Saturday, January 26, 2013
Tina Turner is renouncing her American citizenship to become Swiss, it was revealed today. The American rock diva has lived in the Zurich suburb of Kuesnacht since the mid-1990s and speaks fluent German. The local Zuerichsee-Zeitung newspaper said on its website the local council announced its decision to grant the 73-year-old Turner citizenship in an official notice published in Friday's edition. The decision still requires formal approval from state and federal authorities. ...
Earlier this month, actor Gerard Depardieu announced he was renouncing his French citizenship because of the country's high taxes, and was promptly offered Russian citizenship by President Vladimir Putin. Tina's move has sparked rumors she is following in the footsteps of Depardieu and Facebook's Eduardo Saverin, who now calls Singapore, with its 18% tax rate, home. Wealthy socialite Denise Rich ... renounced her U.S. last year. She was married to billionaire commodities trader Marc Rich, controversially pardoned by Bill Clinton his last day in office. ...
But Forbes says of the singer's move: 'There’s little to suggest taxes motivate the decision, and Swiss rates are high.' ... Her agent did not return MailOnline's request for comment about whether the move was for tax reasons.
- ABC News: Tina Turner to Become Swiss Citizen
- The Atlantic: Why Tina Turner Won't Be an American Citizen Anymore
- Forbes: Swiss Tina Turner Giving Up U.S. Passport
- The Guardian: Tina Turner Takes First Steps to Swiss Citizenship
- L.A. Times: Tina Turner May Become a Swiss Citizen, Give Back U.S. Passport
Wednesday, January 23, 2013
Following up on Monday's post, Golfer Phil Mickelson Plans 'Drastic Changes' in Response to His 63% Marginal Tax Rate: Wall Street Journal editorial, The Mickelson Vote: Lefty Offends the Lefties:
California golfer Phil "Lefty" Mickelson says he will no longer publicly criticize the government for taking most of his paycheck. That's a shame. But even if it's now socially unacceptable for high achievers to suggest they should keep the fruits of their labor, that doesn't mean they will keep supplying that labor....
Mr. Mickelson was beginning to spark a useful conversation about the way that confiscatory tax rates discourage productive effort. But the critics began to emerge on various websites, and, alas, on Monday night the golfer took a rhetorical mulligan. "Finances and taxes are a personal matter, and I should not have made my opinions on them public," Mr. Mickelson said in a statement. "I apologize to those I have upset or insulted, and assure you I intend to not let it happen again."
Too bad Lefty will no longer help educate the lefties on the incentive effects of marginal tax rates. But he can still vote with his Gulfstream and take his tour winnings and his endorsement income to a more friendly locale, such as Florida, Nevada or Texas. All three still have no state income tax, which may be one reason Tiger Woods and so many other golfers (including many Europeans) also live in Florida. Expect a continued migration.
Monday, January 21, 2013
In honor of Martin Luther King, Jr. Day: reports on how some southern officials tried to use state tax laws to stop King and the nascent civil rights movement:
- "In Alabama, ... Governor John Patterson in early 1960 directed state revenue authorities to charge Martin Luther King, Jr., with tax evasion and perjury in completing his Alabama state income tax returns. The charges against King, who had already moved his ministry from the Dexter Street Church in Montgomery to his father's church in Atlanta, specified that he had diverted money raised for the Southern Christian Leadership Conference (SCLC) into his own pockets without ever reporting it as income." Kermit L. Hall, "Lies, Lies, Lies": The Origins of New York Times Co. v. Sullivan, 9 Comm. L. & Pol'y 391, 404 (2004).
- "The only person ever prosecuted under the Georgia income tax perjury statute was Martin Luther King." Corey R. Chivers, Desuetude, Due Process, and the Scarlet Letter Revisited, 1992 Utah L. Rev. 449, 454 n.27.
Sports Illustrated: Mickelson Plans 'Drastic Changes' in Response to Tax Hikes:
Phil Mickelson said he will be making "drastic changes" because of recent tax increases, including California's new, highest-in-the-nation income tax on the wealthy, and he suggested that the tax was one of the reasons he withdrew from the investment group that purchased the San Diego Padres.
"There are going to be some drastic changes for me because I happen to be in that zone that has been targeted both federally and by the state and, you know, it doesn't work for me right now," Mickelson said after his T37 finish at the Humana Challenge in Palm Spring, Calif. "So I'm going to have to make some changes."
Unlike most of his fellow PGA Tour players who live in tax-friendly states like Florida and Texas, Mickelson chooses to live in high-tax California, his home state, where residents voted in November to raise tax rates to 13.3 percent from 10.3 percent for those making more $1 million. ...
"If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate's 62, 63 percent," Mickelson said. "So I've got to make some decisions on what I'm going to do."
- CBS News, Phil Mickelson Says Changes Coming Because of Taxes
- Forbes, Golfer Phil Mickelson May Call It Quits Due To Climbing Tax Rates
- New York Times, Uneasy in the Political Climate, Mickelson Talks Like Someone Ready to Step Away
- USA Today, Phil Mickelson Talks Taxes, 'Drastic Changes'
Wednesday, December 26, 2012
- Business Insider, Facebook Funneled Nearly Half a Billion Pounds Into the Cayman Islands Last Year
- The Guardian, Facebook Paid £2.9m Tax on £840m Profits Made Outside US
- The Telegraph, Big Firms Play 'Double Dutch' to Skip on Tax
- The Telegraph, Facebook Defends its 'Double Irish' Tax Reduction Deal
Monday, December 17, 2012
- CNN, Prince of Wales Defends Tax Status
- The Daily Mail, Prince Charles Reported to the Revenue Over 'Well Entrenched Tax Avoidance Scheme' on £18m Earnings
- The Daily Record, Prince Charles Attacked Over 'Tax Avoidance' Claims
- The Guardian, Prince Charles's £700m Estate Accused of Tax Avoidance
- The Independent, Prince Charles Attacked Over Tax Payments
Thursday, December 6, 2012
Actor Stephen Baldwin was arrested today in New York charged with failure to file state income returns and failure to pay over $350,000 in state income taxes for 2008, 2009 and 2010.
(Hat Tip: Bob Kamman.)
Wednesday, November 28, 2012
Tuesday, November 27, 2012
Fox News: Tax Increases Could Factor in MLB Negotiations, by Ronald Blum:
As free agents negotiate deals this offseason, tax policy is an area that comes up along with the usual issues. Some players are wrangling for as much money as they can get before the end of the year to avoid a take hike in 2013. ... With baseball contracts worth as much as $275 million (Alex Rodriguez) and the major league minimum $480,000, tax policy affects every player who spends most of the season in the big leagues. ...
According to an analysis done by a tax lawyer on the staff of agent Scott Boras, a player with a $10 million salary and average deductions who plays in Florida and is a resident of that state will see his taxes rise from $3.45 million this year to $4.09 million next year under current law. If traded to the Blue Jays, that player's 2013 tax would rise to $4.27 million. And if dealt to a California team, the tax would go up to $4.4 million.
