When most women slide on a pair of jeans, the last thing they want is to make their butt look big. But socialite Kim Kardashian has parlayed her generous posterior into what passes for celebrity these days. She's appeared on Dancing With the Stars, penned an autobiography, launched her own fragrances, and starred in not one, not two, but three reality shows.
Kim married the latest love of her life, New Jersey Nets power forward Kris Humphries, on August 20. Just 72 days later - on Halloween, no less - she announced she was filing for divorce. And hearts across America sank. Why, if these two krazy kids can't make it, what hope do the rest of us have, right? Not surprisingly, skeptics have alleged that the wedding was just a hoax. (It's not clear that the groom, who has said "I love my wife and am devastated to learn she filed for divorce," was actually in on the joke.) We'll resist the temptation to heap more scorn on the situation, so we can focus on what people really want to know - specifically, how will the whole train wreck affect Kim's taxes?
For starters, how will the heartbroken Kim file, single or married? Filing status is determined as of the last day of the tax year. So if Kim rings in the New Year subject to a legal separation, she'll file at the higher single rate, even for income earned during the marriage. (Makes you wonder if anyone at the IRS has any romance in their soul.)
And what about the wedding payday? (Mock the Kardashians all you want, they still managed to turn a $10 million wedding into a profit center.) The star-krossed kouple reportedly earned $15 million from E! for broadcasting the ceremony, $2.5 million from People Magazine for photos, $300,000 more from People for their engagement announcement, and even $50,000 from Las Vegas nightclub Tao for hosting the bachelorette party. Those paydays are obviously taxable, of course. Kim will also owe tax on some of the freebies she got from publicity-hungry vendors. These include a $15,000 cake, $60,000 for three Vera Wang dresses, $400,000 in Perrier Jouet champagne, $150,000 (!) in hair and makeup, and even $10,000 in Lehr & Black wedding invitations. Dumping Humphries doesn't mean she gets to dump the taxes she owes on what she scored for marrying him!
As for Kim's ring, it's a stunner - at 20.5 carats, it's roughly the size of the asteroid that wiped out the dinosaurs. TMZ reports that Kim's pre-nup requires her to buy the ring from Kris if she wants to keep it in case of divorce - ironic, considering that under California law, the bride usually just has to say "I do" to take ownership outright. This means if Kim someday sells the ring (at auction, televised on E!, no doubt), she'll owe tax on any gain above that purchase amount.
What about the wedding gifts from the 500 guests who presumably also weren't in on the joke? Gifts are never taxable as income, so there's no problem there. But Kim has announced she'll be donating the value of the gifts to the nonprofit Dream Foundation, a charitable organization that grants wishes to terminally ill adults. So she gets a double win - tax-free gifts plus a fat deduction for the value of her donation.
Most Americans spend a lot more time planning their wedding than they do planning their taxes. That can be an expensive mistake. For some of us, a good tax plan can actually pay for a pretty nice wedding. But time is running out. If you want to save taxes for 2011, you have to plan for it in 2011. There are fewer than two months left in the year - with plenty of time out for holidays - and our calendar is filling up fast. So call now, so you have plenty of time to enjoy A Very Kardashian Khristmas!
Business Doctors
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-Grow profitable sales
-Eliminate waste in your business
-Pay less taxes
The Jersey Shore gets 'Snook-ied' by Gov. Christie
New Jersey Governor Chris Christie must feel like the Most Wanted Man in America as his fans clamor for him to join the 2012 presidential race. Some observers say it's too late to mount a credible run, while others worry about positions that might offend the Republican base. A year ago, he flatly ruled it out, declaring "Short of suicide, I don't really know what I'd have to do to convince you people that I'm not running." But since then, he appears to be warming to the idea, and he's expected to announce a final decision shortly.
Politicians usually work overtime to avoid offending anyone. And Republicans rarely meet a tax cut they don't like. So how serious can Christie be if he's willing to alienate the crucial "Guido" voting block — especially if it involves shooting down a tax break? That's right, last week Christie actually vetoed a $420,000 tax credit for producers of MTV's hit Jersey Shore reality show!
