paul@tikal.UUCP (Paul D. Samson) (07/23/86)
I recently read where Louis Rukeyser (of "Wall Street Week") is
petitioning the Tax Court to challenge a IRS claim the he owes $500,000
in back taxes. It seems he was involved in limited partnership tax
shelters where master sound recordings were purchased. I too have
gotten involved with such an "investment" and thought I might share
this experience.
First, let me explain how the partnership works. A partnership is
formed for the purposes of purchasing master sound recordings which are
to be used for the production of consumer records. The masters are
purchased using highly leverage creative financing -- sometimes using
'non-recourse' notes, or financing with foreign banks. Since they are
used for the production of goods, they can be depreciated and
investment tax credits (ITC) can be applied for current and past taxes
due. Appears on the surface to be all perfectly legal and in
accordance with IRS rules and regulations. However, the kicker is that
the IRS claims that the masters are grossly overvalued. The result is
the the ITC and depreciation is not allowed and all back taxes plus
interest plus penalties plus ... plus ... are now due.
And that's where the situation stands today. Notices of Deficiency have
been sent, petitions to Tax Court filed, and *expensive* (aren't they
all) attorneys retained. Representative cases have been tried in court
and briefs are being prepared and filed. The next step is Tax Court
determination which should occur sometime during the first half of next
year. The chances for a favorable determination appear to be between
slim and none (and Slim left town, hoo, hoo, hoo). This means that an
assessment of approximately 2x annual gross salary is very likely to
come down next year. Worse yet, "I ain't got the bread" nor a rich girl
friend [or a poor one either].
Has anyone out there in net land gone through such an agonizing
experience or any advice? I'm concerned as to what will happen on
assessment day (A-day). We'll probably appeal to the 9th circuit
court, but I understand that the assessment has to be paid first. But
what if you can't? Should I consider taking a vow of poverty -- becoming
a wondering guru and look for wealthy followers?
Paul Samson -- "Drinkin' 'n Smokin' Heavily"
e-mail: {backbone}!uw-beaver!tikal!paulark@alice.UucP (Andrew Koenig) (07/24/86)
> Has anyone out there in net land gone through such an agonizing > experience or any advice? I'm concerned as to what will happen on > assessment day (A-day). We'll probably appeal to the 9th circuit > court, but I understand that the assessment has to be paid first. But > what if you can't? Should I consider taking a vow of poverty -- becoming > a wondering guru and look for wealthy followers? I suppose you should have thought about it beforehand. My understanding is that not even declaring bankruptcy can wipe out a tax debt.
hrs@homxb.UUCP (H.SILBIGER) (07/30/86)
While I sympathise with the possibility that a large penalty may be assessed, these kind of tax avoidance schemes are a way of cheating the government out of taxes that then have to be paid by legitimate taxpayers. You did not pay your money and tou took a chance.