any of these options would have tax implications — implications that could provide additional justification for the prosecution, since one of the key motivations of anti-money laundering laws is to prevent people from evading taxation by making large payments in cash.

Tax experts I spoke with agreed that the payments would constitute a settlement or extortion. In either case, the responsibility for reporting the payments would lie not with Mr. Hastert but with the payments’ recipient, identified in the indictment as “Individual A.”

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June 7, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Thursday, May 21, 2015

Brunson & Herzig: The NFL Should Not Be Able To Give Up Its Tax-Exempt Status Without Paying An Exit Tax

NFLForbes:  Penalty For Holding: Why The NFL Should Be Forced To Keep Its Tax Exemption, by Samuel Brunson (Loyola-Chicago) & David Herzig (Valparaiso):

Many people think there are too many tax-exempt entities.  Every time news breaks that there are tax-exemptions for fraternities, golf clubs, and social clubs there seems to be general outrage. So most people welcomed the National Football League’s announcement that it was giving up its tax-exempt status, seeing the announcement as the end of an unnecessary taxpayer subsidy. It turns out, though, that it is not that simple. Either the NFL was not providing a public good and should not have been granted the status in the first place, or if the NFL wants to be for profit, then the benefits of the tax exemption should be recaptured, e.g., with an exit tax.

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May 21, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Monday, May 18, 2015

U2 Hits Back At Criticism Over Tax Havens

Bono 2Sky News, U2 Hit Back At Criticism Over Tax Havens:

In an interview with Sky News, lead singer Bono insisted the band pays a fortune in tax and it was "sensible" to move some of their business to the Netherlands.

"It is just some smart people we have working for us trying to be sensible about the way we are taxed," he said.

"We pay a fortune in tax, a fortune, just so people know, and we're happy to pay a fortune in tax.

"Because you're good at philanthropy and because I am an activist people think you should be stupid in business and I don't run with that."

(Hat Tip: Mike Talbert.) Prior TaxProf Blog coverage:

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May 18, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (3)

Friday, May 1, 2015

Ohio Supreme Court Strikes Down Cleveland’s ‘Jock Tax’

Jock TaxWall Street Journal, Ohio High Court Strikes Down Cleveland’s ‘Jock Tax’:

Ohio’s highest court on Thursday struck down Cleveland’s so-called “jock tax,” ruling that the city was excessively taxing visiting professional athletes using an illegal method to calculate their bills. ...

Mr. Hillenmeyer, a former Chicago Bears linebacker who retired in 2010, played one game a year in Cleveland — over a 20-game season — between 2004 and 2006. Cleveland applied its income tax to 5% (1/20) of his earnings.

The city taxed Mr. Saturday, a former center for the Indianapolis Colts, for a single game in Cleveland in 2008. In his case, he never stepped foot in the city but missed that game due to an injury. He owed money anyway because the city’s regulation applied the tax to any game in Cleveland “in which the athlete was excused from playing because of injury or illness.”

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May 1, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (4)

Former NFL Star Plaxico Burress Shoots Himself In Foot, Drops Tax Payment Ball

BurressFormer NFL star receiver, Plaxico Burress, who famously served time in prison after accidentally shooting himself in the leg in a nightclub in 2008, has been indicted in New Jersey on one count of issuing a bad check or electronic funds transfer and one count of willful failure to pay state tax in the amount of $47,903. The charges carry maximum sentences of five years in prison and a $15,000 fine. 

May 1, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Wednesday, April 29, 2015

Why the NFL Gave Up Its Nonprofit Status: To Escape Scrutiny

NFLVox, Why the NFL Just Gave Up Its Nonprofit Status: To Escape Scrutiny:

For years, the NFL's tax-exempt status has been the subject of scrutiny and ridicule. To many people, the fact that a league headed by a commissioner making $44 million a year was categorized as a nonprofit was absurd.

