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The IRS audited the tax returns of Darryl Strawberry, a former…

Customer Question
The IRS audited the tax...
The IRS audited the tax returns of Darryl Strawberry, a former major league outfielder. It
contended that, between 1986 and 1990, Strawberry earned $422,250 for autograph
signings, appearances, and product endorsements, but he reported only $59,685 of
income. Strawberry attributed the shortfall to his receipt of cash for autograph sessions
and promotional events. He allegedly concealed the cash payments in separate bank
accounts of which his CPA was unaware. What tax compliance issues regarding the
alleged underreporting are pertinent?
Submitted: 8 years ago.Category: Legal
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Answered in 11 minutes by:
12/21/2009
Lawyer: Ray, Lawyer replied 8 years ago
Ray
Ray, Lawyer
Category: Legal
Satisfied Customers: 47,079
Experience: 30 years in civil, probate, real estate, elder law
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Thanks for your question.This is classic case of celebrity under reporting here.Many have been investigated as relates to autograph signing and memorabilia related income.In this case even his accoutant was unawware of the diversion of case and non reporting here.The IRS looks specifically for cases here like this to prosecute and make public examples.The guilty party here must deal with criminal penalties , restitution, and fines.

Edited by RayAnswers on 12/21/2009 at 3:46 AM EST
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Customer reply replied 8 years ago
did you get the last response
Lawyer: Ray, Lawyer replied 8 years ago
No what other questions did you have here--paste them if you have them
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Customer reply replied 8 years ago

I asked three different questions?

 

But I saw a 3 line answer and I wanted to know was that all of the answer or was there more that I did not get to see?

Lawyer: Ray, Lawyer replied 8 years ago
I'll leave this for others.Good luck
Ray
Ray, Lawyer
Category: Legal
Satisfied Customers: 47,079
Experience: 30 years in civil, probate, real estate, elder law
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Ray and 87 other Legal Specialists are ready to help you
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Lawyer: Ray, Lawyer replied 8 years ago
Reference for you here about his case.Note he was pro se when he made the deal..

WEST PALM BEACH, Fla. - Former New York slugger Darryl Strawberry will pay the Internal Revenue Service more than $430,000 in back taxes, penalties and interest, under a court judgment signed Tuesday.

Strawberry was convicted in 1995 of evading taxes on income from autographs and memorabilia. He is agreeing to pay the IRS for tax years 1989 and 1990.

Court papers show the former Mets and Yankees star has already paid the IRS more than $8,600.

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Customer reply replied 8 years ago

The IRS audited the tax returns of Darryl Strawberry, a former major league outfielder. It contended that, between 1986 and 1990, Strawberry earned $422,250 for autograph signings, appearances, and product endorsements, but he reported only $59,685 of income. Strawberry attributed the shortfall to his receipt of cash for autograph sessions and promotional events. He allegedly concealed the cash payments in separate bank accounts of which his CPA was unaware. What tax compliance issues regarding the alleged underreporting are pertinent?

 

 

 

 

Morris Jory, a long-time tax client of the firm you work for, has made substantial gifts during his lifetime. Mr. Jory transferred Jory Corporation stock to 14 donees in December 2005. Each donee received shares valued at $11,000. Two of the donees were Mr. Jory's adult children, Amanda and Peter. The remaining 12 donees were employees of Jory Corporation who are not related to Mr. Jory. Mr. Jory, a widower, advised the employees that within two weeks of receiving the stock certificates they must endorse such certificates over to Amanda and Peter. Six of the donees were instructed to endorse their certificates to Amanda and six to Peter. During 2005, Mr. Jory also gave $35,000 cash to his favorite grandchild, Robin. Your firm has been engaged to prepare Mr. Jory's 2005 gift

tax return. In January 2006, you meet with Mr. Jory, who insists that his 2005 taxable gifts will be only $24,000 ($35,000 to Robin _ $11,000 annual exclusion). After your meeting with Mr. Jory, you are uncertain about his position regarding the amount of his 2005 gifts and have scheduled a meeting with your firm's senior tax partner, who has advised Mr. Jory for more than 20 years. In preparation for the meeting, prepare a summary

of the tax and ethical considerations (with supporting authority where possible) regarding whether you should prepare a gift tax return that reports the taxable gifts in accordance with Mr. Jory's wishes.

 

 

 

Your long-time client, Harold (Hal) Holland will meet with your supervising partner next

week for an estate planning appointment. Hal has been married to Winona Holland since

1990. Hal is age 68 and retired. Winona, age 60, retired early to spend more time with

Hal. They are residents of Topeka, Kansas. Hal is a U.S. citizen, and Winona is a citizen

of Australia. Winona has indicated she plans to return to Australia if Hal predeceases her.

Your supervising partner has requested that you identify any potential pitfalls in Hal's

current estate plan so she can bring them to his attention.

