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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)

Wednesday, November 19, 2014

NY Times: Al Sharpton's Influence Grows, As Do His Unpaid Taxes

SharptonNew York Times, Questions About Sharpton’s Finances Accompany His Rise in Influence:

Mr. Sharpton’s influence and visibility have reached new heights this year, fueled by his close relationships with the mayor and the president. Obscured in his ascent, however, has been his troubling financial past, which continues to shadow his present. 

Mr. Sharpton has regularly sidestepped the sorts of obligations most people see as inevitable, like taxes, rent and other bills. Records reviewed by The New York Times show more than $4.5 million in current state and federal tax liens against him and his for-profit businesses. And though he said in recent interviews that he was paying both down, his balance with the state, at least, has actually grown in recent years. His National Action Network appears to have been sustained for years by not paying federal payroll taxes on its employees.

With the tax liability outstanding, Mr. Sharpton traveled first class and collected a sizable salary, the kind of practice by nonprofit groups that the United States Treasury’s inspector general for tax administration recently characterized as “abusive,” or “potentially criminal” if the failure to turn over or collect taxes is willful.

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November 19, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (3)

The Tax Consequences of the Lincoln Center's Naming Rights

NYCForbes:  What's In A Name? Should Naming Rights Reduce Charitable Deductions?, by Peter J. Reilly:

When Avery Fisher gave Lincoln Center $10.5 million in 1973 to renovate Philharmonic Hall it was agreed that the hall be called Fisher Hall in perpetuity. Perpetuity turns out to be measured in decades rather than centuries or millennia. Lincoln Center wants to renovate or raze and rebuild now and is hoping to auction off naming rights. According to this story in the New York Times, objections by the Fisher family have been assuaged by “essentially paying ” them $15 million. I’d really like to dig into what is meant by “ essentially paying”, but dammit Jim, I’m just a tax blogger, not an investigative reporter. I’m going to take “essentially paying” to mean paying and what was paid for was some amorphous right that the Fisher family had to keep its name plastered on a building.

The story raises the question of whether you should be able to take a full charitable deduction for a donation if, as a legally binding condition of the donation, you get to have a landmark building named after you. It is worth noting that the Fisher family actually ended up making a profit, although rather a modest one on the whole deal. I computed the pre-tax return to the family as being roughly 0.85%, which is really anemic, unless you compare it to what is being paid on contemporary deposit balances. If you assume that Mr. Fisher took a charitable deduction with a 70% benefit in 1973 and the family paid capital gain tax on the Lincoln Center payoff, the after tax return comes to 3.88%, which is not great, but still better than getting poked in the eye with a sharp stick.

I’m not sure where I might have went with this, so I have to say – Thank God for law professors – and not just because the Tax Prof gives me plug now and again. Professor William Drennan of Southern Illinois University has written an article titled Where Generosity And Pride Abide: Charitable Naming Rights [80 U. Cin. L. Rev. 45 (2011)].

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November 19, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Friday, November 14, 2014

Buffett to Buy Duracell from P&G in Cash-Rich Split-Off, Save $1 Billion in Taxes

Bloomberg, Buffett Set to Save More Than $1 Billion on Taxes in Swap:

DuracellWarren Buffett is again showing how to use the U.S. tax code to his advantage. For the third time in a year, the billionaire chairman of Berkshire Hathaway has structured a deal in which he buys businesses in exchange for stock that has appreciated. The transactions, called cash-rich split-offs, allow him to avoid capital gains taxes that would be incurred if he sold the shares in the open market.

Berkshire announced today that it would turn over about $4.7 billion in Procter & Gamble stock in exchange for P&G’s Duracell battery business, which will be infused with about $1.7 billion in cash. Since Buffett’s cost basis on the shares was about $336 million, and corporate capital gains are typically taxed at 35 percent, structuring the deal in this way could save Berkshire more than $1 billion. P&G also stands to reduce its tax liability on the sale. ...

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November 14, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Tuesday, November 4, 2014

Aggressive Planning Saves John Malone Billions in Taxes

Bloomberg:  Malone Gained Double Tax Break in Liberty Address Shift,  by Jesse Drucker:

MaloneShifting the address of his Liberty Global Inc. from Colorado to London last year didn’t just put billionaire John C. Malone in a position to reduce his company’s tax bill.

He also took precautions to avoid the capital-gains hit that the so-called inversion would trigger for him and other investors. The day before the deal was announced, Malone -- the company’s chairman and controlling shareholder -- transferred $600 million of his shares into a tax-exempt charitable trust. He avoided paying taxes on his remaining stake, worth about $260 million, by exploiting IRS regulations meant to block a different loophole.

All told, Malone escaped about $200 million in personal taxes, and Liberty Global’s U.S. shareholders together likely saved more than a billion dollars, according to data compiled by Bloomberg.

“He’s congenitally averse to paying taxes,” said Robert Willens, an independent tax accounting analyst in New York City.  

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November 4, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Saturday, October 18, 2014

How to Audit the President

Bloomberg, How to Audit the President, by Richard Rubin:

Obama 2013

The presidency is laden with perks: the jet, the mansion, the personal chef. 

But there's some nastiness, too, awaiting the winner of the 2016 election, namely: mandatory audits from the Internal Revenue Service. The tax returns of the commander-in-chief and the vice president get automatic annual scrutiny from the IRS. Compare that to the 1 in 49 audit rate for everyone else in the $200,000 to $500,000 income bracket. 

What got us poking around on this question was a set of documents released from Bill Clinton's presidential library last week, showing White House lawyers preparing for his second consecutive audit amid questions about the Whitewater real estate deal in Arkansas. The audit requirement is so obscure that one former, very senior IRS official didn't even recall it when we started asking questions.

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October 18, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

Monday, October 6, 2014

Tax Court: Tenured Art Professor Has Separate Trade or Business as Artist

Crile v. Commissioner, T.C. Memo. 2014-202 (Oct. 2, 2014):

CrilePetitioner is an artist and a tenured professor of studio art. ... This opinion addresses the first of respondent’s theories and concludes that petitioner during the years in issue was engaged in a “trade or business” with the objective of making a profit from her activity as an artist. Respondent’s contentions concerning the substantiation of her expenses, the character of those expenses as “ordinary and necessary,” and her liability for penalties and additions to tax will be resolved in due course.

Petitioner has had a long, varied, and distinguished career as an artist. She has worked for more than 40 years in media that include oil, acrylic, charcoal, pastels, printmaking, lithograph, woodcut, and silkscreen. She has exhibited and sold her art through leading galleries; she has received numerous professional accolades, residencies, and fellowships; and she is a full-time tenured professor of studio art at Hunter College in New York City. Respondent agrees that petitioner has been a successful, though rarely a profitable, artist.

During the academic year petitioner devotes roughly 30 hours per week to her art, working mainly at a small studio in her Manhattan apartment. During the summer, she works full time on her art business at a larger studio in upstate New York. The amount of time it takes petitioner to create a finished work of art varies greatly--from one week to two years--depending on its size and complexity. During her career petitioner has created more than 2,000 pieces of art.

Petitioner’s artwork hangs in the permanent collections of at least 25 museums. These include the Metropolitan Museum of Art, the Guggenheim Museum, the Brooklyn Museum of Art, the Phillips Collection, the Hirshhorn Museum, and art museums at eight colleges and universities. Museums have a rigorous vetting process for acquiring art. Museum acquisitions boost an artist’s reputation in the eyes of collectors and may contribute to price increases for the artist’s other works.

Petitioner’s artwork has been acquired by for-profit as well as nonprofit entities. Corporations that have purchased petitioner’s art (several of which have since merged) include AT&T, Exxon, Texaco, Standard Oil of Ohio, Bank of America, Chase Manhattan Bank, Chemical Bank, Charles Schwab, General Mills, Westinghouse, General Telephone & Electronics, Frito-Lay, Cigna, and Prudential. Her works hang in the collections of six major New York law firms. Governmental entities that have acquired her art include the Federal Reserve Board, the Library of Congress, and the State Department (for display in U.S. embassies abroad). Such acquisitions, like museum acquisitions, place a “seal of approval” on an artist’s works and have the potential to make them more attractive to private collectors. ...

Petitioner has generated substantial income from sales of her artwork. Respondent stipulated that the total value of works sold during her career is at least $937,150. Galleries usually took a 50% commission. ...

All in all, the Court finds that petitioner sold, directly or through galleries, a total of 356 works of art during 1971-2013. These sales generated gross proceeds of approximately $1,197,150. After subtracting gallery commissions and other reductions, petitioner earned income of approximately $667,902 from sales of her art during these years. ...

To be promoted and gain tenure, a studio artist must exhibit art; the sale of art is not required. There is an expectation that a professor, once tenured, will continue to make and exhibit art. However, a tenured professor is no longer subject to annual performance evaluations, and the expectation to exhibit art is not rigorously enforced. Petitioner plans to continue her art business following her retirement from Hunter College. ...

