The Price of Fame

This is a story about a boy, a dream, a voice, and a legend. It has no beginning or end, but opens under the boundless California sky on a June afternoon in 2009. There's an ambulance speeding down the mansion-lined streets of LA's "Platinum Triangle." In the ambulance, about to be pronounced dead, is Michael Jackson.

When we think of Jackson, we remember the sheer beauty of his sweet, childlike voice belying the beatings he suffered at the hands of his father. Talent and hard work helped him redefine fame. Billions of dollars in tour revenue. Hundreds of millions of records sold. Thirty-nine Guinness world records. Thirteen number one hits. Thirteen Grammy awards. Twice inducted in the Rock & Roll Hall of Fame. When Jackson died at age 50, entertainment industry gossips waited breathlessly to reveal the details of his estate.

But there was another side to the King of Pop. For all his talent, all his hits, and all his accolades, Jackson was one seriously weird dude. The glove! The chimpanzee! The skin treatments! The sleepovers! (Ok, mostly the sleepovers.) Some of the most bizarre rumors turned out to be pure fiction — no, he didn't really have a prosthetic nose. But even in Los Angeles, where nothing is real, the lurid whispers and tabloid headlines smeared his image and tarnished his legacy.

And that presented a problem when it came time to file his estate-tax return: how should his executors value his "image rights" to control the commercial use of his name, image, and likeness? Those rights can be worth millions for fan favorites like Elvis Presley — but likely far less for someone battling sexual abuse allegations.

Jackson's executors ended up valuing those rights at just $2,105. (Hey, you miss 100% of the shots that you don't take!) The IRS told them to beat it and valued them at $161 million. They also disputed the value of Jackson's music catalogs. And then, because they obviously wanted to be startin' something, they billed him for $700 million more tax.

No surprise, the dispute wound up in Tax Court. And there it sat, fermenting like a bottle of California red, until last week when Judge Mark Holmes uncorked a thriller of a 271-page decision. Holmes laughed at “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.” But he acknowledged Jackson couldn't find a sponsor for the tour he was planning when he died, and settled on $4.15 million for the image. Given the 45% rate in effect in 2009, the decision saves the estate $70 million in tax.

The case shines a light on some challenges for you, if you've got a Grammy or two under your belt. Should you establish a domicile in one of the 30 states that recognize image rights? Should you have those rights appraised as part of your overall estate plan? How should you provide liquidity to pay those taxes? The irony here is that Jackson could afford more tax, no problem. He's earned over $1 billion since he died, and Forbes magazine has ranked him #1 on their Dead Celebrity List every year since 2010.

You may think that if you're not regularly appearing on TMZ.com, these issues mean nothing for you. But right now, revenue-hungry legislators in Washington are taking aim at our current generous estate tax exemptions and "stepped-up basis" on capital gains at death. The answer, as always, is planning — and that's how we keep the whole thing from getting too bad.

Unintended Consequences

Prussian Minister Otto von Bismarck once said that laws are like sausages: it's better not to see them being made. Frankly, that comparison is unfair to sausage makers. When was the last time a kitchen full of lawmakers cooked up something as tasty as a delicate Bavarian weisswürst, or as satisfying as a classic Wisconsin brat, or as fun as a cheddarwurst? But now the new administration has rolled out a grab-bag of tax changes as part of its American Jobs Plan (i.e., infrastructure week) and American Families Plan, and sausagemakers are rolling up their sleeves.

Changing the tax code used to be the sort of Serious Business you'd see in Mr. Smith Goes to Washington. The landmark Tax Reform Act of 1986 was a heroic rewrite of the entire code following five days of sober hearings. A bipartisan coalition of legislative heavyweights like New York's Jack Kemp and New Jersey's Bill Bradley led the charge, battling a sea of lobbyists swamping "Gucci Gulch." The final text passed with majorities in both parties. (Ok, a few years later Dan Rostenkowski, the Ways & Means Chair who finally closed the deal, wound up in jail. But nobody's perfect.)

Today that sort of cooperation has vanished. (You thought it still works like Schoolhouse Rock? Awww, bless your heart.) Tinkering with the tax code is a grubby, partisan exercise in raw political power. Senate Republicans passed the 2017 tax act with hand-written edits in the margins, language we can only assume started out scrawled on the back of cocktail napkins. ("Hearings? We don't need no stinkin' hearings!") Few of the Senators voting on the $1.4 trillion bill had even seen the 479-page text before voting.

Now the circus is back in town. The White House has proposed raising the corporate rate back up to 28%, halfway between where it stood in 2017 and where it stands now. But rank-and-file Democrats, who seem happier closing loopholes than raising rates, look more inclined to settle on 25%. The administration has proposed hiking the capital gains rate on incomes over $1 million to 39.6%. That proposal drew fire faster than the first guy off the boat at Omaha Beach, and we'll probably wind up around 25% there, too.

Writing tax law is a wonderfully sadomasochistic interplay between pain and pleasure, between the bite of increases in one place and the sweet relief of cuts in another. Should estate taxes go back up? Will "coastal elites" get their unlimited state tax deductions back again? Come to think of it, the whole process might not be that different from deciding how much actual "meat" to stuff into those sausage casings, along with the "filler" and other icky stuff.

Whatever recipe they pick, lawmakers should consider how their plans might go wrong. In 1993, President Clinton thought it was unfair that corporate CEOs were making 60 times more than rank-and-file workers. So he added Code Section 162(m), which limits deductions for executive pay to "just" $1 million — except performance-based rewards like stock options and grants. Compensation committees laughed and restructured pay packages to meet the new rules. The result? For 2020, the average CEO took home over 300 times as much as the average employee.

We may not know until December what the tax system is going to look like in January. But our job won't change no matter where it goes: map a course for your finances to avoid any new red lights where you have to stop and pay, and take advantage of green lights where you can go without paying. Either way, you'll be way ahead of the people who settle for just recording their history under the new rules!

Let's Be Honest

Americans love holidays — so much that if we see a blank spot on the calendar, someone is ready to fill it. Usually, it's someone with something to sell: would it shock you to learn that something called the National Retail Federation was behind Cyber Monday? (No Virginia, there is no Cyber Santa.) Friday, April 30, is an especially big day for so-called "Hallmark holidays." It's National Bugs Bunny Day, National Adopt a Shelter Pet Day, and National Hairball Awareness Day. (If that's not harmonic convergence, then nothing is.)

  April 30 is also National Honesty Day. Author Hirsch Goldberg says he created it back in 1991 to contrast with April Fool's Day. Of course, he did it while he was writing The Book of Lies: Schemes, Scams, Fakes, and Frauds That Have Changed the Course of History and Affect Our Daily Lives, so he might have been looking to sell something, too. If you plan on celebrating, we suggest you stay away from politicians and timeshare salesmen. And don't listen to country music — too many cheatin' hearts!