On Tuesday, Richard Rubin at Bloomberg reports, the NFL has finally decided to shed its tax-exempt status. As a result, it will pay an estimated $10 million or so per year in taxes.

But it's important to put this number in the proper context: the league's teams pull in about $9.5 billion per year, nearly a thousand times as much. And since 2000, US taxpayers have spent an estimated $3.9 billion on stadiums for these teams.

The NFL's decision to give up its tax-exempt status isn't some noble recognition of the tax burden it's unfairly been shirking. It's a calculated move to pay a relatively small fee to avoid scrutiny and preempt possible Congressional action.

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April 29, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (3)

Wednesday, April 22, 2015

Warren Buffett’s Nifty Tax Loophole

BuffettBarron's, Warren Buffett’s Nifty Tax Loophole:

Warren Buffett has backed higher individual tax rates–while ensuring that his vast wealth in Berkshire Hathaway is almost immune.

Warren Buffett is fond of saying his tax rate is lower than his secretary’s. He does not publicize his tax returns, but for the tax year 2010, he paid $6.9 million on taxable income of $39.8 million, according to partial disclosures he made in 2011.

What is astounding about those numbers is not the 17.3% tax rate, but that Buffett’s $39.8 million of taxable income is only about 0.05% of his reported net worth ($71 billion according to Forbes, which put him third on its list of the 400 wealthiest people in the world for 2015).

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April 22, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (4)

Wednesday, April 15, 2015

World Premiere of Loopholes, A Pain In The I.R.S.

Tonight is the world premiere of Loopholes, A Pain In The I.R.S. at the Hudson Mainstage Theatre in Hollywood, Calijfornia

Loopholes

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April 15, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Saturday, April 11, 2015

Obama and Biden Release Their 2014 Tax Returns

2014 Obama Tax Return

President Obama and Vice-President Biden yesterday released their 2014 tax returns. Here are charts putting the 2014 returns in context with their earlier returns:

Obama:

Year

AGI

Tax

Charitable Gifts

Gifts/AGI

2014

$477,383

$93,362

$70,712

14.8%

2013

$481,098

$98,169

$59,251

12.3%

2012

$608,611

$112,214

$150,034

24.7%

2011

$789,674

$162,074

$172,130

21.8%

2010

$1,728,096

$453,770

$245,075

14.2%

2009

$5,505,409

$1,792,414

$329,100

6.0%

2008

$2,656,902

$855,323

$172,050

6.5%

2007

$4,139,965

$1,396,772

$240,370

5.8%

2006

$983,826

$277,481

$60,307

6.1%

2005

$1,655,106

$545,614

$77,315

4.7%

2004

$207,647

$40,426

$2,500

1.2%

2003

$238,327

$51,856

$3,400

1.4%

2002

$259,394

$68,958

$1,050

0.4%

2001

$272,759

$86,072

$1,470

0.5%

2000

$240,505

$63,732

$2,350

1.0%

Biden:

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April 11, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

Tuesday, March 31, 2015

Robin Williams Left Publicity Rights (Restricted For 25 Years) to Charity, Avoiding IRS Dispute Embroiling Michael Jackson's Estate

WilliamsHollywood Reporter, Robin Williams Restricted Exploitation of His Image for 25 Years After Death:

[O]ne of the more innovative aspects of Robin Williams' estate planning ... might just might become a model for other celebrities preparing for their demise. ... According to a review of the Robin Williams Trust — filed as an exhibit last Wednesday — Williams bequeathed rights to his name, signature, photograph and likeness to the Windfall Foundation, a charitable organization set up by Williams' legal reps at the law firm of Manatt, Phelps.

There are two important facets of this provision.

First, the Trust restricts exploitation of Robin Williams' right of publicity for 25 years after his death. ...

