Friday, January 20, 2006

Survivor: Tax Evasion Trial

The tax evasion trial of Richard Hatch, the first Survivor winner, may take a strange turn if Hatch testifies in accord with a statement made by his lawyer.  An AP story (here) states that during a break in Hatch's testimony in federal court in Rhode Island for not reporting the $1 million prize and other payments he received in 2000,  Michael MInns, the defense lawyer, told the court that Hatch made a deal with Survivor's producers that they would pay taxes on the prize if he did not report that other contestants secretly received food from friends during the filming of the program.  Hatch has not yet mentioned the purported deal in his testimony, which will continue after a weekend break.  Of course, any deal with the producers would not necessarily absolve him of his reporting duty, but it could undermine his intent, and Minns has described Hatch as the "world's worst bookkeeper." 

The tax evasion charges against Hatch also include the failure to report a payment by a Boston radio station and alleged diversion of funds from a charity he controlled, so any deal with the Survivor producers would not cover that income.  Nor did it help his case when an accountant testified that she told Hatch he had to report the $1 million prize, with no apparent mention of the side deal.  If he did make the heretofore undisclosed deal, he might not be quite as bad a tax planner as he is a bookkeeper. (ph)

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As you suggest, how does that story make any sense? He didn't report the $1 million (and more) in income. It's no defense at all to suggest that he thought someone else would cover the tax on the prize money, if he didn't report it. (Why wasn't a large sum withheld from that payment for taxes, anyway?) A much better defense (if it were true) would be that he didn't realize a prize you seek is a form of taxable income. Of course, that's defeated by the accountant's testimony. (Darn that lack of acct-client privilege in federal court!) Besides, if he earns $1 million in Year One, incurring a $200,000 tax liability (let's say), and a third party were in fact to pay that for him in Year Two when the tax was due, he would then have $200,000 additional income in Year Two that he would have to report and pay taxes on in Year Three. So if he thought the producers had in fact paid the tax, did he report that in Year Three or not? Somehow, I doubt it.

Posted by: Peter G | Jan 21, 2006 6:02:04 PM

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