My, my, my.
This headline and subhed are hilarious and really brightened my morning: “These Millionaires Tried Turning a Yacht Into a Tax Break. The IRS Sank Their Plan: The Ridingers donated Utopia II to charity and ended up paying $3.5 million in taxes and penalties”
JR and Loren Ridinger wanted a new yacht. First, they needed to get rid of the old one.
The 116-foot Utopia II wasn’t selling, so the Ridingers and their lawyers hatched an alternative plan: Donate it, and reap a big tax deduction.
Lots of charities take shoes and clothes. Some take cars (often selling them for cash). Yachts, not so much.
What followed was an odyssey now approaching its eighth year. Audits, lawsuits, a midsea collision. The lesson: Think very, very carefully before you donate your yacht.
The tax filings of the super rich—and the Ridingers, who made a fortune recruiting people to sell antiaging creams and vitamin supplements, are very rich—are enormously complicated affairs. Wealthy taxpayers rely on a bevy of accountants, lawyers and financial advisers to navigate them.
All that advice is no guarantee of a flawless return that passes muster with the Internal Revenue Service, especially with the agency poised to hire more auditors to patrol the tax filings of the top 1%.
The Ridingers thought the 2016 donation would save them about $2 million on their taxes. Instead, they ended up paying $3.5 million in taxes and penalties.
Mr. Ridinger died suddenly last year, but the fight over Utopia II continues. In a lawsuit against their former lawyers, Mrs. Ridinger says the couple was misled into a transaction that ultimately benefited the attorneys. Their onetime lawyers say the couple and their companies misrepresented the yacht’s value and that the transaction didn’t personally benefit them.
See pic below of the couple.