By moving money from salary into signing bonuses, players can sometimes lower their state tax bills. Shifting money into December this year could reduce federal taxes.
In the end, most free agents choose teams based on where they want to play, not on lowering the tax cut on their income.
Monday, November 26, 2012
Don't ever say Charlie Sheen's not the charitable type -- because he recently cut Lindsay Lohan a $100,000 check to cover the actress' six-figure tax bill. ... [S]he and Charlie became close pals while on the set of "Scary Movie 5" back in September. ...
During their bonding period, we're told Lindsay and Charlie talked about everything -- and at one point, Lindsay mentioned her ongoing tax problems. We're told Charlie offered to cut her a check then and there to get the IRS off her tail, but Lindsay refused. Fast forward to last week -- sources close to Lindsay tell TMZ, Lindsay's biz manager received a check from Charlie for $100,000. We're told Lindsay was blown away by Charlie's generosity -- and immediately applied the money to her outstanding tax bill. TMZ broke the story ... Lindsay allegedly owed Uncle Sam $233,904 in unpaid taxes for 2009 and 2010 -- but thanks to Charlie, that number's nearly been cut in half.
Sheen presumabky will be filing a gift tax return to report the transaction. (Hat Tip: Ann Murphy.)
Update: Forbes, Sorry Charlie: Sheen's $100K Taxes For Lindsay Lohan Itself Is Taxable, by Robert W. Wood
Saturday, November 17, 2012
Comedian and actress Janeane Garofalo revealed on Saturday that she was married, unbeknownst to her or her husband, for 20 years. Garofalo wed writer and producer Rob Cohen in what they both thought was a sham ceremony in Las Vegas in the 1990s. Does the couple have to file 20 years of amended tax returns to reflect their married status?
No. The statute of limitations on honest mistakes in tax filing is three years, so Garofalo and Cohen are off the hook for 85% of their union. Even for the last three years, it probably wouldn’t make sense for the couple to amend their returns. Taxpayers have no legal obligation to notify the IRS of innocent errors, and the couple would likely owe more taxes plus interest if they were to amend. (Garofalo and Cohen are probably both high-income earners who pay higher taxes filing married than single.) They should simply wait for the IRS to audit them, which likely won’t happen. The IRS tends to avoid situations that would inflame public opinion. (For example, there is always speculation about the tax hit of catching a historic home-run baseball, but the IRS never goes after the lucky fans.) If the IRS decides to audit the couple, the most likely result is that they’ll pay the higher married rate. No penalty will apply, because they made an honest mistake and acted in good faith.
Garofalo and Cohen might also argue that they weren’t actually married. Nevada law allows for an annulment of marriage because of “mutual mistake.” When a marriage is annulled, the law treats it as having never existed. If the couple got an annulment of their 20-year-marriage — a unique circumstance — they could try to convince the IRS that it should consider the marriage to never have happened.
Thursday, November 15, 2012
Monday, November 12, 2012
In Spain, new austerity measures mean higher sales tax on everything from beer and wine to clothing and movie tickets. But in Bescanó, a small town in the country's northeast, the local theater director has come up with a rather creative way to get around a new 21% tax on tickets for plays at his theater –- by selling carrots instead.
"We sell one carrot, which costs 13 euros [$16] -– very expensive for a carrot. But then we give away admission to our shows for free," he explains in Spanish. "So we end up paying 4% tax on the carrot, rather than 21%, which is the government's new tax rate for theater tickets." ...
Spanish media have dubbed this the "Carrot Rebellion," and the Bescanó theater has won kudos from arts advocates nationwide. Shows are sold out.
But the theater must also follow the law, says Fernando Fernandez, an economist at Madrid's IE Business School. "This is called tax evasion," says Fernandez. ...
Marcé, the theater director, says he consulted a lawyer before launching his carrot sales. He's got backing from the local mayor too. And no one has stopped him so far.
(Hat Tip: Mike Talbert.)
Confirming the advice I have been giving my daughter for 20 years ("All men are pigs"): Scientific American: Men and Women Can't Be "Just Friends":
Can heterosexual men and women ever be “just friends”? Few other questions have provoked debates as intense, family dinners as awkward, literature as lurid, or movies as memorable. Still, the question remains unanswered. Daily experience suggests that non-romantic friendships between males and females are not only possible, but common—men and women live, work, and play side-by-side, and generally seem to be able to avoid spontaneously sleeping together. However, the possibility remains that this apparently platonic coexistence is merely a façade, an elaborate dance covering up countless sexual impulses bubbling just beneath the surface.
New research [Benefit or Burden? Attraction in Cross-Sex Friendship] suggests that there may be some truth to this possibility—that we may think we’re capable of being “just friends” with members of the opposite sex, but the opportunity (or perceived opportunity) for “romance” is often lurking just around the corner, waiting to pounce at the most inopportune moment.
In order to investigate the viability of truly platonic opposite-sex friendships—a topic that has been explored more on the silver screen than in the science lab—researchers brought 88 pairs of undergraduate opposite-sex friends into…a science lab. Privacy was paramount—for example, imagine the fallout if two friends learned that one—and only one—had unspoken romantic feelings for the other throughout their relationship. In order to ensure honest responses, the researchers not only followed standard protocols regarding anonymity and confidentiality, but also required both friends to agree—verbally, and in front of each other—to refrain from discussing the study, even after they had left the testing facility. These friendship pairs were then separated, and each member of each pair was asked a series of questions related to his or her romantic feelings (or lack thereof) toward the friend with whom they were taking the study.
The results suggest large gender differences in how men and women experience opposite-sex friendships. Men were much more attracted to their female friends than vice versa. Men were also more likely than women to think that their opposite-sex friends were attracted to them—a clearly misguided belief. In fact, men’s estimates of how attractive they were to their female friends had virtually nothing to do with how these women actually felt, and almost everything to do with how the men themselves felt—basically, males assumed that any romantic attraction they experienced was mutual, and were blind to the actual level of romantic interest felt by their female friends. Women, too, were blind to the mindset of their opposite-sex friends; because females generally were not attracted to their male friends, they assumed that this lack of attraction was mutual. As a result, men consistently overestimated the level of attraction felt by their female friends and women consistently underestimated the level of attraction felt by their male friends. ...
These results suggest that men, relative to women, have a particularly hard time being “just friends.” What makes these results particularly interesting is that they were found within particular friendships (remember, each participant was only asked about the specific, platonic, friend with whom they entered the lab). This is not just a bit of confirmation for stereotypes about sex-hungry males and naïve females; it is direct proof that two people can experience the exact same relationship in radically different ways. Men seem to see myriad opportunities for romance in their supposedly platonic opposite-sex friendships. The women in these friendships, however, seem to have a completely different orientation—one that is actually platonic.