Petitioner filed Federal income tax returns for all years in issue. On those returns she reported wage income between $85,999 and $106,058, and she reported other taxable income (interest, dividends, capital gains, pensions, and Social Security payments) between $17,658 and $67,046. On her Schedules C, she reported income and claimed the following expenses as deductions in connection with her activity as an artist during the years at issue:

Chart

Petitioner's theory for claiming deductions seems to have been that most experiences an artist has may contribute to her art and that most people with whom an artist socializes may become customers or otherwise advance her career. The trial established that a significant number of the deductions she claimed were not, within the meaning of section 162(a), "ordinary and necessary expenses" of conducting her art business but were "personal, living, or family expenses" non-deductible under section 262(a). The latter expenses appear to have included telephone and cable television bills, newspaper and magazine subscriptions, gratuities to doormen in her apartment building, taxicabs to the opera, museums, and social events, restaurant meals with friends and acquaintances, and international travel to gain inspiration from paintings in European museums. We have deferred to another day the calibration of petitioner's deductible business expenses. But it was clear to the Court that the economic losses she actually sustained in her art business were substantially smaller than the tax losses reported on her Schedules C, owing to the inclusion of many personal expenses when calculating her business income. ...

For any practitioner who teaches--whether a lawyer, an accountant, an economist, or an artist--there is an obvious intersection between the individual’s profession and his or her teaching. But the two activities have different job requirements and entail different skills.

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October 6, 2014 in Celebrity Tax Lore, New Cases, Tax | Permalink | Comments (5)

Wednesday, September 24, 2014

Michael 'The Situation' Sorrentino Has a Tax Situation

U.S. Department of Justice Press Release, Michael "The Situation" and Marc Sorrentino indicted for Tax Crimes Involving $8.9 Million Income:

The SituationTelevision personality Michael “The Situation” Sorrentino and his brother Marc Sorrentino are expected to appear in federal court this afternoon to face an indictment alleging they did not properly pay taxes on $8.9 million in income Michael Sorrentino received from promotional activities, U.S. Attorney Paul J. Fishman announced.

Michael Sorrentino and his brother Marc Sorrentino are charged with one count of conspiracy to defraud the United States. Marc and Michael Sorrentino also are charged with three and two counts, respectively, of filing false tax returns for 2010 through 2012. Michael Sorrentino faces an additional count for allegedly failing to file a tax return for 2011.

According to the indictment returned today:

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September 24, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

Friday, September 19, 2014

Tax-Free $10-$20 Million Disability Policy May Keep Anthony Kim Off PGA Tour

Sports Illustrated, Anthony Kim, MIA Since 2012, Wrestles With Whether To Tee It Up Again or Reap an Eight-Figure Disability Settlement:

KimAnthony Kim has become golf's yeti, an elusive figure who is the source of endless conjecture. What we know for sure is that Kim, 29, has not teed it up at a PGA Tour event in more than 28 months. Once considered the future of U.S. golf, he is now estranged from the game that brought him fame and fortune. ... In some circles, Kim has become golf's Voldemort -- a name that dare not be spoken. ...

Kim's mysterious disappearance has left a void on Tour, to which he brought a much-needed swagger. His first year in the big leagues was 2007, and as a 23-year-old Ryder Cup rookie at Valhalla in '08 he was given the freighted task of leading off in the Sunday singles. "I felt like he was our team leader," says U.S. captain Paul Azinger. "He was an emotional juggernaut. His enthusiasm was infectious. He wanted to go out there and take somebody down. And he did." Kim's 5-and-4 thrashing of Sergio García remains the signature moment of his career, and it helped propel the U.S. to its only Ryder Cup victory since 1999. ...

Kim's hyperaggressive play carried him to two big-time victories on Tour in 2008 -- at Congressional and Quail Hollow -- as he finished sixth on the money list with $4.7 million. At the '09 Masters he made a record 11 birdies during a second-round 65, and the next year he nearly stole the green jacket, going birdie, birdie, birdie, eagle, birdie on the back nine on Sunday before he ran out of holes and settled for third place, four shots behind Mickelson. But even then Kim was battling an injury to his left thumb, which was operated on a month after Augusta. He struggled to regain his form in '11, cracking only two top 10s while struggling with tendinitis in his left wrist, which he said was the result of compensating to protect his thumb. The injuries kept coming. In May 2012 he ruptured his left Achilles tendon while running on a beach in San Diego. Kim had surgery the following month, and his self-imposed exile began.

No IMG staffer would comment for this story, but the party line is that Kim is still injured and expected to return to the Tour someday. ...

So what is? The answer very well may lie in an insurance policy Kim has against a career-ending injury. An IMG source pegged its value at $10 million, tax-free. Kim's friend, who has had financial discussions with him, says, "It's significantly north of that. Not quite 20, but close. That is weighing on him, very much so. He's trying to weigh the risk of coming back. The way he's phrased it to me is, 'If I take one swing on Tour, the policy is voided.'"

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September 19, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Scott Brown and Debbie Wasserman Schultz: The Deductibility of Politicians' Grooming and Clothing Expenses

BrownThe American Democracy Legal Fund has sent this letter requesting the IRS to investigate certain deductions claimed by New Hampshire Republican Senatorial Candidate Scott on his 2010 and 2011 tax returns, including $3,550 for "TV makeup and grooming.

Forbes, When It Comes to Grooming, Scott Brown Is No Debbie Wasserman Schultz:

It’s true that purely personal expenses are never tax deductible (women’s makeup, men’s suits, etc.)  But that’s not what Brown was deducting. He deducted special television makeup products, the pancake powder they put on your face before you yell into a camera for five minutes. That has no non-television application outside in the real world, unlike the cosmetic products and clothes that Ms. Hamper unsuccessfully tried to claim. Brown’s expenses would very likely hold up under examination as an ordinary and necessary business expense related directly to the production of his income.

DebbieThis is a little embarrassing for Democrats timing-wise. On the same day they raised this calumny against Brown, Politico ran a long piece showing how Democrats, too, cringe every time they see or hear Democratic National Committee (DNC) Chairperson Debbie Wasserman-Schultz.  President Obama reportedly dislikes her intently, and if you’ve ever seen her nastiness on television it’s not hard to see why.

Apparently, Ms. Wasserman Schultz tried, and tried, and tried to get the DNC to pay for her clothing, tax-free.  She tried during the convention, she tried during the inaugural, and she tried every time she had the chance.  I have no doubt she has succeeded in getting the DNC to pay for other personal expenses if she was this aggressive with clothes–a clear violation of both election law and tax law.  Personal expenses paid by your employer are wages and should be added to your W-2.

Read the hilarity below:

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September 19, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Thursday, August 21, 2014

The Deductibility of $100 Charitable Contributions to ALS in the Ice Bucket Challenge

Forbes:  Could The IRS Disallow Ice Bucket Challenge Charitable Contributions?, by Tony Nitti:

IceSo let’s say you were challenged via social media to either take the Ice Bucket Challenge or contribute to ALS. Assume further that you are unable or unwilling to get cold and wet, and choose instead to donate to ALS. Do you possess the necessary donative intent if you otherwise wouldn’t have contributed to the cause, and are doing it merely to avoid being publicly chastised by your Facebook friends? Did you make the donation with the anticipation of receiving the benefit of, you know…not having to dump a freezing bucket of water on your head?

OK, rest easy; the IRS isn’t coming after your ALS donation. While the principle of donative intent is very real, in recent years, the courts have tied this principle to a “quid pro quo test,” which states that in order for a donation to lack donative intent, the donor must anticipate receiving a financial benefit from the contribution commensurate with the value the donor transferred to the charity. Because an ice bucket dodger has received no financial benefit, but rather merely a physical one, the contribution is (should be) immune to attack. Plus, I think I’ve read somewhere that the IRS is dealing with a bit of a public perception problem these days, so attacking contributions to a horrible disease is probably not in its best interest.

August 21, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Saturday, August 9, 2014

Robert Redford Sues New York Over $1.6 Million Tax Bill; Can State Tax Nonresident on Sale of Interest in Nonresident LLC?

Sunday, July 13, 2014

The Tax Consequences of the Potato Salad Guy's Kickstarter Campaign

Kickstarter LogoTax Foundation: $21,000 Tax Bill Just for Some Potato Salad:

As of 2:30pm on July 9, 2014, Zack Danger Brown has amassed over $70,000 in pledges from donors using Kickstarter—a website that matches donors to projects—to make potato salad.

KS

Nearly 5,000 backers from across the world have chosen Brown’s potato salad project, and tens of thousands of dollars will be dished to Brown on August 2. But once these funds are given to Brown, they will constitute income that might mean a sizeable tax bill for Brown. Kickstarter explains how pledges are taxed:

In the U.S., funds raised on Kickstarter are considered income… A creator can offset the income from their Kickstarter project with deductible expenses that are related to the project and accounted for in the same tax year. For example, if a creator receives $1,000 in funding and spends $1,000 on their project in the same tax year, then their expenses could fully offset their Kickstarter funding for federal income tax purposes.

Kickstarter also notes creators “may be able to classify certain funds” as nontaxable gifts instead of income, so long as the funds were pledged with “detached and disinterested generosity,” but one look at Brown’s Kickstarter page shows that these funds probably won’t qualify.

