Spidell's Tax Season Tribune

Why divorce when you can rob a bank instead?

By Michael Giangrande, J.D., LL.M.
Technical Tax Writer

An elderly Kansas man was so tired of his wife last year that he wrote her a note telling her that he'd "rather be in jail than at home." He then proceeded to rob $3,000 from a local bank with a note he slipped to the teller, then sat in the bank's lobby and waited for police.¹

Let's find the tax issue

This case was too hard to pass up, so we're going to have to stretch to find the tax issue here. IRC §61 provides that gross income includes all income from whatever source derived. That definition is very broad and includes ill-gotten gains, including those acquired through illegal means, such as bank robbery.

The question is whether the $3,000 the man robbed from the bank is truly income to him. Yes, he robbed the bank, but then he just sat in the lobby with every intention of giving the money back. Way back in '55, before many of us were born, the U.S. Supreme Court held that income is realized whenever there are "instances of undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion."²

So, did the elderly man have complete dominion over the funds if he never actually left the bank? I think this question is best left without an answer for now.

¹ www.kansas.com/news/nation-world/national/article100357577.html
² Commissioner v. Glenshaw Glass (1955) 348 US 426

back to top

Super Bowl ... Round 2

By Sandy Weiner, J.D.
California Editor

Most people think that now that the Super Bowl is over, the big football battle of the season is over. But another big battle rages on. Former NFL cheerleaders have filed a class action suit against the NFL.¹ The suit alleges that the NFL teams conspired to keep cheerleader salaries to a minimal level, although after four cheerleading squads brought lawsuits against various teams last year, cheerleaders are now being paid at least the minimum wage (averaging between $100 and $150 per game). Contrast that with Cam Newton, the Carolina Panthers quarterback who averages over $20 million per year after signing a $103.8 million contract at the start of the 2015 season.

The cheerleaders' pay is also far less than what is paid to the team mascots, whose salaries range between $25,000 and $60,000 per year and who often receive benefits, according to the lawsuit. Some folks claim that being a cheerleader provides squad members with lots of fun travel, front row seats at exciting events, great exposure (no pun intended) and experience, and a springboard to great career opportunities, which makes up for the low wages. But then why isn't the same argument made for mascots who get to wear far warmer clothing (think 8-foot buffalo or Bengal tiger) at some very frigid events?

¹ See http://pdfserver.amlaw.com/ca/NFLCheerleaderantitrust.pdf

back to top

Was Jack Sparrow pirated?

By Sandy Weiner, J.D.
California Editor

With the current debate in Washington over the fiduciary regulation being proposed for financial advisors, we can't help but discuss the current case involving Johnny Depp suing his financial advisors for fraud to the tune of $25 million.

Playing the infamous Jack Sparrow has helped the amazingly talented Mr. Depp amass a booty of close to $400 million in net worth after bringing in more than $650 million in the course of his film career. Why then is he suing his financial managers, The Management Group (TMG)?

Depp is suing them for fraud claiming that they lent $10 million to people close to the actor without his consent, took out a $5 million loan for themselves using his properties as collateral, and caused him to pay $6 million in penalties for failing to timely file his tax returns.

In response, TMG is countersuing for unpaid fees. TMG claims Depp's extravagant lifestyle cost close to $2 million per month to maintain. According to TMG, some of Depp's more outrageous extravagances included:

Paying $3 million to blast the ashes of author Hunter S. Thompson over Aspen, Colorado, with a specially-made canon (see http://www.espn.com/espn/news/story?id=2139349);
Spending $75 million to buy and maintain 14 homes, including a French chateau and a chain of islands in the Bahamas;
Purchasing and renovating a 150-foot luxury yacht at a cost of $18 million, paying for 450 luxury vehicles for millions more, and incurring $200,000 per month to be flown on private planes;
Collecting so much fine art and Hollywood memorabilia that it required 12 storage facilities to maintain; and
Spending $30,000 per month on wine.

TMG is claiming that Depp's lifestyle could not be maintained and he only fired them and raised the fraud allegations when they told him it was time to stop this gluttony and to sell some of his French properties to cover some of his outstanding liabilities.

back to top

Let's get QuizziCAL: Food trucks

By Diane Fuller
Contributing Editor

Here's a stumper for you … click below to reveal the answer.

Your friend Gaston recently decided to quit his job and buy a food truck. Gaston's Steak Frites is a moving brasserie specializing in seared rib eye in a pan reduction sauce served with French fries. Gaston drives through Santa Monica, and with his adept social networking skills, drops a pin at his location. He fires up the grill, starts singing ... No one tries like Gaston, or deep fries like Gaston ... and people come running. In his first month, he made over $20,000 and is on track to go higher. Last week alone, from his favorite spot near the Santa Monica Pier, his sales came in at $8,315, which included $675 in sales of premade gelato. What tax rate should Gaston report for that week and what is taxable?

How'd you do? Click here to find out.

Answer:

You will find the following in ¶43-201 (Food — Reporting requirements for food trucks) of Spidell's Analysis & Explanation of California Taxes^®:

Sales made by a food truck vendor are presumed to include sales tax. As long as Gaston keeps a separate accounting of his gross receipts on the sale of gelato, those sales, like those of other cold food products, are exempt from tax. The remaining $7,640 is taxed at a rate based on where the sales are made — in this case, 9.25% for the city of Santa Monica.

back to top

Let's get quizziCAL

By Diane Fuller
Contributing Editor

Here's a stumper for you … click below to reveal the answer.

You decide to move out of California — high taxes, too many cars, no water, and to build the bullet train crews will be tunneling through the rocky boundaries between the North American and Pacific tectonic plates, and you're convinced this will trigger the "Big One." Hello, Texas! You buy a 10-acre ranch outside of San Antonio for $500,000. It's flat, it's hot, and you're hours away from the ocean. You sell the ranch in an installment sale in July and return to the Golden State in November so you can live on a dinghy and watch the sun as it sets in the Pacific. Are the proceeds from the installment sale taxable by California since you sold the property before you moved back?

How'd you do? Click here to find out.

Answer:

When you file your part year resident return, if you elect out of the installment method for California, the principal would not be taxable to California. (See Spidell's Analysis and Explanation of California Taxes^® ¶22-605 Installment sales)

back to top

A few fun facts about this week's writers:

Diane Fuller is a woman of many talents which include writing children's poetry, taking unwitting challengers to town in poker, and whipping up Michelin-worthy dishes from scratch. Find her laughing with her two grandkids.
My first concert: The Beatles

Mike Giangrande, J.D., LL.M., is the newest member of our Tribune family. An Orange County native, find him doing some backyard gardening, playing with his 3 kids, or daydreaming about tee-time while he's answering Message Board questions.
My first concert: AC/DC

Sandy Weiner, J.D., as California editor, loves all things California. Whether it's hiking at Big Sur or playing at the beach in San Diego where she lives, Sandy takes full advantage of all that California has to offer as a way to clear her head after trying to comprehend and explain California's Revenue & Taxation Code.
My first concert: Led Zeppelin

Never miss an issue

Did a friend forward this to you? To get on the Tax Season Tribune mailing list, contact anthonya@spidell.com. Past issues of the Tax Season Tribune can be accessed through the Tribune Archives.

Tax Season Tribune (2/5/17)