  You know who's not mocking this very made-up holiday? Our friends at the IRS! The tax system relies on "voluntary compliance": taxpayers reporting income and deductions honestly. You don't need to know math to know that could be a problem. So, how are we doing as National Honesty Day rolls around?

  A recent survey of 2,000 Americans by Credit Karma found that only 6% had knowingly cheated on their taxes. Respondents were more likely to cheat on a test or exam (25%), a romantic partner (20%), trivia or another game (20%), or by taking the bus or train without paying the fare (8%). Of those who did cheat, 7% omitted cash income, 7% padded their deductions, 5% omitted tips, 5% paid someone else under the table and didn't report it, and 3% took a chance on not reporting gambling winnings.

  Fortunately, most Americans don't have much chance to cheat. Employers report salaries on W-2s, banks and brokers report interest and dividends on 1099s, and even casinos report jackpots on W-2Gs. The IRS probably knows most of what they need to know long before you file your return.

  That doesn't make the system foolproof. On April 13, IRS Commissioner Charles Rettig told the Senate Finance Committee that the "tax gap" — the difference between what taxpayers owe and what they actually pay — could be as high as $1 trillion per year. The Service had previously estimated that gap at around $381 billion/year. But Rettig mocked those "official" estimates as reading like they’re "from the dark ages," particularly in today's era of offshore accounts, passthrough entities, and cryptocurrency.

  Naturally, the IRS is working hard to close that gap. But politicians don't win elections by raising IRS budgets, even though studies show that every extra dollar going to enforcement raises at least seven dollars in tax. So here's one idea that won't cost the IRS much at all. Former Commissioner John Koskinen has proposed requiring banks to report business bank deposits like they report interest payments on Form 1099. This would let the IRS verify that businesses are reporting all the income they deposit.

  We've said before that the tax code is a series of red lights (where you stop and pay tax) and green lights (where you go without paying). The tax gap represents taxpayers running red lights. But what about those who stop at green lights and miss out on legal opportunities to pay less? That's where we come in. So call us to pay less, and enjoy a slice of cake on National Honesty Day!

Poetry That Is Seen

The punk philosopher Iggy Pop once said, "When it comes to art, money is an unimportant detail. It just happens to be a huge unimportant detail." While we like to think of art as priceless, the sad reality is that with few exceptions, art is just another commodity to be bought and sold.

This week's clash between art and commerce takes us to South Korea, where Lee Kun-hee, son of Samsung Electronics founder Lee Byung-chull, spent 29 years at the helm of the family business. Lee didn't just turn Samsung into the world's largest manufacturer of smartphones, televisions, and memory chips. He turned himself into the richest man in Korea. He even picked up a criminal conviction for tax evasion (later pardoned by President Lee Myung-bak). But that's not what brings us here today.

Lee died last October with a $21 billion fortune including an art collection, started by his father, worth about $2.5 billion. Now it's time for his heirs to tell the government how they're going to cover $10 billion in estate tax. (They'll have five more years to pay.) The collection includes an astounding 13,000 pieces. Some are international masterpieces from artists like Picasso, Monet, and pop prince Andy Warhol. But most are ancient Korean treasures. So how will Lee's heirs raise the cash to cover the bill?

Samsung could boost its dividend to help finance the bill. However, a group of former culture ministers has proposed letting the heirs pay with the art itself. That would avoid a fire sale that depresses prices, would keep the art in the country, and would make it available to museums that can't afford to buy it on their own. Give it some thought and you'll probably agree it's a genius idea. The same principal might also apply to those who own trophy real estate suitable for parks, recreation, or other civic uses.

Valuing works by creators like Picasso and Monet is as much an art as a science itself. Here in the States, the IRS maintains an Art Advisory Panel with 25 experts who meet twice a year to review appraisals submitted with income, gift, and estate tax returns. "Panel discussions are lively and serious," according to an IRS report, and "despite the different perspectives of dealers, museum curators, and scholars, substantial disagreements are rare." The Panel reviews about 500 works per year, generally valued at $50,000 or up.

In the end, though, even the Panel sometimes gets it wrong. In 2012, the heirs of art dealer Ileana Sonnabend inherited a 1959 collage by Robert Rauschenberg titled "Canyon" that included a stuffed bald eagle. They valued it at zero because a 1962 amendment to a 1940 law made it an object that is literally "ill-eagle" to sell. But that didn't stop the Panel from assessing it at $65 million (based on a potential black-market sale) and triggering $40.9 million in taxes and penalties. The heirs settled by donating the work to the MOMA.

Changing art markets and rising art prices promise to make these sort of clashes more common. We may see more with million-dollar auction prices for "non-fungible tokens": digital artworks, recordings, and even tweets stored on blockchain, certified as unique and not interchangeable. (We'll forgive you for wondering why NFTs are worth more than the $39 you can pay to name a star.)

Your own art collection may not extend past the velvet print of dogs playing poker that's hiding in your basement playroom. But that doesn't mean you can't canvass the tax code for the same strategies that major collectors use to whitewash unwanted levies. Just call us for a plan, and we'll make beautiful art with your finances.

Shakespeare the Tax Cheat: A Drama in Two Sonnets

One April day, in 1564/

(We know the month, but sadly not the date)/
The Bard the world would someday all adore/
Was born to write the plays we'd see as great./

Today we think of Shakespeare's clever quatrains./
Yet he was so much more than just a scrivener./
His businesses included trading grains/
And storing them for buyers making dinner./

But sometimes business prompts a hard discussion:/
What separates a trader from a hoarder?/
How much to charge with no ill repercussion?/
It seems he charged too much for law and order./

And so it came in 1598/
He faced tax prosecution from the state./

To cheat, or not to cheat, that is the question:/
We all know no one likes to pay their taxes./
But sadly, taxes aren't a mere suggestion/
And Shakespeare put himself above the masses./

The verdict? Well, today, we're left without one./
The answer, "free" or "guilty," lost to mystery./
It's safe to think that penalties were none —/
Or else we'd see the stain on Shakespeare's history./

So, how are we to think about this Bard?/
The artist, now revealed as merely human./
We still revere his words with high regard,/
Accompanied by moneywise acumen./

And no, we can't resent his pain at paying./
We sympathize with seeing him disobeying!

Something to Celebrate?

  This time of year, millions of Americans celebrate Easter and Passover, the holiest days of their faith. But the calendar is loaded with plenty of "Hallmark holidays," too, usually invented by companies looking to sell something. There's Sweetest Day, invented by greeting card companies to sell more greeting cards. There's Small Business Saturday, invented by American Express to get you to buy local. And who can forget the nerd's favorite holiday, pi day (3.14)? You got it — invented by math companies to sell more math.

Most of those faux holidays don't mean much for tax collectors, beyond an extra serving of sales tax for flowers or chocolate. But as more and more states legalize recreational marijuana, April 20 (4:20) assumes a bigger place on the calendar. The nonprofit Marijuana Policy Project, a DC-based advocacy group, reports that states have collected $7.1 billion in taxes from legal, adult-use recreational sales since 2012, when Washington and Colorado became the first.

