Last time on Celebrity Tax Lives….
We discussed a “Mean Girls Tax System” and “Leeches, Parasites and Gift Horses” and the connection to us real people as well.
And now the explosive FINALE where everything changes…and nothing will ever be the same…but actually is.
9. Blistering Romance:
Celebrity relationships are such tabloid fodder that I do not believe that I need to explain why they happen. The speed of the relationship arc however is quite significant from a tax perspective. Quickly consummated marriages in the celeb world often are the stuff of a fairy tale romance, and as such the happy couple decides that they want a “real” marriage. “Real” means conjoining of financial lives, assets, and of course tax loads. Often as quickly and beautifully that they begin, these unions crash and burn just as spectacularly, and with the disentanglement of the heart, the divorce lawyers and asset managers work to disentangle the bank accounts. The problem is that along with “in sickness and in health” a marriage vow can mean “with taxes, penalties and interest.” The IRS will indiscriminately target both individuals for issues that occurred during the marriage, most often with the innocent spouse caught completely unawares. This leaves the innocent spouse open to asset liens and account levies from the IRS just as if they had in fact been the tax troublemaker. Now in the real world, Spousal protection can be filed and won with the IRS and by showing a consistent reasoning as to why the innocent spouse did not and could not be expected to know that there were tax issues hidden from them by financial controlling spouse. Not so easy for celebrity cases, the spouses are usually both successful in their own right, with dozens of advisors aiding them along the way, the IRS immediately completes a picture of a complicit partner, or at least a willfully blind spouse. The aftershocks in tax terms can be financially daunting even to the most successful of entertainers.
10. All good things must come to an end
The typical response to a celebrity’s wild spending is that there are a lot of rich people in this world and it’s not as usual for them to get into so much tax trouble. Well, business minded people, the hedge-funders, real estate moguls and entrepreneurs, they have a skill can last a very long time but still they plan for retirement because they don’t want to work forever. When you plan for retirement you plan for the future and you plan for your taxes. Not so for celebs, and this is the most apparent issue that arises, they often do not believe the high roll will ever end. One ripped tendon, one flopped movie, a few too many years aged, can turn a career in the millions into a career in hundreds. Artists are often blind to this eventuality, much as a lottery winner is blind that the money can run out. The money does run out, and everyone needs to plan for retirement, and the tax liabilities that come with it.
The takeaway from all this, and the lesson to be learned, is that celebrity or not, a person must surround themselves with the people that can fill in the gaps of their own knowledge. Trustworthy people who can help guide them through their financial life. Most importantly however, is to educate yourself, so that you don’t rely so entirely on another person, who can take it all away. Like I always say, an educated taxpayer is a smart taxpayer. May the Force be with you.
Benjamin Goldburd is an Associate at Goldburd McCone LLP a boutique tax law firm in New York City and Long Island.
For more information on these and other tax issues feel free to contact our offices at 212-302-9400, or on the web at www.goldburdmccone.com