Here is Steven Colbert's take:
Sunday, November 11, 2012
Following up on my previous post, NY's Highest Court Rules 4-3: Lap Dances Are Not 'Art' and Thus Not Exempt From Sales Tax:
Friday, November 9, 2012
As a result of the doping scandal, Lance Armstrong has been stripped of his seven Tour de France wins. In addition to being erased from the record books, Armstrong will have to return up to $16 million in purses and bonuses he received as a result of his win. In this paper, I discuss the tax consequences to Armstrong of his returning his winnings.
Friday, November 2, 2012
Following up on yesterday's post, Owners Race to Sell Their Businesses by Year-End to Avoid 67% Capital Gains Tax Increase:
- MarketWatch: George Lucas’s Jedi Estate Planning
- San Francisco Business Times, George Lucas Saves Hundreds of Millions in Taxes by Selling Before Year-End
Thursday, October 25, 2012
Tax lawyers, especially aging men losing their hair, should be forgiven for looking past the numerous other aspects of this latest little Trump tempest in a teapot to taxes. Surely Mr. Obama will ignore Mr. Trump’s offer, but if he didn’t, who is taxed? Could The Donald deduct the payment? Is there any taxable income to the President?
The tax law tries to get a piece of just about everything. Even so, I don’t see any income to Mr. Obama. If he did produce the documents he would not be selling them. He would merely be revealing them in exchange for a donation. You don’t have income when you do a walk-a-thon for charity, even if your miles end up causing someone else to pledge money.
But the charitable contribution that Mr. Trump is surely assuming he would get on the off-chance that Mr. Obama complies is another matter. Can Mr. Trump deduct the $5 million if he gives it to Mr. Obama’s chosen charity? Whether or not it seems fair, probably. ...As for Mr. Trump, even if (as seems likely) there’s ultimately no $5 million gift to charity, there’s another tax angle. I would bet that some expenses associated with this gambit end up on his tax return as business expenses. After all, there surely must be some respect in which even this latest from The Donald helps to enhance Mr. Trump’s illustrious—and hard to define—brand.
Wednesday, October 24, 2012
Forbes: The Tax Implications of Lance Armstrong's Banishment From Cycling, by Anthony J. Nitti (WithumSmith & Brown, Aspen, CO):
What will be the tax consequence if Armstrong repays race winnings and bonus amounts that were previously included in his taxable income as compensation?
The issue is not one of deductibility. Because the bonuses were originally earned in Armstrong’s trade or business of being a cyclist, any repaid compensation should be deductible as an ordinary and necessary business expense. Rather, the problem Armstrong faces is one of tax benefit.
If the doomsday predictions surrounding Armstrong’s future income stream are to be believed, it’s possible Armstrong may pay out more in bonus restitution during 2013 than he takes in as income. As a result, he may not be able to reap the full tax benefit of the deductions related to his repayments. And even in the event Armstrong is able to fully utilize his deductions in the current year, he may have been subject to a higher tax rate when the bonuses were originally earned — particularly during the pre-Bush tax cut years of 1999-2001 — than he is today. In either scenario, Armstrong would likely enjoy a larger tax benefit if he could travel back in time, exclude the bonus payments from income in the year they were received, and redetermine his prior years’ tax liability.
Fortunately for Armstrong, there is an Internal Revenue Code provision that contemplates such a dilemma. Section 1341 provides that if the facts are right, a taxpayer like Armstrong who is required to repay amounts previously included in income can compute their tax consequences on a “best case scenario” basis. ... Unfortunately for Armstrong, Section 1341 is rife with requirements that must be met before a taxpayer can take advantage of the retroactive reach of the provision. While Armstrong will satisfy the majority of these hurdles with ease, there is one that poses a potentially fatal challenge. ...
The income must have been originally included in the taxpayer’s income because the taxpayer believed he had an unrestricted right to the income. This requirement poses a significant threat to Armstrong’s ability to use Section 1341 to obtain the most advantageous result from any bonus repayments. Because Armstrong has been accused of knowingly violating race rules and the terms of his sponsorship contracts by doping throughout his seven Tour victories, it is difficult to envision the IRS concluding that Armstrong could have believed he had an unrestricted right to his bonus money. Stated in another way, because Armstrong knew his doping was against the rules, he couldn’t have believed he had an “unrestricted right” to the bonus payments. Rather, he would have accepted the bonus money knowing that a subsequent failed drug test — or as it happened, an investigation eight years after his last race — could result in his being forced to forfeit the bonuses.
Previous case law would support this theory, as the courts have made clear that Section 1341 does not apply to any “ill gotten gains,” such as embezzled income, smuggled goods, or illegal kickbacks. Armstrong’s PED use poses a similar problem in that his bonus payments appear to have been earned through “fraud or deceit,” precluding him from using Section 1341 to achieve the most beneficial tax result of any subsequent repayments.
Should Armstrong be unable to utilize Section 1341, he would be limited to merely deducting any bonus repayments in the year they are made, with the tax benefit of those deductions being dictated by the law — and Armstrong’s specific tax picture — in the year of repayment. Of course, given all that Armstrong has been through over the past two weeks, his future tax returns are likely the least of his worries.
(Hat Tip: Ann Murphy, Peter Prescott, Paul Rozek.)
Monday, September 24, 2012
Yale Law Library New Exhibit: The Comic Art of Joseph Hémard:
It would take a genius to illustrate one of the most boring books imaginable, a code of tax laws, and create a comic tour-de-force. That genius was Joseph Hémard (1880-1961), who in his lifetime was probably France's most prolific book illustrator. His illustrations are the focus of the latest exhibit in the Yale Law Library, And then I drew for books: The Comic Art of Joseph Hémard.
The exhibit, on display until December 15, is curated by Farley P. Katz and Michael Widener. Katz, a tax attorney from San Antonio, has built one of the world's finest collections of Hémard's works. Widener is the Rare Book Librarian at the Lillian Goldman Law Library.
Hémard's illustrations have a distinctly French character, usually comic, and often mildly erotic. Many of his illustrations were executed in pochoir, a hand stenciling process producing intense, gorgeous colors still vibrant after three-quarters of a century.
The exhibit showcases eight of the 183 illustrations in Hémard's Tax Code, donated to the Yale Law Library by Katz, along with two of the other three law books on display from the library's Rare Book Collection.
(Hat Tip: Charlotte Crane.)
Tax codes are notoriously dull reading. They are devoid of interest to anyone but professionals trained in the arcane language of the tax laws who, even then, never actually consult them except when required by a specific task at hand. The idea of a lengthy, commercially published tax code, profusely illustrated with humorous cartoon-like drawings full of puns and whimsy, with illustrations beautifully hand printed in color, seems almost unimaginable. But such an incredible book exists! Add to this the facts that the book was printed in occupied Paris near the end of World War II and that it contains numerous risqué and decidedly antiauthoritarian images, and one begins to appreciate how truly fantastic this book is.
