Spidell's Tax Season Tribune

Trust and trademark dispute: Zappa siblings freak out

By Austin Lewis
Managing Editor

One of our favorite topics to write about at Spidell is trusts gone wrong, and in years past we've shared stories about musicians including Elvis Presley, Jimi Hendrix, and John Denver. The latest entry for the Tribune: Frank Zappa and the Zappa Family Trust.

Musician and composer Frank Zappa died in 1993 without leaving specific instructions on what to do with his publishing rights and massive archive of master recordings. Gail Zappa, his widow and mother of their four children (Moon, Dweezil, Ahmet, and Diva), eventually founded the Zappa Family Trust in 2002 to manage Frank's intellectual property.¹

Gail died in 2015, leaving only Ahmet and Diva with controlling shares of the trust. Frank's two most famous children, Moon (who sang on Frank's top-40 single Valley Girl in 1982) and Dweezil (who was an MTV VJ in the 1980s and a musician in his own right) were left with smaller shares.²

Anyone who has ever filed a trust return can see where this is going.

Dweezil's most popular music project is Zappa Plays Zappa, a band he formed in 2006 as a tribute to his father's legacy that he still tours with today. The band name is owned by the trust, and he licensed it until early 2016 when Ahmet — through the Zappa Family Trust — sent him a cease-and-desist order.

The news made the New York Times,³ and the brothers continued arguing with each other in public through open letters on Facebook and blog posts. Dweezil changed the name of his band and his tour, but the legal fight continued. One of the main disagreements was over the Zappa Plays Zappa merchandise money: Ahmet felt it should go to the trust, while Dweezil thought it should stay with his band — after all, they were the ones earning the money on tour year after year.

In the following months, the Zappa Family Trust put Frank Zappa's Hollywood Hills home and recording studio up for sale to help pay off the trust's debt, and Dweezil started a PledgeMusic campaign to raise money to cover legal fees in the trademark dispute over his use of the Zappa Plays Zappa name. The house sold (to Lady Gaga!) for $5.25 million in September 2016, while Dweezil reached his fundraising goal earlier this month and is now raising money to continue to record new music. But it remains to be seen what name Dweezil will tour under when the music is released.

¹ www.nytimes.com/2015/10/09/arts/music/gail-zappa-keeper-of-her-husbands-legacy-dies-at-70.html
² www.latimes.com/entertainment/music/la-et-ms-frank-zappa-children-where-are-they-now-20160628-snap-htmlstory.html
³ www.nytimes.com/2016/04/30/business/media/whats-in-a-name-just-ask-frank-zappas-feuding-heirs.html
⁴ www.dweezilzappa.com/posts/1982286-response-to-my-brother-s-open-letter

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I'll take my sandwich wet

By Kathryn Zdan, EA, and Diane Fuller
Tax Season Tribune Staff

For those of us who are from California, Mexican food is at least a weekly staple. Who doesn't love a savory burrito with fresh guacamole, maybe served wet and layered with cheese?

There's no getting around a burrito's special place in culinary tradition. So how is it possible that with such chutzpah, New York State classifies a burrito as a sandwich?

According to the New York State Department of Finance and Taxation: "Sandwiches include cold and hot sandwiches of every kind that are prepared and ready to be eaten, whether made on bread, bagels, on rolls, in pitas, in wraps, or otherwise, and regardless of the filling or number of layers. A sandwich can be as simple as a buttered bagel or roll, or as elaborate as a six-foot, toasted submarine sandwich."¹ Burritos are included on the list of "common sandwiches," and in New York, "sandwiches are generally subject to sales tax."² Tax revenues ... of course!

Travel less than 200 miles to Massachusetts and you'll find that a burrito is definitely not a sandwich.³ A Massachusetts court ruled against Panera Restaurant when they tried to prevent a Mexican restaurant from renting space in the same shopping center. The court sensibly defined a sandwich according to Merriam-Webster as "two pieces of bread, usually buttered, with a thin layer (as of meat, cheese, or savory mixture) spread between them," and according to the court, common sense dictated that a burrito could not be considered a sandwich.

It's the duty of New Yorkers to rise up in protest! (See Tax rebellion 101.)

Meanwhile, in California ...

California doesn't waste its time on the question of whether a burrito is a sandwich. That isn't to say that we don't have our own set of picky sales tax rules regarding food, especially when it comes to food temperature and where you consume it.

If you buy a frozen burrito at 7-11 to take home and re-heat, it's not taxable. But if you use 7-11's microwave to re-heat a frozen burrito before you pay for it, it's taxable. (BOE Publication 244)

If you dip a sandwich bun in hot gravy (mmm... Phillipe's), the sandwich is taxable. But if you toast bread for a tuna sandwich that's ultimately served cold, it's not taxable. (18 Cal. Code Regs. §1603(e))

Cold take-out food may or may not be taxable, depending on if the seller meets certain rules. Hot food is taxable whether it's eaten in an establishment or taken to go. That includes food that was hot when you ordered it, but showed up at the table at room temperature.

¹ https://www.avalara.com/blog/2014/08/06/burrito-sandwich-new-york-wacky-tax-wednesdays/
² https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/sandwiches.htm
³ https://www.avalara.com, op. cit.

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Tax rebellion 101

By Kathryn Zdan, EA
Editorial Director

If only two things are certain, death and taxes, a third is close behind: tax rebellion. History is full of uprisings and protests following the application of tax to life's necessities, such as beer, wine, tobacco, and tea.¹ So if you're contemplating a tax protest but are unsure where to start, here are some ideas.

For pure shock value, you can pull a Lady Godiva. The legendary noblewoman pressed her husband to stop taxing his tenants, which he agreed to do only if she rode naked through town on a horse. She immediately saddled up.

Embarrassment worked well in the Whiskey Rebellion, where furious whiskey drinkers seized a tax collector, destroyed his paperwork, shaved his head, and then paraded him through town. Subsequent revolts against this excise tax included the added step of tarring and feathering captured tax collectors.

Or, just completely destroy the item to be taxed. We're all familiar with the time some Bostonians turned their harbor into a giant cup of English Breakfast. It's a little-known fact² that they all had their pinkies out as they tossed the chests of tea overboard.

No matter your method of protest, keep in mind the words of Karl Marx: "It is high treason to pay taxes. Refusal to pay taxes is the primary duty of the citizen!"

¹ https://en.wikipedia.org/wiki/List_of_historical_acts_of_tax_resistance
² Disclaimer: fake news

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We flubbed!

In the Powerball article in last week’s Tribune, we had included a statement suggesting that lottery winners consult with their CPA and a tax attorney. We would like to apologize for overlooking the breadth and depth of knowledge of our EA and CRTP colleagues who work tirelessly to plan and execute the best tax strategies for their clients. We wish tax pros of all accreditations a smooth rest of tax season!

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A few fun facts about this week's writers:

Kathryn Zdan, EA, is not only director of the editorial department, she also "rocks the house" as a regular in curling bonspiels around the country. She also enjoys foreign and avant-garde film, baking, and the Investigation Discovery channel.
Find me: behind my Pentax K1000 camera.

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.
Find me: in a happy mood most of the time.

Austin Lewis loves classic rock, despite being born a few decades late, and he goes to more concerts than anyone else in the office. He's also a big baseball fan, and his worlds collided in 2014 when he saw Paul McCartney at Dodger Stadium.
Find me: in line at Philippe's for a French dip sandwich before a Dodgers game.

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