Brown offers donor specific handouts, such as a recipe book with potato salad recipes from every donor country for pledges of $50 (so far 83 backers), potato salad themed hats for pledges of $25 (234 backers), and even a potato salad themed haiku for pledges of $20 (4 backers).

So, given that Brown’s funds will likely be considered income instead of non-taxable gifts, how much will he have to pay in federal, state, and local income taxes? ... In total, Brown’s federal, state, and local tax burden on his income of $65,912 is $21,167.49 for an effective tax rate of 32.11 percent, leaving him with take home pay of $44,744.51 less taxes and expenses.

Update (7/11/2014): Kickstarter has updated the funding totals (currently around $48,000 at 2:25pm). According to The Business Journals, the boost in total funds resulted from some fake pledges which have now been removed. Stay tuned, and we will update the final numbers once the remaining 21 days have expired.

Other commentators have pushed back on the Tax Foundation's analysis, arguing that the payments would constitute non-traxable gifts.

(Hat Tip: Eli Bortman, Allison Christians, Leandra Lederman.)

July 13, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Thursday, July 10, 2014

How The $1 Billion Kennedy Family Fortune Defies Death And Taxes

Forbes:  How The $1 Billion Kennedy Family Fortune Defies Death And Taxes, by Carl O'Donnell:

KennedyIf America had an aristocracy, the most titled bloodline would certainly be the Kennedys. In the past half century, one Kennedy after another has occupied nearly every political position America has to offer, including the roles of congressman, senator, ambassador, mayor, SEC chairman, state representative, city councilman, and, of course, President.

The sustaining force behind the Kennedys reign is hardly a secret. Thanks to Joseph P. Kennedy, who made a fortune from insider trading only to later chair the SEC, the family is fabulously rich. But exactly how much is America’s first family worth? Forbes pegs the extended family’s fortune at $1 billion.

Protected by a labyrinth of trusts, as well as tax strategies that would make Joseph P. Kennedy proud, the Kennedy fortune now spans approximately 30 family members, and includes the surnames Shriver, Lawford and the Smith. At nearly $175 million as of 2013, Caroline Kennedy is the richest descendant by far, but more modestly endowed relatives, such as Robert Shriver, who is running for Los Angeles County Supervisor, still possess assets in the tens of millions, according to public financial disclosures required of government officials. ...

Like politics, tax savvy seems to run in the Kennedy family. The most recent example is the 1998 sale of the family’s most valuable asset: the iconic Merchandise Mart, a towering retail space on the Chicago River that was once thought to be the largest building in the world. Thanks to a carefully crafted deal with Vornado Realty, the Kennedy family deferred – or possibly avoided completely – capital gains tax on nearly half the value of the sale.

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July 10, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (3)

Wednesday, July 9, 2014

Seinfeld's 10 Enduring Tax Lessons

SeinfeldForbes:  Seinfeld's 10 Enduring Lessons---About The IRS, by Robert W. Wood:

On Seinfeld’s 25th anniversary–it debuted July 5th, 1989–it is being discussed again around today’s version of the water cooler. Yes, Seinfeld at 25: There’s Still Nothing Else Like It. Turns out even a show about nothing can teach us something, including tax lessons like these...

I realize that Seinfeld is not mostly about taxes. But actually, taxes come up a lot in daily life, and yada, yada, yada.

July 9, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Thursday, June 26, 2014

The Impact of Taxes on Carmelo Anthony's Free Agency Decision

Sports Illustrated:  How Much Carmelo Can Make as an NBA Free Agent, by Michael McCann (New Hampshire):

AnthonyAnthony's financial decision-making is also affected by income tax rates, which vary widely by state and, as New York City residents know, municipality. SI.com and tax expert Robert Raiola have crunched the numbers for Anthony (whose projected contract amounts are provided by Spotrac.com). We break down how much he would likely earn, after taxes and the standard 4 percent agent commission, if he signed max deals with the Knicks, Bulls, Heat and Rockets.

Carmelo

Forbes:   How State Taxes Could Play A Role In Carmelo Anthony's Landing Spot, by Tony Nitti

(Hat Tip:  Bill Turnier.)

June 26, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Tuesday, June 17, 2014

Wealthy Clintons Use Residence Trusts to Limit Estate Tax They Back

Bloomberg:  Wealthy Clintons Use Trusts to Limit Estate Tax They Back, by Richard Rubin:

TrustBill and Hillary Clinton have long supported an estate tax to prevent the U.S. from being dominated by inherited wealth. That doesn’t mean they want to pay it.

To reduce the tax pinch, the Clintons are using financial planning strategies befitting the top 1 percent of U.S. households in wealth. These moves, common among multimillionaires, will help shield some of their estate from the tax that now tops out at 40 percent of assets upon death.

The Clintons created residence trusts in 2010 and shifted ownership of their New York house into them in 2011, according to federal financial disclosures and local property records.

Among the tax advantages of such trusts is that any appreciation in the house’s value can happen outside their taxable estate. The move could save the Clintons hundreds of thousands of dollars in estate taxes, said David Scott Sloan, a partner at Holland & Knight LLP in Boston. “The goal is really be thoughtful and try to build up the nontaxable estate, and that’s really what this is,” Sloan said. “You’re creating things that are going to be on the nontaxable side of the balance sheet when they die.” ...

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June 17, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Thursday, June 12, 2014

Tax Implications of $1,500 Waffle House Tip

(Hat Tip: Darryll Jones, Leandra Lederman)

June 12, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Wednesday, June 11, 2014

Dave Chappelle Makes the Case for High Marginal Tax Rates

New York Times:  Dave Chappelle Makes the Case for High Marginal Tax Rates, by Neil Irwin:

Dave Chappelle, the comedian who walked away from a wildly successful TV show named for him a decade ago, made his first talk show appearance in ages Tuesday night. He probably wasn’t intending to make an argument about maximizing the efficiency of the tax system in his appearance on the “Late Show With David Letterman,” but that’s what he ended up doing.

Mr. Chappelle discussed the reported $50 million contract he walked away from when he abruptly ended “The Chappelle Show.” Does the loss of all that money haunt him?

“So I look at it like this,” Mr. Chappelle said. “I’m at a restaurant with my wife. It’s a nice restaurant. We’re eating dinner. I look across the room and I say: ‘You see this guy, over here across the room? He has $100 million. And we’re eating the same entree. So, O.K., fine, I don’t have the $50 million or whatever it was, but say I have $10 million in the bank.’ The difference in lifestyle is minuscule.”

His point is about the diminishing marginal utility of rising wealth. If you are flat broke and somebody gives you $1 million, that money significantly increases your quality of life. Going from $1 million to $10 million makes you better off, though probably not 10 times better off. And similarly, going from $10 million to $50 million in net worth creates far less improvement in your quality of life than those early steps of going from broke to $1 million or $1 million to $10 million. ...

That’s a reason advocates of higher marginal income tax rates on the highest earners would argue there is little loss of human welfare by enacting very high rates on the highest income brackets. The difference in quality of life between “very wealthy” and “extraordinary wealthy” is not that great, which should make it a relatively painless way to raise tax revenue.

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June 11, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Tuesday, June 3, 2014

Pete Rose: A Tax Dilemma

RoseKostya Kennedy, Pete Rose: An American Dilemma 123 n.5 (2014):

Rose liked giving things to coaches, including, in 1978, Jeeps to nine Reds coaches and trainers, a gift with a value of more than $50,000 that he wrote off on his tax return, saying they were for “services rendered.” When the deduction was denied, Rose sued the IRS, claiming that the coaches were necessary to his success. He testified in court that given his approach to the game, he in particular required coaches and trainers to work long and off hours (early morning treatments, off-day batting practice etc.) He won the case mainly because the jury, as Rose’s lawyer Robert Pitcairn put it, regarded Rose as a “unique athlete.” Rose was delighted that the deduction was restored and made a point of saying publicly that he felt coaches and trainers were too often undervalued and underpaid.

(Hat Tip: Erik Jensen.)

June 3, 2014 in Book Club, Celebrity Tax Lore, Tax | Permalink | Comments (1)

Thursday, May 15, 2014

What Is the Value of an NYU Tax LLM? $1 Billion?

Sports Illustrated, Best Sports Deal Ever? How the Silnas Outsmarted the NBA:

SpiritsThere was no official death notice. The documents are sealed, there will be no autopsy. This will have to pass as the obituary. But after lingering on its deathbed, the great golden goose of the sports world was finally killed off last month. The cause of death: a complex and confidential settlement agreement. The chief survivors, brothers Ozzie and Daniel Silna, surely mourn, but they must take solace knowing that their $1 million investment in a sports team that went out of business nearly 40 years ago turned into more than $1 billion.

In 1974 the Silnas, East Coast garment magnates, bought an ABA franchise and moved it to St. Louis. The Spirits were a lovably dysfunctional collective that lasted only two seasons. ...

At the end of the 1975-76 campaign, ... [t] here were only seven teams left, and in the off-season four joined the NBA -- the Denver Nuggets, Indiana Pacers, New York Nets and San Antonio Spurs. The Virginia Squires simply folded. The owner of the Kentucky Colonels, John Y. Brown, accepted a $3.3 million payout to close up shop. (By decade's end Brown had become the Bluegrass State's governor.)

