Friday, October 16, 2015

Taxes, Consumption, Soda, and Obesity 

Readers of this blog know that I am not a fan of a tax aimed solely at soda or soda and sugary drinks. I’ve written about this issue in a series of posts, beginning with What Sort of Tax?, and continuing in The Return of the Soda Tax Proposal, Tax As a Hate Crime?, Yes for The Proposed User Fee, No for the Proposed Tax, Philadelphia Soda Tax Proposal Shelved, But Will It Return?, Taxing Symptoms Rather Than Problems, It’s Back! The Philadelphia Soda Tax Proposal Returns, The Broccoli and Brussel Sprouts of Taxation, The Realities of the Soda Tax Policy Debate, and Soda Sales Shifting?. My criticism of soda taxes and sugary drink taxes is that there are all other sorts of food items that contribute to excessive sugar intake, and the obesity and adverse health effects that the advocates of these taxes claim to be trying to reduce. I have also criticized the disconnect between the tax and public health improvement.

Now comes a report that the enactment in Mexico of a soda tax that meets the demands of the soda tax advocates did cause a reduction in the consumption of soda, particularly among lower income individuals. This resolves the argument between those who claim a soda tax would reduce soda intake and the soda industry which claims that soda taxes would not deter soda consumption. I’ve never thought this issue deserved attention, because it doesn’t require rocket science or an experiment in Mexico to figure out that an increase in a tax on an item will reduce consumption of that item unless the item is an absolute necessity or unless the black market finds a way to provide the item while evading the tax.

What remains undetermined is whether a reduction in soda consumption will reduce obesity and other adverse health effects. It will take many years to figure this out. It will not be easy. Why? Because there are multiple variables in the causation of obesity and other adverse health effects. It is not unlikely that people who find soda to be too expensive because of the tax will spend their dollars on pies, cakes, candy, doughnuts, cookies, ice cream, and similar items. Because it is absurd to think that taxing soda consumption out of existence will cause significant decreases in obesity and other adverse health effects, any tax attack on bad health habits would need to be far-reaching. And, of course, making a tax attack that far-reaching would be counterproductive in many ways, and poses all sorts of policy concerns. Though advocates of the soda tax point to tobacco taxes as the reason for reduction in the use of certain tobacco products, it is far more likely that the “shock and horror” public service messages and advertisements, or the experience of watching someone die from tobacco-induced cancer, has a much stronger effect on behavior.

Wednesday, October 14, 2015

Taxes, Benefits, Freedom, and Greed 

When I read this article by someone identified as “Dennis S” about a story published on the Brietbart web site, I was delighted to note that even those who have made shrinkage of government a part of their political platform acknowledge some of the unintended consequences of that policy. Dennis S suggests that the damage from the recent rainstorms that swamped South Carolina would not have been quite as catastrophic had the state government paid more attention to infrastructure. South Carolina has been beset by funding reductions in the maintenance of bridges, dams, and roads. Not long ago, the state’s legislature refused to enact a $400 million infrastructure protection and repair bill, and those supporting the bill predicted catastrophe when the next hurricane or intense storm hit. Sometimes being correct in one’s prediction is unpleasant, leaving “I told you so” as a quip that seems harsh. Yet it is true. This is what happens when taxes are cut for the sake of getting votes by cutting taxes, when revenue increases are touted as the reward for tax cuts, and government is condemned as an obstacle to freedom. Freedom isn’t worth much when dams break, rivers flood, roads wash out, drinking water is unsafe, electricity goes out, people die, and injuries abound.

Dennis S also notes a behavioral pattern that isn’t new and hasn’t gone unnoticed over the past decade. When New Jersey and other Mid-Atlantic states requested federal aid to help rebuild communities devastated by Hurricane Sandy, anti-government, anti-tax legislators opposed spending the money. The entire South Carolina Congressional delegation voted against the aid bill. Now that South Carolina needs assistance, these anti-government, anti-tax advocates are demanding federal aid. The state that has collected the most federal emergency funding since 2009, Texas, is represented in Congress by a Senator who rails against pretty much every federal program. He relents, of course, when his state stands to rake in money paid by taxpayers in other states.

Then I picked up on a Glenn Reynolds USA Today commentary, in which he frets that Americans are moving from blue states to red states. Reynolds suggests that “people who earn enough money to pay taxes” are trying to escape the high taxes of blue states, whereas those “living on welfare benefits and [not] plan[ning] to change that” would not move to a low-tax state to escape taxes and, if they were to move at all, would select a blue state offering higher welfare payouts. Reynolds explains that the high-tax states eventually will end up with more people who live off benefits, and fewer taxpayers, whereas the low-tax states eventually will end up with fewer people who live off benefits, and enough growth in taxpayers that would permit more tax reductions. The high-tax states, he claims, will go bankrupt. He then notes two possible counter-trends. One, that the high-tax, high-benefit states might lower taxes and reduce benefits, though he considers this unlikely. The other, that taxpayers moving from high-tax states to low-tax states “might bring their political attitudes with them, . . . supporting the same policies that ruined the states they let.” Reynolds offers advice to “conservative billionaires,” suggesting that they pay for programs that explain to blue state residents moving to red states that they should change the way they vote. He admits he does not know if this would work.

As I read this, I kept in mind that South Carolina is a red state. I wonder what is going through the minds of people who moved to South Carolina in order to benefit from lower taxes by cutting benefits. Intact bridges, sturdy dams, functioning electrical power grids, drinkable tap water, and protection against death surely are benefits. I wonder how many South Carolinians, native or newly arrived, are wondering about the “cut taxes, cut benefits” mantra financed by those who need tax cuts simply to finance their purchase of, and subsequent tear-down, of governments. When they succeed – I fear it is not a question of if they succeed – those same benefits will be available to those capable of paying the private sector price, which I guarantee will make the tax cost of these societal needs pale in comparison. What, then, becomes of freedom? Freedom from abusive private sector behavior is no less important than freedom from abusive government. One does not attain that freedom by destroying the private sector or by destroying government. Freedom is attained by destroying greed.

Monday, October 12, 2015

A Federal Income Tax on Everybody? How Would That Work? 

According to this report, Louisiana Governor Bobby Jindal, one of more than a dozen individuals seeking the Republican presidential nomination in 2016, is revealing his tax plan. It seems every candidate has a tax plan, each one seems to be worse than the previous one, and Jindal is going for the prize. According to Jindal, the federal income tax system “must require that every American” have “skin in this game,” that is, pay taxes. Every American?