Film producers bring jobs, spending, and sometimes even a touch of glamour to the locations they choose. And who doesn't want to share a bit of that Hollywood spotlight? For those reasons, over half of all states now offer film tax credits to encourage in-state movie and television production. (Remember, a tax "credit" is a dollar-for-dollar cut in a taxpayer's actual tax bill, not just a deduction from that taxpayer's income.) New Jersey's program is typical, and gives production companies a credit equal to 20% of qualified expenses so long as they incur 60% of their costs in New Jersey. Fans of these programs argue that subsidized productions actually pay for themselves by creating jobs and increasing tourism. Skeptics respond that film credits just transfer existing jobs from one location to another and that they generate short-term, project-based jobs that leave specialized laborers out of work.
MTV's Jersey Shore premiered in late 2009 and quickly became the network's most-watched series ever. Cast members Nicole "Snooki" Polizzi, Mike "The Situation" Sorrentini, Jennifer "JWoww" Farley, and their outrageous, hard-partying housemates have become New Jersey's most famous "family" since The Sopranos. Snooki makes $30,000 per episode now, commands $10,000 for personal appearances, and even rang the bell to open the New York Stock Exchange.
The show's producers reported spending $2.1 million in New Jersey to tape the first season. And officials in Seaside Heights, where the show was first set, agree that it's been a bonanza. That sounds like success, especially in today's tough economy. But not everyone is pleased with how Jersey Shore portrays its subjects. Critics object that it paints New Jerseyites and Italian-Americans as drunken, brawling louts, obsessed with their "GTL" (gym, tanning, and laundry, for those not in-the-know). Ironically, most of the cast isn't even from New Jersey — and not all are Italian, either.
Governor Christie himself has previously blasted the show as "negative for New Jersey" and charges that it "takes a bunch of New Yorkers and drops them at the Jersey Shore and tries to make America feel like this is the real New Jersey." So it came as little surprise when he shot down the tax break. "In this difficult fiscal climate, the taxpayers of New Jersey should not be forced to subsidize such projects as ‘Jersey Shore,’” he wrote in his press release vetoing the credit. “As Chief Executive, I am duty-bound to ensure that taxpayers are not footing a $420,000 bill for a project which does nothing more than perpetuate misconceptions about the State and its citizens.”
So, it looks like Garden State taxpayers won't be subsidizing Snooki's bail the next time she's arrested. What do you think? Is Governor Christie right to stand up for New Jersey pride? Or should he just lighten up, grab a "blast in a glass," and join the fun?
Politicians usually work overtime to avoid offending anyone. And Republicans rarely meet a tax cut they don't like. So how serious can Christie be if he's willing to alienate the crucial "Guido" voting block — especially if it involves shooting down a tax break? That's right, last week Christie actually vetoed a $420,000 tax credit for producers of MTV's hit Jersey Shore reality show!
Film producers bring jobs, spending, and sometimes even a touch of glamour to the locations they choose. And who doesn't want to share a bit of that Hollywood spotlight? For those reasons, over half of all states now offer film tax credits to encourage in-state movie and television production. (Remember, a tax "credit" is a dollar-for-dollar cut in a taxpayer's actual tax bill, not just a deduction from that taxpayer's income.) New Jersey's program is typical, and gives production companies a credit equal to 20% of qualified expenses so long as they incur 60% of their costs in New Jersey. Fans of these programs argue that subsidized productions actually pay for themselves by creating jobs and increasing tourism. Skeptics respond that film credits just transfer existing jobs from one location to another and that they generate short-term, project-based jobs that leave specialized laborers out of work.
MTV's Jersey Shore premiered in late 2009 and quickly became the network's most-watched series ever. Cast members Nicole "Snooki" Polizzi, Mike "The Situation" Sorrentini, Jennifer "JWoww" Farley, and their outrageous, hard-partying housemates have become New Jersey's most famous "family" since The Sopranos. Snooki makes $30,000 per episode now, commands $10,000 for personal appearances, and even rang the bell to open the New York Stock Exchange.
The show's producers reported spending $2.1 million in New Jersey to tape the first season. And officials in Seaside Heights, where the show was first set, agree that it's been a bonanza. That sounds like success, especially in today's tough economy. But not everyone is pleased with how Jersey Shore portrays its subjects. Critics object that it paints New Jerseyites and Italian-Americans as drunken, brawling louts, obsessed with their "GTL" (gym, tanning, and laundry, for those not in-the-know). Ironically, most of the cast isn't even from New Jersey — and not all are Italian, either.