In a brief preface to the Code, Hémard observed that, given “the complexity of the tax system,”22 it is understandable that some must rely on qualified persons to comply with their tax obligations, and that others, although essentially blind to the tax laws, choose to handle their tax obligations themselves, “strengthened by the illusion that a dark night does not offer more perfidious obstacles to the blind man than to the perceptive one.” He then expressed his hope—which must be taken as purely artistic in context—that “the especially arid matters covered by the general Code of direct taxes would receive some useful light through the art of the illustrator.” Hémard brilliantly achieved his goal; his illustrations bring the sterile world of the tax code to a vibrant and wonderful life, filled with humor and populated with peasants and shopkeepers, children and relatives, lovers and crooks, wealthy businessmen and vagabonds, all being squeezed for their last sous by the relentless and merciless tax collector.
Monday, September 10, 2012
Newspaper to France's Richest Man Leaving Country to Avoid 75% Tax Rate: 'Get Lost, You Rich Bastard!'
The News Statesman: French Newspaper to France's Richest Man: "Get Lost, You Rich Bastard":
In response to the news that France's richest man has applied for Belgian nationality, the country's leading left-wing daily has declared: "get lost, you rich bastard!"*
The forthright headline, emblazoned across today's front page of Libération, is aimed at Bernard Arnault, CEO of the luxury fashion conglomerate LMVH. Arnault applied for Belgian nationality after the socialist president François Hollande proposed a new 75 per cent tax rate on earnings over one million euros. He denies he is trying to avoid tax, but Libération nonetheless condemns his decision as "a symbol of the arrogance of the wealthiest".
The headline is actually a play on a famous gaffe made by the former president, Nicholas Sarkozy, who muttered "casse-toi, pov' con" ("get lost, you poor bastard") at a member of the public who refused to shake his hand. The phrase subsequently became a taunt taken up by Sarkozy's left-wing opponents.
UPDATE: Arnault is now suing Libération, according to a press release from his company. Arnault, "has no other choice, given the extreme vulgarity and violence of the headline," it says.
(Hat Tip: Luke McQueen.)
Tuesday, August 21, 2012
(Hat Tip: Bob Kamman.)
Sunday, August 19, 2012
Italy has a public debt of nearly 2 trillion euros, and it's cracking down on its notoriously wily tax evaders. Owners of luxury yachts are a prime target, with tax police launching dockside raids to see how individual tax files line up with owning and maintaining an expensive boat. ...
But yachts are mobile assets. In response, many boat owners are simply weighing anchor and setting course for more tax-friendly Mediterranean marinas. ...
Since the tax crackdown was announced in March, around 30,000 boats have fled Italy, seeking safer havens. They include Slovenia, Croatia and Montenegro to the east, France and Spain to the west, and Tunisia and Malta to the south.
The Italian association of marinas says the yacht exodus has cost the Italian economy some $350 million this year in lost revenues from marina fees and services, and fuel sales. Tax authorities are unrepentant, saying it's important to strike fear in the hears of tax dodgers.
Prior TaxProf Blog posts:
- Sen. John Kerry Skips Town on Sails Tax (July 23, 2010)
- Sen. Kerry Sails Around the Tax Issue (July 27, 2010)
- Sen. Kerry Abandons (Tax-Dodge) Ship, Agrees to Pay $500k MA Tax on Yacht (July 28, 2010)
- Sen. Kerry & Yacht-Gate: Learned Hand's Perspective (July 29, 2010)
Thursday, August 16, 2012
Wall Street Journal editorial: Usain Bolt's Tax Lesson:
As the post-Olympics glow fades, U.K. policy makers are trying to figure out how to keep the flame of British sports burning. They could start by changing Her Majesty's tax laws. After Jamaican sprinter Usain Bolt won his third gold in London last week, reporters asked him why he doesn't compete in the U.K. more often. "As soon as the [tax] law changes I'll be here all the time," he said.
Punitive tax policy had kept the world's fastest man from competing in Blighty for the past three years. Explaining Mr. Bolt's decision to skip a 2010 race in London, his agent told reporters: "He will earn a lot less by competing in Britain if he maintains his current endorsement level." ... Britain takes a cut of an athlete's worldwide endorsement earnings—that means overseas sponsors in addition to those in the U.K.—proportional to the time spent in Britain. By comparison, the U.S. only taxes nonresident athletes on endorsement fees paid by American sponsors. ...
So if in a given year Mr. Bolt ran in six races, one of which was in Britain, Her Majesty's government could collect income tax on one-sixth of his total income from sponsorships. Given that Mr. Bolt's contract with Puma alone is worth $9 million annually, the final U.K. tax bill for a single London race could dwarf his appearance fee, which has been in the range of $150,000 to $250,000. ...
Superstars ... can tailor their professional schedules to maximize earnings without risking damage to their fame or competitive standing. So the best athletes stay out of U.K. competitions, the events have less popular appeal, fewer people attend, and the country forfeits both the economic activity and the tax revenue. The lesson is that taxes influence behavior, and punitive taxation hurts everyone, not least the punitive nation.
- BBC, Usain Bolt: Tax Stops Olympian Running in the UK
- The Telegraph, Usain Bolt Refuses to Race in UK Until Tax Laws Are Changed
Prior TaxProf Blog posts:
- Usain Bolt Runs From the Tax Man (July 12, 2010)
- Olympic Athletes Get Special U.K. Tax Break (July 31, 2012)
Wednesday, August 15, 2012
Forbes: UBS Sues Billionaire Olenicoff In Offshore Tax Cheating Case, by Janet Novack:
UBS, Switzerland’s largest bank, has sued California billionaire developer Igor Olenicoff for malicious prosecution, charging he pursued a meritless federal lawsuit against it built on lies in part to “deflect blame” from his own offshore tax sins.
The suit, which UBS quietly filed in Orange County Superior Court last week, also names Olen Properties Corp., and two of Olenicoff’s lawyers as defendants, and asks for punitive damages, as well as compensation for damage to UBS’ reputation and the $3 million in attorneys’ fees UBS spent defending itself against Olenicoff’s now-dismissed federal suit. UBS’ attorneys in this case, as in the federal one, are from the pricey and prominent law firm of Gibson, Dunn & Crutcher.
In Dec. 2007, in a deal with federal prosecutors, Olenicoff, one of the 400 Richest people in America, admitted he had lied on his tax returns about his ownership of foreign accounts from 1998 through 2004, paid $52 million in back taxes, penalties and interest for those years, and pleaded guilty to a single felony of filing a false 2002 tax return. Then, in September 2008, he turned around and sued UBS and others, claiming they had mislead him about the legality and taxation of his secret offshore accounts. ...