So, Mr. Jindal, does that mean the person with no income would be required to pay an income tax? How about infants who are not trust fund babies? Would they be paying an income tax? Are you serious?

Jindal’s prize-winning absurdities include elimination of the standard deduction, the deduction for personal and dependency exemptions, and most other deductions. The federal income tax liabilities of almost all lower-income and middle-income Americans would increase.

And what would Mr. Jindal do with the increased revenue? Would he reduce the budget deficit? No. Would he see to it that the nation’s infrastructure is spared becoming a competitor for worst in the world? No. He would eliminate corporate income taxes. And the federal estate tax. Anyone with even half a brain knows who would be stashing even more cash with those moves.

Jindal also proposes a credit for people with children under 18, though it is unclear whether this would be for all families or just those with small amounts of income. He proposes a similar credit for people older than 65 whose income is under $5,000. Imagine scraping by on $5,500 of annual income and being required to pay into an income tax system originally designed to reduce the income and wealth inequality of the late nineteenth century, which had plunged the nation into economic crisis time and again.

So after Jindal claims every American should be paying federal income tax, he proposes a plan that doesn’t accomplish that result. Brilliant. When he adds in the claim that by reducing federal tax revenue – which must mean huge reductions for the economic elite, because surely the 99 percent not in the top one percent would not be getting reductions – wages would grow at more than 8 percent, he demonstrates why he ought to be sitting in some tax classes. Again, anyone with half a brain knows what happened when a similar “cut taxes on the wealthy” stunt was pulled early in this century. There’s more to responsible tax policy than dishing out sound bites that play to the peanut gallery. There’s a reason I don’t blog about quilting, needlepoint, and welding.

Fortunately, there is very little chance that Mr. Jindal will be moving from Baton Rouge to 1600 Pennsylvania Avenue. Hopefully, no one else will take ownership of his daft tax ideas.

Friday, October 09, 2015

A Crappy Tax Idea? 

A reader directed my attention to a story that was published about six months ago. I missed it, perhaps because I was not using “poop” in my google searches for developments in tax policy.

The title of the article, How One Man Wanted To Save The World By Taxing Its Poop is misleading. The one man in question, Pierre Leroux, proposed something rather different. He came up with his idea by combining his goal of letting “a country maintain its citizenry without exerting authority over them, and for people to retain their property without using it to deprive others” with his Malthusian beliefs that scarcity drives desperation and authoritarianism and his theory that human feces could be used to fertilize crops in the same way animal manure was used.

So Leroux, also critical of the then-current practice of piping human waste into the countryside where it was released without regard to its impact, proposed that human waste would be collected and used as fertilizer. But he did not propose a tax on human poop. Instead, under his plan, each person “would religiously gather his dung to give to the State, that is to say the tax collector, in place of tax or personal levy.” In other words, Leroux was suggesting that taxes be paid, not with money, but with human waste. Not surprisingly, his idea tanked.

In Les Miserables, Victor Hugo picked up on the idea, describing sewers as “gold flowing from full hands.” Perhaps it is fortunate that Hugo’s defense of Leroux’s theory did not find its way into the musical. Imagine the inspiration it would give to the folks who express their displeasure with tax policy by paying, or attempting to pay, tax liabilities with pennies, as I described in Does It Make Tax Cents?. Though I described “the use of pennies and coins [to pay taxes as] an event which happens often enough to be almost boring,” I guarantee that if a news report comes along describing someone’s attempt to put the Leroux tax payment proposal into action, I will write about it. That sort of stunt surely would bowl over the tax collector.

Wednesday, October 07, 2015

Putting More Tax Information “Out There” for the Tax Database Thieves 

In User-Friendly Taxpaying, Kathleen Delaney Thomas suggests that tax compliance can be increased if the tax paying process is simplified. She rests the need for change on several unquestionable features of the federal income tax system, features also present in many state and local tax systems. First, tax laws are confusing. Second, compliance is “incredibly tedious and burdensome.” Third, these features tempt taxpayer to shirk their self-compliance obligations, even to the point of dishonesty. It is difficult to disagree with these propositions.

Thomas proposes reducing the efforts needed to comply with the tax law. She offers several ideas. One is to permit taxpayers to use electronic devices such as smart phones to input their tax-relevant transactions into an online database that could then be ported over to an electronic tax return. Another is to increase the number of transactions subject to third-party information reporting, with the data finding its way into the online databases described in her first idea. Yet another is a modified version of ReadyReturn, in which the taxpayer, rather than the Internal Revenue Service, prepares the return using the information in the online database.

Thomas recognizes that her ideas might encounter several objections. They might cost more than the benefits they provide. They might be unnecessary considering that professional return preparers and tax preparation software already exists. They might diminish taxpayers’ understanding of the tax laws. In a footnote, she acknowledges the concern that I have, and that is security. She writes, “One important concern here would be security.” She notes that there have been problems with national-security surveillance, with the Affordable Care Act web site, and with hacking of government databases. Her response is two-fold. One is that because private companies also have been hacked, government online database security is not necessarily inferior. The other is that taxpayers could be made more comfortable with the process by enrolling participants one small group at a time.

Thomas describes an abandoned IRS project called “My IRS Account.” The plan was to take existing portals and combine them so that taxpayers could access their tax information directly. The officials who cancelled the project explained that inadequate funding and the lack of an acceptable business strategy doomed their efforts. The Electronic Tax Administration Advisory Committee has recommended reviving the project, claiming that the IRS should follow in the footsteps of banks and retailers who have similar systems in place. Thomas writes, “Providing numerous taxpayer services in one place would greatly simplify taxpaying.”

Though there is much convenience in having everything in one place, as Thomas suggests, there is another side of “one place” that looms large, and that is “single point of failure.” If hackers find their way into a taxpayer’s account, everything is at risk. There is a reason people are advised not to invest all of their savings in one stock. Diversification reduces risk. And the risk faced by taxpayers in 2015 is that the IRS has an abysmal track record when it comes to data security. Identity thieves file returns in the names of people who then cannot file their returns and are trapped for months and years trying to straighten out the mess. Crooks file false returns that generate billions of undeserved refunds. The transcript database was compromised. The fact that the private sector is almost as derelict in its obligation to keep information secure is no excuse, nor should the private sector be held up as an example to be followed.

