Mayor Sheila Dixon likely won?t face tax implications for receiving gifts from developer and personal friend Ron Lipscomb, but tax experts said the IRS may take an interest in how he paid for those gifts.
The Internal Revenue Service allows an individual to give any other person gifts of up to $12,000 per year without incurring taxes. Once that limit is exceeded, the remaining amount could be taxed for as much as 45 percent of its value. The recipient of those gifts does not have to pay tax on them, according to Jane Brewer, co-chair of accounting and consulting firm KAWG&F?s tax department. However, the IRS may be interested in how Lipscomb represented the gifts in his taxes. According to a state prosecutor?s affadavit first published by The Sun, Lipscomb charged a $2,000 gift certificate to a furrier to a credit card that investigators traced back to his construction firm Doracon.
Typically, personal charges run up on a company credit card by an executive are given as a gift by the company to that individual as additional compensation, which can then be taxed. But the IRS would consider claiming the personal gifts as deductible business expenses as improper, said Rayanne Beers, an associate in the estate and trust division of law firm Blades & Rosenfeld, P.A.
Joel Scharkatz, chair of business valuation and litigation support for KAWG&F, said the only way for Lipscomb to legally deduct the gifts as a business expense would be as compensation to Dixon for a service rendered ? which would then raise ethical issues on her end.
“Bribes are not deductable expenses,” Brewer said.”You don?t usually see those as a separate item on a tax form.”
Defining physical items such as fur coats as gifts is relatively easy, but it may not be so simple for the IRS to determine the value of vacations Lipscomb may have “given” Dixon.
“You could audit it, but it would be very difficult and you?d have to prove that the boyfriend paid for everything,” Beers said. “If they went dutch and she started paying her own way, it?s not a gift anymore.”
