Taxation & Estate Planning

The Bigger They Are, The?.More They Pay?

By Darrin Mish

If you admire the rich and famous for all the money they have, you may be interested to know about Nicolas Cage (of ?National Treasure? and ?Leaving Las Vegas? fame).  The IRS is taking him to court over $6.2 million ($6, 257,005 to be exact) in alleged unpaid income taxes in 2007.

The Orleans District Court in Louisiana imposed the IRS tax lien on his $3.55 million mansion in New Orleans, which the actor has put up for sale.  If he manages to close the sale at that price, he would still owe the state about $2.7 million.

Actually this is not the first time Cage has had to pay large sums in taxes.  In September 2008, the star settled $666,000 plus interest in back taxes and penalties over allegations of improperly deducting personal expenses from taxable amounts.

Cage?s spokeswoman, Annette Wolf declined to comment.

It would seem that the recession has affected all and sundry, and famous personalities like Cage is no exception.  In April this year, the Huffington Post reported that the star had to sell his Bavarian Castle, Scholss  Niedstein because of the sluggish economy.

In fact, even death does not absolve you from the long arm of the IRS.  The late Republican businessman Ralph Hughes died allegedly owing almost $300 million in corporate taxes and penalties, according to the IRS.  In a suit filed recently, the IRS claimed that Hughes? companies illegally transferred large sums of money to shareholders and/or companies under their control in order to evade paying creditors, among whom are the IRS themselves.

The IRS claimed that Hughes? companies, Cast-Crete and Florida Engineered Construction Products Corp. (FECP) did not submit their corporate tax returns for the last four years, despite attempts by IRS officials to obtain the returns, compute and collect taxes due.  As a result, the IRS had to do their own research and came to the conclusion that the companies were liable for $128 million in taxes, $117 million in penalties and $54 million in interests, making the total debt more than $299 million.

Furthermore, the IRS alleged that after those fraudulent transfers of funds to shareholders and other controlled companies, Cast-Crete and FECP became insolvent and were left with only $11 million to pay taxes.  A total of $118 million was distributed, out of which $61 million went to Hughes himself.  According to the IRS, Hughes did not report $27.9 million on his own personal income tax while reporting more than $16 million as interest payments by his companies although there was no underlying debt.

Hughes? family has strongly disputed the IRS? claims and they intend to prove his innocence.

Full post as published by IRS Problem Solver Blog on August 04, 2009 (boomark / email).