Hal has stated that, in addition to providing some wealth transfers to his wife Winona,

he wants to treat his three children by his prior marriage (Gina, Halbert, and Julianna)

approximately equally in terms of total wealth received from him while he is alive and as

a result of his death.

Hal and Winona prepared and submitted via e-mail the list of assets shown below.

  • Principal residence in Topeka titled in the names of Hal and Winona, joint tenants with

right of survivorship; purchased with $280,000 of consideration furnished solely by

Winona; fair market value of $400,000.

  • Household furnishings in the Topeka house; fair market value of $34,000. Winona

owned almost all of these furnishings before she married Hal.

  • Portfolio of publicly traded stocks in Hal's name; fair market value of $5.12 million.
  • Mountain cabin and land in Vail, Colorado. Hal purchased the property in 1988 for

$60,000; fair market value is $460,000. Hal never visits the cabin, but Halbert spends

every summer and several weeks during the winter at the cabin.

  • Stock in Harold's Hammocks, Inc. (a closely held C corporation) transferred to the Oz

State Bank Revocable Trust in 1992; fair market value of $226,000, and basis of

$15,000. The trust owns 12 of the 100 outstanding common shares. Hal acquired the

12 shares in 1988 in a Sec. 351 transaction. Julianna and Gina each own 44 shares,

which Hal gifted to them in 2005.

  • Individual retirement account at ToKan State Bank. The account consists of the funds

rolled directly into the IRA from the non-contributory qualified retirement plan of

Hal's former employer when Hal retired. Fair market value of the IRA is $540,000.

Hal has not yet received any distributions. He is the IRA beneficiary, and Winona is the

contingent beneficiary if Hal predeceases her.

  • Cash of $825,000 in checking and savings accounts in Hal's name.
  • Mutual fund shares in the names of Hal and Julianna, joint tenants with right of

survivorship. Hal provided all the consideration ($9,000); fair market value of

$64,000. He intended to use the money to finance Julianna's education, but she

received a full scholarship.

  • Stock in Dolrah, Inc. (a firm that elected S corporation status in 1990 upon its formation).

The stock is in Hal's name, and he is one of six stockholders; fair market value of

$79,000.

Hal's current will reads as follows:

 

 

To my wife, Winona, I leave outright any household furnishings that I own, $500,000 of

stock from my portfolio of publicly traded stocks, and all of my stock in Dolran, Inc.

To my grandchild, Halbert, Jr., I leave $3,750,000 of stock from my portfolio.

I leave the rest of my estate outright in equal shares to my children, Gina, Halbert, and

Julianna.

Required:

Prepare a memo to your supervising partner to help her prepare for the appointment

with Hal. In the memo, advise the partner of any pitfalls (problems) you have identified

 

 

Lawyer: Ray, Lawyer replied 8 years ago

Morris Jory, a long-time tax client of the firm you work for, has made substantial gifts during his lifetime. Mr. Jory transferred Jory Corporation stock to 14 donees in December 2005. Each donee received shares valued at $11,000. Two of the donees were Mr. Jory's adult children, Amanda and Peter. The remaining 12 donees were employees of Jory Corporation who are not related to Mr. Jory. Mr. Jory, a widower, advised the employees that within two weeks of receiving the stock certificates they must endorse such certificates over to Amanda and Peter. Six of the donees were instructed to endorse their certificates to Amanda and six to Peter. During 2005, Mr. Jory also gave $35,000 cash to his favorite grandchild, Robin. Your firm has been engaged to prepare Mr. Jory's 2005 gift

tax return. In January 2006, you meet with Mr. Jory, who insists that his 2005 taxable gifts will be only $24,000 ($35,000 to Robin _ $11,000 annual exclusion). After your meeting with Mr. Jory, you are uncertain about his position regarding the amount of his 2005 gifts and have scheduled a meeting with your firm's senior tax partner, who has advised Mr. Jory for more than 20 years. In preparation for the meeting, prepare a summary of the tax and ethical considerations (with supporting authority where possible) regarding whether you should prepare a gift tax return that reports the taxable gifts in accordance with Mr. Jory's wishes.

 

 

This is certainly filled with potential liability for all of the parties involved.Each of them individually should be counseled to seek independent advice of their choosing.

 

The big problem here is that Mr. Jory is our client here and we would look to preparing his taxes in this matter.Mr.Jory should be advised on his individual liabilities here

 

The firms should decline the others involved as their interests may compete with his and should be completed by others.We would want to advise Hal that we will prepare his return and what his liabilities are.These gifts may well require the folsk that received them to pay taxes on such gifts.His protection and proper completion of his return is our main priority.

 



Edited by RayAnswers on 12/21/2009 at 5:37 AM EST
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Experience: 30 years in civil, probate, real estate, elder law
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