Last week, New York legalized recreational use for adults age 21 and older. Of course, there aren't any local joints where you can legally buy it yet — that may take a year or more, depending on where you live. And you'll pay some hefty taxes when you do, with a 9% sales tax going to the state, 4% going to the county, and a wholesale tax based on the level of THC. The final tax could reach as high as 20-21%, which is in line with other states ranging from 10% in Maine to 47% in Washington.

Officials estimate the new taxes will raise $350 million per year once the market matures, based on $3.5 billion in annual sales. That's a tiny fraction of the state's total $177 billion budget — but every bit helps in an economy still reeling from Covid.

The move will also save courts and police departments over $100 million per year they're currently wasting busting smokers, at an average cost of $4,390. Now they can spend it fighting real crime. And in an ironic twist, one Colorado study showed legal dispensaries actually raise nearby housing values — which may lead to bonus revenue from property taxes.

New York's new law allows cities, towns, and villages to blackball retail dispensaries in their jurisdictions. But that may be fiscally short-sighted. It means passing up sales tax revenue, along with income taxes on the jobs the new businesses create. And it's not like there haven't always been "unlicensed" dealers waiting to satisfy demand. Some advocates even worry the proposed taxes will be too high to compete with illegal dealers.

Today's move towards taxing recreational marijuana represents a profound cultural shift. Forty years ago, former First Lady Nancy Reagan told schoolchildren to "just say no" to drugs. But drugs refused to take "no" for an answer, so here we are. Thirty six states have authorized medical marijuana, and one out of three Americans can legally indulge recreationally. That list includes some surprises. Country singer Merle Haggard opened his redneck anthem, "Okie From Muskogee" with the line, "We don't smoke marijuana in Muskogee." Now the "Sooner state" has over 2,200 licensed dispensaries.

The good news, for overtaxed New Yorkers, is they can opt out of the new marijuana taxes entirely. Just say no! New York will be more than happy to tax you $6.44/gallon for your booze and $4.35 for a pack of smokes. Or you could treat your body like a temple and start saving for that Peloton you've always wanted. We'll even show you how to write off the Peloton!

Penny for Your Thoughts

In 2017, country singer Luke Bryan scored a #1 hit with "Most People Are Good." Certainly, most people consider themselves good. Of course, "illusory superiority bias" (also known as the "better than average" effect) means most of us think we're better than we really are at most everything. One survey showed 64% of drivers rating themselves "excellent" or "above average" — something that's plainly impossible to anyone who's spent time on the road. Most Americans rate themselves more attractive than average, too, as anyone who's spent time on Tinder can tell.

But some people, well, they're such treasures you just want to bury them. Today's story takes us to Fayetteville, Georgia, 22 miles south of downtown Atlanta. In November, mechanic Andreas Flaten quit his job at the A OK Walker Luxury Auto Shop to escape the "toxic" work environment. But Flaten's former boss, Miles Walker, churlishly refused to send his final pay. Finally, this month, it arrived at the end of Flaten's driveway: a wheelbarrow filled with 91,515 pennies, covered with motor oil and topped with a two-word note featuring an Anglo-Saxon swear word.

Now Flaten and his girlfriend spend their evenings cleaning the pennies with old rags. It takes them a couple of hours to polish $5 worth, which makes us hope they've at least got Netflix. As for Walker — who, come the revolution, will not be dealt with kindly — he says he can't recall whether or not he delivered the 500 pounds of coins. "I don't really remember," he told WGCL-TV. "It doesn't matter, he got paid, that's all that matters." (He sounds like the kind of guy who sits up at night cleaning his 12-gauge with Maker's Mark and muttering "kill the wabbit.")

What would our friends at the IRS think of Walker's stunt? You won't catch them wasting their time wiping oil off pennies — they don't take cash! You can convert your Benjamins into tax payments at IRS partner retailers like 7-Eleven, CVS, Dollar General, or Speedway, but you'll have to pay a processing fee.

State and local tax collectors sometimes loosen up the rules. Ohio, which probably isn't the first place you'd go looking for 21st-century financial innovation, became the first state to let businesses pay with Bitcoin. (They stopped after fewer than 10 accepted the offer.) The transaction itself is considered a taxable sale, so you can wind up owing tax on the money you use to pay the tax. And if you use more Bitcoin to pay that tax, you'll wind up trapped in an endless Russian nesting doll of tax bills drilling deeper into the void.

Legal cannabis businesses face the opposite challenge. The "devil's lettuce" is still illegal at the federal level, an obvious buzzkill. Most banks won't risk money laundering charges rolling out the green carpet to growers or sellers. A small number sidestep the problem by filing "suspicious activity" reports for every cannabis transaction — but really, isn't life just too short? Most cannabis companies just hire armored cars to make their five-figure and six-figure sales tax deposits at state and local offices.

How do we feel about the whole (literal) mess? To Flaten: here's hoping your next employer treats you with a little more respect. To Walker: Karma's just sharpening her nails and finishing her drink — she'll be with you shortly. And to the rest of you: We don't care how you pay your taxes; we just want to help you pay less!

O Canada!

Time to play a word association game: what jumps into your mind when you hear the word "Canada"? If you're like most Americans, it's ice hockey or curling. Maybe it's poutine, that irresistibly savory shotgun marriage of french fries smothered in cheese curds, and gravy that gives Canadians a helpful layer of belly fat to insulate against the winter cold. Or maybe you picture Dudley Do Right, the cartoon Mountie. Whatever your answer, it probably fits into the cliche of Canadians as "nice."

Unfortunately, all those nice Canadians live right across the world's longest unguarded border from (*checks notes*) us. Former Prime Minister Pierre Trudeau once likened it to "sleeping with an elephant." Comedian Robin Williams, who filmed several movies there, drew a sharper contrast, once saying, "You are the kindest country in the world. You are like a really nice apartment over a meth lab." Sometimes American temptations float over the border — including the temptation to fudge on taxes.

This week's story takes us to Good Fortune Burger, a Toronto burger joint that temporarily renamed some of its sandwiches after office supplies so you could expense them. So, for example, the $10 Fortune Burger became the Basic Steel Stapler. The $11 Diamond Chicken Burger became the Mini Dry Erase Whiteboard. (What controller would look twice at that charge?) Vegetarians could order the Wired Earphones with Mic (formerly known as the Emerald Veggie Burger). And if you were just looking for a snack, the CPU Wireless Mouse looked suspiciously like parmesan fries!

Burger fans ordering the faux-labeled food may get a naughty thrill out of submitting the fake expenses — a bit like teenagers sneaking booze out of Mom and Dad's bar and replacing it with water. As for the restaurant's owners, they're probably sitting by their phone waiting for the MacArthur Foundation folks to call with their Genius Grant. But the nice auditors at the Canada Revenue Agency are probably bracing for a deep dive into some grease-stained paper receipts.