Governor Christie himself has previously blasted the show as "negative for New Jersey" and charges that it "takes a bunch of New Yorkers and drops them at the Jersey Shore and tries to make America feel like this is the real New Jersey." So it came as little surprise when he shot down the tax break. "In this difficult fiscal climate, the taxpayers of New Jersey should not be forced to subsidize such projects as ‘Jersey Shore,’” he wrote in his press release vetoing the credit. “As Chief Executive, I am duty-bound to ensure that taxpayers are not footing a $420,000 bill for a project which does nothing more than perpetuate misconceptions about the State and its citizens.”
So, it looks like Garden State taxpayers won't be subsidizing Snooki's bail the next time she's arrested. What do you think? Is Governor Christie right to stand up for New Jersey pride? Or should he just lighten up, grab a "blast in a glass," and join the fun?
Is there a new hidden tax on home sales?
Life would be a lot easier for all of us if tax laws didn't change all the time. Every year, Washington writes new laws. The IRS writes new regulations interpreting those laws. The Tax Court issues new decisions interpreting those regulations. And the IRS issues enough revenue rulings, revenue procedures, private letter rulings, and similar proclamations to keep an army of accountants and attorneys gainfully employed.
Sometimes, in the midst of all that motion, facts get twisted and misinterpreted. Sometimes a rumor gets launched that takes on a life of its own. Right now, there's an email going around that has most of us tax professionals shaking our heads. It warns that, starting in 2013, the healthcare reform act imposes a 3.8% sales tax on home sales. If you sell your $400,000 home, you'll owe a $15,200 tax!
If you see it in an email, it must be true, right? The truth, as is often the case with taxes, is a little more complicated than that - and a lot less scary. First, let's take a look at how taxes are figured on home sales today:
First, calculate "adjusted sale price." This is the sale price of the house, minus expenses of actually selling it (last-minute fixups, commissions, etc.).
Next, subtract "adjusted basis." This is the price you paid for the house, plus closing costs, plus any improvements you make that add value, prolong its life, or give it a new or different use. "Adjusted sale price" minus "adjusted basis" equals "gross profit."
If you've owned your home for more than two of the last five years and used it as your primary residence for more than two of the past five years, you can subtract a "Section 121 exclusion" of up to $250,000 if you file individually or $500,000 if you and your spouse file jointly. If you don't meet the two-year requirement, you can still take a pro-rated exclusion reflecting how long you did meet those requirements.
"Gross profit" minus "allowable exclusion" equals taxable gain. If you hold your house longer than a year, it's taxed as long-term capital gain and capped at just 15%.
The bottom line here is that few home sales are taxable - especially in today's down market - because of that Section 121 exclusion. So, where does the new healthcare law come in? Well, it does impose a new "unearned income Medicare contribution," beginning in 2013, of 3.8% on capital gains, for individuals earning over $200,000 and families earning over $250,000. (Don't you love how the folks in Washington spin that 3.8% "unearned income Medicare contribution"? Wouldn't it just be easier to call it a "tax"?)
That means any gain on the sale of your home that isn't already sheltered by the $250,000 or $500,000 exclusion might be subject to the new tax if your adjusted gross income is over the $200,000 or $250,000 threshold. That's a pretty far cry from saying there's a new 3.8% sales tax on home sales!
But somewhere along the line, Chicken Little saw the new 3.8% tax, missed the rest of the process, and saw the sky starting to fall. Being a thoroughly modern chicken, she hopped on her computer to fire off an email telling all of us that the sky was falling - and that email spread faster than the latest news about Snooki or the Kardashians. So now here we are, setting the record straight.
The next time you get an email with a rumor that sounds too awful to be true, don't just run around like Chicken Little. Send it to us. We can tell you if it's something you really need to worry about - and if so, we'll help you craft a plan to avoid or minimize the threat!
Sometimes, in the midst of all that motion, facts get twisted and misinterpreted. Sometimes a rumor gets launched that takes on a life of its own. Right now, there's an email going around that has most of us tax professionals shaking our heads. It warns that, starting in 2013, the healthcare reform act imposes a 3.8% sales tax on home sales. If you sell your $400,000 home, you'll owe a $15,200 tax!
