Rahm Emanuel: Another Obama Appointee with Ethical Lapses?

[preciousjeni]

Originally Posted by Kevin

If anyone caught the op-ed piece in the NY Post penned by Dick Morris (I know, I know) and Eileen McGann, it raises some issues about Emanuel which on their face appear a lot more troubling than the sorts of things which have already caused other Obama cabinet potentials to withdraw their names from consideration.

The issues raised are these:

1) Emanuel lived rent-free in the home of Rep. Rosa De Lauro for several years and didn't report the fact that he received that home rent-free to the IRS as income (anyone who has had tax law knows the Duberstein case which basically says this is income, and it would appear that the gift wasn't completely gratuitous because Emanuel had used his influence with Freddie Mac to send some money the De Lauros' way). Accoridng to the op-ed, 'experts' think the rent could add up to $100K of taxable income.

You've misled us, friend.

Berman was president of Mohawk Metal Corporation. Duberstein was president of the Duberstein Iron & Metal Company. They would often talk on the phone and give each other names of potential customers. After receiving some particularly helpful information, Berman decided to give Duberstein a gift of a Cadillac. Although Duberstein said he did not need the car as he already had a Cadillac and an Oldsmobile he eventually accepted it. Mohawk Metal Corporation later deducted the value of the car as a business expense, but Duberstein did not include the value of the Cadillac in his gross income when he filed his tax return, deeming it a gift. The Commissioner asserted a deficiency for the car’s value against Duberstein. The Tax court affirmed.

(Ok, granted Wikipedia is not a professional reporting agency...)

So, the issue was NOT THE GIFT. It was the fact that the gifting company reported the gift as a business expense while the recipient did not. If the gifting company hadn't reported it, it would be considered a gift and would, therefore, not be taxable income.

[KSigkid]

Originally Posted by preciousjeni

You've misled us, friend.



(Ok, granted Wikipedia is not a professional reporting agency...)

So, the issue was NOT THE GIFT. It was the fact that the gifting company reported the gift as a business expense while the recipient did not. If the gifting company hadn't reported it, it would be considered a gift and would, therefore, not be taxable income.

Wikipedia is wrong. Here's a link to the opinion: http://supreme.justia.com/us/363/278/case.html .

Essentially, Kevin's correct, in that the case dealt with the definition of what is a "gift" under the tax laws. The Commissioner wanted the Court to give a specific definition of what would count as a "gift," and the Court declined to do so, instead directing that lower courts should look at a variety of factors (including facts that may show the donor's intent, etc.). Applying Duberstein to this situation, one would look at Delauro's intention, i.e. whether it was done out of some generosity.

Granted, the case wasn't only about whether or not item was a gift...but the case stands as perhaps the most important decision in examining whether something qualifies as a gift or taxable income.

But...as I'm not a tax professional by any stretch of the imagination, if you want to have an in-depth discussion of the implications of the Duberstein decision, I can put you in contact with my tax professor.

ETA: I suppose this is why they tell us at law school not to rely on Wikipedia case briefs.

[preciousjeni]

Originally Posted by KSigkid

Wikipedia is wrong. Here's a link to the opinion: http://supreme.justia.com/us/363/278/case.html .

Essentially, Kevin's correct, in that the case dealt with the definition of what is a "gift" under the tax laws. The Commissioner wanted the Court to give a specific definition of what would count as a "gift," and the Court declined to do so, instead directing that lower courts should look at a variety of factors (including facts that may show the donor's intent, etc.). Applying Duberstein to this situation, one would look at Delauro's intention, i.e. whether it was done out of some generosity.

"The record is significantly barren of evidence revealing any intention on the part of the payor to make a gift. . . . The only justifiable inference is that the automobile was intended by the payor to be remuneration for services rendered to it by Duberstein."

And how did they come to that conclusion?

"In No. 376, Duberstein, an individual taxpayer, gave to a business corporation, upon request, the names of potential customers. The information proved valuable, and the corporation reciprocated by giving Duberstein a Cadillac automobile, charging the cost thereof as a business expense on its own corporate income tax return. The Tax Court concluded that the car was not a "gift" excludable from income under § 22(b)(3) of the Internal Revenue Code of 1939."

Granted, the case wasn't only about whether or not item was a gift.

That was my point.

In the Emanuel case,

Emanuel is a multimillionaire, but lived for the last five years for free in the tony Capitol Hill townhouse owned by De Lauro and her husband, Democratic pollster Stan Greenberg.

During that time, he also served as chairman of the Democratic Congressional
Campaign Committee - which gave Greenberg huge polling contracts. It paid Greenberg's firm $239,996 in 2006 and $317,775 in 2008. (Emanuel's own campaign committee has also paid Greenberg more than $50,000 since 2004.)...

Emanuel never declared the substantial gift of free rent on any of his financial-disclosure forms. He and De Lauro claim that it was just allowable "hospitality" between colleagues. Hospitality - for five years?

My issue with the bolded statement is that it wasn't a "gift" at all if it was an exchange for some sort of arrangement they had.

[KSigkid]

Originally Posted by preciousjeni

"The record is significantly barren of evidence revealing any intention on the part of the payor to make a gift. . . . The only justifiable inference is that the automobile was intended by the payor to be remuneration for services rendered to it by Duberstein."

And how did they come to that conclusion?

"In No. 376, Duberstein, an individual taxpayer, gave to a business corporation, upon request, the names of potential customers. The information proved valuable, and the corporation reciprocated by giving Duberstein a Cadillac automobile, charging the cost thereof as a business expense on its own corporate income tax return. The Tax Court concluded that the car was not a "gift" excludable from income under § 22(b)(3) of the Internal Revenue Code of 1939."


That was my point.

In the Emanuel case,



My issue with the bolded statement is that it wasn't a "gift" at all if it was an exchange for some sort of arrangement they had.

I still think you're interpreting the case incorrectly, but I'm just a law student, not a lawyer (and certainly not a tax lawyer), so take my interpretation for what you will.