Tax: February 2008 Archives
Criminal tax defense lawyers refer vernacularly to criminal tax cases that arise from legal business operations as "pure tax cases" as opposed to other tax cases that arise from illegal business activity.
Interestingly, Agents with the Internal Revenue Service raided the offices of nightclub operator Pure Management Group last week thereby creating the penultimate "pure tax case." The news accounts speculate that the investigation stems from cash payments patrons of the various Pure nightclub venues paid to doormen and other personnel to gain admission and for other services, including "bottle service" the historical equivalent of a "minimum" that a patron must commit to spend in the club. Those nightclubs typically generate 5000 patrons per night on weekends and each may pay $100.00 to $1,000.00 for the privilege of being "selected" to enter the club from a line that may extend for city blocks and last for hours.
The real hubub stems not from the investigation itself, but rather from the news that doormen at these nightclubs were and have been making nearly $500,000.00 per year, mostly tax free (until now), performing a relatively simple function. Truly a situation of being literally in the right place at the right time.
What happens next is the " we will cooperate quote from Pure which read as follows:
"Pure Management Group is fully cooperating with this IRS investigation and looks forward to a quick and satisfactory resolution," a statement released by the company said. "Until that time, we will have no further comment on this matter."
Pure Management Group owns some of the most popular venues in
This investigation may be difficult for the IRS because with the high profile investors come the high profile defenses. The IRS will likely seek to squeeze the investigation from the outside in, meaning that they will go after the employees, the doormen, bouncers and waitstaff with the hope of resolving those cases by obtaining information and cooperation for cases, civil and criminal, aimed at the larger newsmaker investors and other owners. To readers of this Blog, you already know the objective is to create high-profile cases that make the news and then increase the potential for deterrence. It's almost March.....six more weeks until tax time.
As we sit quietly awaiting the fate of poor
The Internal Revenue Service disallowed those expenses and Nicholas Cage filed a Petition in the United States Tax Court contesting the disallowances that now create income for him at the personal level and his alleged alter-ego company, Saturn Productions is similarly contesting those disallowed expense deductions. The Internal Revenue Service, in disallowing the expenses as improper because they were personal in nature re-characterized them as non-deductible which created a situation where they were then treated as income to the owner of the company, namely, Nicholas Cage. The net net is that Cage's company loses the deductions and Cage is charged with the income. This is actually a relatively simple case that hinges primarily upon the adequacy of the documentation maintained by Saturn and Cage to sustain the deductions.
Mr. Cage....Mr. Snipes is home if you want to give him a call.
John Hanamirian
As a lifelong Philadelphia Eagles fan, it pains me to acknowledge the New York Giants as the Super Bowl Champions. Okay, enough said and on to underdog number two, Mr. Snipes. Unreal.
Despite, or because of (if you are a regular reader of this blog) a 600 page diatribe in which Mr. Snipes attacked any and everyone who has anything to do with administration of the Internal Revenue Laws, Mr. Wesley Snipes was acquitted of the felony charges for which he faced a potential of 16 years in prison. Instead, Mr. Snipes will face sentencing for misdemeanor failure to file tax returns offenses wherein he faces 3 years in jail. In the normal course, there would be little to no jail time for a failure to file offense. The exceptions are where there is a pattern of failure to file or, as here, there is some other relevant conduct on the part of a taxpayer for the court to take into consideration in the context of determining the appropriate sentence. Relevant conduct is that activity of a person that even though it may be uncharged criminally it is significant enough to warrant consideration for the prupose of imposing a criminal sentence. I would say Mr. Snipes' defense team did a terrific job in mitigating the intent component of the offenses Mr. Snipes was charged with having committed. Now, let's see if we can keep him out of jail. Then he and Eli can go to Disney.
John M. Hanamirian