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March 31, 2015 in Celebrity Tax Lore, IRS News, Tax | Permalink | Comments (0)

Sunday, February 22, 2015

A Taxing Oscars: $160,000 Swag Bags and Tax Incentives for Best Picture Nominees

IRS, Gift Bag Questions and Answers:

Q: What are the federal income tax consequences to a person who accepts a gift bag in recognition of involvement in an awards show?
A: In general, the person has received taxable income equal to the fair market value of the bag and its contents and must report that amount on his or her federal income tax return. ...

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February 22, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Saturday, February 7, 2015

Malcolm Butler, Not Tom Brady, to Pay Income Tax on Super Bowl MVP Truck

BradyFollowing up on Thursday's post, The Tax Consequences of Tom Brady's Gift of His Super Bowl MVP Truck to Malcolm Butler:  ESPN, Malcolm Butler to Pay Taxes on Prize:

The truck that Chevrolet presented to New England Patriots quarterback Tom Brady as Super Bowl MVP will be given directly by the company to teammate Malcolm Butler instead.

Chevy spokesman Michael Albano said the truck, a loaded Colorado, will be given to the cornerback, who intercepted Russell Wilson's pass on the goal line to seal the Patriots' win in Super Bowl XLIX last Sunday. The event will take place in the Boston area Tuesday, Albano said.

If Brady received the truck himself and gave it to Butler, he would have to count its value -- which Albano said was worth roughly $35,000 -- as income and he would be taxed on it, said Robert Raiola, a CPA who specializes in sports tax management with O'Connor Davies in New Jersey. Brady also might have had to pay a gift tax. U.S. residents can give $5,430,000 worth of gifts in their lifetime before having to pay tax on what they give. It is not known how close Brady might be to that limit.

Now instead of Brady paying income taxes, Butler will have to, according to Raiola. The approximately $35,000 value will now count as income to Butler, and he will pay taxes on that.

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February 7, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Friday, February 6, 2015

Brian Williams, Helicopters, and Tax

Brian WIlliamsFor those following the revelation that NBC News anchor Brian Williams has been wrongly claiming for over a decade that a helicopter he was riding in was struck by enemy fire in Iraq:  The New Yorker, The Fact-Checked Adventures of Brian Williams, by Andy Borowitz:

The fact-checking department at NBC News has verified that the following anecdotes told by Brian Williams actually happened. ...

4. In May of 2011, the elevator in my building suffered an equipment malfunction en route to my penthouse. I was stuck talking to a tax attorney for seven minutes before I was rescued.

(Hat Tip: Erik Jensen.)

February 6, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Thursday, February 5, 2015

The Tax Consequences of Tom Brady's Gift of His Super Bowl MVP Truck to Malcolm Butler

BradyForbes, IRS Is Coming After Tom Brady's Super Bowl MVP Truck, by Ryan Ellis:

The world champion New England Patriots will celebrate with the city of Boston today in the now customary duck boat parade downtown.  It would be fitting if an IRS agent was waiting for quarterback Tom Brady at the end of the route.

Specifically, he might want to talk about Brady’s new truck.  You know, the 2015 Chevy Colorado he won as Super Bowl MVP. The same truck Brady wants to hand over to Patriots rookie cornerback Malcolm Butler, who won the Super Bowl on a last second interception.

The truck is considered a taxable prize under the Internal Revenue Code, section 74.  It’s taxed at Tom Brady’s marginal income tax rate of 39.6 percent. ... Tom Brady will pay ($34,000 x 39.6 percent) in taxes, or $13,500 in income tax on this prize. ...

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February 5, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (6)

Sunday, February 1, 2015

The Super Bowl and Tax

Super BowlForbes, Super Bowl XLIX Tax Tale Of The Tape: Who Ya' Got?, by Tony Nitti:

Do me a favor. Put down the Form 1040 you’re working on, take a good look in the mirror, and be brutally honest with yourself: are you a typical tax accountant?

Do you find yourself noticing the time of day, or the exit number on the highway, and thinking, “that’s a great Code section!”

Is your sense of humor limited to giggling uncontrollably at tax-themed double entendres like “hot assets” and “dynamic scoring?”

