Have you ever watched Extreme Makeover: Home Edition and wondered how these poor families would ever manage to pay the taxes on these enormous "renovations?"
I have.
It never made sense to me that these people would be able to accept all this without incurring an unaffordable tax liability.
Anyway, I've often wondered about it. But wonder no more: it's explained in my tax casebook*!
"To avoid tax consequences, ABC 'leases' the home for a short period and pays the 'rent' in the form of home improvements. Lawyers advised the recipients that no taxes are owed, claiming, that the payments fall under the exception of section 280A, which permits the rental of homes for 15 days with no tax consequences. Paying no taxes on the receipt of so much largesse just seems too good to be true."
That's all the book says, at least that we've gotten to so far. I do get the impression, though, that the authors don't think so much of ABC's strategy.
Meanwhile, the following paragraph is also amusing:
"The first Survivor winner Richard Hatch took an entirely different approach. He simply failed to report his million dollar winnings. He must have assumed that all IRS employees were among the 100 people in the United States who did not watch the finale of the show. But he was wrong.
Anyway, if all that isn't interesting enough, apparently tomorrow we're also studying George W. Bush's 2004 tax return.
* Federal Income Taxation: Principles and Policies, Fifth Edition by Michael J. Graetz and Deborah H. Schenk. Foundation Press, 2005. (Although for reasons I don't understand there are also copyright dates ranging from 1940 to 2002. Go figure.)