Tuesday, September 13, 2011

Steve Martin - Tax Advisor

This was originally published on PAOO on 6/8/10.

Private Letter Ruling 201016097

There is a bit that Steve Martin does where he tells you how to make a million dollars and pay no income tax. It’s a very simple plan. First you make one million dollars. Then you pay no income tax. He then addresses the possibility that the IRS might contact you. Simple. You just say “I forgot”.

Any time I see something of such elegant simplicity I want there to be something to it. Some kernel of truth hidden in the nonsense. When it came to Steve Martin’s routine, though, I despaired Until now.

Private Letter Ruling 201016097 was not directed to Steve Martin. The ruling is directed to a taxpayer who is 82 and according to Wikipedia, Steve was born in 1945. Nonetheless it finally vindicates him as a tax advisor. The taxpayer withdrew all the money from a Roth IRA and failed to put it into a rollover Roth within 60 days. The head note to the ruling indicated that the failure was “due to her mental health conditions which affected her ability to handle her financial affairs”. (That “her” is another clue that it wasn’t Steve Martin, himself, applying for the ruling). More on the gender issue follows.

I thought we might be heading to a punch line involving you have to be crazy to blow a roll over deadline, but I was delighted on deeper reading to find an illustration of the Steve Martin Rule (We need to specify Steve to avoid confusion with Martin Ice Cream, a key decision on personal good will). As we read about Taxpayer A moving funds from IRA Account X to non IRA account Y at financial institution M. We find “Taxpayer A represents that he suffers from a condition which impairs his memory.” There it is. “I forgot.” Whether the memory issues having anything to do with the gender transformation between the head note and the third paragraph is a question left unanswered.

Taxpayer A was granted relief. He or she may have forgotten about the whole thing by now, but the rest of us can remember the next time we are in a jam to say “I forgot.”

Oh by the way :

Any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein

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