Another one of those Olenicoff sued, Bradley Birkenfeld, his UBS banker, has a request for court costs from Olenicoff pending in federal court. Birkenfeld helped the government build its case against UBS. But while Olenicoff, now 70, escaped without jail time, Birkenfeld was sentenced to a stiff 40 months in jail for conspiracy after prosecutors decided he hadn’t been forthcoming about Olenicoff’s enormous offshore accounts. Birkenfeld, 47, was recently released to a halfway house and is scheduled to be released from federal custody at the end of November. He is still pursuing a claim for an informant’s reward from the IRS for his role exposing UBS.
- American Lawyer, After Squashing $1.7 Billion Olenicoff Suit, Gibson Dunn Takes Offensive for UBS
- Bloomberg, UBS Sues Billionaire Olenicoff for Filing Failed Tax Suit
Tuesday, August 14, 2012
One of my readers was watching a Twilight Zone episode (The Man in the Bottle) in which a tax issue arose. A genie granted a man four wishes. One of the wishes was for $1,000,000. The couple gave $57,355 to friends. Then an IRS agent showed up and in 60 seconds calculates a federal income tax liability of $942,640 (leaving the man and his wife with $5). The agent says that he is using the standard deduction and married filing jointly rates. The episode aired in 1960. Time travel exists in the Twilight Zone. So, the reader wants to know, in what year did the wish get granted? To quote the reader, “In other words, can you recreate the tax liability [as computed by] the IRS agent?” The reader says he has tried tax years 1913-1960 without success, and asks, “Is it possible the IRS agent was wrong?”
Then I tried. It’s a roughly 95% effective tax rate. Even in the World War II years, with top marginal rates in the 90s, I don’t think one could get to a 95% overall rate. My guess is that the screen writers wanted to make a shocking outcome! Tax is Everywhere, Even in the Twilight Zone.
Friday, August 10, 2012
Following up on last week's post, The Tax Treatment of U.S. Olympic Medal Winners:
- Neil H. Buchanan (George Washington), Taxes, Media Hype, and Dog Bites Man
- Citizens for Tax Justice, The Olympic Tax Exemption: It Gets Worse
- NPR, Should We Tax Olympic Prize Money?
- NY Times, Taxing Olympic Medalists
- L.A. Times editorial, Tax-Free Olympic Glory?
- L.A. Times, Lawmakers Propose Tax Breaks for California's Olympic Medalists
- Slate, Tax the Olympians: Sen. Marco Rubio and President Obama Team Up for a Ridiculous New Tax Break for Olympic Medal Winners
- Tax Foundation, Misunderstanding Tax Reform: The Case of The Olympic Tax Elimination Act
Monday, August 6, 2012
Next year Mark Zuckerberg’s base salary will receive a dramatic pay cut—going from a base salary of $600,000 to just one dollar.
Which raises the question: will he ever pay taxes again? ...
Zuckerberg’s pay cut could reduce his income tax burden to nothing. It’s possible that he might even be eligible for certain types of government aid for those with low-income -- although it’s unlikely that he would collect them.
In order to reduce his tax burden to zero, Zuckerberg would have to forego any future cash bonuses or additional stock awards. He would also have to stop employing certain Facebook services for personal use. Last year, for example, he had imputed income from the use of aircraft for personal use of about $692,679. He also received $90,850 in estate and financial planning from Facebook.
Can Zuckerberg really live without income? ... When you have the net worth of Zuckerberg, you can live for a very, very long time on tax-free debt that you can use as income. Let’s say that Zuckerberg needs $2 million of spending power per year and lives another 60 years. That’s $120 million of spending. If he gets an interest rate of 4 percent and just rolls it.
I have no idea what kind of plans Zuckerberg has for his future income and taxes. He may not want to accumulate debt for his entire life. Perhaps he has plans to become a big spender and will need to derive income beyond what he can get from muni bonds. But it’s very likely that at least some of the $90,850 worth of financial advice Zuckerberg received went to minimizing tax exposure.
Friday, August 3, 2012
Tuesday, July 31, 2012
Forbes: Olympians Get a Free Pass on Taxes at the London Games, by Kelly Phillips Erb:
Olympians at the games are getting a nice tax break under an exemption passed just for the London 2012 games. If not for the exemption, those at the games might have to pony up some pounds for the Queen.
You see, the Brits, like the U.S., have a tax system that attempts to tax global income. Under British tax law, the amount of tax due is pro-rated based on the number of events that an athlete competes in inside the country; this is in addition to a 50% tax rate on appearance fees. If, for example, an athlete participates in ten athletics events in 2012 and one of those events is located in the UK, the Brits take the position that they are more or less entitled to 1/10 of that athlete’s worldwide income (some exceptions apply but you get the idea). The tax is imposed even though the athletes may not live in Britain.
The law has kept big names like Spanish golfer Sergio “El Nino” Garcia and Rafael Nadal out of the country for a number of events. Those omissions made sports news but didn’t make many waves beyond their individual sports. The Olympics, however, is on a completely different scale: you can’t have a competitive Olympics unless athletes from all over the world actually show up – and attendance was threatened by these tax laws. Last year, Jamaican über sprinter Usain Bolt famously declared “I am definitely not going to run [in London]” until the Olympics because of what he viewed as punitive tax laws. His declaration sent the country into a tizzy, worrying that other athletes might make similar proclamations – or not show up for the 2012 Olympics at all.
In order to stem any controversy, the British taxing authorities agreed to a limited exemption to the tax rule. The exemption covers those athletes who are visiting the UK in order to compete in the Olympic Games and a limited number of people who are visiting the UK to work on Games-related activity. It does not apply to those working on construction of the Olympic venues
Monday, July 30, 2012
Huffington Post: Kim Kardashian and Kris Humphries: Trouble at Tax Time?, by Julian Block:
Picture a cozy household of three -- Brad Pitt, Angelina Jolie and the friendly tax man. Fact is, whether Brad, Angelina, Jennifer, Bristol, Levi, Snooki, or anyone else is hooking up, breaking up, or something in between, the odds and ends of their relationships are grist for the Internal Revenue Service mill.
Consider, for example, the splashy wedding of reality TV personality Kim Kardashian (her second marriage) to basketball player Kris Humphries (his first). They wed on August 20, 2011. Seventy two days later, Kim filed for divorce. Kris countered by seeking an annulment on the grounds of fraud (the case is still pending).
The difference between a divorce and an annulment isn't a difference without a distinction. The courts grant a divorce to mark the end of a marriage that was valid when entered into, whereas they grant an annulment to end a marriage that was void or voidable. A marriage is void when it legally couldn't have taken place -- like when one of the parties was under the age of consent at the time of the marriage or already married. Voidable is legalese for incapable of consenting -- for example, one of the parties was intoxicated or the victim of behavior like duress, coercion or force.
To a couple interested only in the fastest way to untie the knot, the question may seem to be an unimportant technicality. Those watchful souls at the IRS, however, think that there's an important difference when Form 1040 time rolls around. According to an IRS ruling, if an annulment is retroactive, the couple was never married. As a result, they had no right to file joint returns [Rev Rul. 76-255, 1976-2 CB 40].