That left the Spirits. The franchise was unwanted by the NBA, but the aggrieved Silnas were unwilling to take a lump-sum payment to go away. With the help of their lawyer, Donald Schupak [Tax LL.M. 1970, NYU], the brothers cut a deal: The four ABA teams decamping to the NBA would make a one-time payment to the Silnas of $2.23 million, and they would pay the brothers one-seventh of their national broadcast revenues in perpetuity.

All first-year law students worth their highlighters know the danger of contracts without termination periods. The NBA's outside counsel -- including a young lawyer, David Stern -- saw this and tried to indemnify the league from disputes that might arise from the contract.

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May 15, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Wednesday, May 14, 2014

State Taxes May Compel Johnny Manziel to Avoid Ohio Residency

Sports Illustrated, State Taxes May Compel Johnny Manziel to Avoid Ohio Residency:

ManzeilJohnny Manziel may be a Cleveland Brown, but don't expect him to become an Ohioan. Manziel, a Texas resident, was selected 22nd overall in the NFL draft. He is slotted to earn $4,738,000 this year. As a Brown, a portion of Manziel's NFL income will be subject to Ohio's 5.392 percent income tax plus local income taxes. Assuming he remains a Texas resident, Manziel will pay the Buckeye State and local authorities approximately $278,000 this year. Had he been drafted instead by the Texans, Cowboys, Jaguars, Dolphins, Buccaneers or Titans, Manziel would have mostly avoided state income taxes, as those teams play in states without income taxes. All NFL players pay federal income taxes and so-called "jock taxes," which are state and municipal taxes levied on athletes for playing games in different venues.

Manziel can still avoid Ohio's income tax on most of his endorsement earnings simply by making sure that he remains a Texas resident. He's thus likely to keep his Texas residency and not avail himself of Ohio tax law unless it's absolutely necessary. A local trading card show or endorsement for a Cleveland car dealer would trigger Ohio tax law, but national endorsement deals would not. Expect Manziel to avoid spending 182 days in Ohio, as doing so would risk him being classified as a "full-year nonresident" under Ohio law and having higher taxes. Although Manziel dropped in the draft, he remains one of its most marketable players. He recently signed a multi-year endorsement deal with Nike that will reportedly pay him at least $20 million.

(Hat Tip: Bill Turnier.)

May 14, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Monday, May 5, 2014

Could Forced Sale of the L.A. Clippers Save Donald Sterling $323 Million in Taxes as § 1033 Involuntary Conversion?

SterlingFollowing up on my previous post: The Daily Beast, Donald Sterling’s Last Laugh: Force Him to Sell the Clippers and He Could Pay No Taxes; Ironically, the NBA’s Ultimate Penalty Will Save the Owner as Much as $323 Million, by Nick Lum:

Donald Sterling’s reputation had a bad week, but his pocketbook has never looked better. The punishment meted out by NBA Commissioner Silver—the maximum league fine of $2.5 million—pales in comparison to the billion dollars Sterling stands to make from selling the Clippers. Ironically, the league’s nuclear option—a forced sale—could also end up lining Sterling’s pocketbook with millions in tax savings. Instead of his just deserts, will Sterling end up with a sweet tax treat?

If Sterling had voluntarily sold the team for $1 billion, he would have owed about $200 million in federal income tax and another $123 million in California state income tax. But thanks to a tax law that applies only to forced sales or other “involuntary conversions,” Sterling’s profits may all be tax-free.

Section 1033 of the tax code provides a special tax treatment for people whose property has been stolen, appropriated by the government (e.g. eminent domain), or otherwise “involuntarily converted.” The basic idea is that if you have received money because someone took your stuff away from you, you shouldn’t have to pay taxes since you didn’t enter into the transaction voluntarily. ...

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May 5, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (4)

Thursday, May 1, 2014

Forced Sale of the L.A. Clippers Could Cost Donald Sterling $100-$200 Million in Taxes

Forbes, How Clipper's Sterling Could (Maybe) Avoid a Tax Bill Today:

Could Sterling look to treating the sale as an involuntary conversion under Section 1033 of the tax code?  Basically the code section allows in cases where property is compulsorily or involuntarily converted  – the owner can have nonrecognition of gain if he/she purchases replacement property (assuming of equal value).  The owner has basically two years after the close of the tax year in which the gain was made to buy replacement property.

Translation – Sterling could seek to claim that his property (ownership of the Clippers) was compulsorily or involuntarily converted (being forced to sell it by the NBA) under Section 1033.  NOTE:  the argument that Sterling had to sell because of his own actions – not the NBA’s – is a fair one and could be a possible IRS line of attack.

Sterling could then seek over the next two years to purchase like property – another sports team(s) of equal value.  While Sterling is banned from the NBA there are many other sports teams out there (think European soccer teams) that he might look to purchase.   Sterling’s argument would be that the Clippers are a professional sports team and he has bought another sports team – that he is not limited to just purchasing an NBA team.

The tax benefit for Sterling – transferred basis to the new sports team and deferral of capital gains taxes (ie will have to pay tax when he sells the soccer team down the road (or at death) – assuming no sharp pencils on estate tax planning).  Bottom line – no tax bill today.

May 1, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (12)

Sunday, March 16, 2014

Church Marketing Campaigns for Their Pastor's Books and Private Inurement

Pajama Pages, On Driscoll, It’s Called Inurement, and It’s Probably Illegal:

Real MarriageMark Driscoll may have imperiled his church’s nonprofit status and, with it, cost his congregation millions of dollars in tax deductions. I am neither a lawyer nor an accountant, but I can read IRS publications that describe the kind of hot water that Mars Hill Church and other churches can get into when they use donated money to buy their pastors’ books.

You can read the 50-page IRS description of inurement here, but I’ll try and summarize it for you here and explain why this applies to Driscoll’s NYT campaign and perhaps many other churches that use church resources to benefit their pastors’ publishing careers.

Churches and other charities are granted non-profit status so long as they use the money they raise exclusively for religious, educational or charitable purposes. Although they can pay staff and officers for work they perform to advance their stated purposes for the public, they cannot take special measures to direct the resources of the organization to any private individual or corporate entity, especially an individual that is an insider of the charity. Such activity is considered inurement, but before considering it in more detail, it’s worth reviewing what we know of the Mars Hill/Driscoll arrangement.

Mars Hill spent approximately $220,000 that had been donated to it to purchase services and books to have Driscoll’s book [Real Marriage: The Truth About Sex, Friendship & Life Together] appear on the New York Times best seller list. ... Mars Hill reports that it received $25m in tithes and offerings last year. Assuming an average deduction value of a contribution to be 25 percent, as the Congressional Research Service does, Mars Hill members saved $6.25m in tax payments because of the church’s exempt status. So, a $220,000 investment has the potential to cost church members $6,250,000.

Patheos, Do We Need a Code of Ethics for Mega-Pastors Who Write?:

Recently World Magazine had a piece on Unreal Sales for Mark Driscoll’s Real Marriage to the effect that the Mars Hill Church bought Driscoll’s book a place on the NYT best seller list through a marketing company with a deliberate intent to by-pass the NYT’s own safe guards against authors or publishers artificially inflating the sales figures for their book. This might even violate IRS rules and regulations about non-for-profits committing inurement. CT also has a piece on this where they link to Mars Hill Church’s official response to the issue.

March 16, 2014 in Book Club, Celebrity Tax Lore, Tax | Permalink | Comments (2)

Sunday, March 2, 2014

A Taxing Oscars: $80,000 Swag Bags, Tax Policy, and Divorce in Blue Jasmine

1.  IRS, Gift Bag Questions and Answers:

OscarQ: 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. ...

Q:  If these are gifts, why do they have to be treated as income?
A:  These gift bags are not gifts for federal income tax purposes because the organizations and merchants who participate in giving the gifts bags do not do so solely out of affection, respect, or similar impulses for the recipients of the gift bags.

Q: Can the recipient take a charitable contribution deduction if he or she contributes the gift bag to charity? 
A: If the gift bag is donated to a qualified charitable organization, the recipient may be able to take a tax deduction for his or her charitable contribution, subject to applicable limitations and requirements. But this does not change the taxability of the value of the items.  The fair market value must still be reported on the celebrity recipient’s federal income tax return.

2.  U.S. News & World Report, And the Winner of the 'Worst Tax Policy' Oscar Is ..., by Matthew Mitchell (George Mason University):

Film subsidies from the government are a waste of money.

TaxProf Blog, The Wolf of Wall Street Wins Oscar for Best Tax Break:

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3.  Forbes:  Tax Lessons From Woody Allen's 'Blue Jasmine', by Peter J. Reilly:

Blue JasmineI have just a couple of tips that can greatly reduce post marital stress. They fly in the face of conventional wisdom, but they are based on extensive reading of Tax Court decisions. The recommendations are that you not file a joint return for the final year of the marriage and that non-custodial parents not expect to be able to claim dependency deductions.

