Via the NYT’s politics blog:
One big issue that tax attorneys are pointing to is the fact that the Palins did not report as income the $43,490 that the state gave the family to cover travel expenses for Mr. Palin and the Palin children. Had the Palins reported these payments as income, the couple would have had to pay taxes on it.
These tax attorneys note that neither Mr. Palin nor the children were employees of the state. Nor were they traveling on behalf of the state. There was some discussion that perhaps some portion of Mr. Palin’s travel expenses might be excludable as income if there was a bona-fide business reason for his presence and if he assisted Mrs. Palin in her official duties.
But there was also uniform agreement that it would be hard to make a case for the not reporting the payments to the children as income.
“The children’s travel payments are clearly taxable income,” said Jack Bogdanski, a tax professor at the Lewis and Clark Law School in Portland and a former advisor to the Internal Revenue Service. “The money paid for Todd Palin’s travel might possibly turn out to be tax-free, but it would be quite a stretch.” …
The other area attracting attention is Mr. Palin’s snowmobiling racing and whether it is a legitimate business (which allows the Palins to deduct snowmobiling expenses) or whether it is a hobby, for which no deductions will be allowed.
The Palin’s deducted $9,000 in business losses from snowmobiling. This tax-loss would not be allowed if the activity is a hobby. The I.R.S. rule is that if an activity produces a profit in three of the past five years, is a businesses and not a hobby. But the Palins released tax returns for only two years, so it is impossible to tell. One year showed a $9,000 loss, the other year a slight profit.
Another I.R.S. test is whether making a profit – and not just having fun in the snow – was the “predominate, primary or principal objective” of Mr. Palin’s snowmobiling.
As [Texas Tech tax prof Bryan] Camp writes, the tax question is: “Why does he do it? Love of sport or love of lucre?”
What say you, BMG tax whizzes? Are the Palins scamming those of us who pay the taxes we owe, or just taking advantage of the opportunities the tax code provides them?
Also
This should piss off some taxpayers.
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p>http://taxprof.typepad.com/tax…
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p>Jack Bogdanski (Lewis & Clark) & Bryan Camp (Texas Tech) have independently reviewed the tax issues raised by the release of Gov. Palin’s 2006 and 2007 tax returns and financial disclosure form, as well as the remarkable opinion letter issued from Washington D.C. tax lawyer Roger M. Olsen. Jack and Bryan conclude that there are serious errors in Gov. Palin’s returns as filed and that she and her husband owe tens of thousands of dollars in additional taxes.
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p>Jack Bogdanski, There’s No Debate: Palins Owe Thousands in Back Taxes:
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p>There is no serious debate (at least, none that has been brought to our attention) about the fact that at least the amounts paid for the children’s travel — $24,728.83 in 2007, according to the Washington Post — are taxable. The campaign’s tax lawyer has got at least that much of the law, and perhaps more, wrong. … The Palins, who had their tax returns done by HR Block, simply got it wrong. And the fact that the state payroll office got it wrong, too, doesn’t erase the Palins’ unpaid tax liability.
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p>Bryan Camp, A Brief Analysis of Governor Palin’s Tax Returns for 2006 and 2007:
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p>The release of an opinion letter by attorney Roger M. Olsen dated September 30, 2008, has stirred up the pot once again about the accuracy of Sarah and Todd Palin’s 2006 and 2007 tax returns. Not only that, but Mr. Olsen’s letter raises a couple of new issues.
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p>This paper focuses on five problems: three raised in the tax returns and two new ones raised by Mr. Olsen’s letter. Here’s a summary of the five problems and my conclusions, for those who want to cut to the chase. My analysis will follow.
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p>1. The Palins did not report as income some $17,000 that Governor Palin’s employer (the State of Alaska) paid her as an “allowance” for her travel. Can they do that? Yes, most likely.
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p>2. The Palins did not report as income some $43,000 that the State of Alaska paid the Governor as an “allowance” for her husband and children’s travel. Can they do that? No, most likely not.
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p>3. The Palins deducted $9,000 on their 2007 return, claiming it was a loss from Mr. Palin’s snow machine racing activity. Can they do that? Most likely not, but more info could make the deduction o.k. If any of the above issues goes against the Palins they then risk getting hit with the section 6662 penalty for “negligence or disregard of rules or regulations.”
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p>4. Can the Palins avoid the section 6662 negligence penalty by claiming that they reasonably relied either (a) on the W-2’s sent to them by their employer, which did not reflect either the $17,000 or the $43,000, or (b) on their tax return preparer H&R Block, or (c) on Mr. Olsen’s opinion letter dated September 30, 2008? The three reliance defenses are unlikely to succeed, but more info may make the (b) defense a good one.
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p>5. Does Mr. Olsen have any exposure to sanctions by the IRS because of his letter? I believe Mr. Olsen’s letter probably violates 31 C.F.R. section 10.35. If so, he would be exposed to possible sanctions from the IRS Office of Professional Responsibility.
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I’m never sure when I’m supposed to be upset and bothered by omissions on tax returns and when I’m supposed to be forgiving or nonchalant. If you can show me that the miscreant had intentionally tried to get out of paying her fair share, then, by all means, summon the outrage and let the rants rip. Until then, I’m willing to grant that any given mistake was innocent.