Here in the states, none of that chicanery would matter. While the tax code has traditionally let you deduct 50% of most business meals, last year's COVID-19 Relief Bill raised it to 100% for 2021 and 2022. North of the border, though, the 50% limit still applies. (Ice road truckers and other long-haul drivers can deduct 100% of their meals for eligible trips.) So, reclassifying your 50%-deductible meal as 100%-deductible office supplies really can give your deductions as a boost.

Now, deducting $5 extra from your $10 meal means you'd have to eat a lot of burgers to move the needle on your refund. But Canadians will put anything in their mouths — they're perfectly happy snarfing down jellied moose nose, deep-fried pork jowls dipped in maple syrup, and "flipper pie" made out of seal flippers. So we can totally see some cash-strapped entrepreneurs eating a month's worth of burgers to outfox the tax man.

(If you've nicknamed your accountant "the Chef" because of how he "cooks the books," don't worry, he figured this all out long ago.)

Today's Covid-battered economy is pushing the most creative minds in business to work overtime to stay ahead of the game. We love seeing them applying that same creativity to trimming taxes. We're just glad that we've got "nicer" strategies for your tax bill here at home!

Laboratories of Democracy

In 1787, the founding fathers gathered in Philadelphia to fix the weak Articles of Confederation, and wound up adopting the first written national constitution on earth. ("A republic, if you can keep it," Ben Franklin said. The jury's still out.) The framers sought to achieve a perfect balance of power between federal and state governments. Among other roles, the states would become "laboratories of democracy," free to experiment with different policies to see which worked best. We see that today with states' varying approaches to lockdowns and masking to defeat Covid.

Now those federal and state laboratories are all looking for revenue to fight the economic fallout from that pandemic. More and more, they're eyeing wealth taxes to fill the gap. Senate Democrats have introduced legislation levying a 2% tax on wealth over $50 million, rising to 3% over $1 billion. Sponsors say it would raise $2.75 trillion over 10 years from just 75,000 families.

Administering a wealth tax would be easier said than done. For starters, it means filing the equivalent of a financial colonoscopy every year. But how do you value assets like cryptocurrency that fluctuate like a fat man's EKG? What about illiquid assets like real estate, closely-held businesses, and art? How do you value your yacht, your wine cellar, and your Swiss watches? We joke that every new tax act is the "Accountants and Attorneys Full Employment Act." But this one would be the "Appraisers Retire Filthy Rich Act."

A wealth tax poses fairness problems, too. It's a fact of life that what goes up often comes down. Tesla founder Elon Musk saw his net worth blast off from $24.6 billion a year ago to $200 billion last month. For a hot second, he was the richest man on earth. But now Tesla's stock is returning to earth as fast as his SpaceX rockets, and he's down to his last $170 billion. How fair is it to tax him $900 million on paper gains that vanish before he even files his return?

Now states are becoming wealth tax-curious, too. California Assembly Bill 2088 proposed a constitutionally dubious scheme to filch 0.4% of global wealth over $30 million. But it would kick in after you spend just 60 days per year in the state and follow you for 10 years after you leave. The Wall Street Journal mocked it as a plan to "chase away the rich, then keep stalking them," and likened it to the Eagles' hit "Hotel California" ("You can check out any time you like, but you can never leave").

Not to be outdone, New York legislators have proposed a "mark-to-market" tax clipping billionaires at the state's highest 8.82% rate on their paper gains: no sale needed. And Washington state legislators have proposed nicking 1% of assets above $1 billion with a tax that would hit essentially just four people (Jeff Bezos, his ex-wife Mackenzie, Bill Gates, and Steve Ballmer).

Here's the problem with mad scientists cooking up new taxes in their state revenue labs. We have 50 of them — and residents who don't like playing guinea pig can just pack up and leave. Right now, California loses almost 2,000 people every day. New York loses tens of thousands to Florida every year. (They call it "retiring.") And really, who wouldn't want to trade slushy New York winters for sunny tax-free beaches, especially when you start getting old enough that your hips can predict the weather?

We'll finish with the usual reminder that we're keeping an eye out here so you don't have to. But if you're the cautious type, you might just want to get that Napa winery tour out of the way sooner rather than later!

Moonlighting

Over the years, we've written a fair number of stories about frustrated taxpayers choosing to cut their bill the old-fashioned way: by cheating. In today's America, which seems more divided than at any time since the Civil War, tax cheats truly cut across all lines — political, racial, religious, and socioeconomic. (Last year, the Justice Department indicted two Forbes-certified billionaires for tax fraud). Some of their schemes are so clever you really wonder why they didn't just go legit.

  We've also written about tax professionals breaking the rules for clients. You probably don't think of tax nerds as a bunch of bad hombres. But accountants have stolen more money with their pens than bank robbers like Willie Sutton or Bonnie and Clyde ever "liberated" with a gun. Remember Enron? They never would have conned so many people for so long without the Arthur Andersen seal of approval. (Oh, and when we say "bad hombres," we don't mean to exclude women who cheat for their clients. None of them seem happy with stealing 79 cents for every dollar a man steals.)

  So, taxpayers cheat. Tax pros cheat. I know, film at 11. But it's rare that we get to take aim at tax collectors doing it. Which brings us to this week's story, featuring "Florida Man" Joel Greenberg.

  In 2016, Greenberg won the race for tax collector in Seminole County, just outside of Orlando. The office came with a $70,000 salary and 100 employees spread over six offices. The job included a full boat of responsibility over property taxes, local business and tourist development taxes, hunting and fishing licenses, drivers licenses and license plates, and sales taxes on cars, boats, and mobile homes.

  But somehow Greenberg found time to test new ways of collecting revenue, like encouraging employees to pack heat and buying equipment to take payment with Bitcoin. Auditors eventually found he "wasted more than a million dollars on vendor contracts, hired unnecessary staff for around $1.65 million and had questionable credit card charges of $384,000, including for weapons, ammo, body armor and a drone." (A drone? Really?!?) And he saddled the county with $1.4 million in legal costs, including $215,000 to settle harassment charges from seven subordinates.

  Then things got weird. And creepy. Last June, federal prosecutors indicted Greenberg on charges of stalking. Apparently, he set up fake social media accounts to accuse a political opponent, who works at a school, of sexual misconduct with a student. Two months later, another grand jury filed a superseding indictment (i.e., piled on even more charges) for sex trafficking a child (projection much?) and illegally accessing Florida's drivers license database for information on "sugar babies" he was paying for sex.

  Greenberg had been free on bail since his arrest, with the usual stipulations that he stay in the Middle District of Florida and not leave his house between 8 p.m. and 6 a.m. But it seems his arrest was an invitation to humility that he declined. Last Sunday, he broke curfew to chase down his wife at her mother's condominium in Jupiter, near Palm Beach. She called police, and now Greenberg is cooling his heels in jail.  

Greenberg probably didn't set out to become the poster child for misusing his office, but here we are. The good news is, Seminole County has a new tax collector dedicated to restoring the office's integrity. And you have a powerful resource in the form of us to help you pay less without risking an electronic ankle monitor!

