Chicago Bears Block #1 Draft Pick Caleb Williams' Tax Savings Strategies In His Contract

SB Nation, Caleb Williams Asked Bears to Pay Him as an LLC:

Caleb Williams has finally signed his rookie contract with the Chicago Bears. What took so long? Williams’ representatives were reportedly making some unprecedented requests for his contract before he put his name on the dotted line.

Williams was still participating in rookie and team activities, but he hadn’t signed his four-year, $39 million deal with the Bears until earlier this week. According to Pro Football Talk, there were differences in the language of Williams’ contract, including one odd request I don’t think I’ve ever seen a player make.

In negotiating his rookie deal, Bears QB Caleb Williams explored creative tax strategies, from being paid as an LLC to having payments treated as a forgivable loan. https://t.co/hzrn5Gsr44

— ProFootballTalk (@ProFootballTalk) July 17, 2024

Continue reading

State Taxes Drive Away Star Athletes And Undermine Local Teams

Dan Mitchell, Greedy Politicians Drive Away Star Athletes and Undermine Local Teams:

The fundamental insight of supply-side economics is that people respond to incentives. So if the government imposes a high tax rate on income, people will try to avoid or evade the money grab.

Especially if they have any ability to control the timing, level, and composition of their income.

Star athletes are definitely in this group.

• Phil Mickelson
• Max Verstappen
• Usain Bolt
• LeBron James
• Bryce Harper
• Dwight Howard
• Shohei Ohtani
• Tyreek Hill

We can add Grant Williams to that list, as reported last year from Boston.

Continue reading

ProPublica: Sports Team Owners Face New Tax Scrutiny From The IRS

ProPublica, Sports Team Owners Face New Scrutiny From IRS Over Tax Avoidance:

The IRS has launched a campaign to examine whether wealthy taxpayers are violating the law when using their ownership of sports teams to save large amounts in taxes.

The effort will focus on sports industry entities that are reporting “significant tax losses” to “determine if the income and deductions driving the losses” are lawful, according to the IRS announcement earlier this year. That announcement, which consisted of one sentence on a webpage devoted to compliance campaigns by the IRS division that focuses on large businesses, did not specify what kinds of abuses the agency will be looking for.

The initiative comes after ProPublica, drawing on leaked IRS data, revealed how billionaire team owners frequently report incomes for their teams that are vastly lower than their real-world earnings.

Continue reading

California Legislation Would Ask Congress To Close Shohei Ohtani Tax Loophole

Following up on my previous posts (links below):  The Athletic, California Lawmaker Seeks to Close Shohei Ohtani Tax Loophole: ‘It’s a Massive Hidden Ball Trick’

Shohei Ohtani will avoid paying an estimated $90 million in California state income taxes as a result of deferring nearly all of his record-setting $700 million contract with the Los Angeles Dodgers. Now California lawmakers are pushing to change the federal tax code to prevent Ohtani’s contract structure from becoming standardized among high earners in baseball and beyond.

State Senator Josh Becker introduced legislation on Wednesday that urges the U.S. Congress “to establish a reasonable cap on deferred compensation.” Senate Joint Resolution No. 14 passed a Revenue and Tax Committee vote 6-1. The next step for the resolution, which was sponsored by State Controller Malia Cohen, will be discussion and a vote on the State Senate floor in the coming weeks.

“Ultimately, this is about fairness,” Becker said in a phone interview. “This is earned income. This is not retirement income. This is income that is earned here and should be taxed here. It wasn’t what the federal tax code was meant to contemplate. It’s a massive hidden-ball trick.”

Continue reading

Empire Star Terrence Howard, Hit With $1m Judgment For Back Taxes, Says It Is Immoral To Tax Descendants Of Slaves

Steven Chung (Tax Attorney, Los Angeles), Actor Terrence Howard Hit With A Judgment For More Than $900,000 In Back Taxes While Claiming It Is Immoral To Tax Descendants Of Slaves:

On February 22, 2024, actor Terrence Howard was issued a default judgment making him liable for federal back taxes. Howard, who received an Oscar nomination for Best Actor for his role in “Hustle and Flow,” has been in numerous films and television shows since the 1990s. ... The judgment states Howard is liable for a total of $903,114.72 consisting of tax, penalties, and interest. ...

Howard left a voicemail with the lead prosecutor, Maria Elizabeth Ruwe, claiming it is “immoral” for the United States to charge taxes to the descendants of slaves:

Four hundred years of forced labor and never receiving any compensation for it. Now you have the gall to try and prosecute and charge taxes to the descendants of a broken people that you are responsible for causing the breakage… In truth, the entire United States should, by default, become the property of the descendants of slaves. But since you do not have the ability [or] the courage to do it, let’s try this in court … We’re gonna bring you down. ...

As for Howard’s claim about the immorality of taxing descendant of slaves, the IRS considers these reparation arguments to be frivolous. The IRS specifically states that there is no “Black Tax Credit” or other reparation-related income deductions. Making frivolous tax claims can result in civil and criminal penalties, including fines and even imprisonment.

Continue reading

Taylor, Travis, And Taxes: Addressing The Environmental Cost Of Private Jet Travel

Washington Post, Why the Idea of Taylor Swift’s Super Bowl Jet Trip Is Sparking Controversy:

Flying on a private jet is one of the most carbon-polluting ways to travel. Legal scholars and lawmakers are calling for taxes to address the environmental cost.

Few celebrities have had their jet travel come under as intense scrutiny in recent months as Taylor Swift, who has crisscrossed the country in a private plane to watch her boyfriend Travis Kelce play for the Kansas City Chiefs. Fox News blasted her on Sunday as she arrived in Baltimore to attend the AFC championship game, tweeting that her jet was “belching tons of CO2 emissions.”

Private jet trips rank as the most carbon-intensive ways to travel, generating nine times as much carbon per passenger as flying commercial, according to a 2023 paper from University College London. And now that the Chiefs have made it to the Super Bowl, many are wondering whether Swift will fly the roughly 14,000 miles it would take to get from a concert in Tokyo on Feb. 10 to the game in Las Vegas on Feb. 11 and then to Melbourne in time for her next show on Feb. 16, reigniting the debate over whether owners of private planes should be held responsible for the planet-warming emissions they generate. ...

Swift’s publicist has said she buys carbon offsets to compensate for her jet travel, but didn’t respond to a request for more detail about what kind or how many offsets the artist has bought. There’s a wide range in quality and oversight in the offset market, and many offsets are meaningless.

But legal scholars and Congress members are pushing for another way to make private jet owners such as Swift pay for their emissions: taxes.