Until and unless the protection of online data is heightened to a point of 99 percent confidence, the IRS should not create yet another vulnerability, another door through which the robbers can force their way in. In the meantime, why not focus on the problem rather than the symptoms? The underlying cause of some noncompliance is the complexity of the tax laws. Treating the symptoms does not cure the illness. The tax laws need to be simplified, though that will not reduce noncompliance on the part of those for whom complexity is not the issue.

It will take money to strengthen the security of online government databases. It will take political courage to simplify the tax laws. Both are tasks that are within the scope of the responsibilities set in front of the Congress. Until and unless the Congress acts responsibly with respect to these responsibilities, creating another online tax information database will energize the thieves and hackers who thrive on the opportunity to attack weaknesses such as single points of failure.

Monday, October 05, 2015

Analyzing Income Inequality 

I came across an interesting article focusing on the relationship between tax evasion and income inequality. The article reviews Gabriel Zucman’s The Hidden Wealth of Nations, which attempts to explain a puzzle that I didn’t realize existed. I wonder how many people are aware of this quirk in global economics.

According to Zucman, all of the financial liabilities in the world should equal all of the world’s financial assets. That’s because each financial instrument represents, ultimately, a lender and a borrower. One example is the issuance of a bond by a corporation. The corporation has a liability, and the purchaser of the bond has a matching asset. Similarly, a person who puts $500 in the bank has an asset worth $500, and the bank has a liability of $500 because it owes $500 to the owner of the bank account. On a personal level, if someone lends $100 to a friend, the lender has an asset worth $100, which can be called a loan receivable, and the friend has a liability, or debt, of $100.

Yet the world’s accounts don’t balance. When the world’s financial assets and liabilities are added up, the liabilities are at least $8 trillion higher than the assets. As Zucman puts it, it’s as though planet Earth is $8 trillion in debt to the planet Mars.

So what’s happening? At least $8 trillion in financial assets have been hidden. Zucman thinks the amount is much higher, because the financial asset accounting does not include physical assets such as “houses, commercial buildings, land, art, yachts, gold, jewelry, and so on” that are held, for example, in offshore trusts. One can quibble about the number, but the point is that financial assets have been hidden.

So what’s the big deal about hiding financial assets? It means that they escape taxation. They escape property taxation that otherwise applies in certain jurisdictions. The income that they produce goes unreported, and is not taxed. And who benefits from this tax evasion? Those who can afford to engage in tax evasion strategies. In other words, those who already have significant wealth and income can increase their net worth even more, by reducing or eliminating the payment of taxes. In turn, this exacerbates income and wealth inequality. It also weakens the argument that the wealthy have earned their assets by engaging in economically beneficial behavior. Asset-hiding causes the truly small business, individuals of modest means, and the poor to be hit with the burden of taking up the slack. It certainly puts “maker” and “taker” in a very different light than the one used by the apologists for the greedy.

Zucman explains how this hiding game will make inequality even worse: “It’s not intuitive,[but] the impact on inequality is very big and could be even bigger down the road. The effective tax rate on wealth and capital is a key determinant of wealth inequality in the long run.” In other words, capital gets a higher rate of return than does labor, which causes increasing amounts of property to be owned by the very wealthy.

Zucman thinks a global financial register could increase compliance and deter law-breaking tax havens from continuing to assist in the destruction of the economies of nations whose tax revenues have been jeopardized by asset hiding. But I wonder if such a solution would work, as the isolationists in each country would object to the supposed erosion of freedom and liberty that they think comes from international cooperation. Unfortunately, these folks have no clue that their freedoms and liberties are being eroded even as I write, by asset-hiding tactics and the ever-growing shadow of income and wealth inequality. As Sun Tzu advised, know your enemy.

Friday, October 02, 2015

Taxation of Prizes, Question Three 

Several questions were posed at a sweepstakes site. Here is another one that caught my attention:
Since the prize values are reported as other income I assume the tax rate would be whatever tax bracket you are in and not just the local/state sales tax?
The tax rate that applies would be roughly the person’s tax bracket, though the impact depends on the numbers, as I like to say. Including the value of the prize in gross income affects adjusted gross income, which in turn can affect other items of gross income and deductions. For example, as adjusted gross income increases, certain deduction limitations increase, for some taxpayers. The same is true with respect to the amount of social security payments included in gross income, for some taxpayers. But as a rough rule of thumb, yes, if a person is in a particular tax bracket, that percentage can be used to come up with a rough idea of the tax impact.

The question, however, also referred to the local or state sales tax. The awarding of a prize is not a sale, so the sales tax ought not apply. But perhaps I am wrong. Are there any states in which a sales tax is imposed on prizes even though there is no sale? If so, that would have no effect on estimating the federal income tax liability generated by receipt of the prize.

Perhaps the person intended to refer to state and local income taxes. Most state income taxes apply to prizes, whereas local income taxes apply if they are broader, for example, than a simple earned income tax. And, yes, one can use the winner’s state income tax bracket percentage in computing a rough estimate of the state income tax liability generated by the prize.

Wednesday, September 30, 2015

Taxation of Prizes, Question Two 

Several questions were posed at a sweepstakes site. Here is another one that caught my attention:
I won concert VIP tickets, there is no value on the tickets, so I can’t sell them. If no value is on them, why am I paying taxes on them? With W-1099
I’m not sure what “With W-1099” means, though I suspect it means the person received a Form 1099. Some prizes are transferable, and some are not. That affects value but it does not cause the value of the prize to be excluded from gross income. What this person faces is a valuation problem. The fact that no price is printed on the ticket does not mean that the tickets have no value. Many things of value do not have prices on them or even attached to them. The company issuing the prize tickets presumably issued a Form 1099, and presumably there is a value on that form. So the answer is, the tickets have a value, that value was determined and placed on the Form 1099, and that amount must be reported as gross income.

I wonder what happened in this case. Did the winner report gross income equal to the amount on the Form 1099? Did the IRS show up? Unless the person who posted this question lets us know, the answers will remain a mystery.

Monday, September 28, 2015

Taxation of Prizes, Question One 

Several questions were posed at a sweepstakes site. This is one that caught my attention:
Hi I have won a travel sweeps worth (ARV) $26,000. And after reading many articles about paying taxes and all, I told the sponsors I had to decline from the grand prize. She wrote back saying that their CPA said I don’t have to claim anything and they would not send a 1099 to us, since everything is paid for and there is no cash prizes. Is that legit?? Thanks for any advice and your reply.
So a person wins a prize, tells the company awarding it that the winner cannot accept it because it will be taxed, creating a liquidity problem, and the company spokesperson says, in effect, “Not a problem, it’s not in cash, we won’t send a Form 1099.” So the winner asks, quite understandably, “Is that legit?”

