Jack Bog had it first: The Palins owe thousands in back taxes

[dhpgetsit]

Jack Bog had it first: The Palins owe thousands in back taxes
Kari Chisholm
Nearly a month ago, Jack Bogdanski -- Oregon blogger and L&C tax law professor -- suggested that there might be a problem with Sarah Palin's taxes. To the best of my googling ability, Jack was the first one to raise the question. From September 10:

Governor Palin, your tax return, please
...The trips back and forth between the two locales certainly appear to be the Palins' personal choice. They could live entirely in Juneau, but apparently they prefer the life they have in Wasilla, and so they engage in long-distance commuting. All well and good. It's a free country. ...

I do know something about the federal income tax consequences of fringe benefits, and it certainly appears to me based on the published reports that some, if not most, of these "per diems" should have been included as income on the Palins' federal income tax return. If they weren't, something's wrong. ...

Unless Palin's spouse and kids are also her employees and she can show that they were away on their own businesses, their expenses would not be deductible by the governor. And therefore she cannot exclude from income any per diems attributable to any of them.


On Friday, the McCain campaign released Sarah Palin's tax returns for 2006 and 2007 .

And after spending the weekend reviewing them, Bogdanski says it's crystal clear:

There's no debate: Palins owe thousands in back taxes
...ne commentator has reported that there is now a "wonky debate" as to the correctness of their omitting the travel money from their tax returns. We disagree. 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.


Bogdanski takes apart the memo by the Palin's tax lawyer, line by line. He cites specific sections of the U.S. Tax Code and the applicable case law in reviewing every possible explanation and every possible loophole.

The Palins, living as they do in Alaska, are governed by Ninth Circuit law. The key case on deductibility of family travel expenses in this circuit is Stratton v. Commissioner, decided in 1971. In Stratton, a State Department foreign service officer's own travel expenses were ruled deductible, but his wife and children's travel expenses were held to be nondeductible. ...
The Palin children cannot be performing more than incidental services for the state -- if they provide any at all. Under Stratton, then, there is no "business purpose" for their travelling between Juneau and Wasilla, and thus their travel payments are taxable.


While the crux of the situation is the unpaid taxes on the travel benefits provided to the Palin children, Bogdanski seems to think that there's more fire where there's smoke:

There is more to brood about on the Palins' returns, to be sure. Last year Todd Palin claimed losses from his snowmobile racing "business" as a tax shelter against his fishing income. He also claimed deductions for use of a portion of the Palins' residence in his fishing business -- deductions that are difficult to claim legitimately, and which may be further complicated if, as reported, the state reimbursed the Palins for use of that home as a travel allowance. ... And if somebody at the IRS took a good, hard look at the payments for Sarah and Todd, we would bet that there would be some additional tax due there as well.
Now that the tax returns have been released, Bogdanski's not alone anymore. The Washington Post, ABC News, and Wall Street Journal are on the story. So is the TaxProf Blog.

Discuss all this over at Jack Bog's Blog.

http://www.blueoregon.com/2008/10/jack-bog-had-it.html