Allan Rolnick, CPA
Summer is coming, and for music fans across America that means stadium tours. Swifties went through several bear attacks to get tickets to her Eras tour shows. And on May 10, a singer we’ll call B hits the road for 41 stadiums in ten countries. The summer renaissance is her first tour in seven years, and you can expect her fans to party all night. B and husband are already two of the most successful artists of any era. This time, she’s taking a lesson from the airlines by using so-called “dynamic pricing” to squeeze every dime she can out of fans. Billboard estimates she could gross as much as $300 million this go-round, and that’s before millions more in merchandise. It used to be that musicians toured to support album sales. But now, with Spotify paying an average of 4/10 of a penny for each stream, the top acts practically give away the music to support the tours. Naturally, the fans at the IRS are happy to share in this diva’s success. They don’t even have to sing backup to collect millions! But they want to be sure she’s paying everything she owes. So, the IRS audited B for 2018 and 2019. They disagreed with a whole grab bag of items on her return: legal and professional fees, a charitable contribution carryover, and what appear to be some real estate operating expenses. They sent a Notice of Deficiency for $805,850 (plus $161,170 in interest) for 2018 and $1,447,747 (plus $288,549 in interest) for 2019. In 2014, Billboard named B the highest-earning Black musician of all time. She’s worth 500$ million all by herself. (The filing reveals that she files separately from her husband, like all the single ladies.)
She could probably cover that 3$ million just by scrounging through her couch cushions and the plastic on her sofa. But you don’t get to be worth 500$ million in the first place by wasting 3$ million. And so, on April 17—coincidentally, the day before the filing deadline for this year’s return—she petitioned the Tax Court to say “sorry” to the IRS and determine there were no deficiencies in her 1040. B’s petition doesn’t reveal how much she already sent to the IRS. We can assume it would be enough to break most peoples’ souls. This isn’t the first time she’s had to blow millions on taxes, either. In 2017, she and her husband moved into an $88 million mansion in Bel Air. The cozy 30,000 square foot crib came complete with eight bedrooms, 11 baths, a 15-car garage, an irreplaceable lizard-skin door, and bulletproof windows looking out over the LA basin. (Jealous?) Oh, and it has not one, not two, not three, but four swimming pools. (Three isn’t enough? Maybe the fourth is for the help?) Property taxes are $1.06 million per year. Unbelievably, according to the LA Times, there are seven houses in the city with even higher taxes. And the city just passed a new mansion tax, which took effect this month, imposing a 5.5% tax on any sales above $10 million. Most tax court cases settle before trial. If B doesn’t reach an agreement in hers, it’ll probably take a year or two before we learn if she’s a broken-hearted girl. But you don’t have to win 32 Grammys to put smart planning to work, and you don’t have to be a diva to pay less. So don’t hurt yourself sending the IRS more than you have to. Call us—tax planning is our superpower!
Allan J Rolnick is a CPA who has been in practice for over 30 years in Queens, NY. He welcomes your comments and can be reached at 718-896-8715 or at firstname.lastname@example.org.