The recommendations fly in the face of conventional wisdom, because planners assume that people are rational and want to minimize their aggregate tax liability and will then equitably share the savings. Only in rare circumstances will separate filing produce a lower tax liability. The dependency deduction may be more valuable to a non-custodial parent. So if you are having one of those friendly divorces, my advice might not be applicable to you. Of course there is a term for a couple that can navigate all the complexities of a divorce without the least bit of anger and recrimination and irrationality. The term is “still married”. Since both my recommendations are unconventional, they both merit a bit of discussion. ...

The movie Blue Jasmine might be a better warning on the perils of filing jointly with a financially sketchy spouse. Of course Jasmine’s failure to follow her friend’s advice with regard to joint filing was not her only mistake. There is, however, a strong argument for the more financially sophisticated half of the couple to not ask for a joint return, even though it costs extra taxes.

March 2, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

Friday, February 21, 2014

Kevin Durant Sues Accountant Over Tax Troubles

The Oklahoman:  Kevin Durant Sues Accountant Over Tax Troubles:

DurantOklahoma City Thunder star Kevin Durant is seeking monetary damages from a California accountant on counts of professional negligence, breach of fiduciary duty and breach of contract. He is asking for at least $200,000 on each count.

Oklahoma City Thunder star forward Kevin Durant is having tax troubles, and he blames his former accountant.

In a federal lawsuit, Durant complains the accountant made a number of mistakes on his company’s tax returns, such as deducting the cost of his personal chef as a business expense.

“Fees paid to a personal chef would not be regarded by a reasonably prudent accountant as qualifying for a business expense deduction,” Durant’s attorneys stated in the lawsuit.

Durant sued California accountant Joel Lynn Elliott in December on counts of professional negligence, breach of fiduciary duty and breach of contract. He is asking for at least $200,000 on each count.

(Hat Tip: Jon Forman.)

February 21, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

Monday, February 17, 2014

Money, Money, Money: ABBA Wore Outrageous Outfits Onstage to Claim Tax Deduction

The Guardian:  Abba Admit Outrageous Outfits Were Worn to Avoid Tax:

AbbaThe glittering hotpants, sequined jumpsuits and platform heels that ABBA wore at the peak of their fame were designed not just for the four band members to stand out – but also for tax efficiency, according to claims over the weekend.

Reflecting on the group's sartorial record in a new book, Björn Ulvaeus said: "In my honest opinion we looked like nuts in those years. Nobody can have been as badly dressed on stage as we were."

And the reason for their bold fashion choices lay not just in the pop glamour of the late 70s and early 80s, but also in the Swedish tax code.

According to Abba: The Official Photo Book, published to mark 40 years since they won Eurovision with Waterloo, the band's style was influenced in part by laws that allowed the cost of outfits to be deducted against tax – so long as the costumes were so outrageous they could not possibly be worn on the street.

I guess that explains this:

Meat

Money, money, money
Must be funny
In the rich man's world
Money, money, money
Always sunny
In the rich man's world
Aha-ahaaa
All the things I could do
If I had a little money
It's a rich man's world

(Hat Tip: Pippa Browde, Sergio Pareja.)

February 17, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Tuesday, February 11, 2014

The Tax Treatment of American Olympic Medal Winners

Monday, February 10, 2014

What Is the Value of Michael Jackson's Estate? Executor Says $7.2 Million; IRS Says $1.25 Billion

JacksonStarcasm.net:  IRS Says Michael Jackson Estate Grossly Undervalued, Owes IRS $702 Million in Taxes:

If you recall, after pop singer Michael Jackson passed away in 2009 his estate executors placed the value of his estate at $7.2 million, including his likeness being valued at $2,105 and his sizable interest in the trust that owns his and The Beatles’ music catalog being worth zero. If those numbers seem a little low to you, you’re not alone. The Internal Revenue Service also believes the estimated valuations to be low — so low actually that they are not only going after hundreds of millions of dollars in back taxes, but they are doubling the additional penalties thanks to the rarely used “gross valuation misstatement penalty.”

According to documents filed with the U.S. Tax Court in Washington and obtained by the L.A. Times, the IRS estimates the value of Michael Jackson’s estate at the time of his death to be slightly more than $7.2 million — try $1.25 BILLION! (Yes, that is correct.)

The $1.178 billion difference equates to $505 million in taxes with an additional $197 million in penalties. (The IRS usually assesses a 20% penalty for underpayment, but as I mentioned above, they implemented the gross valuation misstatement penalty, which doubled the penalties to 40%.)

The IRS lists examples of some of what they have determined to be gross valuation misstatements, including Michael Jackson’s likeness — which they estimate to have been worth $434.264 million, obviously way more than the $2,105 claimed by Jackson’s executors

February 10, 2014 in Celebrity Tax Lore, IRS News, Tax | Permalink | Comments (0)

Sunday, February 2, 2014

New Jersey Taxes Could Eat Up All of Peyton Manning's Super Bowl Earnings

Forbes:  New Jersey Taxes Could Eat Up All of Peyton Manning's Super Bowl Earnings:

Super BowlPeyton Manning has the opportunity to pull a John Elway and ride off into the sunset as a Denver Bronco after winning his second ring, not that he wants to retire. His career will hinge upon an offseason exam on his surgically-repaired neck, according to ESPN ’s Chris Mortensen. Obviously, the most important implication of the exam will be Manning’s health. But whether his career continues will have an effect on how much tax New Jersey can collect from him for his appearance in the Super Bowl XLVIII.

Should the Broncos beat the Seahawks, Manning—and the rest of his teammates—will earn $92,000. The loser’s share in the Super Bowl is $46,000. So why does Manning’s future beyond February 2 matter to New Jersey? It would seem logical that the Garden State would apply its tax rates on the $92,000 or $46,000 Manning earns for his week in East Rutherford. Unfortunately, we are dealing with tax laws, not logic.

February 2, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Monday, January 20, 2014

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.

January 20, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (5)

The Wolf of Wall Street Wins Oscar for Best Tax Break

Economic Policy for the 21st Century: “Wolf of Wall Street” Won Oscar for Best Tax Break:

WolfAlthough Oscar nominations were announced yesterday, one winner has already been determined: the Oscar for Best Tax Break (not a real Academy Award). Among the nine films nominated for Best Picture, The Wolf of Wall Street received the largest state tax incentive, a 30 percent tax credit from New York State. In effect, New York State taxpayers paid for a third of its $100 million in production costs. ...

All nine movies nominated for Best Picture were filmed in jurisdictions with movie production incentives. Clearly, a lower cost of doing business attracts the best filmmakers to these locales.

The important question is: do these incentives pay off for the states?

The answer is no. Similar to most targeted tax breaks, movie production incentives routinely fail to deliver on the economic promises made by their proponents. Supporters frequently claim movie incentives create jobs and lead to net gains in tax revenue. However, data from several states find movie production incentives generate less than 30 cents for every lost dollar in tax revenue.

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(Hat Tip:  Glenn Reynolds.)

January 20, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Thursday, December 26, 2013

Mark Zuckerberg's $2 Billion Tax Bill

ZuckerbergForbes:  Mark Zuckerberg's $2 Billion Tax Bill Double Last Year, Higher Than Most Billionaries, by Robert W. Wood:

Last year Mark Zuckerberg caused a kerfuffle by generating what many called the biggest tax bill ever for an individual, about $1 billion in taxes. That was impressive, but much of it was done via withholding as part of his Facebook pay. Besides, Facebook got a tax deduction for every dollar.

The Facebook founder and CEO is in for an even bigger tax hit now. But as with last year, it seems largely within his control. Company filings say he is selling 41.4 million shares worth approximately $2.3 billion. Most of the net proceeds are supposed to be used to pay the taxes Mr. Zuckerberg will incur by exercising options to purchase 60 million shares of Facebook Class B common stock.

Mr. Zuckerberg now has 58.8% of the voting power, but this whopping sale of shares would take him down to 56.1%. Still, post-sale he will retain more than 444 million shares. And he may still have unexercised options too.

But it is easy to see that even among elite filers, Mr. Zuckerberg is, well, elite. According to IRS data on the top 400 tax returns, the average in that elite group was about $48 million. And the entire group of 400 paid only $16 billion.

That was in 2009, but even accounting for inflation and a now somewhat more robust economy, the $2 billion tax payment is astounding, on top of big numbers last year. Warren Buffett paid less than $7 million in 2010. Yes, that was million, not billion.

Prior TaxProf Blog coverage:

December 26, 2013 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Wednesday, December 25, 2013

Santa's Tax Bill

SANTA CLAUS 1040_Page_1

Forbes:  The True Cost of Christmas: Santa's Tax Bill, by Kelly Phillips Erb:

[W]e’ve had quite a few discussions in my household about how Santa manages, in one night, to get all of his work done. Clearly, he has help. And that has financial and tax consequences, right? So we had a little chat about Santa’s money and his tax bill. And here’s what we – a tax attorney and three kids – decided: ...

His deductions appear to far outweigh his revenue, at least according to our mostly very unscientific surmisings. That said, Santa, if you’re reading, two quick things: One, I realize I’m not under age 14 but I’ve been really, really good this year. Just saying. Two, taxes can be confusing. It wouldn’t do to see Santa audited so call me with any questions. You have the number (my kids are sure of it).