It's All Fun and Games . . .

 Last week, hell broke loose on Wall Street as an online flash mob of mostly-rookie traders took on the hedge fund elite — and won. Their target: GameStop (GME), a struggling retailer selling used video games, often out of shabby strip centers surrounded by check-cashing joints and tattoo parlors. Shares have soared from about $17 at the beginning of the month to as high as $483, swinging hundreds of points in days. Suddenly GME was worth more than household names like Nissan and Kellogg's.

The bizarre saga is the product of a classic "short squeeze," the nightmare scenario for short sellers making bets on stocks going down. How does it work? Let's say you buy a dress at Nieman's for $200. Your friend says "I'll pay you $10 to borrow it for a month." She takes it back to the store and pockets the $200, hoping to find it somewhere else on clearance for $80 before the end of the month. Two weeks later, Julia Roberts wears it to the Oscars. It sells out, and now your friend has to pay $300 for it on Ebay. In this case, your friend is the hedge fund, and the Ebay sellers are the traders bankrupting them.

Many of the greenest players trade on Robinhood, a controversial app that "gamifies" trading. (Critics accuse them of "overserving" naive customers in much the same way as Sénor Frog's overserves naive sophomores on their first spring break.) On Thursday, Robinhood halted buying in GME and even sold out positions without bothering to ask owners. Friday the price soared again, meaning Robinhood's abused traders sher wood like their stock back. Lawyers are already on the case, and the SEC won't be far behind.

Where do our friends at the IRS come in? First, any profits GME's dollar-store moguls make when they catch this sort of lightning in a bottle are taxable. They're mostly short-term capital gains, taxed as ordinary income. Many of the lucky winners who bought GME are high school or college kids who've never even filed taxes before. They're not going to know what to do with the 1099-Bs they get next January, and many will find themselves short come April 15, 2022.

Of course, what goes up often comes crashing back down. Most GME winners would be smart to treat their windfall like a lottery, pay their tax, and escape before the bubble bursts. But we all know they won't. Some will get greedy, try to ride their gains to the moon, and stubbornly ride it back down into obscurity. Or they'll make the classic mistake of confusing a bull market for genius, throw their gains into "the next GameStop," and get wiped out by what grownup Wall Streeters blandly call "regression to the mean." At least those losses will wipe out any tax on their original gains.

Second, last week's trading has renewed calls for a financial transaction tax — a tiny fraction of a penny levied on every share of stock or option contract. This would be a shot across the bow for the amateurs driving GME prices, but a direct hit on those much-maligned high-frequency traders who shell out enormous sums for high-speed data feeds to give their computers a fraction of a second jump on price movements.

Somewhere in Hollywood right now, a coked-up screenwriter is pitching the story to a bored producer: "It's Wall Street meets Fight Club!" (First rule of stock club is you don't talk about stock club.) Nobody knows how the story ends. By the time you read these words, GME could be trading for pennies. Or it could be the new Bitcoin. Either way, we're here to help you keep as much of your gains as possible. So call us before you buy, and buckle up for the ride!

Oh, the Taxes You'll Save!

March 2 marks the birthday of America's favorite self-help author, Theodor "Dr. Seuss" Geisel. Seuss died in 1991 with an estimated net worth of $75 million, so he knew a thing or two about paying tax. But archivists recently discovered a file of unpublished manuscripts revealing just how much he resented it. His first effort, The Lor-Tax, stumbled a bit out the gate. ("I am the Lor-Tax. I'm feeling the squeeze!" just doesn't sing.) But several drafts further down, they discovered a masterpiece of trochaic tetrameter. Today, we're pleased to reveal an excerpt:

  That IRS! That IRS! I do not like that IRS!
I do not like to pay my tax.
I want to cut it with an axe!

  Would you like to pay by check? Would you like it in Quebec?

  I do not want to write a check.
It makes no difference in Quebec.
It hurts too much to write a check.
(And tax is higher in Quebec!)

  Would you pay it on the clock? Would you pay it on a dock?

  It makes no difference when I pay,
I know you want it all today.
I owe because I sold some stock
So now I can't afford a dock.

  Would you, could you, on a hill? Pay them! Pay them! Here's the bill!

  What's the point, up on a hill?
I will have to pay them, still.
Trust me, it won't be a thrill.
I wish that I could take a pill.

  How about we try a plan?
That's not hard to understand!
See how much the plan can save
And make the IRS behave!

  Say! I like when I can plan!
I can buy a new sedan
And take a trip to Kazakhstan
With cash I save because I plan!

  It's easy to see why Dr. Seuss didn't rush to publish this one before his death in 1991. Still, if planning was simple enough for Dr. Seuss to champion, it should be a no-brainer for you too!

Shouldn't This Be In People Magazine Instead?



Back in 1788, George Washington turned down his chance to become King of the new United States of America. Maybe that's why the closest thing we have to a royal family right now — at least, as far as supermarket tabloids are concerned — is the Kardashians. While the family redefines the concept of "famous for being famous," they've managed to parlay that fame into more than $2 billion of wealth. (If you're like many people, hearing that fact may make you want to punch a wall so hard that whoever pulls out your arm will be crowned the next King of England.)

Kim Kardashian grew up affluent as the daughter of attorney Robert Kardashian, best known for helping walk O.J. Simpson free from murder charges. (In fact, O.J. is Kim's godfather.) She first tasted notoriety as Paris Hilton's friend and stylist. But soon after, she pioneered leveraging a sex tape as a publicity stunt, and it was off to the races. Since then, Kim has launched beauty and fragrance lines and parlayed her social media following into an estimated $780 million fortune.

Kim's romantic history starts with a brief starter marriage at age 19. Then there were 72 days of wedded bliss with NBA player Kris Humphries, which some skeptics dismissed as a publicity stunt. It looked like she found the real deal when she married rapper Kanye West in a "blizzard of celebrity." The pair have four children, with the obligatory celebrity offspring names (North, Saint, Chicago, and Psalm). Architectural Digest recently invited readers into their home, which Kanye described as a "futuristic Belgian monastery."

But Kanye has struggled with mental health issues, and the marriage has been shaky for some time. And so it was no surprise when Kim announced last week that she was filing for divorce. Like everything else in her life, it's sure to cause a frenzy on TMZ and Entertainment Tonight. But there's one place it won't cause a frenzy, and that's at the IRS.

Up until 2017, the IRS was actually in the business of helping couples untie the knot. How? Divorcing spouses could swap property between themselves with no tax consequences. This means, in the traditional example, that one spouse can keep the house for the kids to grow up in without paying any tax on the appreciation to date. And alimony rules let the spouse with the higher income paying it shift the tax on that income to the spouse with the lower income receiving it.

Today, property transfers "incident to divorce" are still tax-free. But the Tax Cuts and Jobs Act of 2017 eliminated the alimony deduction for separation agreements effective after December 31 of that year. And child support has always been nontaxable and nondeductible.