If you see it in an email, it must be true, right? The truth, as is often the case with taxes, is a little more complicated than that - and a lot less scary. First, let's take a look at how taxes are figured on home sales today:
First, calculate "adjusted sale price." This is the sale price of the house, minus expenses of actually selling it (last-minute fixups, commissions, etc.).
Next, subtract "adjusted basis." This is the price you paid for the house, plus closing costs, plus any improvements you make that add value, prolong its life, or give it a new or different use. "Adjusted sale price" minus "adjusted basis" equals "gross profit."
If you've owned your home for more than two of the last five years and used it as your primary residence for more than two of the past five years, you can subtract a "Section 121 exclusion" of up to $250,000 if you file individually or $500,000 if you and your spouse file jointly. If you don't meet the two-year requirement, you can still take a pro-rated exclusion reflecting how long you did meet those requirements.
"Gross profit" minus "allowable exclusion" equals taxable gain. If you hold your house longer than a year, it's taxed as long-term capital gain and capped at just 15%.
The bottom line here is that few home sales are taxable - especially in today's down market - because of that Section 121 exclusion. So, where does the new healthcare law come in? Well, it does impose a new "unearned income Medicare contribution," beginning in 2013, of 3.8% on capital gains, for individuals earning over $200,000 and families earning over $250,000. (Don't you love how the folks in Washington spin that 3.8% "unearned income Medicare contribution"? Wouldn't it just be easier to call it a "tax"?)
That means any gain on the sale of your home that isn't already sheltered by the $250,000 or $500,000 exclusion might be subject to the new tax if your adjusted gross income is over the $200,000 or $250,000 threshold. That's a pretty far cry from saying there's a new 3.8% sales tax on home sales!
But somewhere along the line, Chicken Little saw the new 3.8% tax, missed the rest of the process, and saw the sky starting to fall. Being a thoroughly modern chicken, she hopped on her computer to fire off an email telling all of us that the sky was falling - and that email spread faster than the latest news about Snooki or the Kardashians. So now here we are, setting the record straight.
The next time you get an email with a rumor that sounds too awful to be true, don't just run around like Chicken Little. Send it to us. We can tell you if it's something you really need to worry about - and if so, we'll help you craft a plan to avoid or minimize the threat!
The Buffet Inspired Tax Law, will it work?
Last month, billionaire Warren Buffett wrote a piece for the New York Times arguing that it's time for our tax system to stop coddling the super-rich. Buffet reported that while he paid a healthy $6,938,744 in federal income and payroll taxes last year, that figure was just 17.4% of his taxable income - a lower percentage than was paid by any of the other 20 people in his office. The solution, Buffett proposed, is for Congress to raise rates immediately on the 236,883 taxpayers reporting income over $1 million, and raise them even further on the 8,274 earning more than $10 million. "My friends and I have been coddled long enough by a billionaire-friendly Congress," he concluded. "It's time for our government to get serious about shared sacrifice."
Buffett's argument attracted immediate objectors. Some argue that taxing "the rich" can't raise enough revenue to close the deficit because there just aren't enough of them. Others pointed out that much of the income that Buffett says isn't taxed enough consists of "qualified corporate dividends," which are taxed at corporate rates ranging up to 35% before being paid out to individuals.
Now President Obama has weighed in - and it turns out, he likes Buffett's argument enough to adopt it as his own. On Monday, he proposed a $3 trillion deficit reduction package with several important tax provisions:
First, he would let the Bush-era tax cuts expire, raising top rates on ordinary income from 35% to 39.6% and capital gains from 15% to 20%. This would raise $800 billion over the coming decade.
Next, he would close corporate loopholes and cap the value of itemized deductions for individuals making more than $200,000 and joint filers making more than $250,000. This would raise another $700 billion.
Finally, he would impose a special minimum tax, called "the Buffett Rule," on those earning more than $1 million. He didn't specify a rate, but said it should be no less than what the average middle-class taxpayer pays. The new rate would only apply to about 0.3% of taxpayers, and wouldn't raise significant revenue - but it sets a more populist tone for the debate and underscores Obama's assertion that "we can't cut our way out of this hole."
