Tax stuff I think is interesting. It is either copied from my primary blog on forbes.com http://www.forbes.com/sites/peterjreilly/ or stuff that I did not put there because being on forbes is a good gig and they have, you know, standards. Also some guest posts.
Saturday, August 30, 2014
IRS Has To Play Ball With Mets on Darryl Strawberry's Money
Originally Published on forbes.com on February 10th,2012
According to the Baseball Almanac, Darryl Strawberry in his seventeen years playing major league baseball had exactly 1,000 RBI’s (33.5% of those were him driving himself home from home plate). If you scroll down you will see that he earned more than $20,000,000 driving all those runs in. Included in that is about $100,000 per year ($8,891.82 per month, you can do the math) in deferred compensation from his first employer the Mets.
A Qualified Domestic Relations Order (QDRO) issued by a Florida court in 2006 awarded $800,000 of the deferred comp to Charisse Ann Strawberry. A qualified domestic relations order allows the payee of deferredcompensationto be changed without triggering taxable income to the earner. It is handy in divorces. Ms. Strawberry is in bankruptcy. The trustees would like some of that money to be available to her creditors. Unfortunately, Ms. Strawberry is not alone in having creditor problems. The IRS has a claim on the deferred compensation. It had already issued a levy on the funds to collect Daryl’s 2000 tax liability. As I noted inthis piece, ferocious as it can seem, the IRS mostly can only send you annoying mail, until you get to liens and levies. With a levy they either take your stuff or tell people that owe you money to pay it to them instead. Having received a levy notice it would be foolhardy of the Mets to pay Darryl or Charisse instead of the IRS.
The Mets have initiated the interpleader in order to ensure that the disputed deferred compensation funds are given to those that are properly entitled to it and to ensure that they are protected from further liability.
The Trustee and the Mets had worked something out and the Court was prepared to dismiss the interpleader, but the IRS wanted there to besummary judgment based on sovereign immunity. The argument the IRS has is that there is a Code section that protects people who turn property over to the IRS, even if the levy turns out to be wrongful. There were also issues about the authority of the bankruptcy court to rule on the issue and the statute of limitations. The Court was with the Mets on this one quoting a district court decision:
[T]he right to interpleader is not incumbent upon a stakeholder showing that it is in jeopardy of multiple liability, as well as multiple litigation. Instead, “[a] stakeholder acting in good faith, may maintain a suit in interpleader to avoid the vexation and expense of resisting adverse claims, even though he believes only one of them is meritorious.”
Frankly, it is all a bit too “lawyerly” for me, but I haven’t seem much coverage on this decision and the tax troubles of celebrities always seem to be of some interest. The day job, which is now also a nights andweekend job, has been slowing me down a bit, but you may still want to follow me on twitter @peterreillycpa.