Taxable Talk

Well, Edwin Kanguatjivi told Reuters that Mr. Snipes is filming a movie in Namibia. “It is confirmed. He is definitely here.” The United States does not have an extradition treaty with Namibia.

Meanwhile, a South African report states that Snipes is filming the movie Gallowwalker, and that its’ producers have asked to delay Snipes’ return to the United States until December, when filming has completed.

Snipes has been in trouble in the past: reckless driving on a motorcycle, a phony South African passport, and carrying a concealed weapon. Snipes faces up to sixteen years in prison if convicted on all of the tax charges.

Joe Kristan of Roth Tax Updates has a great summary of the Snipes charges. And the Los Angeles Times has a good background article, too.

Actor Wesley Snipes was indicted today on eight counts of tax fraud. Snipes is accused of not filing tax returns for the last six years and of filing false refund claims totaling $12 million.

Over the last six years Snipes appeared in at least eight films, including The Art of War, Blade 2, and Blade: Trinity. He also produced Blade 2 and Blade: Trinity.

The Associated Press report notes that Snipes used American Rights Litigators (ARL). ARL was sued by the Department of Justice in 2003. Among the charges in the indictment is that ARL takes 20% of the refund and that ARL has a history of filing false returns.

The indictment’s main point is that Snipes and his preparers prepared returns that included only foreign income. If you’re a regular reader of this blog, you know that the U.S. taxes the worldwide income of its citizens (and permanent residents).

Thanks to The Smoking Gun, we can see Snipes’ 1997 Amended Return (Form 1040X). On page 1, we can see that Snipes’ return has been amended to remove $19,238,192 of income, generating a refund of $7,360,755. The reason is shown on page 3: The income previously reported is “not from taxable sources per [IRS Regulation]1.861-8(f)(1).” The three pages that follow attempt to justify this position.

Did you notice the title of the form on page 3? It’s Form 8275-R, used, “To disclose items or positions taken that are contrary to Treasury regulations.” Not only is this position contrary to regulations, it’s contrary to the Tax Code, which is law: Section 61(a) states that income is all income from whatever sources: “Thus, citizens of the United States generally also are taxed on income earned outside the geographical boundaries of the United States unless they prove that the income is specifically exempted. E.g., sec. 61(a); Cook v. Tait, 265 U.S. 47, 54, 56 (1924).” [From Specking, et. al., v. Commissioner, 117 T.C. No. 9]

Meanwhile, Snipes is nowhere to be found. Soon, though, he may be joining Richard Hatch in the Bozo Taxpayers Hall of Fame, and serve 16 years in ClubFed.