Polls show a majority of Americans favor higher taxes on top earners to help reduce the deficit. And Democrats generally favor this week's plan. In fact, some supporters don't think it goes far enough. Former Labor Secretary Robert Reich, for example, suggests raising taxes to 50% on income between $500,000 and $5 million, 60% on income between $5 million and $15 million, and 70% in income over $15 million.
Opponents, on the other hand, have already attacked the proposal as "class warfare" and "political games." Congressional Republicans have said they're willing to consider closing tax loopholes, so long as the resulting gains go towards lowering overall rates. But they've pledged to resist any net increase in revenue, and House Speaker John Boehner has declared tax hikes "off the table." That means this week's plan in general, and the Buffett Rule in particular, stand little chance of actually passing.
Obama's proposal is still worth paying attention to, even if Republicans don't pretend to take it seriously. It illustrates how the rising deficit is increasing pressure to raise taxes. And it signals where Obama might go if he wins next year's election - especially if Democrats retake the House of Representatives. Count on us to keep an eye out for you so that we're ready to keep your taxes as low as possible - no matter which proposals wind up passing into law!
Buffett's argument attracted immediate objectors. Some argue that taxing "the rich" can't raise enough revenue to close the deficit because there just aren't enough of them. Others pointed out that much of the income that Buffett says isn't taxed enough consists of "qualified corporate dividends," which are taxed at corporate rates ranging up to 35% before being paid out to individuals.
Now President Obama has weighed in - and it turns out, he likes Buffett's argument enough to adopt it as his own. On Monday, he proposed a $3 trillion deficit reduction package with several important tax provisions:
First, he would let the Bush-era tax cuts expire, raising top rates on ordinary income from 35% to 39.6% and capital gains from 15% to 20%. This would raise $800 billion over the coming decade.
Next, he would close corporate loopholes and cap the value of itemized deductions for individuals making more than $200,000 and joint filers making more than $250,000. This would raise another $700 billion.
Finally, he would impose a special minimum tax, called "the Buffett Rule," on those earning more than $1 million. He didn't specify a rate, but said it should be no less than what the average middle-class taxpayer pays. The new rate would only apply to about 0.3% of taxpayers, and wouldn't raise significant revenue - but it sets a more populist tone for the debate and underscores Obama's assertion that "we can't cut our way out of this hole."
Polls show a majority of Americans favor higher taxes on top earners to help reduce the deficit. And Democrats generally favor this week's plan. In fact, some supporters don't think it goes far enough. Former Labor Secretary Robert Reich, for example, suggests raising taxes to 50% on income between $500,000 and $5 million, 60% on income between $5 million and $15 million, and 70% in income over $15 million.
Opponents, on the other hand, have already attacked the proposal as "class warfare" and "political games." Congressional Republicans have said they're willing to consider closing tax loopholes, so long as the resulting gains go towards lowering overall rates. But they've pledged to resist any net increase in revenue, and House Speaker John Boehner has declared tax hikes "off the table." That means this week's plan in general, and the Buffett Rule in particular, stand little chance of actually passing.
Obama's proposal is still worth paying attention to, even if Republicans don't pretend to take it seriously. It illustrates how the rising deficit is increasing pressure to raise taxes. And it signals where Obama might go if he wins next year's election - especially if Democrats retake the House of Representatives. Count on us to keep an eye out for you so that we're ready to keep your taxes as low as possible - no matter which proposals wind up passing into law!
(Evil) Corporate Taxes and their CEO's !
Last week, the Institute for Policy Studies (IPS), a Washington-based think tank, released a report revealing that 25 major corporations paid more to their chief executive than they did to the IRS. That list includes household names like Ford, Coca-Cola, Verizon, Prudential, General Electric, Boeing, and eBay. Altogether, those 25 companies averaged $1.622 billion in pre-tax income. They paid their CEOs an average of $16,684,071. But when it came to taxes, they averaged $304 million in refunds on their federal corporate income tax.