I should leave this as an examination or semester exercise question, except that I no longer teach the basic federal income tax course. So here’s the answer, in a word. No. Does that come as a shock to my students who think that every answer is, “It depends”? I hope not. Sometimes the answer is a flat-out yes or no. But the tax professionals rarely are paid to answer those easy ones.

I wonder what happened in this case. Did the winner accept the prize? Did the company issue the Form 1099? Did the winner report gross income? Did the IRS show up? I’d say “stay tuned,” even though that phrase is fading out of use, but I can’t because I have no idea. Does anyone?

Friday, September 25, 2015

In What Year Should a Prize Be Reported as Gross Income? 

The question is simple. When a person wins a prize, in what year should the person report the income on the federal income tax return? The question is not whether the prize is taxable. The question involves timing. Incidentally, timing questions are not eliminated by enactment of a “flat tax” or similar gimmick, because the time value of money causes people to prefer delaying the reporting of income.

The answer isn’t simple, though some try to avoid the complications. For example, the commentator at this site says “You only have to claim a trip prize on taxes AFTER you have taken the trip. When we won the France trip back in 2001 we didn’t actually take the trip until 2002 so we claimed it on our taxes in April 2003. That sure helps.” And the commentator at another site answered the question this way:
But what year should that income be reported in? While I won the contest in 2010, I won’t be receiving any value from the prize until 2011. Income in the U.S. is based on the concept of constructive receipt. The idea is when you receive something, whether or not you utilize it doesn’t matter; rather, it’s just the receipt that counts. Suppose you receive a check in the mail on December 27th but don’t go to the bank to deposit until the following January. You can’t delay the income because you’re tardy in going to the bank. The income still must be claimed on this year’s tax return.

Constructive receipt works in reverse, too. I won’t receive any of the benefits of the hotel room until January 2011. That portion of the prize–the $1,200 that my hotel room would cost if I paid for it directly–should be claimed on my 2011 tax return (due in 2012) as Other Income.
Both explanations leave out an important fact. When was the prize winner permitted to take the trip? If in 2015 a person wins a trip to Paris in April 2016 and must wait until April 2016 to take the trip, then, yes, the value of the trip is included in the person’s 2016 gross income. On the other hand, if in 2015 a person wins a trip to Paris that can be taken whenever the person chooses to do so, then the value of the trip is included in the person’s 2015 gross income even if the person takes the trip in 2016 or even 2017, or even not at all. Without knowing the information in the specific situations described by the commentators, it is not possible to evaluate their responses.

Wednesday, September 23, 2015

When Escaping Tax Isn’t Enough: Grab Some Tax Giveaways 

It’s bad enough, isn’t it, that the gas extraction industry has managed to escape taxation in Pennsylvania that every other state in which it does business imposes an extraction tax. The justification, that such a tax somehow will shut down the industry in the state, is absurd. It’s not as though the gas in Pennsylvania can be relocated to another state the way manufacturing businesses and administrative offices can be moved. I explained this two months ago in Goodbye Because of Tax? Hardly.

It is disturbing when industries, companies, or individuals find ways to wiggle around basic principles in order to carve out special exceptions that give them advantageous positions compared to the ordinary person. It is a sign of greed, selfishness, and arrogance. It hurts society and civilization, and in the long run it harms even those who set themselves apart as special and deserving of favored treatment. Unfortunately, they lack the ability to see into the future, blinded by their money addiction.

But it’s worse. According to this story, the Pennsylvania legislator most beholden to the gas extraction industry announced that Pennsylvania Republican legislators want to enact legislation that will give tax breaks designed to encourage manufacturers to purchase gas from the gas extraction industry, and to compensate the industry for any revenue losses generated by reductions in the price paid by these manufacturers. So it’s no longer just a matter of escaping the payment of tax, it’s now a matter of taking taxes paid by other people and adding them to the wealth stockpiles of the oligarchy.

There is another twist. This proposal might be a ploy. The governor wants Pennsylvania to join all other states in which gas extraction occurs by enacting a severance tax. The Republicans might be planning to give up their proposal if the governor gives up his. But that outcome is nothing more than a win for the industry and its Republican supporters. The bottom line is that no valid reason exists for letting the gas extraction industry in Pennsylvania get away with a tax exemption that no other state provides. The majority of voters elected a governor who made imposition of the severance tax one of his campaign platform planks. It’s time for the legislators in Harrisburg to heed the wishes of the people and to stop buckling under the demands of a moneyed handful.

Monday, September 21, 2015

More Tax Fraud, This Time in Judge Judy’s Court 

Slightly more than a month ago, in More Tax Fraud in the People’s Court, I described a case in which the parties disclosed that they had underreported the cost of an item in order to avoid sales taxes and in which one of the parties mis-identified the purchase in order to obtain a deduction to which he was not entitled. This was not the first television court show in which tax fraud cast a shadow on the case, and it certainly was not the first to involve a tax issue. As I happen upon these shows, out of order and often months or years after they originally aired, I discover fact patterns deserving of commentary. Those who read this blog are familiar with the litany of these posts, including Judge Judy and Tax Law, Judge Judy and Tax Law Part II, TV Judge Gets Tax Observation Correct, The (Tax) Fraud Epidemic, Tax Re-Visits Judge Judy, Foolish Tax Filing Decisions Disclosed to Judge Judy, So Does Anyone Pay Taxes?, Learning About Tax from the Judge. Judy, That Is, and Tax Fraud in the People’s Court. Yes, there now is another one.

In the latest Judge Judy television show that I watched, the plaintiff was suing the defendant to recover money that she claimed she had lent to the defendant. She also was suing for rent. The defendant alleged that the payments were gifts. The plaintiff provided a print-out of an email that the defendant had sent to the plaintiff, in which he acknowledged that the money was a loan. Confronted with this evidence, the defendant admitted having sent the email. As for the rent, he explained that he had moved out in February and thus did not pay March rent even though he did not remove his things until April.

Early in the proceedings, trying to get a handle on the defendant’s financial situation, the judge asked him, “Did you file tax returns last year?” The defendant replied, “No.” So the judge asked, “How di you support yourself?” The defendant responded, “My business is a cash business.” The judge’s reaction was wonderful. She said, “I’m getting a bad feeling about this case.”

