Taxable Talk

The IRS released its 2006-2007 Priority Guidance Plan earlier this month. There are 264 projects listed. Some of the projects include:

• Regulations to facilitate electronic filing and reduce taxpayer burden [for corporations]. Temporary regulations were published on May 30, 2006.



• Guidance regarding the treatment of incidental health insurance benefits provided under a profit-sharing or stock bonus plan.



• Revenue ruling on taxable health benefits for beneficiaries.



• Guidance on Health Savings Accounts.



• Guidance on political activities by section 501(c)(3) [charitable] organizations.



• Guidance on the treatment of fees incurred in credit card transactions [for financial institutions].



• Revenue procedure under section 3402 regarding the withholding rules applicable to poker tournaments.

It should be noted that just because an item is listed does not mean that the IRS will take action. For example, the revenue procedure for poker tournaments was on the 2005-2006 Guidance Plan and no action was taken. However, when an item appears for two straight years, it's likely that the IRS will eventually release something.

If you're a Native American and reside in California on a reservation, you're exempt from California personal income tax. However, you're not exempt from federal income tax. And that's where this story begins.

The Chumash tribe runs a very successful casino near Santa Ynez, north of Santa Barbara. Tribal members receive quite a bit of income each year, and must remit federal income tax. A few years ago the Chumash were approached by Benecorp LLC. Benecorp presented to the Chumash the "CapNet 7 Financial Models." 32 members of the Chumash are alleged to have saved millions in taxes through "sham management fees," according to this story in the Los Angeles Times. The same story notes that in April 2004, outside experts told the Chumash that the program, "is being administered in a way that is not authorized under current IRS laws."

Without knowing the nuts and bolts of the program, it's impossible for me to determine whether the CapNet 7 Financial Model complies with tax laws or not. I did notice when looking at Benecorp's website that the heart of the plan is a trust. The government alleges that the plan, "[created] sham entities and sham transactions." We've seen that in plenty of trust enforcement actions recently. The Chumash officially severed all links to Kenneth Sorenson, one of the two principals behind Benecorp.

The moral is the usual one. Stephen Drake, the other principal of Benecorp, said in a 2004 interview, that Chumash who learned of the program thought it was too good to be true. That just might be the case.

There's nothing at all about tax in this post. You're all forewarned.

Instead, this post focuses on my avocation—writing. My second book has just been released. Written with my good friend Scott Harker, it's called Why You Lose at Poker.

We take the sixteen most common errors in poker, show you how to recognize them, and then how to eliminate them from your game for good.

If you love to play poker but just can't seem to win consistently, this is the book for you!

You can purchase this book today at Amazon.com. It should be available in book stores such as Barnes & Noble in about three weeks.