From Jay Katz:  Christmas is the Time of the Year when Tax Nerds Mostly Wonder:

10. If every person who sings Christmas songs is named Carol.
9.  If a person who does not believe in Santa is a rebel without a Claus.
8.  If a prudent taxpayer should shop only at the After Tax Dollar Store.
7.  If Santa’s helpers are W-2 employees or 1099 subcontractors.
6.  How long it takes to prepare and file all of Santa’s gift tax returns.
5.  If Santa is entitled to a tax credit for every solar paneled chimney he goes down.
4.  Whether Santa should depreciate or take the standard mileage deduction for his reindeer.
3.  Whether Santa’s workshop qualifies for a home office.
2.  Whether Santa can take a hobby loss for the model airplane that fell out of his bag.
1.  Whether it is fair that Santa has to work every Christmas Eve.

December 25, 2013 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Tuesday, December 17, 2013

Billionaires' Use of Zeroed-Out GRATs Blows $100 Billion Hole in Estate Tax

SandsBloomberg:  Accidental Tax Break Saves Wealthiest Americans $100 Billion, by Zachary R. Mider:

Sheldon Adelson makes no secret of his disdain for the estate tax. “How many times do you have to pay taxes on money?” the casino magnate asks. ... Shares of his Las Vegas Sands Corp. are at a five-year high, making him one of the world’s richest men, worth more than $30 billion. ...

Federal law requires billionaires such as Adelson who want to leave fortunes to their children to pay estate or gift taxes of 40 percent on those assets. Adelson has blunted that bite by exploiting a loophole that Congress unintentionally created and that the IRS unsuccessfully challenged.

By shuffling his company stock in and out of more than 30 trusts, he’s given at least $7.9 billion to his heirs while legally avoiding about $2.8 billion in U.S. gift taxes since 2010, according to calculations based on data in Adelson’s U.S. Securities and Exchange Commission filings.

Hundreds of executives have used the technique, SEC filings show. These tax shelters may have cost the federal government more than $100 billion since 2000, says Richard Covey, the lawyer who pioneered the maneuver. That’s equivalent to about one-third of all estate and gift taxes the U.S. has collected since then.

The popularity of the shelter, known as the Walton grantor retained annuity trust, or GRAT, shows how easy it is for the wealthy to bypass estate and gift taxes. Even Covey says the practice, which involves rapidly churning assets into and out of trusts, makes a mockery of the tax code. “You can certainly say we can’t let this keep going if we’re going to have a sound system,” he says with a shrug.

Covey’s technique is one of a handful of common devices that together make the estate tax system essentially voluntary, rendering it ineffective as a brake on soaring economic inequality, says Edward McCaffery, a professor at the University of Southern California’s Gould School of Law. Since 2009, President Barack Obama and some Democratic lawmakers have made fruitless proposals to narrow the GRAT loophole. Any discussion of tax shelters has been drowned out by the debate over whether to have an estate tax at all, McCaffery says. ...

Facebook Chief Executive Officer Mark Zuckerberg and Lloyd Blankfein, the CEO of Goldman Sachs, are among the business leaders who have set up GRATs, SEC filings show. JPMorgan Chase helps so many clients use the trusts that the bank has a special unit dedicated to processing GRAT paperwork, says Joanne E. Johnson, a JPMorgan private-wealth banker. “I have a client who’s done 89 GRATs,” she says. Goldman Sachs disclosed in a 2004 filing that 84 of the firm’s current and former partners used GRATs. Blankfein has transferred more than $50 million to family members with little or no gift tax due, according to calculations based on data in his SEC filings. Charles Ergen, chairman of Dish Network, and fashion designer Ralph Lauren passed more than $300 million each, calculations from SEC filings show. ...

Congress created the GRAT while trying to stop another tax-avoidance scheme that Covey developed. In 1984, Covey, a lawyer at Carter Ledyard & Milburn in New York, publicized an estate-tax shelter he’d invented called a grantor retained income trust, or GRIT. Covey figured out how to make a large gift appear to be small. He would have a father, for example, put investments into a trust for his children, with instructions that the trust should pay any income back to the father. The value of that potential income would be subtracted from the father’s gift-tax bill.  Then, the trust could invest in growth stocks that paid low dividends so that most of the returns still ended up going to his kids.

Six years after Covey started promoting this technique, Congress termed it abusive and passed a law to stop it. The 1990 legislation replaced the GRIT with the GRAT, a government-blessed alternative that allowed people to keep stakes in gifts to their children while forbidding the abuse Covey had devised. Covey studied the law and found an even bigger loophole. “The change that was made to stop what they thought was the abuse, made the matter worse,” he says. Fredric Grundeman, who helped draft the bill while he was an attorney at the U.S. Treasury Department and is now retired, says the framers didn’t recognize the new law’s potential for abuse.

Covey recognized that a client could use the 1990 legislation to avoid gift taxes if he did something that would otherwise make no sense: put money in a trust with instructions to return the entire amount to himself within two years. Because he doesn’t have to pay tax on a gift to himself, the trust incurs no gift tax. Covey calls the trust “zeroed out.” Because the client isn’t paying any tax upfront, the transaction amounts to a can’t-lose bet with the IRS. If the trust’s investments make large enough gains, the excess goes to heirs tax-free. If not, the only costs are lawyer’s fees, typically $5,000 to $10,000, Covey says.

Three years after the new law took effect, Covey created a pair of $100 million zeroed-out GRATs for Audrey Walton, the former wife of the brother of Wal-Mart Stores Inc. founder Sam Walton. The IRS, which had banned such GRATs through regulation, demanded taxes and took her to court. In 2000, the U.S. Tax Court found in Walton’s favor, determining the 1990 law didn’t prohibit a “zeroed-out” GRAT. Covey had won a rare prize: an official seal of approval for a tax shelter.

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December 17, 2013 in Celebrity Tax Lore, Tax | Permalink | Comments (4)

Peter O’Toole's Tax Philosophy

National Review:  Peter O’Toole: He Loved Drink, Feared the Taxman:

OTooleO’Toole could also laugh at himself. He recalled that after he struck it rich in the 1960s, he tried to bully everyone in his household into voting Labour. He thought he had succeeded with everyone, until his working-class driver told him he had taken the Rolls down to the polling station and voted Conservative because his own taxes were too high.

That, he said, got him to thinking. He admitted his fellow actors Michael Caine and Sean Connery had a point when they said Britain’s high tax rates did discourage work, and moved themselves overseas. The year we spoke, Margaret Thatcher began cutting Britain’s tax rates, negating the need for O’Toole to ponder joining them.

(Hat Tip: Glenn Reynolds.)

December 17, 2013 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Friday, December 13, 2013

ESPN: PGA Tour's Tax-Exempt Business Model Yields Only 16% to Charity

ESPN Outside the Lines, Tax Breaks Power PGA Tour Giving:

ESPNThe PGA Tour's nonprofit business model has allowed it to avoid paying up to $200 million in federal taxes over the past 20 years, and its tournaments -- designed to benefit local charities -- operate in ways that fall short of acceptable charitable practices, an "Outside the Lines" analysis of IRS data finds.

The tour's charitable giving is a centerpiece of its golf events, tournament telecasts and website. The professional golf organization touts nearly $2 billion in donations over 75 years.

Yet that philanthropy has been bolstered by millions of dollars of annual tax breaks for the PGA Tour and its tournaments, which often are run by charities that spend far more on prizes, catering and country clubs than they do on sick kids, wounded vets or economic development. In one case, running a PGA tournament actually caused a charity to lose money -- more than $4.5 million over two years, the analysis found.

"Outside the Lines" analyzed the tour's U.S.-based tournaments that received charitable tax exemptions in 2011 (the most recent year available) and found they spent, on average, about 16 percent on actual charity. That figure is far below the minimum 65 percent that charity watchdog groups say makes for a responsible charity.

One of the groups, Charity Navigator, gave a "zero rating" to each of the tournament charities it reviewed for "Outside the Lines." ...

A breakdown of the 25 tour stops run as 501(c)(3) charities or private foundations can be found here.

Video here.

Prior TaxProf Blog coverage:

December 13, 2013 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Thursday, December 12, 2013

Tax Consequences of Sale of Michael Jordan’s ‘Flu Game’ Sneakers by Former Jazz Ball Boy for $104k

MJSports Illustrated, Michael Jordan’s ‘Flu Game’ Sneakers Auctioned for $104K by Former Jazz Ball Boy:

Preston Truman, a 35-year-old former Jazz ball boy, auctioned off the autographed pair of sneakers worn by Bulls guard Michael Jordan during his famous “Flu Game” for more than $104,000.

GreyFlannelAuctions.com listed the pair of the black and red Air Jordan 12s, worn during Game 5 of the 1997 Finals, at a starting price of $5,000, with bidding opening on Nov. 18. The auction company’s website indicates that 15 bids were received, and that the final price realized Thursday was $104,765. ... Jordan signed both of the Size 13 shoes, and the lot includes Jordan’s black game socks, too. ...

