Archive | Tax Planning Strategies

How Oregon is helping a billionaire save some bacon on Bacon

There are two current mysteries about Francis Bacon’s Three Studies of Lucien Freud. First, who paid $142.4 million, the most ever paid for a work of art at auction, in November for the triptych? Second, why is it currently being displayed a mere three miles from my home, in the well-regarded-but-let’s-face-it-not-internationally-renowned Portland Art Museum?

Can’t help you with the first question. But the answer to the second seems to come down to…taxes!!

See, if the buyer is a collector living in a state like California or New York or Washington, all of which have high sales taxes, he could be subject to more than $10 million in sales taxes or use taxes on the purchase.

But, as gallerist Elizabeth Leach told Willamette Week’s Matthew Korfhage, if the artwork detours to the no-sales-tax state of Oregon for at least 90 days, the buyer could avoid paying sales tax altogether.

Here’s a link to Korfhage’s excellent summary of who the buyer might be and the possible reason why Portlanders can enjoy this work through March 30. By the way, I was at the museum late one day in early January and spent close to a half-hour in the room where the work is displayed. I don’t think there were more than a dozen visitors in the room at any time. Check it out, art lovers!!!

Apple avoids billions in taxes, and it all looks legal; those guys really are smart

Lawmakers are using words like “gimmicks” and “schemes” to describe how Apple Corporation has used a web of subsidiaries spanning the globe to avoid taxes. There are hearings this week at which Congressmen are expected to say they are shocked, shocked, to hear of tax loopholes being exploited.

As The New York Times reported, Congressional investigators have determined that “some of Apple’s subsidiaries had no employees and were largely run by top officials from the company’s headquarters in Cupertino, Calif. But by officially locating them in places like Ireland, Apple was able to, in effect, make them stateless — exempt from taxes, record-keeping laws and the need for the subsidiaries to even file tax returns anywhere in the world.”

One of Apple’s Irish affiliates reported profits of $30 billion between 2009 and 2012, but because it did not technically belong to any country, it paid no taxes to any government, The Washington Post reported. Another paid a tax rate of 0.05 percent in 2011 on $22 billion in earnings, according to the report.

It’s not expected that any of this will be determined to be illegal–just a highly proactive use of the existing tax rules. Interviewed by The Times, University of Southern California law professor Edward Kleinbard, a former staff director at the Congressional Joint Committee on Taxation, gets the Quote Of The Week Award. “There is a technical term economists like to use for behavior like this,” said Kleinbard. “Unbelievable chutzpah.”

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

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.

Gay marriage at the Supreme Court: Taxes, as usual, are the key to everything

Edith Windsor saw the federal government claim more than $360,000 in taxes on the assets she inherited from her spouse’s estate when her spouse died in 2009. How could that be, when you are allowed to inherit an unlimited amount from a spouse free of estate tax?

Edith’s spouse was a woman. She and Thea Spyer had been together for more than 40 years, and got married in Canada in 2007.

Gay marriages, registered domestic partnerships, and other same-sex unions do not get equal tax treatment when compared to heterosexual marriages. The contortions of tax preparation caused by the fact that same-sex couples are treated differently for federal and state tax purposes are phenomenal. As the Windsor case shows, the differences can also be remarkably expensive.

The 83-year-old Ms Windsor is going to get her day in court–the Supreme Court–early next year. The Court is going to hear her federal suit challenging the Defense of Marriage Act. The Second Circuit Court of Appeals has said the law is unconstitutional.

“I think we’ll win if there’s justice, meaning they read the briefs and pay attention to the content,” Windsor told The New York Times. “But if it doesn’t happen this time, it will happen next time or the next. But it will happen.”


Morningstar says, “Go west — or east — for college savings plans.”

Morningstar, the mutual fund reviewer and financial advisory firm, has come out with its ratings of Section 529 college savings plans, with top ratings going to plans in Alaska, Utah, Nevada and Maryland.

Morningstar’s top-rated plans: Alaska’s T. Rowe Price College Savings Plan (managed by T. Rowe Price Associates, Inc.), Maryland’s College Investment Plan (T. Rowe Price), Utah’s Educational Savings Plan, and Nevada’s Vanguard 529 College Savings Plan (Upromise Investments, Inc.), all of which got “Gold” ratings.

Following them with “Silver” were four other plans: Arkansas’ iShares 529 Plan (Upromise Investments, Inc.), Michigan’s Education Savings Program (TIAA Tuition Financing, Inc.) Ohio’s CollegeAdvantage 529 Savings (Ohio Tuition Trust Authority) and Virginia’s CollegeAmerica (American Funds)

Note: Different plans in the same state may have different ratings. For example, Alaska’s John Hancock Freedom 529 (T. Rowe Price) got a “neutral” rating, putting it behind more than two dozen other plans. Oregon’s MFS 529 Savings Plan received a “Bronze,” putting it in with a group of 18 other states that are behind the top-eight-rated,
but the state’s College Savings Plan managed by TIAA Tuition Financing, Inc., received only a “neutral” rating.

Here are all the Morningstar Ratings of 529 Plans.