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p>Governor Palin is so very wrong for America in so many other, obvious ways — from her witch doctor to her certainty that she is a modern day Esther destined for greatness to her social conservatism and rank cronyism. Maybe she also squeezes the toothpaste tube at the wrong end, never shuts the cabinets, and listens to bad music on the radio round the clock. Does it matter?
if she didn’t ask the state to pay her and her family per diems for living in their own danged house in the first place. Also Joe Sixpack doesn’t these opportunities, God bless him… also it’s Mavericky and patriotic.
Demonstates the need for a simpler more fair tax system, but here he goes, micro-managing fiscal policy so we’ll be left with more arcane and complicated tax statutes while raising marginal rates on those needing more financial incentive, not less incentive to succeed. Oh well. Bring it on. I love the smell of additional prof. billings in the morning.
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p>But responding directly to your more mundane points, it’s not so difficult to defend the position that the presence of the Governor’s family and therefore the travel expenses for them — she is afterall, a family values official — is beneficial to her success as a Governor and her office’s agenda. I’d take on the IRS in a second with that argument.
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p>Professional snowmachine racer. Facts and circumstances. We have professional tennis, basketball, track and field, Nascar, … snowmachining is a gotcha moment for you? Pick some other sport or entertainment that’s not really mainstream media, say opera? That’s gotta be a hobby, no? That couldn’t possibly be a business. How presumptuous of me. Of course it could be. It’s silly to have even mentioned it. Facts and circumstances; your link says as much.
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p>Note also on those taxes, Grimminy, that family really gave to charity–they earned the least of the candidates and gave the most. Forget Joe “uh yah I gave more but didn’t write it down” Biden, look at Obama: Your link, Thanks!
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p>Cheap bastards. Wonder who picks up the tab when they go to lunch. Sigh. Probably me.
No, gary. I’ve made a substantial profit on opera in each of the last several years. Whereas Todd Palin, in the two years for which we have returns, lost money one year, and barely made money the second. We don’t know what happened the third; as I understand it, the IRS would say that if he lost money in that third year, it’s a hobby.
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p>Silly me — I thought you might be interested in the issue presented, since it’s within your alleged area of expertise. But no, you’re just interested in scoring cheap points against the Democratic ticket. You disappoint me, but I won’t make that mistake again. I’ve edited the post’s title accordingly.
I’m hurt to the core. You parroted 2 insignificant sparks of an issue and fanned them mightily. I replied. You ignored.
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p>But I’ll repeat, rephrased, but only because you’re a tenor:
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p>1: The money paid by the employer for family travel was business related. Why do we know this? i) she’s run on a platform of family values; family advances her agenda as governor and is easily arguably business expenses of the state; ii) the State of Alaska advanced the money, legally, and treated it for all purpose as an expense that is not compensation. The state, by failing to report the money as income, considers it not income. The presumption to the contrary is on the IRS. The taxpayer’s argument is one I’d have no qualm representing.
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p>2: Facts and circumstances determine whether business or hobby. You failed to read or understand either of the 2 times I typed “facts and circumstances”? Should you be able to provide the (4th time) facts and circumstances that prove or disprove the husband’s snowmobiling to be a hobby or not, then you have a post with substance. Otherwise, the facts and circumstances of your post are merely cheap points. i.e. you’re speculating out your ass (that’s technical tax talk).
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p>No, that’s incorrect. Section 183 doesn’t say that, but somehow, I don’t think you’re really interested in any type of non-partisan analysis with respect to the husband’s snowmobiling venture.
… and David was the Baritone.
Then not knowing the pecking order, I’m not sure, who, if anyone, I’ve miffed.
I’m hurt to the core.
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p>You’ll get over it. You’re tough.
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p>you’re a tenor
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p>I’m a baritone. Don’t insult me. đŸ˜‰
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p>she’s run on a platform of family values; family advances her agenda as governor
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p>This is an interesting but, IMHO, dubious theory, since I doubt that the definition of taxable income depends on a politician’s political platform. If you’ve got a link, I’d be interested to see it. Seriously.
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p>Facts and circumstances determine whether business or hobby.
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p>Sure, but it’s not quite that simple, is it? IRS says:
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p>Now, I’m no tax lawyer, but it sure looks to me as though carrying on an activity for profit is what drives this determination, and the presumption mentioned in the last sentence is what I’m talking about (apparently I was wrong about the 2 of 3 years — it’s 3 of 5).
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p>I actually am interested in “non-partisan analysis.” If you’re interested in supplying it, leave out the BS next time.
If an activity is profitable for 3/5 years then the IRS will presume that it is a business activity. To the best of my knowledge the inverse is not true. Just because an activity is unprofitable does not mean the IRS will presume it’s not a business activity. As Gary said, the inqury comes down to facts and circumstances.
So I get to write off all by clothes?
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p>I represent myself as a great dresser when I do sales calls…So I get to write off all by clothes?
Let’s see, she has an opinion letter from a tax attorney; an employer that considered the travel expenses paid as business; and an objective basis for treating them as such.