Continue reading

State Controller Asks Congress To Change Law To Block Shohei Ohtani’s Avoidance Of $100 Million California Tax By Deferring $680 Million Of His Dodgers Salary For 10 Years

Following up on my previous post, Shohei Ohtani’s Contract Could Save Him $100 Million In Taxes — And Start A Silicon Valley Tax Planning Trend:  Robert W. Wood (Forbes), California Seeks Tax Law Change For Ohtani $700 Million Baseball Contract:

Baseball star Shohei Ohtani’s record-breaking $700 million contract with the Los Angeles Dodgers is in the news again, and this time it is all about taxes. The baseball phenom and his advisers appear to have lawfully steered clear of California taxes for most of the outsize pay deal—for now.

Ohtani reportedly deferred most of his salary under his 10-year contract with the Dodgers. It may cleverly avoid California’s 14.4% state income tax as long as he moves out before the big money starts rolling in. But California’s Controller Malia M. Cohen wants Congress to change the tax code to cap deferred payments, a change that could ensure the state gets a hefty cut.

California has been known to change the law to send tax revenues its way, sometimes even retroactively, such as the 2023 law to retroactively tax certain trusts. But a change to get a piece of deferred pay deals like Ohtani’s would have to be made to federal tax law, not just California. The California Controller asked for Congress to step in over the $700 million Dodgers player contract that awards the start pitcher-slugger just $20 million for ten years of play. The whopping $680 million payout kicks in for 2034 through 2043 to nicely escape California tax, as long as Ohtani moves out by 2034.

Continue reading

Shohei Ohtani’s Contract Could Save Him $100 Million In Taxes — And Start A Silicon Valley Tax Planning Trend

The Athletic, How Shohei Ohtani’s Contract Could Save Him $100 Million in Taxes — And Start a Silicon Valley Trend:

Shohei Ohtani copycats might start popping up soon — and not only in baseball, where young players might try to pursue lucrative careers as both a hitter and a pitcher. Instead, his deal is resonating in Silicon Valley, where the unique structure of Ohtani’s heavily deferred $700 million contract with the Los Angeles Dodgers has opened the eyes of other high earners.

Pinnacle Peak Advisors, a tax advisory firm catering to the wealthy in San Jose, Calif., keeps fielding questions from parties outside the sports world curious about the workings of Ohtani’s deal. ...

Ohtani this month agreed to play for the Dodgers for a decade at $70 million per season, but from 2024-33, he’ll draw just $2 million per season. Ohtani is deferring $680 million — more than 97 percent of his earnings — until after his 10-year deal with the Dodgers expires, when that money comes back to him in equal annual payments from 2034-43.

When Ohtani receives the bulk of the money, he’ll no longer be under contract with the Dodgers; experts say that the structure of the contract appears likely to save Ohtani between $90 and $100 million in state taxes, so long as he lives outside of California when the deferred money is paid out.

Another key component in potential tax savings is how he has timed the deferral payments, spanning a decade. A 1996 federal law forbids states from taxing retirement income on out-of-state residents when payments are made in “substantially equal periodic” amounts over at least 10 years.

Continue reading

Jeff Bezos Will Save Billions In Taxes By Moving To Miami

The Messenger, Jeff Bezos Will Save Billions on His Tax Bills by Moving to Miami:

Amazon founder Jeff Bezos is escaping more than Seattle’s gloomy weather with his cross-country move to sunny Miami.

The world’s third-richest person, worth roughly $161 billion according to Forbes, will also ditch Washington State’s hefty taxes, likely saving him billions of dollars over the long term, according to securities filings, tax lawyers and accounting experts.

Aaron Johnson, a tax lawyer at law firm Lane Powell in Seattle, told The Messenger that Bezos “stands to benefit from significant tax savings if he changes his domicile.”

On the immediate front, The Washington Post newspaper owner will avoid Washington State’s controversial new 7% tax on investment profits, which residents began paying this year.

Later, Bezos will dodge the Pacific Northwest state’s long-standing top estate tax of 20%, the highest in the nation.

Robert Willens, an independent tax and accounting expert in New York, told The Messenger that Bezos will “adroitly sidestep Washington's estate tax levies, which, in his case, could easily amount to upwards of $32 billion” based on his current net worth. The tax, which is in addition to the top federal estate tax of 40%, hits fortunes starting at just over $2.1 million. ...

One lure he didn’t mention in his announcement: massive tax savings.

Last but not least, Bezos will remove himself from the crosshairs of state lawmakers’ efforts to impose a 1% “extreme wealth tax” on the worldwide holdings of the very richest residents. If passed into law, the levy would hit billionaires on the paper value of their assets, regardless of whether or not they’ve been sold.

When the 59-year-old announced Nov. 2 on Instagram that he was leaving his Seattle home base of three decades for Florida, he said the impetus for the move had come from a desire to be closer to his parents, who he said recently relocated back to Miami from Seattle. He also said the operations of his Blue Origins rocket company were “increasingly shifting” to Cape Canaveral, Fla., a three and a half hour drive 190 miles north of Miami. 

Continue reading

The Trump Indictment, Tax Law, And Conway Twitty

New York Times, A Surprise Accusation Bolsters a Risky Case Against Trump:

The unsealed indictment against former President Donald J. Trump on Tuesday laid out an unexpected accusation that bolstered what many legal experts have described as an otherwise risky and novel case: Prosecutors claim he falsified business records in part for a plan to deceive state tax authorities.

For weeks, observers have wondered about the exact charges the Manhattan district attorney, Alvin L. Bragg, would bring. Accusing Mr. Trump of bookkeeping fraud to conceal campaign finance violations, many believed, could raise significant legal challenges. That accusation turned out to be a major part of Mr. Bragg’s theory — but not all of it.

“Pundits have been speculating that Trump would be charged with lying about the hush money payments to illegally affect an election, and that theory rests on controversial legal issues and could be hard to prove,” said Rebecca Roiphe, a New York Law School professor and former state prosecutor.

“It turns out the indictment also includes a claim that Trump falsified records to commit a state tax crime,” she continued. “That’s a much simpler charge that avoids the potential pitfalls.” ...

Continue reading

DePaul Law Review Symposium Call for Papers: Succession

The DePaul Law Review has issued a call for papers for its Spring 2024 symposium: 

The DePaul Law Review will devote the third issue of its 73rd volume (slated for publication in Spring 2024) to a Symposium addressing the Emmy-winning scripted drama Succession from a legal and pedagogical point of view. The aim of this special issue is to collect in one place the insights of a variety of faculty members with different legal subject-matter expertise, as a resource for all who are interested in the use of this award-winning work for the teaching, practice, and study of law. The DePaul Law Review has already secured the participation of a number of distinguished scholars.

Continue reading

Tobin: MTV The Challenge – Did Tori And Devin Just 'Win' A Huge Tax Problem?

TaxProf Blog op-ed:  MTV The Challenge – Did Tori and Devin Just “Win” a Huge Tax Problem?, by Donald Tobin (Maryland; Google Scholar):

Spoiler Alert: if you haven’t finished watching the season, don’t read this.

There is almost nothing better in life than watching trash TV with one's daughter. As a tax professor and former dean, my tax colleagues may be disappointed to learn that, yes, I watch MTV’s The Challenge. I often reduce stress by watching “trash TV” and my favorite TV activity is watching MTV’s realty show, The Challenge, with my daughter. A major problem, however, is that as a tax professor I see tax problems everywhere, and the final episode of the challenge provides a wonderful opportunity to discuss the assignment of income doctrine and the fruit and tree metaphor from Lucas v. Earl, 281 U.S. 111 (1930), and Helvering v. Horst, 311 U.S. 112 (1940). So much for a relaxing evening watching TV with my daughter.

Continue reading

President Biden And Vice President Harris Release Their 2022 Tax Returns

President Joe Biden and Vice-President Kamala Harris released their tax returns yesterday.

• President Biden's 2021 tax return
• Vice President Harris's 2021 tax return
• White House Press Release

• Blomberg, Bidens Report $610,702 in Income Last Year, Trim Charity Giving
• CNN, President Biden and Vice President Harris Release Their 2021 Tax Returns
• New York Post, Joe and Jill Biden Made More Money, Paid Less Tax in 2021 Than ‘20, Returns Show
• New York Times, Biden’s Tax Forms Show He and the First Lady Earned $610,702 in 2021

Continue reading

Olympic Taxes: Katie Ledecky Faces $44,000 U.S. Tax Bill, Katie Nageotte $0

Bloomberg, Ledecky May Owe U.S. $44,000 in Taxes for Olympics Glory:

As the Olympic flame goes out in Tokyo on Sunday, marking the end of the 2020 Games, swimming phenom Katie Ledecky and pole vaulting sensation Katie Nageotte will both be leaving with gold.

A hefty tax bill awaits back in the U.S., but only for one of them.

Ledecky, now the most decorated female swimmer of all time, likely owes the U.S. government about $44,000 from her two gold and two silver medal wins. That estimate is based on her lucrative corporate sponsorships and the prize money attached to her medals.

Nageotte, who won gold in women’s pole vaulting, likely won’t pay any taxes on her winnings, thanks to a special exemption for those with more modest financial success.

Continue reading

Michael Jackson's Estate Beats The IRS: Tax Court Sets FMV Of His Name And Likeness At $4 Million, Not $161 Million

Wall Street Journal, Michael Jackson Estate to Face Smaller Tax Bill After Court Ruling:

Michael Jackson’s estate prevailed over the Internal Revenue Service on several key issues in a closely watched court case, an outcome that will push the estate’s tax burden below the government’s initial assessment.

In a ruling issued Monday, U.S. Tax Court Judge Mark Holmes found that the singer’s name and likeness were worth $4 million when he died in 2009 at the age of 50, not the $161 million the government had claimed. The IRS won on some other points about the value of other Jackson assets, but will get far less than the hundreds of millions of dollars in taxes and penalties it had sought from the estate.

The government and the estate settled some issues, and the case came down to the question of how to value three main assets: Mr. Jackson’s name and likeness and two entities tied to the music business.

The estate initially started with some lower values, but by Monday’s decision, it had said those three assets were worth $5.3 million combined. The government had started with higher values and an estate tax bill topping $500 million, but eventually concluded those three assets were worth $481.9 million combined. Judge Holmes, in his ruling, said they were worth $111.5 million. The estate’s actual tax bill will be determined later. ...

A central question in the case was this: Was it foreseeable that the estate would—as it since has done—build a successful business around Mr. Jackson’s image? Or was that such a long shot that the estate could plausibly claim, as it initially did, that Mr. Jackson’s name and likeness was worth $2,105? As Judge Holmes put it, the estate was “valuing the image and likeness of one of the best known celebrities in the world—the King of Pop—at the price of a heavily used 20-year-old Honda Civic.” ...

Continue reading

The Billionaire Behind The Biggest U.S. Tax Fraud Case Ever Filed

Wall Street Journal, The Billionaire Behind the Biggest U.S. Tax Fraud Case Ever Filed:

Prosecutors accused Robert Brockman, a litigious, sometimes penny-pinching software entrepreneur, of hiding $2 billion from the Internal Revenue Service. ...

[In] the largest criminal case ever brought against a person accused of evading U.S. taxes, [f]ederal prosecutors in October charged Mr. Brockman with using a web of offshore entities to conceal about $2 billion in income from the Internal Revenue Service.

Mr. Brockman has pleaded not guilty to 39 criminal counts, including tax evasion, wire fraud, money laundering and evidence destruction. He and his attorneys didn’t respond to requests for comment.

Prosecutors allege the bulk of the tax evasion stemmed from profits Mr. Brockman made from investments with Vista Equity Partners, a private-equity firm he helped launch in 2000 and which now manages $73 billion in funds dedicated to software investments.

Vista founder Robert Smith, the wealthiest Black person in America, settled his own tax-evasion case with the government, which was made public on the day of Mr. Brockman’s indictment. Mr. Smith has agreed to testify against his former mentor, one of at least two Brockman confidants to turn on him. ...

The record-setting case pits Mr. Brockman, a billionaire with a reputation as a relentless litigant, against the immense resources of the federal government. Legal specialists say the government appears to have strong evidence, but federal prosecutors may face challenges trying the case because of the complexity of tax laws governing offshore trusts.

Continue reading

Hemel & Lord: Jeffrey Epstein’s Billionaire Tax Avoidance Assistance Business

Following up on my previous post, NY Times: College Dropout Jeffrey Epstein Earned Hundreds Of Millions As His Cut Of Billions Of Taxes Saved By Clients Using His Strategies — Typically GRATs:  Daniel Hemel (Chicago; Google Scholar) & Bob Lord (Institute for Policy Studies), Beyond Lucrative: Jeffrey Epstein’s Billionaire Tax Avoidance Assistance Business:

The sex-trafficking scandal surrounding the late Jeffrey Epstein already has tarnished the reputations of prominent politicians, businessmen, and the British royal family. Now it’s casting a dark shadow on an estate tax-avoidance strategy popular among Wall Street CEOs and tech entrepreneurs.

The strategy exploits a loophole that Congress unintentionally left open when it passed provisions related to grantor retained annuity trusts, or GRATs, in 1990. Use of these trusts already has cost the IRS—by one estimate—well over $100 billion in just the last two decades. A recent filing with the Securities and Exchange Commission by the private equity firm Apollo Global Management reveals that the firm’s longtime CEO, Leon Black, relied on Epstein’s assistance to extract more than $500 million of tax savings from GRATs.

Continue reading

Bob Dylan’s Genius Was Rewarded By The Tax Code

Following up on my previous posts:

• Did Bob Dylan Sell The Copyrights To His 600 Songs To Avoid A Higher Capital Gains Tax Rate In The Biden Administration?
• Bob Dylan’s Catalog Sale Highlights A Tax Advantage For Songwriters

Washington Post op-ed:  Bob Dylan’s Genius Was Rewarded by the System — and the Tax Code, by Charles Lane:

[Bob Dylan] just sold the rights to “Blowin’ in the Wind” and 600 other songs to Universal Music Publishing Group for a reported $300 million. Added to his previously reported net worth of $200 million, the transaction implies that Dylan will reach his 80th birthday on May 24 as a half-billionaire.

This is a tribute to his genius and, on the whole, to a political and economic system that rewards artists whether they merely entertain multitudes — or inspire them to march against that same system.

Nevertheless, some socially conscious musician could write a song protesting the Dylan deal, because of what it reveals about that engine of irrationality and inequality known as the U.S. tax system.

Continue reading

Bob Dylan’s Catalog Sale Highlights A Tax Advantage For Songwriters

Following up on my previous post, Did Bob Dylan Sell The Copyrights To His 600 Songs To Avoid A Higher Capital Gains Tax Rate In The Biden Administration?:  Wall Street Journal Tax Report, Bob Dylan’s Catalog Sale Highlights a Tax Advantage for Songwriters:

The answer, my friend, is blowin’ in the tax code.

The sale of Bob Dylan’s songwriting catalog to Universal Music Publishing Group, announced this week, likely means he is trading an ongoing income stream for a lump sum now. The price hasn’t been revealed but is said to be between $300 million and $400 million.

Mr. Dylan’s sale is the latest and largest of a spate of similar deals this year that come with significant tax benefits both for the songwriters selling the rights and for the companies buying them, and those incentives are encouraging transactions. ...

For musicians, a key advantage is that they can sell self-created works and owe capital-gains tax rates of 20% on the sale. That’s instead of owing ordinary tax rates of up to 37% each year on the royalty income they get from streaming, licensing and other uses of their works.

The lower capital-gains rate isn’t available to painters, filmmakers or videogame developers, who pay ordinary income-tax rates on sales as well as royalties.

Continue reading

Did Bob Dylan Sell The Copyrights To His 600 Songs To Avoid A Higher Capital Gains Tax Rate In The Biden Administration?

Jack Bogdanski (Lewis & Clark), It's Alright, Ma (I'm Selling 'Em All):

I read today that Bob Dylan has sold the copyrights to more than 600 of his songs, pretty much all of them, to Universal Music for a reported $300 million. It sounds like a lot of money, but scrolling down in one of the stories, I saw that Stevie Nicks recently got $80 million for hers. Heck, Dylan is not even four times Stevie Nicks? It does not compute. Maybe he sold too cheap.

Anyway, this news causes my alleged mind to turn to a time-honored pastime among tax types: allocating the mega-purchase price among the various songs. The whole catalog is worth the overall price Universal is paying, but how much would you pay for, say, just "All Along the Watchtower"? Tax people have to unbundle packages this way all the time. The packages just aren't usually as cool as this one. ...

Why is he selling now? The income tax hit will be massive. Maybe he's thinking his tax rates are going to go up next year under Biden, and in whatever state he calls home. And maybe he's getting a better tax rate by selling than he would get by continuing to collect annually. But still, he's setting up a nice payday for the IRS if he's cashing in all his chips at once. (Maybe he's getting paid out over a few years, which might allow him to spread the tax hit out a bit over time.)

Geoff Colvin (Fortune), Was Bob Dylan’s Sale of His Massive Music Catalog a Tax Maneuver?:

For a number of reasons, late 2020 may be the absolute optimal moment to sell a top-tier music catalog, and Bob Dylan’s catalog is arguably on a tier of its own near the very top. ...

The deal’s value to Dylan depends on how the proceeds get taxed. A gigantic windfall like his would normally be taxed as a capital gain at a rate of 20% under current law. But President-elect Biden has proposed taxing capital gains as ordinary income for taxpayers with income over $400,000. The top ordinary income rate is now 37%, and Biden has proposed raising it to 39.6%. ...

Continue reading

ProPublica: How A Tax Break To Help The Poor Went To NBA Owner Dan Gilbert

ProPublica, How a Tax Break to Help the Poor Went to NBA Owner Dan Gilbert:

After a lobbying effort, Dan Gilbert, billionaire founder of Quicken Loans, won special tax status for wealthy areas of downtown Detroit where he owns billions worth of property.

Billionaire Dan Gilbert has spent the last decade buying up buildings in downtown Detroit, amassing nearly 100 properties and so completely dominating the area, it’s known as Gilbertville. In the last few years, Gilbert, the 57-year-old founder of Quicken Loans and owner of the Cleveland Cavaliers, has also grown close to the Trump family.

Quicken gave $750,000 to Trump’s inaugural fund. Gilbert has built a relationship with Ivanka Trump, who appeared at one of his Detroit buildings in 2017 for a panel discussion with him. And, last year, he watched the midterm election returns at the White House with President Donald Trump himself, who has called Gilbert “a great friend.”

Gilbert’s cultivation of the Trump family appears to have paid off: Three swaths of downtown Detroit were selected as opportunity zones under the Trump tax law, extending a valuable tax break to Gilbert’s real estate empire.

Continue reading

Washington Nationals Players Face 46% Tax On Their World Series Bonus, Houston Astros 37%

Bloomberg Tax, Nationals, Tax Collectors Set to Score Post-World Series:

The Washington Nationals are World Series champions for the first time—and for the first time in line for lofty bonuses subject to a mix of taxes and fees.

Each Nationals player is in line for an estimated $416,837 for their postseason efforts, although they’ll bring home about $238,639 after taxes if they live in Maryland or Virginia. Players who live in the nation’s capital will forfeit an extra $13,339 due to the District of Columbia’s higher income taxes. World Series runner-up the Houston Astros are set for $262,027—$165,077 of which they’ll pocket after similar fees.

Continue reading

Horse Named 'Tax' Finished 14th In Kentucky Derby; 'Spinoff' Finished 17th

Tax had the #2 position at yesterday's Kentucky Derby and finished 14th. The horse is sponsored by Dean Dorton, a full-service accounting, technology and consulting firm.

Spinoff (I am not making this up) was 17th out of 18 finishers.

Continue reading

Actor Wesley Snipes’ Offer In Compromise Got Sniped By The IRS

New York Law Journal, Actor Wesley Snipes’ Offer in Compromise Got Sniped by the IRS:

If you watch TV, listen to the radio, read a newspaper or hear conversations, invariably you will notice many organizations offering their services to settle tax liabilities for pennies on the dollar. How real are these offers to help a delinquent taxpayer?

There is no question that the Internal Revenue Service (IRS) has liberalized its collection policies and procedures. Specifically, the agency has established a “Fresh Start” initiative to permit qualified taxpayers a means to pay less taxes through the Offer in Compromise (O.I.C.) program. The IRS also grants different types of installment arrangements for taxpayers who may not qualify for an O.I.C. ...

Even though the O.I.C. program has become more commercialized, there are many taxpayers who do not qualify. Last year, Actor Wesley Snipes made headlines when his O.I.C. was rejected by the IRS. Upon information and belief, Snipes failed to file Federal Income Tax Returns for the years 2001-2006, allegedly owing the IRS at least $23.5 million. After the IRS issued numerous collection notices and liens, Snipes filed a Request for a Collection Due Process Hearing. He then submitted an O.I.C. for an $842,061.00 offer in full satisfaction of his $23.5 million debt to the IRS.

Continue reading

Bryce Harper Will Save Tens Of Millions In Taxes By Spurning The Dodgers And Giants

Los Angeles Times, Bryce Harper Will Save Tens of Millions in Taxes by Spurning the Dodgers and Giants:

For Major League Baseball players, three teams are at the bottom of the standings on state taxes: the Los Angeles Dodgers, San Diego Padres and San Francisco Giants.

That’s because California is in a league of its own on personal income taxes. We’ve got by far the highest state rate in the nation, topping out at 13.3%.

By contrast, Pennsylvania has a low flat rate for every taxpayer regardless of income. It’s just 3.07%. That’s one reason why superstar slugger Bryce Harper signed an eye-popping 13-year, $330-million contract last week with the Philadelphia Phillies, spurning the Dodgers and Giants.

Harper will save tens of millions in taxes by signing with the Phillies instead of a California team. “With a contract of that magnitude, it’s dramatic,” Scott Boras, Harper’s agent, says of the taxes. “It could be almost a full year’s compensation." “The Giants, Dodgers and Padres are in the worst state income tax jurisdiction in all of baseball,” Boras adds. “Players really get hit.” ...

Continue reading

Death, Taxes, And The New England Patriots

Mockingbird, Death, Taxes, and the New England Patriots:

In 2 Corinthians 3:7-11, Paul writes about two “ministries.” Here’s what he says:

Now if the ministry of death, carved in letters on stone, came with such glory that the Israelites could not gaze at Moses’ face because of its glory, which was being brought to an end, will not the ministry of the Spirit have even more glory? For if there was glory in the ministry of condemnation, the ministry of righteousness must far exceed it in glory. Indeed, in this case, what once had glory has come to have no glory at all, because of the glory that surpasses it. For if what was being brought to an end came with glory, much more will what is permanent have glory”

The New England Patriots are a ministry of death. Their greatness is carved in letters on stone. They are so glorious that mere mortals cannot look them full in the face. Tom Brady wears Ugg boots in public and barely takes any heat for it. The Patriots are unassailable. I do not rend my garments and I do not gnash my teeth for a simple reason: I am already dead.

The42, Death, Taxes, and the New England Patriots:

Continue reading

Tax And The Basis Of Sex (Plus My Connection To RBG)

Forbes:  Tax Court Decision Stars In A Major Motion Picture, by Peter J. Reilly:

It never occurred to me that a Tax Court decision could star in a motion picture, but it has happened. The film has a pretty provocative title On The Basis of Sex, but they don't mean it that way. Felicity Jones portrays a young Ruth Bader Ginsburg (RBG) ... and Arnie Hammer as her husband Martin Ginsburg. I have it on very good authority that Martin Ginsburg was a first-rate tax attorney (See follow-up). And another star in the movie is a Tax Court decision. How often does that happen? ...

The decision is  Charles E. Moritz v. Commissioner of Internal Revenue, which was decided by Judge Norman O. Tietjens in 1970 in favor of the IRS. Mr. Moritz had represented himself — not surprisingly given the low stakes.  The decision was appealed to the Tenth Circuit where Mr. Moritz was represented by  Ruth Bader Ginsburg and Martin Ginsburg backed up by Melvin Wulf of the ACLU and Weil, Gotshal & Manges.  The lead attorney for the United States was James Bozarth played by Jack Reynor.  Sam Waterston, who has played a lawyer on TV more than once, portrays Solicitor General Erwin Griswold. ...

Continue reading

Why Pro Athletes May Lose A Fortune Because Of The New Tax Law

MarketWatch, Why Pro Athletes May Lose a Fortune Because of the New Tax Law:

Because of changes to the tax law that went into effect this year, professional athletes might need to put their CPAs on speed dial.

That’s because players in sports leagues like the NBA, NFL, MLB, WNBA and NHL have traditionally been able to deduct tens or hundreds of thousands of dollars for things that they no longer can.

Continue reading

Ohio Supreme Court: Cincinnati Reds Are Not Subject To Sales Tax On Bobblehead Giveaways

Court News Ohio, Reds Score Tax Exemption for Bobbleheads, Giveaways:

In a dispute between state tax officials and Cincinnati’s professional baseball team, the Ohio Supreme Court today quoted the team’s longtime radio announcer by declaring, “This one belongs to the Reds.” [Cincinnati Reds v. Testa, Slip Op. No. 2018-Ohio-4669 (Nov. 21, 2018)]

A divided Supreme Court determined the Cincinnati Reds were exempt from paying “use” tax on bobbleheads and other promotional items given to attendees at selected home games. The Court concluded the team successfully demonstrated that the cost of the items were factored into the cost of game tickets and counted as a tax-exempt “resale” of the items to fans.

Justice Patrick F. Fischer cited Reds announcer Marty Brennaman and several other sports figures as he delved deeply into the rich history of Ohio’s influence on professional baseball in the Court’s lead opinion. Because of the unique and undisputed evidence in the record, Justice Fischer cautioned that the ruling may not be applicable to other professional sports teams and organizations that sponsor promotional item giveaways. The Reds argued that rather than discount the ticket price to less-desirable games, the team factored a portion of ticket price to cover the costs of giveaways as a means to boost attendance.

Continue reading

Kahn: GoTaxMe — Crowdfunding And Gifts (Why Peter Strzok Should Be Taxed On The $450k He Raised On GoFundMe)

Jeffrey H. Kahn (Florida State), GoTaxMe: Crowdfunding and Gifts, 22 Fla. Tax Rev. ___ (2019):

In 2018, Peter Strzok was fired from the FBI, based on text messages that he sent degenerating President Trump. A week later, a group set up a GoFundMe page soliciting funds to help with his “legal costs” and to replace his “lost income.” As of early September, that fund had raised over $450,000. GoFundMe states on its website that donations made are usually considered to be “private gifts” and not taxable to the recipient. Using Mr. Strzok’s campaign as an example, this article will discuss the current standards for determining whether a transfer qualifies as a nontaxable gift and the policy rationale for the exclusion of gifts.

Continue reading

The Tax Consequences Of A Haunted House

Charles Edward Andrew Lincoln IV (Tax LL.M. 2018, Boston University), The Tax Consequences of a Haunted House:

If a seller has been estopped legally from denying the existence of ghosts and poltergeists on the premises—thus meaning the house is haunted a matter of law, then how should the haunting be added in to the cost basis for tax purposes? More generally, if a house is legally haunted, what does this mean for tax purposes?

In the famous popular 1st year law student case—colloquially known as the Ghostbusters case—Stambovsky, v. Ackley, the New York Court of Appeals deftly wrote, “as a matter of law, the house is haunted” If a seller has been estopped legally from denying the existence of ghosts and poltergeists on the premises—thus meaning the house is haunted a matter of law, what does this mean for tax purposes?

Continue reading

Does Trump's Tax Law Doom The L.A. Rams?

Bloomberg, You May Be Able to Blame Trump for Your Football Team’s Lousy Record:

If your favorite NFL team doesn’t make it to the playoffs, President Donald Trump’s tax overhaul might be in part to blame.

The 2017 law could put teams in states with high personal income tax rates at a disadvantage when negotiating with free agents thanks to new limits on deductions, including for state and local taxes, according to tax economist Matthias Petutschnig of the Vienna University of Economics and Business.

Petutschnig’s research into team performance over more than two decades shows that National Football League franchises based in high-tax states lost more games on average during the regular season compared to teams in low or no-tax states. That’s because of the NFL’s salary cap for teams, according to Petutschnig; if they have to give certain players more money to compensate for higher taxes, it reduces how much they pay other players and lowers the team’s overall talent level [Regulatory Compensation Limits and Business Performance – Evidence from the National Football League].

Continue reading

Aretha Franklin Died Without a Will, Bequeathing Estate Issues To Her Heirs

New York Times, Aretha Franklin Died Without a Will, and Estate Issues Loom:

Aretha Franklin left no will when she died last week at the age of 76, according to documents filed on Tuesday in a Michigan court, which could result in details of her personal finances being made public. ... According to Michigan law, the assets of an unmarried person who dies without a will are divided equally among their children. Ms. Franklin had been married twice, but was long since divorced. ...

[H]igh-profile probate proceedings can drag on for years and lead to infighting among families, lawyers and others. Such estates can become especially complicated when it comes to issues like music rights. The case of Prince, who died two years ago and left no will, has led to numerous family disputes and even the revocation of a multimillion-dollar music deal.

Amanda DiChello, an estate lawyer at the firm of Cozen O’Connor in Philadelphia, said that a surprising number of celebrities and wealthy people die without a will.

Robert W. Wood (Forbes), Like Prince, Aretha Franklin Died Without A Will. Why You Should Have One:

Aretha Franklin, the Queen of Soul, died without a will. Papers have already been filed in court by Franklin’s four sons and niece. That means there will be public proceedings. There could be court battles too, depending on who claims what. Unexpected celebrity deaths can make the rest of us think about what documents we need to have in place. The tax and financial hassle of probate or intestacy can be huge, even for normal sized estates. When you add the extra zeros that go with a successful entertainer, the failures can seem much more palpable.

Continue reading

Tax Tips From Paul Manafort's Conviction

Robert W. Wood (Forbes), Tax Tips From Manafort Conviction That Might Keep IRS Away:

The conviction of former Trump campaign chairman Paul Manafort on eight counts of financial crimes nets the first conviction for Special Counsel Robert Mueller.

Political commentators on both sides are jabbering over this. They also have the guilty plea by former Trump fixer Michael Cohen to talk about. But aside from politics, there are some serious tax lessons here for everyone. And they are surprisingly simple.

Continue reading

Classic Lesson From The Tax Court: When Hornung Won The 'Vette

I'm back from vacation, but busy preparing for the start of classes, so I offer another Classic Lesson that I have been saving.  I hope you enjoy it.  I will return next week with a new Lesson based on a recent case.

I find tax more interesting than football.  But I know I am not like most people.  So I enjoy using the classic case of Hornung v. Commissioner, 47 T.C. 428 (1967), because it not only teaches students a bit about football history, it also helps them understand a really important tax concept: the doctrine of constructive receipt. As a bonus, it is also one of those fun cases where the taxpayer and the IRS take the opposite of their normal positions, with amusing consequences.

Paul Hornung was an outstanding football player in the 1960’s, winning a bunch of very well known awards: the Heisman Trophy, the NFL MVP award, and induction into both the professional and college football halls of fame.  Here's a Sports Illustrated tribute to him.

Hornung also won a Corvette on December 31, 1961, when his team (the Green Bay Packers) beat the New York Giants for the National Football League Championship. Remember, at that time the NFL was the main football league so this was, basically, the Super Bowl. The AFL was only just starting and it was several years before the first designated “Super Bowl” game occurred between the leagues.

Hornung was selected by Sport Magazine as the game’s most valuable player. That selection came with an award: a brand-spanking new 1962 Corvette. The award was announced in Green Bay at the conclusion of the game in the late afternoon of Sunday, December 31, 1961. The car was in Manhattan. Hornung picked up the car the next week at a lunch given in his honor by the magazine. He sold the car a few months later for just over $3,000.  He did not report any income from receiving the Corvette, either in 1961 or in 1962.  When the IRS audited his 1962 return, he claimed that if receipt of the Corvette was income, it was income in 1961, not 1962, under the doctrine of constructive receipt.  To see how that worked out for him, you will need to dive below the fold.

Continue reading

Burger King's Brilliant Take On The 'Pink Tax': Would You Pay Double For 'Chick Fries'?

Inc., Burger King Takes on the Pink Tax and It's Brilliant: Would You Pay Twice As Much For "Chick Fries"?:

Have you heard of the "pink tax"--a term for the routine practice of charging more for products and services targeted to women than those targeted to men? If not, you will soon. Though the term's been around for years, and the practice itself has existed from the earliest days of commerce, both have gained more prominence lately. That's thanks to a study showing just how common it is, and a bill introduced in the House to make gender-based pricing illegal. Now, Burger King has gotten into the act in a very witty way.

To highlight the unfairness of the pink tax (so called because products for women are often colored pink), Burger King recently briefly offered its regular Chicken Fries for $1.69 a box, or "Chick Fries," the same food in the same serving size, but in a pretty pink box where the chicken has a bow and eyelashes, for $3.09. Then they created an ad.

Continue reading

Anthony Bourdain's Estate Planning Lessons For All Of Us

Forbes, How Anthony Bourdain's Estate Plan Reflected The Two Most Important Parts Of His Life:

Ever since his untimely death, the press and the public hasn't been able to get enough of Anthony Bourdain. His name caused another commotion this week when his will was probated in New York. The New York Post’s Page Six headline read “Anthony Bourdain Worth Only $1.21M at the Time of His Death.” Social media responded immediately as the actual dollar amount just didn’t seem right.  How could Bourdain’s net worth be so much less than the public previously speculated?

While a man’s worth is quite subjective, Bourdain, by all accounts, was an American success story. Though he often admitted that he’d lived paycheck to paycheck well into his 40s, by having an estate valued in excess of $1 million, Bourdain could be considered in the top 3% of all Americans in terms of wealth. In his case, the estate plan reflected two interesting aspects of the man and what he truly valued.

Estate Planning Is About Protecting Those You Love
Bourdain was thorough in making provisions for his only child as the bulk of his estate will pass to her. ...

Continue reading

LeBron James' Move To The Lakers Could Cost Him $21 Million In Extra State Income Taxes

Forbes, LeBron James' Move To Lakers Could Cost Him $21 Million In Extra State Income Taxes:

The $154 million question is: How much is the move to LA really costing James? As with any tax question, the answer is simple: It depends. On a lot of factors.

About the only fact we know is that his salary this season will be $35.7 million. The rest is fuzzy. Will he become a California resident? He owns a house out there, so it seems to make sense that he would be a resident after he signs his four-year deal. Not so fast — California has some of the most liberal residency laws in the country. Rather than focusing on days spent in the state, California focuses more on domicile and the temporary/permanent nature of one’s stay there. ...

Should he become a California tax resident, this move will cost him $5.2 million this year on salary and endorsement income, not to mention higher taxes on investment income. This would end up being over $21 million in additional state income taxes over the life of the contract.

The Hill, Nunes to LeBron: Brace yourself for California's Taxes

Continue reading

Why A $3.3 Million Lunch With Warren Buffett Is A Good Tax Move In 2018

Wall Street Journal, Winning Bid to Have Lunch With Warren Buffett: $3.3 Million
Forbes, Why A $3.3 Million Lunch With Warren Buffett Is A Good Tax Move In 2018:

Earlier this week, a charity auction to have lunch with Warren Buffett resulted in a winning bid of $3,300,100. The winning bidder, who has chosen to remain anonymous, won the right to eat with the billionaire at Smith & Wollensky steakhouse in New York City. The annual lunch with Buffett benefits Glide Foundation, which offers food, shelter, health care and other services to homeless and low-income people in San Francisco.

When you have the means to spend $3 million on lunch, you might not be looking for a tax break. But in this case, the bidder may qualify for one. Here's why it could make good tax sense this year:

Continue reading

Tax Court Judge Gets His Moment In Michael Jackson Case

Wall Street Journal, Taxman in the Mirror: Judge Gets His Moment in Michael Jackson Case:

Mark Holmes writes pithy tales of failed marriages and booming businesses, weaving in F. Scott Fitzgerald, historical digressions and groan-aloud puns.

Now he’s working on a much-anticipated thriller (get it?) about the late pop superstar Michael Jackson.

Mr. Holmes is no best-selling author. In fact, his work is free. Mr. Holmes is a federal judge known for the clear, colloquial writing style he brings to arcane rulings on the U.S. Tax Court.

He’s handling the final phases of the hugely complicated court case stemming from Mr. Jackson’s estate-tax return. An unusual combination of music fans and tax nerds is anticipating the end of the five-year court battle, and Mr. Holmes is poised to apply his distinctive voice to one of the most recognizable voices of the 20th century.

Continue reading

Tax Consequences Of The $130,000 Payment To Stormy Daniels

Forbes:  Stormy Daniels, Michael Cohen, Giuliani, Trump & Taxes, by Robert W. Wood:

At first it appeared that Michael Cohen had paid off Stormy Daniels with his own money, and without President Trump's knowledge. Then, Rudy Giuliani said President Trump had reimbursed him. Then, there was some reshuffling about who knew what when. There were some awkward questions about whether President Trump knew of the deal at the time, or only learned of it later. The timing and mechanics of the reimbursement seem a little confused. From a tax viewpoint—which surely isn't the most important part of this story--many of these details may not matter. Even so, the tax issues are an interesting side show. Just about every kind of payment has tax consequences, to both the recipient and to the one who paid the money.

There's no question that Stormy Daniels would have to pay tax on the $130,000 payment. Settlement money is almost always taxable to the recipient, unless it is for personal physical injuries or physical sickness. That is one of the rules about taxes on legal settlements. But on the payer side of the equation, it isn't so clear whether someone paying her could deduct the payment, leaving aside the question of who effectively paid the money. Michael Cohen may have expected reimbursement at the time or only learned of the reimbursement later. Someone else was ultimately paying the bill.

Continue reading

WSJ: Meghan Markle’s U.S. Citizenship Will Cause Post-Marriage Tax Headaches For British Royal Family

Following up on my previous post:  Wall Street Journal, Look Out, Meghan Markle! The IRS Is Watching:

Dear Meghan,

Congratulations on finding your Prince Charming! I don’t want to be the bad fairy at the festivities, but we need to have a serious talk about taxes.

Meghan, I know you lived as a U.S. citizen in Canada and may be aware of tax issues faced by the seven million or so Americans living abroad. And I know you’re committed to Harry, because you’ve given up a lot since you two became serious, including your lucrative acting career and your lifestyle website.

But I don’t think you know the tax torment many American expats face when they marry non-U.S. citizens—as you’re about to do. Nearly every financial move they make, and other moves they don’t think of as financial, raises a U.S. tax issue.

Continue reading

Classic Lesson From The Tax Court: Twitty Burgers!

The Tax Court issued no opinions last week, likely because it was holding its Judicial Conference at Northwestern School of Law in Chicago. Our colleagues over at Procedurally Taxing attended and blogged about it here. Les Book reports (here) that the last session of the Conference was looking forward to the future of the Tax Court.

Future, Schmoocher. My love of history keeps my head buried firmly in the sands of the past. For not only is the past prologue, it’s also epilogue. That’s the lesson I take away from this Tax Court classic: Harold Jenkins v. Commissioner, T.C. Memo. 1983-667, a case I teach as an epilogue to the Supreme Court's classic Welch v. Helvering, 290 U.S. 111 (1933).The Jenkins case deserves your attention not only because of its lesson about the difference between business and personal deductions but also because of the poetry (?) it inspired both from Tax Court Judge Leo H. Irwin and from the IRS Office  of Chief Counsel 

All that, and more, below the fold.

Continue reading

A Taxing Oscars: $100,000 Swag Bags Come With $50,000 Tax Bill

Money, This Year's Oscar Swag Bags Could Come With a $50,000 Tax Bill:

Swag bags are a big perk of going to the Oscars. But movie stars who accept the goodies could owe a hefty tax bill. ...

For top-earning movie stars, the result could be a tax bill that eats up roughly half the value of the bag. While the recent Tax Cuts and Jobs Act lowered the top federal income tax rate, it still amounts to a hefty 37%. There’s also state income tax, which in California tops out 13.3%. In other words, movie stars who collect a gift bag worth $100,000 could end up owing $50,300 in state and federal taxes. ...

To be sure, stars have some options to avoid paying out of pocket for stuff they don’t really want, says San Francisco tax lawyer Robert Wood [Oscars $100K Swag Bag's Taxing Price Tag].

IRS, Gift Bag Questions and Answers:

Continue reading

Had Cris Collinsworth Followed His Original Post-NFL Plan To Be A Tax Lawyer, He Would Be Poring Over The New Tax Law Today Rather Than Calling The Super Bowl

Minneapolis Star-Tribune, Calling NFL Games a Taxing Job For Ex-Bengals Receiver Cris Collinsworth:

If his life had unfolded as he planned, Cris Collinsworth wouldn’t be spending this week in the Twin Cities, studying video of the Patriots and Eagles. He’d be in an office, poring over the details of the new U.S. tax code.

The former Bengals receiver began attending law school while still playing in Cincinnati [J.D. 1991, University of Cincinnati College of Law]. Armed with an accounting degree — and an affinity for business and tax law — Collinsworth saw his future in the legal world, even after a radio station asked him to be a fill-in host. ...

Collinsworth’s secondary mission is to share the “terrific story lines’’ of Super Bowl LII.

As he clicked off the list — Eagles quarterback Nick Foles’ comeback! LeGarrette Blount and Chris Long winning rings with the Patriots last year, now playing for Philly! — Collinsworth’s voice bloomed with excitement, in a way it probably wouldn’t have if he were discussing tax law.

“Believe me, I’m not longing for the days when I was going to become a lawyer,’’ he said, laughing. “Especially come tax time.’’

Continue reading

The Tax Implications Of Game Of Thrones

In a recent post of mine I referenced Game of Thrones (“GOT”), which is an HBO TV series based on the book collection “A Song of Ice and Fire” by George R.R. Martin. A commentator asked “Would it surprise you to know that some of your readers don't have the faintest idea of what your reference to "Game of Thrones" means?”

For such readers, I regret that you have not read this incredible fantasy adventure series. Not only because it’s good, but because references such as mine abound. Me nem nesa. A particularly amusing and creative spin comes from the otherwise staid ABA Section on Taxation. Each year the Tax Section puts out a “Tax Challenge” for both J.D. students and LL.M. students. This year’s Tax Challenge looks at some tax implications from GOT. Here’s how it starts:

Continue reading

NY Times: Canada Debates Whether Purchase Of Leibovitz Photos For $4.75m And Donation Valued At $20m To Art Gallery Is A Tax Dodge

New York Times, Canada Debates Whether Gift of Leibovitz Photos Is Also a Tax Dodge:

Someone — and absolutely no one involved seems ready to say who — came up with an idea in 2012 for a patron to purchase 2,070 photos by the American portrait photographer Annie Leibovitz and then donate them to a museum in Canada.

This was a colossal score for the Art Gallery of Nova Scotia in Halifax, which owned nothing by Ms. Leibovitz at the time.

For Ms. Leibovitz, who had a financial crisis several years earlier, the transaction meant she earned several million dollars.

And the donor, a Deloitte Canada partner who said he had bought the collection to honor his mother’s memory, stood to qualify for a generous tax deduction and recognition as an arts patron.

Four years later, though, a Canadian government panel that must sign off on the deduction is still balking at approving it, partly because the panel won’t accept a $20 million valuation for a collection that the donor purchased for just $4.75 million.

Continue reading

Tax Court Denies Billionaire's $33m Charitable Deduction; Did University Of Michigan 'Rent Its Brand To Brazen 10:1 Tax Avoidance Scheme'?

Forbes, Billionaire Miami Dolphins Owner Gets Shut Out At Tax Court:

Billionaire Stephen Ross, owner of the Miami Dolphins, who thanks to a $200 million donation (largest in the history of the school) was described as Leader, Visionary, Philanthropist, Wolverine by the Universtiy of Michigan. ... Mr. Ross got his start in real estate based on his knowledge of federal tax garnered as a tax attorney for Coopers and Lybrand. ... I have to wonder whether the name of his flagship Related Companies is a tax geek joke.

Forbes, Billionaire Stephen Ross And The Ten For One Charitable Deduction:

The brazenness of the charitable plan with the University of Michigan designed to benefit Wolverine Billionaire Stephen Ross revealed in the Tax Court RERI Holdings I  decision is stunning.

The bare bones of the plan are that RERI, whose principal investor was Mr. Ross, bought an asset (call it "the thing") which it donated to the University of Michigan toward a $5 millon pledge that Mr. Ross had made.  Under the gift agreement UM had to hold onto "the thing" for two years, then sell it.  The amount that UM received would be credited to Mr. Ross's pledge. Round numbers RERI acquired "the thing" for $3 million.  When it came time to sell it UM had it appraised at $6 million.  UM sold it to a partnership for $2 million under pressure from Mr. Ross who threatened to count that amount towards his pledge, if they ended up getting less.  How large was the charitable deduction taken by RERI, of which Ross was the principal investor? That would be $33,019,000.

Mr. Ross is a prominent philanthropist.  It is tough to characterize this particular transaction as philanthropic as the claimed tax savings dwarf the amount out of pocket or the amount netted by the University of Michigan.  You have to wonder to what extent University development officers knew what was going on. Was University of Michigan seeking charitable donations or renting its brand to a tax avoidance scheme?

Continue reading

WSJ: In Face-off With IRS, The Boston Bruins Win Big

Following up on last month's post, The Boston Bruins (And Other Pro Sports Teams) Can Deduct 100% Of Meal Expenses At Away Games:  Wall Street Journal Tax Report, In Face-off With IRS, the Boston Bruins Win Big:

The Boston Bruins ruled the world of professional hockey six years ago when they last won the Stanley Cup. But the team’s victory last week over the Internal Revenue Service will likely resonate far beyond the rink.

In Jacobs v. Commissioner, [148 T.C. No. 24 (June 26, 2017),] the owners of the National Hockey League’s Bruins argued the team should be able to deduct 100% of the cost of certain meals they provided to players and staff. Under current law, only 50% of the cost of many business meals is tax-deductible.

Continue reading

My Advice to Bezos (And Gates, Buffett, Etc.): Pay Some Tax

Oxford University Press Blog:  My Advice to Mr. Bezos: Pay Some Tax, by Edward Zelinsky (Cardozo):

Jeff Bezos, the billionaire founder of Amazon, has asked on Twitter for advice about the use of his fortune for philanthropy. 

My advice is that Mr. Bezos should pay some tax.

Continue reading