(Hat Tip: Francine Lipman.)
Sunday, July 22, 2012
[N]ow is a good time to review the UK’s taxation rules on non-resident athletes. Not only will the golfers in this week’s tournament be liable for taxes on their winnings, but they will also owe Her Majesty’s Revenue and Customs (HMRC—UK’s tax collector) for taxes on endorsement income. In fact, even those who do not make the cut -- and will therefore not earn money from the tournament -- must pay taxes on endorsements. HMRC has a “Foreign Entertainers Unit (FEU)” whose job is to track the movement of athletes and entertainers who play or perform in the UK throughout the year. Tournaments withhold taxes from athlete earnings, so tracing income and withholding is relatively easy. ...
[G]olfers playing in The Open Championship will pay taxes on the following income from this week’s work:
- Tournament Winnings -- for those who make the cut
- Endorsement Retainers -- taxed based on days playing/practicing in the UK v. days playing/practicing elsewhere
- Winning/Placing Bonuses -- fully taxed by the UK
- Ranking Bonuses -- taxed based on ranking points earned in the UK v. points earned elsewhere
- Paid appearances before, during & after The Open
(Hat Tip: Cory Birkhauser.)
Tuesday, July 17, 2012
Following up on Friday's post, Holy Taxation, Batman! H&R Block Messes Up Bruce Wayne's Taxes: H&R Block has corrected its mistake:
- Don't Mess With Taxes, Holy Amended Tax Infographic, Batman!, by Kay Bell
- Forbes: Batman (Files Amended Tax) Returns After H&R Block Admits Error, by Janet Novack
Sunday, July 15, 2012
Following up on my earlier post: Forbes: Owner of Nation's First Marijuana Pharmacy Now Broke and Fighting IRS, by Janet Novack:
Lynnette M. Shaw, the colorful pot activist who opened the first licensed medical marijuana dispensary in the United States, is fighting an IRS bill for $1.27 million in back income taxes and penalties and has filed for personal bankruptcy, listing $276,000 in state sales taxes among her debts.
Shaw was forced to shut her Marin Alliance for Medical Marijuana in Fairfax, Ca. late last year, after U.S. Attorney for Northern California Melinda Haag wrote a letter to her landlord threatening to seize the building that housed her operation. The letter was part of a coordinated crackdown by four U.S. Attorneys in California on marijuana dispensaries. ...
Shaw’s personal income tax troubles stem from an IRS decision to deny business expense deductions to marijuana dispensaries under a provision Congress passed in 1982 (§ 280E) that disallows deductions for “trafficking in controlled substances” as “prohibited by Federal law or the law of any State in which such trade or business is conducted.” Surprisingly, Shaw never incorporated the dispensary—as either a for-profit or not-for-profit corporation. Instead, she ran it as a sole-proprietorship, reporting its $1 million plus in annual sales and all its expenses on Schedule C of her individual 1040 tax return.
Shaw’s previously unreported lawsuit filed in U.S. Tax Court late last month, shows that rather than reporting profits, she reported losses totaling $186,826 in 2008 and 2009. After denying all her expenses for everything from cannabis to utilities, IRS auditors calculated Shaw had taxable income of $2.83 million for those years. This past March it sent her a bill for $1.27 million n back taxes and penalties, plus an as yet uncalculated amount of interest. Shaw says she owes nothing. (Harborside, which is incorporated, has reportedly been hit with a $2.5 million IRS bill; according to the U.S. Tax Court docket, it filed suit challenging the assessment in December.)
Shaw’s suit argues that the IRS is ignoring state laws legalizing medical marijuana as well as a 2007 U.S. Tax Court decision (Californians Helping To Alleviate Medical Problems, Inc.) that was decided largely in favor of another, now closed, marijuana dispensary. In the CHAMP case, the IRS conceded that 280E doesn’t preclude deducting the cost of goods sold (i.e. the cost of the cannabis). The court also ruled that CHAMP could deduct the cost of providing extensive counseling and caregiving services to its members, although not the cost of actually distributing the marijuana.
The title of this blog post is courtesy of Country Joe and the Fish:
Don't bogart that joint, my friend
Pass it over to me.
Don't bogart that joint, my friend
Pass it over to me.
Saturday, July 14, 2012
If you want to publicly criticize Argentina’s government, make sure all your tax filings are in order.
That was the thinly veiled message President Cristina Fernández de Kirchner sent Wednesday near the end of a speech broadcast on all national television and radio stations. Reiterating her standard criticism that media “operations” are depressing Argentinians with gloom-and-doom stories, she derided an article published last Sunday. ... In the story, the owner of a real-estate agency, one of its directors and an employee were quoted complaining that recent government measures essentially blocking the sale of foreign currency to citizens had paralyzed their business.
Kirchner then dropped this bit of information: the firm in question hasn’t filed taxes since 2007 and neither has the director quoted in the story, whom she named.
How did she know? She had called up the head of the tax agency to ask, and this, too, she openly revealed on Wednesday’s broadcast. ... [B]y saying that she had called the taxman out of supposed concern for the real-estate agency, she unabashedly established cause and effect: you criticize me; I punish you.
Friday, July 13, 2012
Kay Bell notes that H&R Block's flashy campaign -- Superhero Economics: Bruce Wayne (Batman) v. Peter Parker (Spiderman) -- wrongly asserts that Batman would not be liable for any federal income tax on his $143 million income because of his $279 million of charitable giving:
Section 170(b)(1)(A) limits the charitable deduction to 50% of the taxpayer's adjusted gross income. So Batman would be taxable on roughly $72 million, leaving over $200 million of the charitable contribution deduction to be carried over to future years.
Update: H&R Block has corrected its mistake:
- Don't Mess With Taxes, Holy Amended Tax Infographic, Batman!, by Kay Bell
- Forbes: Batman (Files Amended Tax) Returns After H&R Block Admits Error, by Janet Novack
National Public Radio, 'Sports Tax Man' Is a Financial Quarterback:
NPR's Kevin Leahy consulted an accountant who calls himself the Sports Tax Man. ...
KEVIN LEAHY: Last week, point guard Steve Nash was on the market. Nash is Canadian, beloved in his home country. And the Toronto Raptors wanted him badly. ...
RAY RAIOLA: The way I like to look at it, he'll receive 50 cents on a dollar.
LEAHY: That last voice belongs to Robert Raiola, CPA. On Twitter, he's known as Sports Tax Man. Raiola ignored the Prodigal Son storyline and referred to a new Canadian tax law.
RAIOLA: In 2012, the top rate in the province of Ontario is 48%. In 2013, the top rate will be 49.5%.
That means Nash would pay more tax in Toronto than if he signed in, say, California. Suddenly a big offer from the Raptors doesn't look quite as enticing. Raiola doesn't work for Steve Nash, but it's his job to think this way. He calls himself a financial quarterback. ...
