Tuesday, February 5, 2008

Always Bet on Black!

Yes, that's my main man Wesley Snipes' line from Passenger 57. Apropos given the recent news of his exoneration of some nasty felony tax fraud charges (his bankroll will still take a dent - he's not off the hook for paying taxes).

Essentially Wesley had been filing returns and paying with bogus checks (so not paying at all), basing his argument that he is not subject to tax on what is called the "861 position", named after a provision of the Code that deals with sourcing of income. The argument is that Section 861 and its regulations define "taxable income" in such a way as to exclude most income from being subject to tax. See the Wikipedia entry.

This is an extraordinarily oft-promoted position that has been repeatedly shot down in the courts. So why did Snipes win?

For a typically arcane reason. In order for Snipes to be convicted for criminal tax fraud, it had to be proven that he did not believe that he was acting in good faith in avoiding paying taxes. Essentially, the jury believed that he was a victim of "bad advice".

Lots of commentary on this at the TaxProf Blog.

Still, it's not all roses for Wesley - he still owes 8 figures in back taxes and penalties and interest stands to serve some jail time for the misdemeanors that he was convicted of - failure to file returns (up to 3 years).

And Always Bet on Black? Seems to be true given that Richard Hatch was not as successful.

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