Indeed, this exchange between the judge and the defendant resurfaced when the judge explained why she was rejecting the defendant’s claim that he did not owe rent because he had moved out even though his things were still in the premises. She characterized his “I don’t have to pay rent because I wasn’t there even though my things were there” defense to his “it’s cash so I don’t need to pay taxes” way of “dealing with the IRS.” In other words, both his rent defense argument and his approach to taxation were ridiculous and indefensible.

So now that the world, or at least as much of it as is interested in watching and even learning from television court shows, knows who this fellow is and knows that he has not paid taxes on his cash business, will he be audited? Does an IRS employee track these shows? Do the producers of the show send transcripts of the show to the IRS or state revenue departments when tax misfeasance appears?

Friday, September 18, 2015

Tax Simplicity and Complexity in One Case 

A recent case, Okonkwo v. Comr., T.C. Memo 2015-181, illustrates how the tax law sometimes is simple to apply and sometimes rather complicated to explain. The Internal Revenue Code provision under consideration was section 280A. Those who have studied it, including thousands of bewildered tax students, ought not be surprised that it is both simple and complex.

The taxpayers, a married couple, were respectively a cardiologist and an employee in the cardiology practice. They lived in the Bel Air secton of Los Angeles. In 1992, they purchased a vacant lot in Woodland Hills, in 1997 built a house on the property, and then tried to sell it. Failing to do so, in 2002 they gave up trying to sell it, and rented it for $6,000 per month to an unrelated tenant. Whenthe tenant moved out in 2007, the taxpayers’ daughter moved into the house and paid rent of $2,000 per month, while the taxpayers resumed trying to sell the property.

The taxpayers’ federal income tax returns were prepared by a certified public accountant. He used estimates of deductions that the cardiologist taxpayer provided. On the 2008 return, the taxpayers included a Schedule E, characterizing the Woodland Hills property as rental real estate, reported rent of $24,000, expenses of $158,360, and a net loss of $134,360. The expenses included mortgage interest, taxes, insurance, and depreciation. The loss was characterized as passive.

When he was getting ready to prepare the taxpayers’ returns for 2009 and 2010, the accountant asked the taxpayers about the significant decrease in rental income. The taxpayers explained that the previous tenant had left and their daughter had moved in. On the 2009 and 2010 returns, the gross receipts of $24,000 and $6,000, respectively, expenses of $108,600 and $113,820, respectively, and net losses of $84,600 and $107,820, respectively, were reported on Schedule C, not Schedule E. The taxpayers indicated that they were in the construction business and that the receipts and expenses were attributable to that business.

When the IRS initially examined the return, the taxpayers, following the accountant’s advice, filed an amended return for 2008, shifting the receipts attributable to the Woodland Hills property from Schedule E to Schedule C, claiming a refund. The IRS subsequently issued a notice of deficiency, rejecting the refund claim, disallowing $19,211 of mortgage interest expenses claimed as a deduction for the Bel Air property, and imposing the accuracy-related penalty. Thereafter, the IRS issued another notice of deficiency, for 2009 and 2010, disallowing the Schedule C deductions, adjusting deductions related to the Bel Air residence, and adjusting a deduction for retirement contributions. The IRS determined that the Woodland Hills house was held for the production of income, that the losses were passive, that the taxpayers owed income tax, and that the accuracy-related penalty should be imposed.

The taxpayers filed a petition with the Tax Court. The IRS filed an answer, and subsequently amended the answer to allege that the deductions were limited under section 280A to the amount of the taxpayers’ rental income. The IRS argued that section 280A applied because the taxpayers’ daughter lived in the Woodland Hills house during the years in issue. The taxpayers argued that section 280A did not apply because they were real estate developers and the insurance company providing the homeowners policy required the house to be occupied.

The court held that the daughter’s use of the house was personal and that under section 280A(d)(1) and (2)(A) was attributable to the taxpayers. Accordingly, they did not qualify for an exception to the provision in section 280A(d)(1) that treated the daughter’s use as use of the dwelling unit as a residence. Accordingly, section 280A(a) applied, disallowing the deductions. The court then cited section 280A(c)(5) to concluded that “deductions relating to the Woodland Hills house are limited to the extent of rental income.”

The court imposed the accuracy-related penalty because the taxpayers “did not make a reasonable attempt to comply with the law or maintain adequate books and records relating to their 2008 return.” The 2008 penalty, however, related to the interest deduction on the Bel Air residence, not the Woodland Hills property, and the taxpayers and accountant acknowledged that the deduction was based on the cardiologist taxpayer’s estimate. When it came to the 2009 and 2010 returns, the court sustained the penalty to the extent it related to itemized deductions also based on estimates, but held that with respect to the Woodland Hills property the taxpayers relied in good faith on the accountant’s judgment that the expenses related to that property were fully deductible.

The simple part of the case is that, indeed, the taxpayers were not in the construction or real estate development business and that section 280A applied. The complex part of the case is the absence of any reference to section 280A(b). That provision permits the taxpayers to deduct mortgage interest and real estate taxes even if they exceed the rental income. There are three possibilities to consider. First, perhaps the interest and taxes did not exceed the rental income. That is unlikely, especially in 2010 when the rental income was merely $6,000. Second, the taxpayers failed to raise the section 280A(b) issue. Third, the court simply overlooked section 280A(b). That the taxpayers represented themselves certainly did not improve the chances of section 280A(b) getting attention.

Section 280A is simple in part and complicated in part. The statement by the court, citing section 280A(c)(5), that “deductions relating to the Woodland Hills house are limited to the extent of rental income” is true only if the mortgage interest and real estate taxes on that property were less than the rental income, which I doubt was the case. Otherwise, section 280A(c)(5) is far more complex and cannot be explained correctly in a short sentence. When I teach basic federal income tax, it requires three Powerpoint slides to illustrate how section 280A(c)(5) works, in part because the concept is not simple and in part because the language of paragraph (5) is dense and inexplicably convoluted. My attempt to translate the provision into English reduces the complexity but cannot eliminate it because the concept underlying section 280A(c)(5) is complicated. It is not difficult to imagine why the taxpayers in this case, and perhaps the court, got lost in the maze of section 280A.

