Movie fans can have a tough time finding something new in today’s sea of reboots and sequels. The Marvel Cinematic Universe alone has sold $25 billion in tickets since Iron Man kicked things off in 2008. Right now, your local multiplex is screening the third Ant-Man movie. (Ant-Man? Really?) Next month, John Wick makes his fourth appearance. And there are so many Fast & Furious movies now that producers just give them roman numerals, like Super Bowls. But this weekend, moviegoers got a rare treat – a truly original comedy-horror destined for B-movie legend that snorted up $23.1 million in its opening weekend.
Cocaine Bear asks us to imagine what would happen if a drug smuggler dropped a stash of booger sugar out of a plane over a Georgia forest, and a bear got into the bricks. The answer? You already know. Bad things. Bad, bloody, grisly things. The plot is loosely based on the true story of “Pablo Escobear,” a 175-pound black bear that found a stash dropped by a cop-turned-smuggler in 1985. Of course, saying a flick like Cocaine Bear is “loosely based on a real story” is like saying, “Die Hard is a Christmas movie.”
Cocaine Bear has absolutely nothing to do with taxes. But that wasn’t going to stop me from spinning it into one of these weekly columns. I just needed a plausible hook . . . and then it fell from the sky.
Let’s assume, for the sake of argument, that you were the one who found a stash of drugs on an afternoon hike. It’s yours if you can escape the murderous drug lord looking to get it back. But will Uncle Sam want to get his paws on a piece of it, too? History tells us the answer.
In 1957, Ermenegildo Cesarini and his wife Mary bought a used piano at auction for $15. Seven years later, they found $4,467 hiding in the strings. They reported the income on their 1964 return and paid $836.51. Months later, they amended their return and asked for a refund. The IRS politely laughed at their request. The parties wound up in Tax Court, where they focused on three questions.
First, was the money properly includible in gross income? Judge Young found no exception to the general rule that “gross income includes all income from whatever source derived.” Second, would taxes be due when the Cesarinis bought the piano or found the money? In the absence of contrary state law, common law provides that the money wasn’t “reduced to undisputed possession” until the couple actually found it in 1964. And third, could it qualify as capital gains? Young cited the statute that defined “capital gains” as gains resulting from the sale or exchange of property held for more than six months, then found that neither the piano nor the money was sold or exchanged. Fifty years later, the case still stands for the proposition that a “treasure trove” is just as taxable as W-2 wages.
The real challenge for Pablo’s lawyers today would be how to value the property their four-legged client found in the woods. Would it be the wholesale price the smuggler paid before dropping it out the plane? Would it be the street value when it landed in the woods? Or would the IRS forbear collection entirely because there’s no legal market for the prize?
If you’re like most movie fans, you find it unbearable to waste money on taxes you don’t have to pay. That’s where we come in. Remember, only you can prevent paying too much – and you do it with a plan. So call us after you see the movie, and you’re ready to protect your honey pot!