As for Steve Nash, the Canadian? He wound up signing with the Los Angeles Lakers. He'll play with Kobe Bryant, soak up the sunshine and avoid those steep Canadian taxes.
(Hat Tip: Nicole Zumwalt.)
Monday, July 9, 2012
Reuters: Socialite Denise Rich Dumps U.S. Passport, by Lynnley Browning:
Denise Rich, the wealthy socialite and former wife of pardoned billionaire trader Marc Rich, has given up her U.S. citizenship -- and, with it, much of her U.S. tax bill.
Rich, 68, a Grammy-nominated songwriter and glossy figure in Democratic and European royalty circles, renounced her American passport in November, according to her lawyer. Her maiden name, Denise Eisenberg, appeared in the Federal Register on April 30 in a quarterly list of Americans who renounced their U.S. citizenship and permanent residents who handed in their green cards.
By dumping her U.S. passport, Rich likely will save tens of millions of dollars or more in U.S. taxes over the long haul, tax lawyers say.
Rich, who wrote songs recorded by Aretha Franklin, Mary J. Blige and Jessica Simpson, is the latest bold-faced name to join a wave of wealthy people renouncing their American citizenship. Facebook co-founder Eduardo Saverin gave up his U.S. passport to become a citizen of Singapore, an offshore tax haven, before the company's initial public offering in May.
Nearly 1,800 citizens and permanent residents, a record since data was first compiled in 1998, expatriated last year, according to government figures. ...
Rich's ex-husband, commodities trader Marc Rich, fled the United States in 1983 when indicted on charges of tax evasion, fraud, racketeering and illegal trading of oil with Iran. They divorced in 1996. Marc Rich received a presidential pardon in 2001 on President Bill Clinton's last day in office. Federal prosecutors and Congress investigated the pardon, and in 2002 a House of Representatives committee concluded Denise Rich had swayed the action through [$450,000 in] donations to the Clinton library and campaign.
- New York Post, Denis Rich Dumps U.S. Passport to Save Millions in Tax
Sunday, July 1, 2012
Katie Holmes' master plan to file for divorce in New York may have created HUGE tax problems for Tom Cruise ... sources connected with the couple tell TMZ. ...
Katie filed divorce docs in NYC, in large part because she wants sole legal custody of Suri and New York courts are way more likely to grant Katie sole legal custody and control over child-rearing decisions than California courts. But here's the problem ... sources connected with the couple tell us ... Tom has been trying to do everything legally within his power to avoid strong ties to New York City because the tax rates are ridiculously high ... and he does not want any appearance that he or Katie have been living there. ...
TMZ has obtained documents which show Tom deeded their NYC apartment to Katie last August and our sources say it was done specifically for tax purposes. ... Sources say Katie is using the apartment to establish residency in New York for the purpose of the divorce -- something we're told can screw Tom tax-wise.
Saturday, June 16, 2012
Wall Street Journal: Lunch With Warren Buffett: One Giant Tax Deduction, by Laura Saunders:
Is the donation tax-deductible? Experts say most of it probably is, meaning taxpayers in effect will pick up about $1.2 million of the tab. ...
Like any other charity, Glide will have to send the donor a letter saying how much of the gift is tax-deductible, and the assessment must be able to withstand a challenge by the IRS. Last month, the U.S. Tax Court, in a case known as Mohamed v. Commissioner, denied an $18.5 million charitable deduction by a California couple who didn't have correct paperwork before they filed their return.
Experts expect Glide's letter to exclude the fair-market value of the lunch from the donation total. The law mandates a disallowance for any goods or services received in connection with the donation, such as the lunch, which includes Mr. Buffett, the donor and up to six invited guests. The fair-market value is the cost of the prepared food to regular diners, not the purchase price of the groceries at a market.
What is Mr. Buffett's company and conversation worth? Nothing, under an IRS rule in effect since the mid-1990s. It deems "celebrity presence"—as when a famous artist gives a museum tour to a donor who has won it in a charity auction—to have no value in and of itself. Mr. Buffett has specified that talk of investments is off limits, so he isn't providing a service.
Update: Forbes, Should Warren Buffett's $3.46M Lunch Be Tax Deductible?
Friday, June 1, 2012
[T]he investigation is focused not only on your run of the mill fraud but on federal and state income tax issues (the MLB has already confirmed via the bankruptcy petition that the Dodgers owe the City of Los Angeles nearly a quarter of a million dollars in back taxes). ...
Jamie McCourt had previously alleged in the nasty, public – did I mention nasty? – divorce of the former owners that the couple had paid no federal or state taxes for at least six years, beginning 2004, the year the McCourts bought the Dodgers. That was as of last year. There’s no word on whether any taxes had been filed or paid for 2010 and/or 2011. Last year, Frank McCourt’s accountant confirmed that the McCourts and/or related entities were under examination for 2006, 2007 and 2008. That was confirmed by Major League Baseball (MLB) Commissioner Bud Selig last year. ...
The MLB alleges that Frank McCourt – who holds a degree in economics from Georgetown University – improperly converted as much as $189 million. If that’s true – and if he didn’t report it as income – that could result in a pretty sizable tax bill and potentially, criminal charges.
- Bloomberg, Feds Ask for Docucments From McCourts
- L.A. Times, Dodgers' McCourt-Era Finances Investigated by Federal Panel
- L.A. Weekly, Frank McCourt Under Federal Investigation For Possible Tax Evasion, Financial Wrongdoing
Wednesday, May 16, 2012
- Facebook Co-Founder Renounces U.S. Citizenship in Advance of IPO, Saving Millions in U.S. Taxes (May 11, 2012)
- Will Facebook Co-Founder's Renunciation of U.S. Citizenship Increase His U.S. Tax Bill? (May 12, 2012)
- Seto, Kleinbard Explain Tax Consequences of Facebook Co-Founder's Renunciation of U.S. Citizenship (May 13, 2012)
Bloomberg, Facebook’s Saverin May Save $67 Million on U.S. Tax Bill, by Jesse Drucker:
Facebook co-founder Eduardo Saverin will save at least $67 million in federal income taxes by dropping U.S. citizenship, according to a Bloomberg analysis of the company’s stock price. Those savings will keep growing if Facebook’s shares increase. ...
Saverin’s stake may be worth as much as $2.89 billion, based on the company’s 1.898 billion total shares outstanding. His stake was worth about $2.44 billion in September. Bloomberg calculated the $67 million figure by applying the 15 percent U.S. capital gains rate to the approximate $448 million spread between the two values. Bloomberg’s methodology was reviewed by Robert Willens, an independent tax adviser based in New York.
“The calculations and assumptions are not only erroneous, they also further perpetuate the false impression that tax was the reason behind Eduardo’s decision,” Goodman said, declining to cite specific errors. “His motive had nothing to do with tax and everything to do with his desire to live and work in Singapore.”