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December 12, 2013 in Celebrity Tax Lore, Scholarship, Tax | Permalink | Comments (1)

Monday, December 9, 2013

IRS Drops Tax Hammer on Stanley Burrell

HammerTMZ, IRS to MC Hammer: We're 2 Legit 2 Quit ... Pay Your $800k in Back Taxes:

MC Hammer just got touched in a big way by Uncle Sam ... for failing to pay almost $800K in back taxes ... according to court documents obtained by TMZ.

The Feds sued Hammer, née Stanley K. Burrell, and his wife Stephanie ... accusing them of stiffing the IRS to the tune of $798,033.48 on his '96 and '97 income taxes.

December 9, 2013 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Wednesday, November 13, 2013

What's Tax Got To Do With It? Tina Turner 'Relinquishes' (Not 'Renounces') U.S. Citizenship

TinaWashington Post, Tina Turner Formally ‘Relinquishes’ U.S. Citizenship:

This item just in via an “activity” report from the U.S. Embassy in Bern, Switzerland, headlined “Soul Legend Relinquishes U.S. Citizenship.”

“Long-time Swiss resident Tina Turner” was in the embassy Oct. 24 to sign her “Statement of Voluntary Relinquishment of U.S. Citizenship under Section 349 (a)(1) of the INA” — the Immigration and Naturalization Act. ...

The key word in the embassy report apparently is the term “relinquishment.” That means, a knowledgeable source told us, that she did not “formally renounce her U.S. citizenship under 349(a)(5) Immigration and Nationality Act, but took Swiss citizenship with the intent to lose her U.S. citizenship.” As opposed to formal renunciation — a much more complex process, we were told — there are no “tax or other penalties for loss of citizenship in this fashion.”

For the difference between relinquishing and renouncing U.S. citizenship, see here. As this detailed post makes clear, the tax consequences are the same whether one relinquishes or renounces U.S. citizenship. Previous press coverage suggested that Ms. Turner's actions may be motivated in part by a desire to escape the new FATCA regime.

(Hat Tip: Walter Schwidetzky.)

November 13, 2013 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Tuesday, November 12, 2013

What Is Michael Jackson's Name Worth? Estate Says $2,105, IRS Says $434,000,000

BadBillboard: Michael Jackson Estate's Valuation ($2,105) Vs. IRS' MJ Valuation ($434 Mil.):

This case pits the estate of Michael Jackson against the IRS, and centers on the $7 million taxable value of the estate's assets which were reported to the IRS. There's little doubt that the valuation of Michael Jackson's name and likeness rights at a paltry $2,105 raised a few eyebrows at the IRS offices -- the IRS' valuation was greater than $434 million and, in all, valued Michael Jackson's estate at more than $1.1 billion. The IRS has issued a notice of deficiency -- a bill for debts owed -- of estate taxes totaling more than $505 million. And because the IRS contends the executors significantly undervalued the estate's property, it tacked on additions of $196 million for good measure!

In response to the IRS' notice of deficiency, sent on on July 26, 2013, the Jackson estate filed a petition with the U.S. Tax Court, contending the valuations of the assets "were accurate and based upon qualified appraisals by qualified appraisers who had extensive experience valuing entertainment industry assets." On August 20, 2013, the IRS filed its response to that assertion, which detailed all of the proposed IRS valuations of Michael Jackson's assets, including his name and likeness. The disagreement has set the stage for a contentious valuation battle.

There's little doubt that the IRS knows that the exploitation of dead celebrity names and likeness is big business. What makes the estate of Michael Jackson's battle with the IRS of extreme interest is that, while the valuation of an estate's assets for federal estate tax purposes is usually made when a person dies (there is an election of value estate assets as of six months after the date of death), any subsequent dispute with the IRS over the worth of celebrity "name and likeness" rights rarely become public.

The rights of a deceased celebrity's estate to that celebrity's name and likeness rights are governed by state, not federal, law. So unless a deceased celebrity died a resident of a state affording posthumous protection for rights of publicity, such rights literally go to the grave along with that celebrity. This happened in the hotly litigated cases involving Marilyn Monroe, where the ultimate determination of her status as a New York and not a California resident meant Monroe's rights of publicity failed to survive her (since New York has no law protecting posthumous rights of publicity).

Conversely, California has for many years statutorily protected the rights of both living and dead celebrities in their names, voices, signatures, photographs and likenesses. In fact, these rights extend for 70 years after death, and, like most property rights, are licensable, transferable and descendible.

November 12, 2013 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Thursday, November 7, 2013

The Tax Treatment of Buyouts of Coaches' Contracts

USA Today:  Tax-Free Buyouts? Coaches Take a Chance With the IRS:

ButchTheir employment contracts were clear: When the head football coaches of 11 major public universities broke their contracts late last year and accepted jobs at other public schools, they faced responsibility for more than $7 million in buyouts.

Equally clear was what has become a basic tenet of college sports business: The coaches weren't going to pay. Their new employers were.

That's where a different interpretation of tax law has gained a foothold. A handful of schools — including Tennessee and Cincinnati earlier this year — have worded recent contracts to shield buyout payments made on behalf of coaches from being subject to income taxes. The schools paid substantial amounts on behalf of football coaches hired last winter: Tennessee sent $1.4 million to Cincinnati after hiring Butch Jones [top right], and Cincinnati sent $943,000 to Texas Tech to cover Tommy Tuberville's [middle right]buyout.

TubervilleUnder federal tax law, it is undisputed that an employer's payment of an employee's personal obligation must be treated as taxable income to the employee. But a buyout payment also is viewed as a business obligation.

Two tax law professors contend that gives schools the ability to treat the payment as a reimbursable business expense by the coach. Douglas A. Kahn, a professor at the University of Michigan law school, and his son, Jeffrey H. Kahn, a professor at Florida State's law school, advanced the idea in a law review article published in 2007 [Tax Consequences When a New Employer Bears the Cost of the Employee's Terminating a Prior Employment Relationship, 8 Fla. Tax Rev. 539 (2007)].

They acknowledged in the article that their assertion is vulnerable to dispute by the IRS. But in a recent interview with USA TODAY Sports, the Kahns said if the IRS challenged it, they think a coach who litigates the matter would prevail.

November 7, 2013 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Tuesday, October 1, 2013

Tom Hanks Leaves Captain Phillips Premiere Early to Avoid NYC Tax Man

Tom HanksThe National Enquirer, Tom Hanks IRS Avoidance:

Captain Tom laying low in NYC and it’s all because of his swanky abode in NYC that has the IRS up in arms!

Hanks, 57, has a primary residence in California which means the Tax Man only allows him to spend 183 days per year at his apartment in NYC and the Apollo 13 is already at about 149 days this year, so he has to be careful now with how he splits his time.

According to Showbiz411, the A-lister even had to skip out early at his Captain Phillips preem at the New York Film Festival last Friday night because he had to fly back to California so he didn’t take up an extra day of his New York time.

October 1, 2013 in Celebrity Tax Lore, Tax | Permalink | Comments (21)

Thursday, September 19, 2013

Founder of Beanie Babies to Plead Guilty to Tax Evasion

BeanieBabiesTy Warner, CEO of Ty Inc., which makes Beanie Babies, has agreed to plead guilty to tax evasion and pay $53.6 million in penalties in one of the largest offshore tax evasion cases in history.  He tried to enter the IRS's Offshore Voluntary Disclosure in 2009 but was rejected because he was already under investogation.

September 19, 2013 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Saturday, September 14, 2013

Johnny Football's Toughest Foe: Alabama or the IRS?

Manzel 2Following up on my previous post, NFL.com: Tax Issues for Manziel Raised From Alleged Autograph Income:

Everyone from opposing defenses to autograph dealers to the NCAA have tried to tackle Texas A&M quarterback Johnny Manziel in various forms in the last year, and the Heisman Trophy-winning sophomore has been too slippery for all of them.

But is he too slippery for the IRS?

That's essentially the question raised by TexasTaxTalk.com, which wondered aloud with an opinion column this week about what Manziel's tax return will look like next April. Or perhaps more to the point, what it looked like last April. If indeed Manziel accepted money for thousands of autographs, as was aggregately alleged in three ESPN reports, he has a tough decision to make come tax time, writes attorney David Gair:

What should he do at tax time? Report the income or keep up his story that he never got anything? He is stuck between a rock and a hard place. If he fails to report his income on his return, then he has just committed a crime. Willfully filing a false tax return is a felony that can net you three to five years in jail depending on the charge. But reporting the income on the tax return could be an admission that he violated NCAA rules. Between the two, if I were him, I would chose not to violate federal law.

September 14, 2013 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Thursday, September 12, 2013

Wal-Mart's Waltons Use CLATs, FLPs and GRATs to Shield Billions From Estate Tax

Walmart Logo (2013)Bloomberg, How Wal-Mart’s Waltons Maintain Their Billionaire Fortune, by Zachary R. Mider:

America’s richest family, worth more than $100 billion, has exploited a variety of legal loopholes to avoid the estate tax, according to court records and IRS filings obtained through public-records requests. The Waltons’ example highlights how billionaires deftly bypass a tax intended to make sure that the nation’s wealthiest contribute their share to government rather than perpetuate dynastic wealth, a notion of fairness voiced by supporters of the estate tax like Warren Buffett and William Gates Sr.  