Wednesday, September 16, 2015

When Crime Does Not Pay and Tax Makes It Worse 

A recent Tax Court decision, Rodrigues v. Comr., T. C. Memo 2015-178, should serve as a warning of how badly things can go when someone is convicted of a crime. Gary Wayne Rodrigues was convicted of mail fraud, health care fraud, money laundering, conspiracy to commit money laundering, embezzlement, and accepting kickbacks to influence operation of a union hospitalization trust fund. He was sentenced to 64 months in prison, ordered to pay a $50,000 fine, and ordered to pay $378,103.63 in restitution to the union. Because Rodrigues had no liquid assets from which to pay the fine and restitution, the government proposed garnishing his pension plan balance. Because of concerns over the tax consequences, Rodrigues established an IRA into which his pension benefits were rolled over, to give him time to arrange another way to pay the fine and restitution. On appeal, his conviction was affirmed, and the trial court ordered the funds in the IRA to be distributed to satisfy the fine and restitution. In the meantime, the union sued Rodrigues, obtained an $850,000 judgment against him, and succeeded in its motion to garnish the gains and interest in Rodrigues’ IRA. Accordingly, the IRA custodian issued a check to the trial court to cover the fine and restitution, and a check to the union for $89,343.98 in partial satisfaction of its judgment. Thereafter, the custodian issues a Form 1099-R to petitioner reporting taxable distributions from the IRA equal to the $517,447.61 that it had paid on behalf of Rodrigues.

Rodrigues reported the $517,447.61 on his tax return, computed a tax of $113,116, but did not pay the full amount of the tax. The IRS assessed the tax shown on the return, filed an NFTL, and then sent a Notice of Tax Lien Filing. In response, Rodrigues submitted a Request for Collection Due Process or Equivalent Hearing, claiming he was not liable for the tax, questioning the legality and validity of the garnishment order, requesting a hearing from prison, and asking the IRS to restore his IRA with interest. The IRS response was returned as undeliverable because Rodrigues did not include an inmate register number in his request. After a long series of communication and attempted communication between the IRS and Rodrigues, the matter ended up in the Tax Court.

The parties agreed that the transfer of the pension benefits into the IRA was not a taxable distribution. However, they disagreed on the tax consequences of the distributions to the trial court and the union. The Tax Court reject Rodrigues’ argument that the distributions were not included in gross income because he did not personally receive them. The court explained that the distributions were constructively received by Rodrigues because they were made in satisfaction of his obligations. The Tax Court also rejected Rodrigues’ argument that he was not taxable on the distributions because he relied on the trial court, the government, and the IRA custodian to comply with the law and they failed to do so in setting up the IRA and distributing funds from it. The court explained that Rodrigues was the one who decided to set up the IRA, and did so to find alternative sources of paying the fine and restitution. The Tax Court did not accept Rodrigues’ argument that the reasoning of the state court judge permitting the union to garnish the gains and interest in the IRA proved that the distributions were not taxable to him. The Tax Court refused to consider Rodrigues’ argument that the garnishment violated the Consumer Credit Protection Act and the Mandatory Victims Restitution Act because it does not have jurisdictions over those types of claims.

The effect of the tax law is to compound the financial cost of the crimes for which Rodrigues was convicted. In addition to being hit with a fine, restitution, and civil judgment, he was additionally hit with a federal income tax liability because those amounts were paid with tax-deferred retirement benefits rolled into an IRA and then distributed from the IRA. There will be some who consider this outcome to be excessive, and those who respond by noting that crime does not pay and the tax outcome is just part of the price that is paid. Though that may be true, I doubt that tax consequences arising from potential fines, restitution obligations, and civil judgments are on the mind of those who engage in this sort of behavior.

Monday, September 14, 2015

A New Tax Specialty: Porn 

Yes, you read that correctly. According to this report, the Alabama House Ways and Means Committee, trying to deal with a budget shortfall, has approved legislation imposing a 40 percent excise tax on, well, it depends on whose explanation is accepted. Some are calling it a tax on porn. The legislator who proposed the tax describes it as applying to “any entertainment product that’s adult in nature, that you have to be over 18 to purchase.” The language of the bill imposes the tax on “gross receipts resulting from the sale or rental of sexually-oriented material the sale or rental of which is prohibited to a minor as defined herein.” The bill provides extensive definitions of “sexually-oriented material.” Exceptions are carved out for movies carrying an R or NC-17 rating, contraceptive devices and medication, and prescription medications “intended to enhance sexual performance or sexual enjoyment.” The definition of sexually-oriented material includes “[a]ny book, magazine, newspaper, printed or written matter, writing, description, picture, drawing, animation, photograph, motion picture, film, video tape, pictorial presentation, depiction, image, electrical or electronic reproduction, broadcast, transmission, video download, telephone communication, sound recording, article, device, equipment, matter, oral communication, depicting breast or genital nudity or sexual conduct as defined herein.”

So assuming this bill is enacted and withstands First Amendment challenges, which is highly unlikely, people in Alabama are going to find themselves paying an excise tax not only on what generally is considered “porn,” but also subscriptions to a variety of mainstream magazines that happen to depict topless people. Keep in mind that the word “breast” in the proposes statute is not modified by the adjective “female.” And what of magazines that contain photographs of paintings of unclothed individuals? Tax lawyers will be wrestling with definitional issues unlike those to which they are accustomed. Courts have struggled in other contexts with the definitions of obscenity and pornography, so tax lawyers will find themselves studying cases and rulings from areas of law beyond the familiar though complex arena of taxation. Sometimes tax lawyers do need to immerse themselves in constitutional law, but this Alabama endeavor will revamp the landscape.

This is not the first time genius legislators have singled out “pornography” for increased taxation. Kansas dabbled in it back in 2005. In the same year, eight senators tried the same thing in the federal Senate. In 2008, legislation was introduced in California, as nicely discussed by Kay Bell. Why did these, and similar efforts elsewhere, fail to get traction? Because the First Amendment prohibits, in the words of constitutional law expert Eugene Volokh, “tying a tax strictly to a product's content. . . . you can't tax Playboy, for instance, unless you also hit Newsweek and National Geographic.”

The only silver lining in this unwise idea is that it will solve one small challenge facing the tax profession. Many people, including most law students, consider tax law to be “boring,” a word I have heard thousands of time in conversations about tax. I’m sure, once I convince my dean and associate dean that there should be a new course called “Porn Tax,” the word “boring” will not enter into commentary. Just like the title of today’s post probably will up the page view count.