Those rules were always most valuable in cases where one spouse brought more money into the marriage than the other. (Of course, sometimes that's exactly why people got hitched in the first place — see, for example, Playmate Anna Nicole Smith marrying an 89-year-old billionaire. But that's a story for another day.) Kim and Kanye are both rich enough in their own right that there shouldn't be much financial connection after the split. The gossips at the IRS will have to look somewhere else for celebrity stories that keep them busy.

We usually take this column as an opportunity to remind you that every financial decision you make has at least some tax consequence. This one has less than you might think. But it's still important to call us to make sure you're taking advantage of every break you're entitled to!

Monkey Business

Walk into any suburban supermarket, and you'll find entire aisles of food you wouldn't have seen when you were a kid. What the heck is quinoa, anyway? Who invented kombucha? And if mom had served kale, you might have appreciated broccoli more. But there's one whole category that delights millions, and that's the case full of milks made from soybeans, almonds, cashews, or anything else but classic "moo juice." They're popular enough that dairy interests have sued producers for using the word "milk." (The case prompted former FDA Commissioner Scott Gottlieb to declare, "an almond doesn't lactate, I will confess.")

This week's story takes us to the shelf at your neighborhood Target, where you won't find Chaokoh Coconut Milk anymore. Why not? According to People for the Ethical Treatment of Animals, the company forces monkeys to pick the coconuts that go into the milk. The group found "cruelty to monkeys on every farm, at every monkey-training facility, and in every coconut-picking contest that used monkey labor." The monkeys are "tethered, chained to old tires, or confined to cages barely larger than their bodies."

Target joins Costco, Wegman's, Food Lion, and Stop & Shop in discontinuing the product from Thailand's Theppadungporn Coconut Company. But PETA reports that Kroger, Albertson, and Publix all still carry it.

Naturally, that got me wondering, how would we tax the poor monkeys? (No, I don't get out very much, thank you for asking.) Collecting half a banana at the end of a long work day seems impractical, as well as a tad cruel. (Fact check: monkeys don't actually eat bananas in the wild, and some zoos have stopped serving them because they're too sugary.)

Microsoft founder Bill Gates suggested one answer when he proposed taxing robots that take away human jobs. "If a human worker does $50,000 of work in a factory, that income is taxed. If a robot comes in to do the same thing, you'd think we'd tax the robot at the same level," he said in 2017. Of course, it won't be the robots paying, it will be the factory. We can't imagine robots being any happier about it than we are. (Can you picture HAL 9000 from 2001: A Space Odyssey reacting when he learns he has to fill out a W-4? "I'm sorry Dave, I'm afraid I can't do that.")

The same approach could work for all sorts of non-human labor. Budweiser can pay on behalf of their Clydesdales hauling wagons of beer. Circuses can pay for the elephants they train to do tricks. (There won't be much to collect; everyone knows elephants work for peanuts.) And just imagine Willie Wonka sweating bullets when he sees the IRS coming after his beloved Oompa Loompas!

I'm having fun here, of course. But the story raises legitimate questions about how taxes should respond to changes in our economy. For example: we tax gasoline sales to pay for roads because cars and trucks use gas-powered engines. The more you use those roads, the more you pay. But the cost of batteries has dropped far enough to make electric engines competitive with their gas-powered peers. That gives Teslas an unfair advantage. Perhaps a special tax on electric car chargers could even the scales?

Next time you find yourself at the grocery store, look around and notice how silly some of the choices have become. (Do we really need 25 flavors of Cap'n Crunch? Don't they all tear up the roof of your mouth?) When it comes to taxes, though, we're here to help you make the smartest choices, with no high-fructose corn syrup or annoying trans fats!

Punch Drunk

Odds are good that if you hear the words "Mike Tyson" and "money," you think of the huge purses ($685 million!) that Iron Mike won, then squandered, in his colorful career. Tyson, who surely could have benefited from reading a Dave Ramsey book, was legendary for his excess. Who else would drop $1.5 million on five Bentley Azures in a single day, or $180,000 on three Bengal tigers, or $2 million for a gold bathtub? Boxing fans can debate where Tyson ranks at throwing punches — but pound-for-pound, he was the heavyweight champion of the world at throwing away his money.

It turns out, though, that on his journey from the mean streets of Brooklyn to the glittering Las Vegas strip, Tyson learned something profoundly important about our own favorite topic: tax planning. Back in 1996, as he was preparing to earn $30 million for 30 minutes' work fighting Evander Holyfield for the WBA Heavyweight Championship, a reporter asked him if he had a "plan" for the fight. Tyson, who turns out to be a lot smarter than some people might have expected, famously quipped that "Everyone has a plan until they get punched in the mouth."

Tax planners like us don't headline on pay-per-view TV. We don't take down multimillion dollar purses in Vegas casinos. But we still get punched in the mouth, even if we rarely lose a tooth. And the way we bob and weave when we're in the ring for you can make the difference between showing off your new bling, or paying your rent with Wendy's coupons.

We've just taken one unexpected punch in the form of Covid-19. Much of the planning we do involves estimating when and how best to recognize taxable income. For example: should you contribute to a "traditional" retirement plan, defer the tax, and pay when you take it out? Or should you choose a Roth option and take the tax hit now in exchange for tax-free income down the road? Events like the Covid recession wreak havoc for some clients, and create surprising opportunities (like Roth IRA conversions) for others. This chaos makes careful planning and projection crucial.

Now it looks like we're about to take some more jabs in the form of higher taxes. Candidate Joe Biden proposed rolling back most of the Tax Cuts and Jobs Act of 2017, and his razor-thin majorities in the House and Senate should make those changes possible. These would include raising corporate taxes from 21% to 28%, raising the top rate on individuals back to 39.6%, and capping the value of itemized deductions at 28% for filers earning over $400,000. He would also reduce the estate tax threshold from $11.7 million to $3.5 million and raise the rate from 40% to 45%.

Biden has also proposed hikes that would go well beyond undoing the 2017 cuts. For starters, he would double the rate on capital gains for taxpayers earning over $1 million. That probably wouldn't have cost Tyson anything: as good as he was at buying, there's no known record he ever sold anything at a profit.

And Biden would also impose the full 12.4% social security tax tax on wages over $400,000. That sort of haymaker would have cost Tyson an extra $85 million over his career. Just imagine how many tigers or cars the extra tax would have knocked out!

2021 is going to be a "Main Event" year for tax planning. There won't be room to hide in the ring. Good thing you've got us in your corner! We'll help you go the distance against whatever punches Washington throws.

Use Your Words

It's a common misconception that accounting and taxes are all about numbers. Looking at a balance sheet or a tax return, it's an easy mistake to make. Just look at all those numbers in all those boxes! In reality, though, it's not about numbers, and any competent 10-year-old can handle the math. Accounting and taxes are all about the rules we use to manage the numbers. And we express those rules in words. Which brings us to this week's sad story about a lawyer, not an accountant, blowing it with the wrong words.