Saverin’s capital gains tax liability comes “at a time when the rate is probably the lowest it ever will be, and it’s a substantial discount to the value of what his position in Facebook will likely be two weeks from now,” said Edward Kleinbard, a tax law professor at the University of Southern California in Los Angeles. Any profit from future appreciation of Saverin’s Facebook stock will be earned free of capital gains tax in the U.S. and Singapore, which doesn’t impose the tax. “That’s got to be by far the biggest benefit, assuming Facebook’s stock appreciates at even a fraction of the level people expect,” Willens said.
Will Smith Backs President Obama's Call for Higher Taxes on the Rich (But Not France's Proposed 75% Rate)
Fox News, Will Smith Backs Obama Tax Jack:
One of Hollywood's biggest and best-paid stars is supporting President Barack Obama's call for higher taxes on the country's top earners. Will Smith said while promoting Men In Black III last week that he supports the move. "I'm very supportive of that idea," Smith told The Associated Press in an interview. "America has been fantastic to me. I have no problem paying whatever I need to pay to keep my country growing."
But Mr. Smith, who was paid $20 million for Men in Black III, recoiled when asked about French President-elect Francois Hollande's proposal to tax millionaires at a 75% rate:
Tuesday, May 1, 2012
The iconic writer scolds the superrich (including himself—and Mitt Romney) for not giving back, and warns of a Kingsian apocalyptic scenario if inequality is not addressed in America.
I guess some of this mad right-wing love comes from the idea that in America, anyone can become a Rich Guy if he just works hard and saves his pennies. Mitt Romney has said, in effect, “I’m rich and I don’t apologize for it.” Nobody wants you to, Mitt. What some of us want—those who aren’t blinded by a lot of bullshit persiflage thrown up to mask the idea that rich folks want to keep their damn money—is for you to acknowledge that you couldn’t have made it in America without America. That you were fortunate enough to be born in a country where upward mobility is possible (a subject upon which Barack Obama can speak with the authority of experience), but where the channels making such upward mobility possible are being increasingly clogged. That it’s not fair to ask the middle class to assume a disproportionate amount of the tax burden. Not fair? It’s un-f***king-American is what it is. I don’t want you to apologize for being rich; I want you to acknowledge that in America, we all should have to pay our fair share. That our civics classes never taught us that being American means that—sorry, kiddies—you’re on your own. That those who have received much must be obligated to pay—not to give, not to “cut a check and shut up,” in Governor Christie’s words, but to pay—in the same proportion. That’s called stepping up and not whining about it. That’s called patriotism, a word the Tea Partiers love to throw around as long as it doesn’t cost their beloved rich folks any money.
This has to happen if America is to remain strong and true to its ideals. It’s a practical necessity and a moral imperative. Last year during the Occupy movement, the conservatives who oppose tax equality saw the first real ripples of discontent. Their response was either Marie Antoinette (“Let them eat cake”) or Ebenezer Scrooge (“Are there no prisons? Are there no workhouses?”). Short-sighted, gentlemen. Very short-sighted. If this situation isn’t fairly addressed, last year’s protests will just be the beginning. Scrooge changed his tune after the ghosts visited him. Marie Antoinette, on the other hand, lost her head.
Wednesday, April 25, 2012
I taught my last classes of the academic year today -- thanks to my students in Federal Income Tax and Federal Estate & Gift Tax for a wonderful semester!
Well we got no choice
All the girls and boys
Makin' all that noise
'Cause they found new toys
Well we can't salute ya
Can't find a flag
If that don't suit ya
That's a drag
School's out for summer
School's out forever
School's been blown to pieces
No more pencils
No more books
No more teacher's dirty looks
Well we got no class
And we got no principles (principals)
We ain't got no innocence
We can't even think of a word that rhymes
School's out for summer
School's out forever
My school's been blown to pieces
No more pencils
No more books
No more teacher's dirty looks
Out for summer
Out 'til fall
We might not come back at all
School's out forever
School's out for summer
School's out with fever
School's out completely
Tuesday, April 24, 2012
Former Saturday Night Live cast member Jon Lovitz, a registered Democrat who voted for Barack Obama in 2008, criticizes the President's tax policy (language warning: many f-bombs):
Friday, April 20, 2012
Following up on my prior post, Tax Court to Decide: Are Documentaries Hobbies for Tax Purposes?: Forbes, Maker of 'Up With People' Movie Knocks Down IRS, by Janet Novack:
In a big win for documentary filmmakers, a U.S. Tax Court Judge Thursday ruled that Lee Storey, the producer and director Smile `Til It Hurts: The Up with People Story, can write off hundreds of thousands of losses from her filmmaking against her substantial income as a Phoenix lawyer, even though she failed to make a profit for six straight years. ... In her 46-page decision, [Judge] Kroupa not only accepted documentary filmmaking as a legitimate business, but also recognized it is one where the unprofitable start-up phase may be longer than normal and allowed Storey ever penny of her claimed losses. [Storey v. Commissioner, T.C. Memo. 2012-115.]
See also Double Taxation.
Tuesday, April 3, 2012
Forbes, TaxMasters Leaves CNN, Fox News, MSNBC Holding Empty Bag, by Janey Novack:
TaxMasters, the heavily advertised “tax resolution” company that filed for bankruptcy last month, has left several big media companies, as well as its clients and law firms, holding an empty bag. In a court filing yesterday, TaxMasters listed TimeWarner’s CNN unit at its largest unsecured creditor, owed $2.6 million. Its second largest creditor is the Philadelphia based law firm of Blank Rome, owed $2.3 million.
TaxMasters’ unsecured creditors are unlikely to see much, if any, cash. ... In addition to CNN, TaxMasters’ 20 largest listed creditors include News Corp.’s Fox News Channel (owed $938,414); Houston advertising firm Maxximedia (owed $1,326,676); American Express (owed $679,497); radio network Westwood One, now a part of Dial Global (owed $676,000); the History Channel (owed $653,820); MSNBC (owed $259,441); Yahoo (owed $196,475); Dial Global’s Weather Channel (owed $172,233); The Discovery Channel (owed $136,850) and Disney’s ESPN (owed $94,265).
Noted criminal defense attorney F. Lee Bailey represented himself in Tax Court in a convoluted $4 million dispute with the IRS. Mr. Bailey won the major issue in the case -- the tax issues arising from his handling of client funds under a verbal agreement with the U.S. Government -- but lost most of the other issues in the case (including his claimed loss deductions for his yacht). The court also approved negligence penalties against Mr. Bailey:
If Mr. Bailey had disclosed to a tax professional the facts underlying the adjustments we have sustained, and if the professional had advised him to report the items as he did, then he might have a colorable claim of reasonable cause based on reliance on advice. However, Mr. Bailey offered no evidence of such informed advice, nor of any other claim of reasonable cause and good faith. This defense is therefore unavailing to Mr. Bailey.
Bailey v. Commissioner, T.C. Memo. 2012-96 (Apr. 2, 2012) (143 pages). For more, see: