Archive | Tax Advice

Now that’s a home run: McCourts back in court over billion-dollar Dodgers franchise

By on April 24, 2013 in Creative, Tax Advice

Nasty multi-million dollar divorces make for some great financial insights, especially when they wind up in court.

Today’s lesson: How profitable it can be to own a professional sports franchise, and how the tax code’s preferential rates for capital gains benefit the super-wealthy.

Frank McCourt owned the Los Angeles Dodgers. When he and his wife Jamie divorced, Jamie got $131 million as a settlement.

They were back in court this week. The reason: Shortly after the divorce, Frank sold the Los Angeles Dodgers for $2.15 billion. Jamie’s lawyers say the settlement should be thrown out because she was misled about the value of the team. (Isn’t it entertaining when people fight over hundreds of millions of dollars?)

The tax angle: Court documents show that Frank made $1.278 billion on the sale. His lawyers say he has paid more than $460 million in state and federal taxes on the sale.

If you’re keeping score at home, that’s a combined federal-and-state tax rate of about 36%, or roughly the same percentage that a single person in California would have to pay on ordinary taxable income of more than $90,000.

Oscars tax hangover: No free swag bags for celebrities

By on March 8, 2013 in Internal Revenue Service, Tax Advice, Tax Evasion

You probably heard that performers, nominees and others attending the Oscars got “Swag Bags” containing goodies worth $47,802, as Today.com and others reported. A lovely consolation prize for any nominees who didn’t get the statue, fer sure.

But did you hear that people getting the bags have to pay taxes on them?

Really! The IRS has said–you can see it for yourself right here–
that the value of the goodies are income and not gifts.

Says the Service, “…the organizations and merchants who participate in giving the gift bags do not do so solely out of affection respect or similar impulses for the recipients of the gift bags.”

The IRS says that businesses showering goodies on celebrities don’t do it out of affection!Those corporations don’t really, really love them!!

And people, don’t think the celebrities won’t notice that these gift bags are not about love. The IRS also has a bunch of rules about how businesses have to report the value of the gifts on Form 1099-MISC, which is sent to the goodie-bag recipients…and to the IRS.

Sex and the IRS: making “friends” with your IRS auditor, extreme version

By on February 8, 2013 in Creative, Internal Revenue Service, Tax Advice, Tax Planning Strategies

Dear IRS: I’ve Read About This In Your Manuals, But I Never Thought It Would Happen To Me…

Sometimes I sort through tedious tax court cases looking for some mildly interesting nugget to share, and sometimes a thing of sheer weirdness lands in my lap.

An Oregon man has filed a lawsuit claiming that an IRS agent intimidated and coerced him into having sex with her.

You cannot make up stuff like this.

The Register-Guard in Eugene, Oregon, has all the details of Vincent Burroughs’ accusation that IRS agent Dora Abrahamson used her position to both threaten him with tax penalties and lure him into having sex with her, after coming to his home “provocatively attired.” (She also sent him a photo of herself in her lingerie.)

This poses so very many questions:

–Have you ever before seen “IRS agent,” “intimidated” and “sex” in the same sentence?

–Threats of tax penalties if you don’t put out: Turn-On or Turn-Off?

–IRS agents actually own “provocative attire”?

Robert W. Wood at Forbes tries to be halfway serious by using this story as a jumping-off point for discussing legitimate ways of getting out of tax penalties . Good for him. Me, I’m just looking forward to seeing what the late-night comics do with this.

Get a receipt when you make a donation! Really!

By on January 30, 2013 in Deductions, Internal Revenue Service, Tax Advice

It warmed my heart to see the article in The Oregonian during the holiday season about someone who had dropped a South African krugerrand worth almost two thousand bucks into a Salvation Army kettle

Turns out this is a little bit of a nationwide phenomenon, as The Huffington Post noted.
But here’s where the warped mind of the tax pro goes with this: The gift is wonderful. But these people making anonymous contributions are missing out on the chance to take a charitable deduction for their generosity!

Where the IRS is concerned, it’s not enough to have a heart (or coin) of gold. You have to have a bank record, receipt, or other proof for any cash contributions you make to charity, and a receipt from the charity (on which you write what you gave and what it was worth) for any non-cash contributions.

Nothing wrong with being anonymous. But c’mon, let’s get those deductions too!

Five thousand reasons people need tax pros

By on January 18, 2013 in Internal Revenue Service, Tax Advice

Did you know that the federal government has an employee—one employee—whose sole job is to represent the interests of taxpayers?

Her name is Nina Olson, and as the National Taxpayer Advocate she runs an office that is charged with helping taxpayers who are having problems with the IRS.

In her annual report to Congress in January, Olson pointed out that legislators have made more than 5,000 changes to the tax code since 2001, as The New York Times reports. She also pointed out that the IRS answered only about two-thirds of all calls from taxpayers, and callers who did get through waited an average of 17 minutes.

Prospects for better service are not good, since Congress keeps looking at cutting IRS’s annual budget — even though it costs the federal government $7 for every dollar cut. You can read the whole report here the next time you’re waiting on hold after calling the IRS (1-800-829-1040.)

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