A conservation easement is a gift of a partial interest in real estate (like mineral rights or development rights) to a qualified organization for conservation purposes. Peeling off those rights makes your property less valuable — so the IRS lets you deduct the value of those rights you donate.

Conservation easements have been deductible since 1980. However, as with so many perfectly legitimate strategies, bad actors have abused the opportunity by inflating appraisals to claim fatter deductions. Naturally, the IRS is hot on their trail. They've taken special aim at "syndicated" conservation easements, where a group of investors form a partnership to buy land, usually at a discounted value from conservation-minded sellers, then immediately convey interests to charity.

Last year, in Railroad Holdings LLC v. Commissioner, the Tax Court dissected one particular deduction for $16 million. Buckle up, Gentle Reader, because following the words here may have you wishing you were back in freshman algebra class.

Here's the deal. Code §170(h)(5)(A) says easements have to be "protected in perpetuity" to be deductible. So, what happens if you sell the property down the road? Regs §1.170A-14(g)(6)(i) says you can still meet the perpetuity requirements if "all of the donee's proceeds (determined under paragraph (g)(6)(ii) of this section) from a subsequent sale or exchange of the property are used by the donee organization in a manner consistent with the conservation purposes of the original contribution."

How do you do that? Easy: paragraph (g)(6)(ii) goes on to say, "the donor must agree that the donation of the perpetual conservation restriction gives rise to a property right, immediately vested in the donee organization, with a fair market value that is at least equal to the proportionate value that the perpetual conservation restriction at the time of the gift, bears to the value of the property as a whole at that time." In other words, if you sell the property, the donee has to get at least that same "proportionate value" of the sale proceeds. Meaning, a ratio of the proceeds.

How important is all of that in real life? In 2012, an LLC gave an easement on 452 acres of South Carolina land to the Southeast Regional Land Conservancy. The deed said if the land was sold, the conservancy would get a portion of the proceeds at least equal to the fair market value of the easement. Sounds reasonable, right? Except — uh oh — that's a number, not a ratio. That picky little word choice was enough for the Tax Court to nuke the $16 million deduction. We can be sure the attorney who drafted that provision is having serious words with his malpractice carrier.

Here at our firm, we don't just settle for numbers in boxes. We go above and beyond to set you up for the best possible results. That's what makes us different, and we think you'll like the savings!

Success Secrets for 2021

It's not just a new year, folks. 2020 is finally . . . finally . . . finally over! While most of us were perfectly happy to see it in with a whimper instead of the usual bang, we're all looking forward to the day when murder hornets, Tiger King, and ("gestures wildly in the air") all the rest have faded from the headlines and start popping up on Jeopardy. ("I'll take Dystopian Nightmares for $200" — but no "Alex," because . . . 2020.)

Have we ever needed a fresher start? This particular January is an especially promising time to look towards future goals. If you're like most people, you've got a stack of resolutions staring you in the face. Eat less, check. Exercise more, check. And would it kill you to call your mom more often? But what if you're really looking to make 2021 count? Career success? Fame and fortune? How can you make the leap to accomplishing those lofty goals?

Scott Galloway is a tech entrepreneur, author, and business school professor who's spent much of the past few years making himself as ubiquitous as possible through books, podcasts, and social media. There's a YouTube clip making the rounds (taken from a longer 2019 interview with MSNBC's Stephanie Rule) where Galloway tells you how to succeed in 2021. And it's the complete opposite of what you might expect: "Don't follow your passion."

Galloway starts by dismissing that advice as fragrant barnyard waste before stating flat out: "If someone tells you to follow your passion, it means they're already rich. And typically, the guy onstage telling you to follow your passion made his billions in iron ore smelting." Galloway, by contrast, recommend a much more practical route: "Find something you're good at, and then spend the thousands of hours . . . to become great at it." Because once you're great at it, he continues, the rewards of being great will kick in "and make you passionate about whatever it is."

So, what does Galloway offer as his ultimate example of turning boring expertise into passion? Where do you go if the doors to the glamorous smelting world are closed? Taxes, of course. "Nobody grows up thinking, 'I'm passionate about tax law.' But the best tax lawyers in this nation fly private and have a much broader selection of mates than they deserve. And they get to do interesting things which, by the way, makes them passionate about tax law."

Galloway finishes his rant by acknowledging that, yeah, following your passion sometimes works. He's just saying don't count on it. "Jay-Z followed his passion and became a billionaire. Assume that you are not Jay-Z.”  Where does that leave boring tax and finance pros like us? We're doing just fine, thank you. We do fascinating things every day. We get to help clients just like you to plan for the brightest possible future. We secure comfortable retirements. We put children and grandchildren through college. We solve complicated business and financial challenges. We may never get our face on magazine covers or bubblegum cards. But that doesn't mean we don't get to help you live your dreams — and maybe even get your face on those covers.

We're not entirely out of the woods. 2021 will bring a different set of challenges, hopefully with fewer murder hornets. But we're looking forward to being here for you whatever the year brings!

Tax Strategies for the Grinch

Despite the 2020 malaise, holiday season is in full swing, and we expect you're on your best behavior to make Santa's nice list. But there's one famous guy who works harder than anyone else to be naughty this time of year, even in 2020 — and that's everyone's favorite Dr. Seuss anti-hero, the Grinch.

We don't care if you prefer the original animated cartoon, Jim Carrey's 2000 live-action remake, or NBC's execrable live-action performance. When you think about the Grinch, you think about what he steals. But have you ever thought about what he pays? You can be sure the Whos down at the IRS do! Fortunately, the Grinch can take advantage of all sorts of tax deductions to help him pull off his Grinchy plot. Those include:

• Mileage. The Grinch can choose to deduct "actual expenses" (maintenance, upkeep and depreciation on his ramshackle sleigh) or the standard allowance (currently 57.5 cents per mile). In the Grinch's case, the short trip down from the top of Mount Crumpet to Whoville makes actual expenses his best bet.

• Uniforms and Work Clothes. Uniforms the Grinch provides for himself are deductible so long as they're not "suitable for ordinary street wear." This time of year, it seems like everyone enjoys a red coat and hat. Still, we think the Grinch's fake-Santy Claus look should be distinctive enough to pass the IRS test.

• Meals and Entertainment. Feeding all those Whos at the end of a long day can't be cheap, even if you opt to save a little by carving the roast beast yourself. The Grinch can deduct 50% of all meals and entertainment he hosts, down to the last can of Who Hash. That's exactly the sort of subsidy that helps the Whos feast, feast, feast, feast.

• Contractor Fees. The Grinch's dog Max looks like he'd really rather just go along for the ride. But that's no reason not to deduct any payment the Grinch makes to his four-legged friend. Max isn't regularly engaged in the trade or business of helping the Grinch steal Christmas, which suggests the IRS would classify Max as an independent contractor (rather than an employee), responsible for his own employment tax and withholding. (Getting off that particular hook is sure to bring out that evil Grinch smile!)