How do they do it? The main culprit, according to the IPS, is "offshoring" revenue to low-tax countries. The study found that the 25 corporations collectively maintain 556 subsidiaries in "tax havens" as defined by the Government Accountability Office. And many of the corporations have a long history of working to reduce taxes on shareholder profits. For example, the New York Times once reported that "G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm." Overall, the study concluded that:
"Our 25 hyperactive tax-dodging corporations employed a variety of avoidance techniques. Not all of these techniques are nefarious. Some corporate tax breaks can have redeeming social value. Incentives that encourage our economic transition to a green energy economy offer one example of these beneficial breaks. But such incentives as these play only a minor role. The lion’s share of tax breaks reward corporate behaviors — from “offshoring” to accelerated depreciation — that are of questionable value to society, especially over the long term."
Not surprisingly, critics of the study have accused the IPS of political bias. And several of the companies cited have disputed the study's findings. For example, the IPS states that eBay paid CEO John J. Donahoe $12.4 million while claiming $131 million in federal tax benefits. EBay responded that they actually paid $646 million in worldwide taxes, with the majority paid here in the U.S. Boeing Corporation also disputes the study, claiming the IPS understated their actual cash tax bill by a factor of 20.
At the same time, the study's narrow focus on federal corporate income tax obscures the true tax burden on corporate profits. Corporations pay billions in state and local taxes in addition to federal tax. CEOs who earn millions in salary pay millions in taxes themselves — usually at higher effective rates than the corporations they work for. Every tax dollar saved for shareholder dividends ultimately gets taxed at the shareholder's own level. And ultimately, who can blame corporations for playing by the legal rules? "After all," says one Forbes magazine columnist, "CEOs and boards are supposed to be running their business for the benefit of shareholders, not the U.S. government."
Whichever side you take, as our nation's debt continues to spiral out of control, lawmakers are focusing more attention on taxes in general — and this includes efforts to reform corporate taxes and close corporate loopholes.
What do you think? Are healthy corporate profits and low corporate taxes a ray of bright sunshine in an otherwise gloomy economy? Or should the townspeople be gathering up pitchforks, lighting torches, and preparing to storm the corporate castles?
How do they do it? The main culprit, according to the IPS, is "offshoring" revenue to low-tax countries. The study found that the 25 corporations collectively maintain 556 subsidiaries in "tax havens" as defined by the Government Accountability Office. And many of the corporations have a long history of working to reduce taxes on shareholder profits. For example, the New York Times once reported that "G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm." Overall, the study concluded that:
"Our 25 hyperactive tax-dodging corporations employed a variety of avoidance techniques. Not all of these techniques are nefarious. Some corporate tax breaks can have redeeming social value. Incentives that encourage our economic transition to a green energy economy offer one example of these beneficial breaks. But such incentives as these play only a minor role. The lion’s share of tax breaks reward corporate behaviors — from “offshoring” to accelerated depreciation — that are of questionable value to society, especially over the long term."
Not surprisingly, critics of the study have accused the IPS of political bias. And several of the companies cited have disputed the study's findings. For example, the IPS states that eBay paid CEO John J. Donahoe $12.4 million while claiming $131 million in federal tax benefits. EBay responded that they actually paid $646 million in worldwide taxes, with the majority paid here in the U.S. Boeing Corporation also disputes the study, claiming the IPS understated their actual cash tax bill by a factor of 20.
At the same time, the study's narrow focus on federal corporate income tax obscures the true tax burden on corporate profits. Corporations pay billions in state and local taxes in addition to federal tax. CEOs who earn millions in salary pay millions in taxes themselves — usually at higher effective rates than the corporations they work for. Every tax dollar saved for shareholder dividends ultimately gets taxed at the shareholder's own level. And ultimately, who can blame corporations for playing by the legal rules? "After all," says one Forbes magazine columnist, "CEOs and boards are supposed to be running their business for the benefit of shareholders, not the U.S. government."
Whichever side you take, as our nation's debt continues to spiral out of control, lawmakers are focusing more attention on taxes in general — and this includes efforts to reform corporate taxes and close corporate loopholes.
What do you think? Are healthy corporate profits and low corporate taxes a ray of bright sunshine in an otherwise gloomy economy? Or should the townspeople be gathering up pitchforks, lighting torches, and preparing to storm the corporate castles?
Guess Who's Unhappy With the IRS?