Did you name your sibling labradors Bitker and Eustice?

If so, that’s OK. You are what you are. ... [F]or 4-6 hours this weekend, you’re going to have to pretend that you’re not the introverted, odd person you clearly are. And that isn’t going to be easy.

But I can help.

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February 1, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Thursday, January 22, 2015

D.C. Tax Law Gave Washington Nationals Unique Advantage in Inking Max Scherzer to $210 Million Deal

MaxWashington Post, Can Max Scherzer’s Contract be a Model for Other Superstars Thinking of Washington?:

Washington may have at least one advantage over other pro sports cities when it comes to wooing high-priced free agent talent: the District’s tax laws.

Scott Boras, the agent for pitcher Max Scherzer and several other Nationals stars who has negotiated some of the biggest contracts in sports, said local tax laws allowed Scherzer and the Nationals to hammer out a creative contract that could provide a blueprint of sorts for other area teams courting big-name talent. That includes the kind of deals that likely would be required for the Wizards to lure, say, Kevin Durant back to his home town or for the Nationals to keep slugger Bryce Harper. ...

Boras said Scherzer’s $210 million contract is not only historic in terms of its size but noteworthy in structure. The deal takes advantage of District tax laws to save Scherzer money — possibly in the seven or eight figures — and keeps the team’s annual salary payments down. It would not have worked in New York, Los Angeles or most other baseball cities, he said. ...

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January 22, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

Monday, January 19, 2015

Martin Luther King, Jr. and the IRS

In honor of Martin Luther King, Jr. Day:  Tallahassee Democrat, Dr. Martin Luther King Jr. and the IRS:

This past year, much ado was made about the so-called “IRS-Gate” and concerns that the Obama administration may have used the agency to target Tea Party and other right wing groups. ... [W]hat often is not stated during the Martin Luther King Holiday weekend is that King, early in his leadership of the Southern Christian Leadership Conference (SCLC), was routinely subjected to IRS audits of his individual accounts, SCLC accounts as well as accounts of his lawyers, first starting during the administration of President Dwight Eisenhower and continuing through the Kennedy administration. ...

[B]y 1962, King had settled with the IRS for a mere $500 dollars for a deduction that he could not explain to auditors. Two years earlier, in February of 1960, a Montgomery, Alabama Grand Jury made King the first person ever charged in that state with criminal tax fraud charges, alleging that in 1956 and 1958, that King through the Montgomery Improvement Association, the organization that had led the successful bus boycotts in that city and was the precursor to the SCLC, had failed to pay the state approximately $45,000 that it was owed in taxes. ...

Looking back, that King was even indicted proved and proves that when necessary, there were and remain many other Americans who were and are more than willing to use the IRS and other tax authorities to harrass individuals and organizations with which they disagree.

(Click on YouTube button on bottom right to view video directly on YouTube to avoid interruption caused by blog's refresh rate.)

January 19, 2015 in Celebrity Tax Lore, IRS News, Tax | Permalink | Comments (0)

Monday, January 12, 2015

More Proof That Tax Lawyers Are Cooler Than Rock Stars

(Hat Tip: Ahmed Taha.)

January 12, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (3)

Friday, November 28, 2014

Lewis Black Hammers Black Friday 'Tax' as 'Most Anti-American Thing I've Ever Heard'

News Busters, Lewis Black Hammers Black Friday 'Tax' as 'Most Anti-American Thing I've Ever Heard':

Black FridayDuring Wednesday evening's edition of The Daily Show on the Comedy Central cable network, comedian Lewis Black devoted his “Back in Black” segment to slamming the tradition of Black Friday, the day after Thanksgiving and a time when stores open early and shoppers arrive before the sun comes up to buy items at huge discounts.

Black claimed that even worse than the rush to get tremendous bargains is the practice of “taxing” stores in malls that stay closed so their employees can spend the time with their families. “That’s the most anti-American thing I’ve ever heard!” Black exclaimed. “It’s like Sharia law for capitalism!”