• Medical and Dental. Speaking of the Grinch's smile, have you noticed those awful teeth? With just a little planning, he could set up a Medical Expense Reimbursement Plan and deduct the cost of straightening and whitening those choppers!

Here's another reason for the Grinch to be happy that his heart grew three sizes that day — and he gave Christmas back. If he really had stolen Christmas, he'd owe tax on it! Ill-gotten gains are just as taxable as any other kind of income, right? We imagine all those flu floopers and tar tinklers would be treated as ordinary income — but who knows how an auditor would treat a set of silver jing tinglers, or a rare zu zitter carzay?

 This holiday season, we wish you and your family the safest, healthiest break from this long year's trials. And remember, don't hesitate to call us with any year-end finance questions!

Positively Wall Street

The Time: July 25, 1965. The Place: The Newport Folk Festival. Master of Ceremonies Peter Yarrow steps out to introduce the singer-songwriter sensation Bob Dylan. Festival organizers are perplexed as they watch his crew setting up heavy equipment. Then Dylan takes the stage to launch into "Maggie's Farm" — with (gasp!) a Fender Stratocaster. Dylan had "gone electric," and music would never be the same. As one wag put it, "he electrified one half of his audience and electrocuted the other."

Fifty-five years later, Dylan has sold over 100 million records, despite a singing voice that sounds like the love child of a sinus infection and an electric shaver. He's Number Two on Rolling Stone's list of rock's 100 greatest artists, trailing only the Beatles. The list of wannabes who have been dubbed "the new Dylan" — a club that includes Bruce Springsteen, John Prine, and Gordon Lightfoot — could fill every coffeehouse in Greenwich Village.

Last week, Universal Music Publishing announced they had bought the rights to the 79-year-old Dylan's entire songwriting catalog for a price estimated as high as $400 million. That's an awfully nice payday for the voice of a baby boomer generation that used to disdain $400 million paydays (at least, before they got older and discovered 401(k)s and Fox News). But it's also a shrewd tax move — one that could save Dylan and his family millions over time.

Dylan still makes millions in royalties from his music. They're taxed as ordinary income at 37%, plus whatever state tax he might pay. Dylan currently spends much of his time in a 6,000-square-foot oceanview compound in Malibu, although it's not certain he pays taxes as a California resident. Those rates may go up as soon as next year if Senate wins in Georgia give incoming President Joe Biden the votes to raise rates.

The sale will eliminate those future royalties and replace them with a lump-sum capital gain. Ordinarily, that's a bad thing, paying tax now when you could wait until later. But that gain is taxed at a maximum of just 20%. So do the math: while paying 37% on $400 million of royalties would cost Dylan $148 million, paying 20% on the same amount of capital gain costs him "just" $80 million. Just like that, $68 million in tax is blowin' in the wind.

The sale will also make it easier for Dylan's heirs to settle his future estate. If the plan includes passing the catalog to his six children, he's taxed at 40% on anything above a "unified credit exemption equivalent," currently $11,580,000. A hard-to-value asset of that size almost guarantees getting tangled up in an audit to establish the proper value. (Michael Jackson's executors pegged his image and likeness at just $2,105 — after ten years of fighting, the IRS sent them a bill for an extra $702 million.)

Dylan isn't the only artist taking this step. Last month, Stevie Nicks announced she had sold 80% of her catalog, worth an estimated $100 million, to publisher Music Wave. She and Dylan join Blondie, Rick James, Barry Manilow, and Chrissie Hynde in selling rights, which generally trade for 10-18 times annual revenue.

Of course, there are plenty of strategies Dylan may have used to defer or eliminate tax on the sale. That's where we come in. If you're looking to sell a business, real estate, or even your own song catalog, you don't have to feel like you're stuck inside of Mobile with those Taxville blues again. We've got the strategies to give you shelter from that storm!

You Can't Keep a Good Man Down

"If at first, you don't succeed, try, try again." That was Thomas Edison's motto — and it's a good thing, considering it took him 10,000 tries to perfect the incandescent light bulb. The Jedi Master Yoda might disagree ("Do, or do not. There is no try"). But trying, over and over until you succeed, is the key to countless triumphs, successes, and origin stories, from Edison to the Rebel Alliance to The Little Engine That Could. This week's story is yet another tale of effort in the face of adversity, of sheer grit and determination in the face of unyielding obstacles.

Abdel Soliman was a tax preparer in New York's up-and-coming Astoria neighborhood, just across the 59th Street Bridge from the glittering Manhattan lights. Sadly for Soliman, "was" is the operative word here. From 2012 to 2015, he and his wife prepared fraudulent returns using fraudulent W-2s to claim fraudulent refunds on behalf of his clients. While they were at it, they also created fictitious companies paying fictitious wages to squeeze fictitious unemployment insurance claims out of the New York Department of Labor. (Apparently, "go big or go home" was their motto.)

In 2017, Soliman and his wife pled guilty to their crimes. The judge slapped them with $3 million in restitution, and Soliman packed his bags for a stay in the federal penitentiary in Lewisburg, PA. (Just kidding — you don't have to pack a bag to go to jail!) In October, he returned home to New York. Ordinarily, that's when the criminal justice system starts worrying about "recidivism" — the risk of relapse into more crime. But Soliman the overachiever was so determined to succeed that he didn't even wait to get out to keep criming!

Last week, federal agents arrested Soliman again on wire fraud and conspiracy charges. It turns out that while he was enjoying Club Fed's all-inclusive accommodations, he was busy stealing $470,000 from his former clients. The IRS says he used a smuggled cell phone to fill out tax returns, keep part of their refunds for himself, and send the clients documents covering up his con. As if that weren't enough, he conspired with unnamed "associates" (legalese for "henchmen") to launder the money by sending it to accounts in Europe and Egypt.

Soliman says it's all baloney. (Of course, as British party girl Mandy-Rice Davies said during the Profumo scandal, when Lord Astor denied having an affair with her, "well he would, wouldn't he?") Soliman freely acknowledges the opportunity: "You wouldn't believe how many phones are in federal prison camps. They're all over the place." But he says he never had one himself, and he's being framed by a fellow prisoner seeking early release to home confinement.

Soliman is currently free on $600,000 bond while he plots his latest defense. Ironically, he's still on supervised release for his original crime, too. We'd feel a lot more optimistic for him if the Bureau of Prisons hadn't confiscated (checks notes) an iPhone from him in May — but stranger things have happened in court. (We're looking at you, OJ.) If history is any guide, the relentless Soliman is already hard at work on his next scam.

Here at our firm, we're just as relentless as Abdel Soliman about helping you pay less. We just don't have to use smuggled cell phones or fraudulent W-2s to do it. Instead, we give you a plan that takes advantages of the tax code's legal "green lights" to go while paying less. So call us on your cell, or even your "landline" (remember those?) to see how much you can save!