I recently heard a former celebrity tax lawyer speak. And while much of his talk involved some pretty grim issues of tax fraud, he started his talk by discussing the practice of celebrity tax law.
One interesting question he presented was the issue of whether celebrities should be taxed on the many goodies they receive by virtue of their celebrity status. While many of these items seem gifts, on the surface, a true gift is really characterized by detachment and disinterest.
Can we really say that many of these items given to celebrities are ”gifts”?
Take, for example, the use of the Oscar dresses that many red-carpet trotters gain the use of. These dresses (and the accompanying jewels) are on loan from the designers. As a result of the one night’s use, the designers get some great publicity. These designers and their dresses gain so much publicity, in fact, that the Oscar fashion becomes a hot topic of discussion, leading to the sale of their clothing designs (as well as the inevitable replica Oscar dresses). So, in essence, couldn’t the IRS just say that the use of the dress was income derived from advertising and promotion services?
Now, what about Hollywood swag bags? Swag bags are those goodie bags that celebrities receive, usually at The Academy Awards (or other award shows). These bags often feature hundreds of thousands of dollars of jewels, cosmetics, vacation deals, spa treatments and various other luxuries. The hope for the companies donating their goods is that the celebrity will be seen using the “gift”, which would generate some publicity for the company.
In 2006, the IRS cracked down on swag bags and as a result, the Academy stopped giving them. But that didn’t stop PR companies from giving them– to both the winners and the losers at the awards shows (the losers receive consolation gift bags, worth tens of thousands of dollars).
Once again, we are led to ask how disinterested and detached this “gift’ really is.
So, should celebrities pay tax on their goodies?