“Next week is my favorite day of the year,” Black stated, but he wasn't talking about Thanksgiving. Instead, it's Black Friday because if you “trample a guy on a Tuesday afternoon, you get charged with assault. But do it in a Walmart on Black Friday, you get a PS4. But this year,” he noted, “something about Black Friday is twisting everyone's panties.” ...

The most disturbing clip came from Steve Doocy on the Fox & Friends morning program, who quoted an email from a viewer as stating: “You have got to be kidding me. … Just go to work. You can celebrate by eating a turkey sandwich while on break. [I] did it for years and was well compensated.”

“Sure, Thanksgiving is just as good eating a cold sandwich alone in the back of a Kmart,” Black snarled. “You don't even need cranberry sauce. You can season it with your tears.”

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November 28, 2014 in Books, Celebrity Tax Lore, Tax | Permalink | Comments (1)

Thursday, November 27, 2014

Taxing Two Thanksgiving Day Gentlemen

TwoForbes:  Taxing Two Thanksgiving Day Gentlemen, by Robert W. Wood:

A central theme of the Bible is that it is better to give than to receive, even when you give up a great deal. Two Thanksgiving Day Gentlemen, a short story masterpiece by O. Henry, gives this theme a twist. A vagabond—today we would call him homeless—is feted each Thanksgiving Day to a grand dinner in a posh New York eatery by a successful businessman. But on this Thanksgiving Day, each man hides his true circumstances.

The businessman is down on his luck so starves for two days in order not to disappoint the vagabond. Ironically, the vagabond is flush, his stomach bursting from two other holiday meals from other well-wishers. Forcing down each bite, he plays along knowing how important this ritual is to his kindly rich benefactor. Only O. Henry could make us feel what each feels as we smile ruefully at the comedy playing out.

In this crowdfunding era, individual acts of kindness still count, even if they don’t produce a tax break. That’s right, the charity the two Thanksgiving gentlemen exchange isn’t tax deductible, since you can’t give directly and get a deduction.

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November 27, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Sunday, November 23, 2014

Tax-Free Buyouts of Coaches' Contracts

Following up on my previous post, The Tax Treatment of Buyouts of Coaches' Contracts:  USA Today, Schools Buying Coaches' Contracts Instead of Buying Out:

StrongIt long has been a practice for universities that want to hire a new coach to pay the "buyout" to get him out of his contract at his old school.

The question has been, who pays the taxes?

To at least a few schools, the answer is nobody. The universities of Texas, Louisville and Alabama at Birmingham have found a way to structure deals to avoid tax implications – simply pay the coach's current school for the rights to his contract, and renegotiate it.

Using that approach, the schools say, the coach does not owe a buyout for terminating his contract because he technically doesn't terminate the contract. It transfers to his new school, which reaches a new deal with the coach, just as schools routinely renegotiate such contracts.

Thus, while Louisville received $4.375 million when coach Charlie Strong left for Texas, the money did not come from Strong. Instead, with Strong's blessing, Louisville sold his contract to Texas. Texas assumed all of that deal's rights and obligations, and agreed to pay Louisville $4.375 million, the same amount as Strong's buyout. ...

It's an approach intended to avoid taxes for coaches and the schools. Under federal tax law, it is undisputed that a payment made by an employer to meet an employee's personal obligation must be treated as taxable income to the employee. But to the schools, a buyout payment is viewed as a business expense. ...

How the IRS or a tax court would view these deals is is an open question, said Jeffrey H. Kahn, a professor at Florida State's law school. Kahn and his father, Douglas A. Kahn, a professor at the University of Michigan law school, wrote a 2007 law review article about buyouts [Tax Consequences When a New Employer Bears the Cost of the Employee's Terminating a Prior Employment Relationship, 8 Fla. Tax Rev. 539 (2007)].

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November 23, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)