Surveys show that most Americans would rather be caught naked in public than face a tax audit. So, what sort of knucklehead goes ahead and asks the IRS to audit him? Then actually takes them to court when they say no?
Fashion designer Georges Marciano left his native Marseilles with his brothers Armand, Paul, and Maurice in 1977, and founded Guess? jeans in 1981. Guess? helped popularize the stonewashed denim look, and gained fame with a series of iconic black-and-white ads featuring supermodels Claudia Schiffer, Eva Herzigova, and Laetitia Casta. Marciano built on that initial success with designer jeans by expanding into watches and accessories, footwear, meanswear, bedding, and fragrances.
Unfortunately, Marciano's eye for business never matched his eye for fashion. In the 1980s and early 1990s, Guess? fought allegations of sweatshop labor, which led to a $573,000 settlement. And in 2005, they were forced to apologize after releasing a line of t-shirts glamorizing the drug trade that proudly declared "Ski Colombia: Always Plenty of Fresh Powder."
Also in 2005, Marciano claims he uncovered evidence of identity theft, fraud, and embezzlement, that he said cost him nearly $200 million. He did exactly what you would do if you were missing that much money — he sued everyone in sight. But somewhere along the line, he started worrying that he owed tax on the stolen money. So in 2008, he wrote the IRS and asked them to audit him! You would think they would be happy to oblige. But Marciano claims they stonewalled his requests, and even sent him refunds totaling $880,997.17 based on a claim for a tentative carryback that Marciano says he never made!
Meanwhile, Marciano's former accountants won judgments against him for libel and intentional infliction of emotional distress, and his creditors forced him into involuntary bankruptcy. So in a last-ditch effort, Marciano filed suit in U.S. District Court, seeking relief from the state court judgments against him, arguing that the IRS had violated his rights (including his due process rights under the Constitution), and once again demanding a "thorough" audit of his tax liabilities.
Last month, Judge Henry Kennedy, Jr., threw out Marciano's case like last season's closeouts. "The extraction by the government of money or property via taxation implicates a constitutionally protected property interest, but, as noted above, Marciano has asserted repeatedly that he owes the government money, rather than the reverse,” Kennedy wrote. “The Court is aware of no precedent establishing a protected property interest in the ability to pay taxes.”
If you ever ask us to sue the IRS to audit you, we'll probably tell you to take a seat and make yourself comfortable while we find you some aspirin! What do you think? Does Marciano really think he owes tax on $200 million? Or is he just asking the IRS to clean up his accounting mess for him?
FOX NEWS: WE REPORT (taxable income over 800 entities)
Tax "Hacking" With Rupert Murdoch
Press Baron Rupert Murdoch started with his father's newspaper in Adelaide, South Australia, and built it into the world's second-biggest media empire. Time magazine has ranked him three times in their annual list of the 100 most influential people in the world. Vanity Fair routinely lists him in their "New Establishment" ranking of the 100 most influential people of the information age. And Forbes ranks him as one of the wealthiest men in the world, with an estimated net worth of $7.6 billion.
But now Murdoch's News Corporation is in hot water because reporters at Britain's News of the World tabloid illegally hacked into telephone voicemails across Britain. Since the scandal came to a boil, several company officials have resigned, others have been arrested, and the News of the World — which began publishing in 1843 when Queen Victoria ruled Britannia — has shut down. Here on our side of "the pond," the FBI is investigating whether Murdoch's forces may have hacked into the phones of 9/11 victims and their families.
But enough of all that legal wrangling. What does the tax man think? More specifically, what do the tax men think — specifically, the Australian Tax Office, with a top corporate tax rate of 36%, our own IRS, with a top rate of 35%, and Britain's Inland Revenue, with a top rate of 30%?
Well, the answer appears to be "not much." Murdoch is known for his anti-tax position. So it's no surprise that Murdoch has, in the words of Judge Learned Hand, "arrange[d] his affairs that his taxes shall be as low as possible." A 1999 study by The Economist magazine found that, for the four years ending in 1988, News Corp paid an effective tax rate of just 6%. That compares with fully 31% for News Corp's rival Disney, the world's biggest media conglomerate.
