A number of news sources are reporting that while BP has been trying to work with fishermen regarding their losses, lack of business records is a complication. And the most glaring complication is the lack of tax returns. There is a price for not complying with the law and one of them is getting caught short when you have a claim for loss of income. The easiest form to use would be a tax return. But when you don’t prepare one or file one, guess what, then you have to try and reconstruct your income after the fact from trip tickets and other pieces. Also, workers who might have claims but got paid under the table don’t have tax returns to justify their income. This points out a real problem in this Country. Compliance. People who are off the grid. This also complicates issues such as health care and social security, when these folks are not contributing to the system, but when they get old and sick, they will be funded by taxpayer dollars. While I feel for these folks and their families, I hope this points out the need to come in out of the cold. The other sad fact is that when they apply for benefits from the government fund, there is no doubt that information will be passed along to IRS who will probably be flocking with agents to the Gulf Coast. If its not, the Treasury Department which is handing out all these checks will find itself with a mild internal issue to say the least.
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Following up on the Yankees
Let’s assume that the Steinbrenner estate was properly planned. What would that have entailed? (1) Delaware situs trusts. Delaware law permits unlimited term “dynasty trusts”. This would permit a Trust to be formed which would last forever. What would be the tax implications of that. No transfer tax until George Steinbrenner’s grandchildren die. That means that the Yankees would be in the family for two generations without estate or GST tax. That means that as long as the team is kept in the family, the team, the stadium, and the YES network all stay in the family. Further, suppose that the YES network gets spun off down the road, so long as the family gets stock from the takeover candidate that transaction is tax free until they cash in the stock. So, for example if FOX bought the YES network and gave NEWSCO stock to the trustees, the transaction would not be taxed. Further even if the team were sold, it could be sold in a tax deferred way to increase cash flow to the beneficiaries. This is a decision for the family, not constrained by taxes or charitable trustees. (2) The Trust would provide that family members serve on the mandatory investment advisory board or as investment trustees. This would avoid implication that the trust is a NY situs trust, while maintaining their control over investment decisions. (3) The trust would provide for sprinkling of income among generations in the Trustee’s discretion. This would permit spendthrift protection for the trust should one of the beneficiaries marry badly or get sued.
Two Owners Two Different Results
As reported in the news, the iconic owner of the New York Yankees, George Steinbrenner died on July 12, 2010. Because he died in 2010, his wealth and the New York Yankees get to stay in his family without the payment of any estate tax. On April 6, 1997, Jack Kent Cooke passed away. He was a very wealthy man, reputed to be in the billions of dollars. He also owned the Washington Redskins, who during his ownership won three Super Bowls. In order to avoid the crippling nature of the estate tax and in an attempt to keep the Washington Redskins under control of his son, John, Mr. Cooke placed the bulk of his estate in a charitable foundation. Because the team was worth a reported $800 Million dollars and needed an owner per the NFL rules, it had to be sold. John Cooke and Dan Snyder each bid on the team. Snyder’s bid was higher and the Trustees had to accept his bid despite their love for the Cooke family.
Let’s look at the facts, Jack Kent Cooke by all indications wanted his son to own the Redskins and used a tax advantaged method to get it to him. George Steinbrenner due to timing of his death will if his estate was properly planned be able to leave the New York Yankees in his family without estate tax or generation skipping tax for two generations. This means that there will probably be a Steinbrenner running the Yankees for the rest of my life and the lives of anyone reading this blog. The Redskins are now owned by Dan Snyder, not John Cooke. A simple twist of fate and tax.
Happy 4th of July!!!
As we think about July 4
You know the American Revolution had an element of tax revolt in it. I say this because a Government must be careful to leave enough to its citizens that they might invest it and grow it and use their money to create. As we enter the mid-term election cycle we have the one thing the Chinese don’t have, the freedom to change course and the freedom to object to the direction this country is heading. Most of you know my Republican political leanings, and as a tax attorney what’s best for me, may not be what’s best for the Country. I thank God that I live in the United States. I would not trade living here with living in any other Country in the World. We may have a rough patch of road ahead, but I know that America will rebound. That free Americans will use their freedoms to move forward. It is amazing to me how quickly we can lose our freedoms. This leads me to my tax tale of the day. A girl, Blonda went into a tanning salon and found out that she had to pay 10% more for her tan than last week. Her best friend, Bambi, belongs to the Hot and Hotter Fitness Club. Hot and Hotter in addition to a few weight machines, saunas and bikes have tanning booths (which is included in their monthly fee). The exact same tanning booths that Blonda’s tanning salon has. Bambi pays no surtax, but Blonda does. Makes a lot of sense, right? Have a great weekend.
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