Estate and gift taxes raised only about $14 billion last year. That’s about 1 percent of the $1.2 trillion passed down in America each year, mostly by the very rich, former Treasury Secretary Lawrence Summers estimated in a December blog post on Reuters.com. The contrast suggests “our estate tax system is broken,” he wrote [How to Target Untaxed Wealth]. ...

Closing just two estate tax loopholes [Familty Limited Partnerships and GRATs] -- ones that the Waltons appear to have used -- would raise more than $2 billion annually over the next decade, according to Treasury Department estimates. That doesn’t count taxes lost to the type of charitable trusts the Waltons used to fund projects like the museum; the department hasn’t estimated that cost. ...

[P]rofessional planners have sometimes held up the Waltons as a model. Patriarch Sam Walton, who founded Wal-Mart in Bentonville, cultivated an image as a regular guy from Oklahoma who enjoyed quail hunting and drove a beat-up Ford pick-up truck. He also showed unusual foresight about estate planning. According to his autobiography, “Made in America,” Sam Walton started arranging his affairs to avoid a potential estate tax bill in 1953. His five-and-dime-store business was still in its infancy and his oldest child was 9. That year, he gave a 20 percent stake in the family business to each of his children, keeping 20 percent for himself and his wife. “The best way to reduce paying estate taxes is to give your assets away before they appreciate,” he wrote in the book.

Sam’s retailing success made his family the richest since the Rockefellers, who themselves were pioneers in estate-tax avoidance. As soon as the tax was enacted in 1916, John D. Rockefeller, then the world’s richest man, circumvented it by simply giving much of his fortune to his son. Congress closed that loophole eight years later by adding a parallel tax on living gifts to heirs. ...

[Charitable lead annuity] trusts are often called “Jackie O.” trusts after Jacqueline Kennedy Onassis, the former First Lady who died in 1994 and whose will called for one. According to IRS data, the Waltons are by far the biggest users of Jackie O. trusts in the U.S.

The money put into these trusts is ostensibly for charity. If the assets appreciate substantially over the years, though, the trusts have another desirable feature: they can pass money tax free to heirs.

A donor locks up assets in these trusts, formally known as charitable lead annuity trusts, or CLATs, for a period of time, say 20 or 30 years. An amount set by the donor is given away each year to charity. Whatever is left at the end goes to a beneficiary, usually the donor’s heirs, without any tax bill.

The type of Jackie O. trust used by the Waltons doesn’t generate a break on income taxes. Instead, the big potential saving is on gift and estate taxes. When a donor sets one up, the IRS assesses how much gift or estate tax is due, based on how much of the trust’s assets will end up benefiting charity and how much will go to heirs. Most donors structure the trusts so that the heirs’ estimated leftover is zero or close to it.

The IRS makes its estimate using a complicated formula tied to the level of U.S. Treasury bond yields during the time when the trust is set up. If the trust’s investments outperform that benchmark rate, then the extra earnings pass to the designated heirs free of any estate tax. The rate has been hovering near all-time lows since 2009. For trusts set up this month, it’s 1.4 percent. With a big enough spread between the actual performance and the IRS rate, a Jackie O. trust can theoretically save so much tax that it leaves a family richer than if it hadn’t given a dime to charity.  ...

The historically low U.S. interest rates since 2009 are making Jackie O. trusts more popular and spurring tax planners to develop variations designed to squeeze out even more tax savings. ... The interest rates have prompted calls for reform even by some estate planners who set up Jackie O. trusts and the non-profit groups that benefit from them. One alternative floated at a Senate Finance Committee hearing in 2008 was to value the donation when the trusts actually give the money to charity, rather than guessing at the amount beforehand. ...

Helen Walton funded her first Jackie O. trusts not with Wal-Mart stock, the family’s biggest asset, but with a stake in Walton Enterprises LLC, the family office upstairs from the bike shop. That may have allowed her to exploit another loophole in the tax code -- one that lets the wealthy discount the value of their fortunes by 30 percent or more. ...

The Waltons have held their Wal-Mart stake in a family limited partnership or similar structure since 1953. ... “It’s beyond belief,” said Wendy Gerzog, a professor at the University of Baltimore and a former U.S. tax court lawyer who has written extensively about the discounts. She said the practice creates “a world of unreality.” ...

[L]awmakers, and the Treasury Department under both U.S. Presidents Bill Clinton and Barack Obama, have proposed eliminating some discounts involving transfers between family members. The Obama administration estimated that its most recent proposal, submitted in 2012, would raise an extra $18.1 billion over 10 years. None of the proposals have gone anywhere.  ...

Not long before Helen Walton created her first Jackie O. trust, her former sister-in-law won a court victory validating another tool to fend off the estate tax. As with the Jackie O. trust, this maneuver exploits the inevitable discrepancy when tax officials try to value future gifts. ‘Aunt Audie’ In 1993, Audrey Walton put $200 million of Wal-Mart stock into a pair of “grantor retained annuity trusts” or GRATs, to benefit her daughters, Ann and Nancy.  ...

The difference between the GRAT and the Jackie O. trust is that the GRAT pays an annuity back to the person who set up the trust, rather than to a charity. The trusts were set up to last for two years, and to pay out $217 million in stock and cash to Audrey Walton. If the stock rose in value so that money was left over at the end, it would go to her daughters tax free. ...

Here’s the catch: Walton claimed she owed no gift tax when she set up the trusts, because, under the IRS’s valuation formula, nothing would remain for her daughters. She claimed, in essence, she was just shifting money out of one pocket and into another, with no tax consequences. The result is a bet with the IRS that anyone would take -- one that tax planners sometimes describe as a “heads I win, tails we tie.”

Audrey Walton’s bet turned out to be a tie because nothing was left over for her daughters. She declined to comment on the case. Still, recognizing the potential loophole, the IRS attacked Walton’s trust, demanding a gift tax payment. Walton fought back, and in 2000 the U.S. Tax Court declared the Walton move legitimate and forced the IRS to rewrite federal regulations to allow it.

The “Walton GRAT,” as it’s now known, has become a common estate-planning technique for people with large amounts of liquid assets, such as CEO’s of publicly traded companies. The current low interest rates make it all the more likely that a GRAT bet will be a win rather than a tie. Users of GRATs, according to SEC filings, include the Coors brewing family and billionaire Nike Inc. founder Philip H. Knight.  

President Obama has repeatedly called for closing the Walton loophole in his annual budget proposal, estimating it would save $3.9 billion over 10 years. So far, the proposals have gotten no traction.

Sam Walton’s death in 1992 wouldn’t have resulted in an estate tax bill, assuming he left the bulk of his estate to his widow, Helen. Money flowing to a surviving spouse is exempt from the tax. Helen died in 2007, leaving billions in Jackie O. trusts.

Graphic:  How to Preserve a Family Fortune Through Tax Tricks

Bloomberg Chart_Page_1

September 12, 2013 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Saturday, August 31, 2013

Conan O'Brien: ConservoTax: The New Tax Software for Republicans

Friday, August 30, 2013

Should the IRS Investigate Johnny Football?

Manzel 2The NCAA and Texas A&M yesterday agreed on the suspension of Heisman Trophy winning quarterback Johnny Manziel for the first half of Saturday's season-opening game at Rice for violating NCAA bylaw 12.5.2.1, which states that student-athletes cannot permit their names or likenesses to be used for commercial purposes, including to advertise, recommend or promote sales of commercial products. or accept payment for the use of their names or likenesses.

Louisville Courier-Journal, Maybe IRS Should Take a Look at Johnny Manziel, by Tim Sullivan:

The Johnny Manziel case has been settled. Whether it’s over may depend on the IRS. The IRS has investigatory tools unavailable to the NCAA, and someone with subpoena power might be wondering how a college quarterback signs autographs in bulk and no money changes hands. It might be worth looking at some of the memorabilia dealers selling the Heisman Trophy winner’s signature to see if they have undeclared income or large, unspecified expenses. It might be worth squeezing some of these guys until some truth comes out.

August 30, 2013 in Celebrity Tax Lore, IRS News, Tax | Permalink | Comments (1) | TrackBack (0)

Thursday, August 22, 2013

Michael Jackson's Estate to IRS: Beat It

Beat It 2My nominee for tax headline of the year is from Kelly Phillips Erb:  Michael Jackson's Estate to IRS: Beat It:

The estate for the King of Pop is planning to go to the mattress in the fight against the IRS over taxes and penalties assessed as a result of values reported on his federal estate tax return. ...

Jackson’s estate was said to have been valued between $80 million and $500 million. That’s, er, a lot of disparity. And that’s exactly the problem.

The estate has valued the assets at lower amounts than the IRS believes to be appropriate. A number of assets are said to be at issue including Neverland Ranch, automobiles and amounts attributable to the singer’s image, likeness and intellectual property.

August 22, 2013 in Celebrity Tax Lore, Tax | Permalink | Comments (0) | TrackBack (0)