Friday, September 11, 2015

Tax Client and Tax Return Preparer Meet Up in People’s Court 

Readers of this blog know that I find interesting tax topics when I watch television court shows. Today I add another to the parade that began with Judge Judy and Tax Law, and continued through Judge Judy and Tax Law Part II, TV Judge Gets Tax Observation Correct, The (Tax) Fraud Epidemic, Tax Re-Visits Judge Judy, Foolish Tax Filing Decisions Disclosed to Judge Judy, So Does Anyone Pay Taxes?, and Learning About Tax from the Judge. Judy, That Is, Tax Fraud in the People’s Court, and More Tax Fraud in the People’s Court. This latest episode is the first time I saw a television court show in which a tax return preparer was sued by a client. My guess is that most tax return preparers would not want to appear on television if sued by a client, and what happened in this instance should make them happy with their decision to stay out of the spotlight.

The client had retired from the New York Police Department after 21 years, and received a pension along with a lump-sum payout of deferred compensation. She went to the preparer because her father had used his services for many years. What happened next was disputed. The client claimed that she did not have any discussions with the preparer about the numbers reported on the return. She explained that he did the returns, she signed them, had to pay federal income tax and received a refund from the state. Two years later, she received a bill from the state for $8,000 in unpaid taxes plus $1,600 in interest. She paid all of it, and then called the preparer, who told her that she had asked him not to report the lump-sum payment on the state income tax return and that he had put a note in the file recording this request. Not being satisfied, the client sued the preparer for the interest, alleging that had he done the state return properly she would not have incurred the interest charges.

The preparer claimed that he did not put the lump-sum deferred compensation payment on the state return because the client insisted that he not report it. When asked about the note written to the file, he denied it existed and denied ever having told the client that it existed. He stated that he explained to the client that the state would pick up on its omission and pursue the taxes due on it. He also claimed to have told the client that it was not criminal to omit the income from the state return because it was reported on the client’s federal return. The client denied that this conversation had taken place. The judge asked the preparer why he would fill out a tax return without reporting what he admitted was income. He stated, “I knew it wasn’t criminal” to omit the income, and repeated that defense several times.

The judge told the parties she found it difficult to believe that there had been no discussion about the issue. She mentioned that apparently the plaintiff had offered to meet with the defendant half-way on the interest payment, but the plaintiff disagreed, claiming that the defendant offered to pay one-fourth of the interest. To cap off this dispute, the defendant denied offering to pay anything.

So the judge went Solomon on the parties. She split the amount in question, ordering the preparer to pay one-half of the interest that the client had been charged.

During the post-trial interviews with the show host, the preparer said that next time he would get the conversation in writing if the taxpayer wanted to “push the envelope” and that he had worked with the client because her father had been a client for a long time. The plaintiff, in her post-trial interview, simply stated it was not her fault.

There are so many lessons to be learned from this episode. First, yes, get it in writing and put it in writing. Though writings do not eliminate disputes, they eliminate a good chunk of the you-said-I-said debates. Second, a preparer ought not accommodate a client who wants a return that does not comply with the law. It’s that simple. Third, if the preparer has written a note to the file, keep it, and if necessary, provide a copy to the client. Fourth, if told that a document exists, ask for a copy. Fifth, if claiming that a document exists, bring it to court. Sixth, don’t hang on to a client simply because the person’s relative or friend is a client. If it is time to say good-bye, wave farewell and move on.

Wednesday, September 09, 2015

It’s a Failure of Some Sort, But It’s Not a Tax Failure 

Last week, as I browsed my Facebook news feed, I noticed that someone had shared a post called “History Lesson on Your Social Security Card.” As I read it, I recoiled in horror. Lie after lie compounded the utter worthlessness of the content. Curious, I did a search, and found the same content on a variety of sites, including The Financial Physician. Perhaps I am doing society a disservice by sharing a link, because there is a real risk that people will go to that page, read this propaganda, and believe it.

But as I thought about writing a post taking this “lesson” apart, something in the back of my brain woke up and said, “This is familiar. Surely you have written about this.” And so I did another search. I discovered that EIGHT YEARS AGO I did debunk this nonsense, in Social Security Email: Nonsense Breeds Nonsense. Though finding the 2007 post confirmed that my memory still worked, as does my ability to recognize financial garbage when I see it, the discovery disenchanted me. One would think that after eight years, this evil would have been extinguished, especially as other debunkers of outrageous lies, such as the folks at FactCheck and Snopes, had also educated Americans to demonstrate the fallaciousness of what some have called fraud.

As an educator, it is both frustrating and puzzling when members of a species proudly calling itself sapiens sapiens cannot get it right even when given the opportunity to learn. The failure isn’t a failure of the substance. It’s not a failure of the law, nor is it a failure of the tax law or the social security law. It’s a failure resting on some deep flaw in certain humans. Finding the solution is a challenge, but it is a necessity. It might be clever to wonder what would happen if some clown decided to spread claims that the sun rises in the South and just as many people who fell for the “history lesson” succumbed to this “geography tutorial.” At worst, some people would get lost, and others would miss a photogenic sunrise. But what happens when the issue in question is far more serious than sunrise locations or the history of social security? What happens when the lies and the propaganda deal with health care, children’s nutrition, gunfire, cybersecurity breaches, and nuclear weapons? What happens when life or death hangs in the balance while the merchants of fraud do their thing?

I am a firm believer in free speech. Say what you want, and say it out loud and in public so that I, and others, know what is in your brain. But understand that others will point out the flaws in your assertions when the issue is a matter of fact and not one simply of opinion. Tell me that you don’t like chocolate, and I’ll smile and let it go, but tell me that chocolate is made from brussel sprouts and I’ll exercise my free speech rights to explain that you have no clue and thus ought not to be trusted on matters of food origins. But I will do so in ways that help determine whether the nonsense emanating from your mouth, your pen, or your keyboard reflect intellectual deficiency or moral depravity. If it’s the former, I will do all that I can do to help you get through having been duped. But if it is the latter, I will do all that I can do to let the world know that the Great Liar is circulating among us.

It might help to repeat some of what wrote in Social Security Email: Nonsense Breeds Nonsense:
For all of my law school teaching career, I have emphasized to my students that what they think is the "fun" part of lawyering, namely analysis and theoretical policy discussion, cannot begin until the facts are known. Good lawyers know what facts need to be ascertained, and good lawyers know how to find facts, how to interview clients, how to do empirical research, how to find information. There's more to research than finding the law. In many respects, it is easier to find the law than it is to determine the facts.