How do Murdoch and News Corp do it? First, by slicing and dicing their income into a dizzying number of pieces. And second, by taking advantage of seemingly every international tax loophole on the books. News Corp includes a staggering 800 subsidiaries. That number includes over 60 in various sunny tax havens like the Cayman Islands, Bermuda, the Netherlands Antilles, and the British Virgin Islands. (Hey, if you were picking someplace to send your money to avoid taxes, would you pick someplace like Iceland?)
Here's today's tax quiz question. What would you guess is Murdoch's most profitable subsidiary? Fox News? The Wall Street Journal? Britain's Sunday Times? Nope, nope, and nope. Try "News Publishers" — a Bermuda corporation with no newspapers, no magazines, and no TV stations. Heck, News Publishers doesn't even have employees! Shifting profits across national boundaries lets Murdoch Corp take advantage of jurisdictions like Bermuda with near-zero tax rates.
Ironically, though, all that chicanery may have actually cost Murdoch. As The Economist reported, "The complexity of News Corporation’s structure baffles analysts and puts off institutional investors." The magazine suggests that this complexity accounts for News Corp's share price underperformance in the late 1990s and makes it more expensive for him to finance new acquisitions.
Choosing the right entity for your business is one of the most important decisions you'll make. And while you probably don't need 800 entities, you might profit from more than one. Let us help you with the right plan to make the most of your business — with no illegal phone hacking involved!
Press Baron Rupert Murdoch started with his father's newspaper in Adelaide, South Australia, and built it into the world's second-biggest media empire. Time magazine has ranked him three times in their annual list of the 100 most influential people in the world. Vanity Fair routinely lists him in their "New Establishment" ranking of the 100 most influential people of the information age. And Forbes ranks him as one of the wealthiest men in the world, with an estimated net worth of $7.6 billion.
But now Murdoch's News Corporation is in hot water because reporters at Britain's News of the World tabloid illegally hacked into telephone voicemails across Britain. Since the scandal came to a boil, several company officials have resigned, others have been arrested, and the News of the World — which began publishing in 1843 when Queen Victoria ruled Britannia — has shut down. Here on our side of "the pond," the FBI is investigating whether Murdoch's forces may have hacked into the phones of 9/11 victims and their families.
But enough of all that legal wrangling. What does the tax man think? More specifically, what do the tax men think — specifically, the Australian Tax Office, with a top corporate tax rate of 36%, our own IRS, with a top rate of 35%, and Britain's Inland Revenue, with a top rate of 30%?
Well, the answer appears to be "not much." Murdoch is known for his anti-tax position. So it's no surprise that Murdoch has, in the words of Judge Learned Hand, "arrange[d] his affairs that his taxes shall be as low as possible." A 1999 study by The Economist magazine found that, for the four years ending in 1988, News Corp paid an effective tax rate of just 6%. That compares with fully 31% for News Corp's rival Disney, the world's biggest media conglomerate.
How do Murdoch and News Corp do it? First, by slicing and dicing their income into a dizzying number of pieces. And second, by taking advantage of seemingly every international tax loophole on the books. News Corp includes a staggering 800 subsidiaries. That number includes over 60 in various sunny tax havens like the Cayman Islands, Bermuda, the Netherlands Antilles, and the British Virgin Islands. (Hey, if you were picking someplace to send your money to avoid taxes, would you pick someplace like Iceland?)
Here's today's tax quiz question. What would you guess is Murdoch's most profitable subsidiary? Fox News? The Wall Street Journal? Britain's Sunday Times? Nope, nope, and nope. Try "News Publishers" — a Bermuda corporation with no newspapers, no magazines, and no TV stations. Heck, News Publishers doesn't even have employees! Shifting profits across national boundaries lets Murdoch Corp take advantage of jurisdictions like Bermuda with near-zero tax rates.
Ironically, though, all that chicanery may have actually cost Murdoch. As The Economist reported, "The complexity of News Corporation’s structure baffles analysts and puts off institutional investors." The magazine suggests that this complexity accounts for News Corp's share price underperformance in the late 1990s and makes it more expensive for him to finance new acquisitions.
Choosing the right entity for your business is one of the most important decisions you'll make. And while you probably don't need 800 entities, you might profit from more than one. Let us help you with the right plan to make the most of your business — with no illegal phone hacking involved!
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