Many people, including lawyers, are woefully remiss when it comes to checking facts. Baseless rumors are started by the evil, the manipulative, the power-obsessed, the revenge seekers, and the deranged, and they acquire lives of their own. Politicians and their operatives pepper the airwaves and the internet with what must be called by its true name, propaganda. People too lazy, too uneducated, too busy, too disinterested to check the authenticity of what's being said don't simply ignore it, but believe it, and then replicate it, contributing to the spread of nonsense throughout the world.
It is not that difficult nor time-consuming, when encountering claims and assertions, to do a bit of research and fact-checking. Not only does it help snuff out propaganda in its early states, it’s also good exercise for one’s brain. Yes, that brain. The brain that is the justification for appropriating the name sapiens sapiens. It’s time to start living up to that title.

Monday, September 07, 2015

“Who Knows Taxes Better Than Me?” 

No, I am not the one asking the question. And if I did ask the question, it would not be delivered in a manner suggesting that the answer is no one. And surely there are at least a few people who know taxes better than me.

The person who asked the question was none other than Donald Trump. He made the comment on a radio show in Birmingham, Alabama in late August.

So for Donald Trump, I have some questions to see if you measure up to at least one person who definitely knows taxes very well. Let’s see if Trump has done any of these things:

Mr. Trump, have you read the Internal Revenue Code cover to cover at least twice?

Mr. Trump, have you read the U.S. Master Tax Guide cover to cover for several years in a row?

Mr. Trump, have you read a considerable portion of the Treasury Regulations dealing with taxes?

Mr. Trump, have you read any state taxation statutes?

Mr. Trump, have you read any local tax ordinances?

Mr. Trump, have you done any tax planning?

Mr. Trump, have you drafted any documents intended to implement a tax plan?

Mr. Trump, have you prepared hundreds of tax returns?

Mr. Trump, have you prepared your own tax returns?

Mr. Trump, do you want people to take you statements that the “fair tax is okay” and the “flat tax is okay” as proof you know taxes better than anyone? Because, if you do, for me and many others, those statements demonstrate you know very little about taxation that matters. Certainly not enough to set yourself up as an omniscient tax expert.

But don’t worry, Mr. Trump, you might know more than the other candidates who think themselves qualified to be president of this country. Perhaps the best thing about your claim is that it will trigger all sorts of boasting from other candidates about their tax expertise. If that happens, thank you for triggering more material for this blog.

Friday, September 04, 2015

A Truth of Taxation 

Controversy is swirling about the posting of a sign by a Shippensburg, Pennsylvania, property owner that stated a $10 parking fee charged for parking on the property would “help support our local school district.” According to this story, the property is an empty lot which the owner makes available for parking during a corn festival and during a community fair. Curious individuals asked school district officials if contributions had been received by the district and they explained they were unaware of any. One official suggested asking the school’s athletic booster club, but it, too, had not received anything. Finally, the property owner explained that the money collected for parking was used by him to defray a portion of his school real property tax on the property. The property owner noted that the tax is more than the property generates in annual income, apparently because it is characterized and valued as commercial property.

Some people think that the sign implied that the parking fees would be transferred to the school district as a charitable contribution or similar donation. The owner of an adjacent property called the sign “a little misleading.” The property owner who posted the sign asserted that it is honest. According to the property owner, people paying the parking fee asked what he was doing with the money, and that prompted the posting of the sign.

Technically and literally, the sign is correct. The parking fee receipts were used to pay taxes, and taxes support the operations of the school district. Yet when people read the sign, many, perhaps most, think that they are contributing to a donation that is over and above the school district’s tax receipts. An even more precise sign would state, “I use the parking fees to defray school taxes on this property.” I have no idea whether this would generate additional complaints about the fee or cause people to park elsewhere, though apparently all lot owners in the area turn their vacant ground into parking lots during these events.

This might start a trend. Every business could post a sign that states, “A portion of our sales receipts helps support our local schools,” or “A portion of our client billings helps support our local police and fire departments.” Technically, this would be true, except, of course, for those who are not paying their taxes. Perhaps employees and unions could bargain with employers by promising that “a portion of our wages helps support the military, national parks, and the environment.”

Or perhaps the next fad will be a button one could wear on one’s jacket or shirt or other article of attire: “I pay taxes. Do you?” Perhaps I’ve given someone an idea. Perhaps that person should pay me a commission for the inspiration. It would be income. I would pay taxes on it. Think of all the things I’d be supporting.

Wednesday, September 02, 2015

When Tax Maneuvering Goes Bad 

The politicians outdid themselves this time. According to this story, a gerrymandering stunt has backfired, leaving the outcome of a vote on a local sales tax increase in the hands of one person.

When the promoters of the Business Loop 70 Community Improvement District in Columbia, Missouri, decided to finance their projects with a sales tax increase, they were required to comply with a state law that subjects the increase to approval of those who reside in the district. So the promoters gerrymandered the borders of the district so that it would not include any voters. In other words, they redrew the boundary lines to exclude residential properties. It might have worked – as it is unclear how something can be approved if there is no one qualified to vote – but those doing the gerrymandering stunt messed up. They overlooked a residence. And thus, 23-year-old Jen Henderson, a college student, has the only vote. She has suggested she will vote no, because the sales tax increase, as are all sales taxes, is regressive, hurting lower income individuals more than it affects higher-income people. She also noted that the director of the proposed district would benefit from the arrangement.

I dislike gerrymandering. It’s nothing more than manipulation. In this instance, it reflects an attempt to disenfranchise the voters who, under state law, have a right to approve or disapprove a tax that will fall upon them. The promoters want to impose a tax without giving those who are affected a say in the matter. Of course, disenfranchising voters has become a primary weapon in the attempt to take over more than a sales tax issue in one small town in the Midwest. It has become a staple of the oligarchy and its puppets. This time around, the effort backfired. I’m not so confident that next time, with a bigger playing field and more at stake, it will similarly falter. It could, if people would get educated about what is happening behind the scenes. After all, they don’t teach this stuff in our public schools. They don’t want people to know what actually transpires when political maps are redrawn. The best thing about this story is not the oversight by the promoters. It’s the opportunity it presents for Americans to learn that those who claim to be on their side aren’t. That’s the sort of lesson that, if learned too late, brings tears and no recourse.

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