Official Lance Armstrong Thread: Part 3 (Post-Confession)

[Scott SoCal]

That's a really good analysis, well done. Thanks for putting the thought and time into it.

A few points though on a cursory look through;

The $2.5m award for legal fees and costs would not be taxable. Only the $5m settlement fee would be. If you are being restored costs to your previous position prior to the litigation those costs are restored in full and you're not taxed. It's a little more complex than this but some of the reasons the award and the "costs" are separated is because they will be treated differently by the IRS.

Interest income whilst taxed at Federal income rates can be deferred and invested to avoid income tax due to the amounts they earn. Although using a federal rate for the example given is fairly normal.

Management fees/commissions are tax deductible but these would have been a regular expense regardless of a SCA paying out or not. Nevertheless the "costs" award by SCA would have covered these off, they would not be due a second time around. You really shouldn't be subtracting those from the SCA credit as SCA paid "costs".

I'm unconvinced on the Ferrari fee. I don't disagree that it most likely wasn't declared but I don't see it that it would be paid in the manner which is was suggested. The article itself says it wasn't "confirmed". If it was made the fact that it was shoveled through Swiss bank accounts gives rise that it was pre-tax income that never saw the light of day in the US.

Whilst the analysis is good the numbers are off.

Let's break this down...

Interest income whilst taxed at Federal income rates can be deferred and invested to avoid income tax due to the amounts they earn.

Interest income whilst taxed at Federal income rates ... ordinary income sometimes depending upon the investment. Sometimes there is no tax on income - municipal bonds as one example.

can be deferred... Tax Qualified plan or simply through holding an investment. Lance would have had reasonably low limits on how much he could plow in to a TQ plan and it's far more likely that his income would have DQ'd him from a TQ plan altogether. Now if you want to say that not selling an asset is the same as tax deferral then be my guest.

Now, what you are trying to say is;

Interest income... can be deferred and invested to avoid income tax due to the amounts they earn.

complete and utter nonsense.

 

[Jack (6 ch)]

Agreed.

But, there remains an interesting question. Could Lance truly have generated enough income on the original settlement ($5m + $2.5m) to cover the penalty?

<pls excuse snip>


Based upon these two cases, it appears that Lance would require something on the order of a 20% annual return if he had wisely invested the original settlement amount.

While 20% is not outside the realm of possibility, there weren't a lot of folks making that kind of financial return during this period of global recession.

.

really interesting approach which caught my eye and made me think... the correct (investment analysis) approach is to address the choice pre deal and think 'risk adjusted rate of return'. BUT I know ambitious young athletes say 'give my life for a medal' (I paraphrase) - they have arguably nothing to lose; I think, in general, no one is really playing a money game at that point (or they are: everything or nothing).


Once you have the money (your analysis) it is a different game - how to stay ahead of damages, legals, taxman (and try saying to taxman err.. that income I overpaid you on....I need some back now...don't ask me why...). Money on deposit rates would not do it for LA since the mid 2000s. Equity indices would struggle . An expensive (dealing/ mgt costs) and well chosen hedge fund type vehicle would have done it. If LA was in the friends & fam group of every Wiesel IPO since those days (and exited cutely into cash) I think he could be WAY ahead - can anyone collect data on west coast IPos?

Oddly. LA did (perhaps) have the unusual option at comeback 2.0. Came back and heightened the risk of losing it all when he had a good stash off the table. That's a separate discussion, though.

 

[thehog]

Let's break this down...



Interest income whilst taxed at Federal income rates ... ordinary income sometimes depending upon the investment. Sometimes there is no tax on income - municipal bonds as one example.

can be deferred... Tax Qualified plan or simply through holding an investment. Lance would have had reasonably low limits on how much he could plow in to a TQ plan and it's far more likely that his income would have DQ'd him from a TQ plan altogether. Now if you want to say that not selling an asset is the same as tax deferral then be my guest.

Now, what you are trying to say is;
.

Which is why I stated the following which you avoided bolding:

Although using a federal rate for the example given is fairly normal.

But I'm glad you agree with the remainder of my posts.

 

[Scott SoCal]

Which is why I stated the following which you avoided bolding:



But I'm glad you agree with the remainder of my posts.

Interest income whilst taxed at Federal income rates can be deferred and invested to avoid income tax due to the amounts they earn.

Please explain how: /interest income/ can be deferred and invested to avoid income tax due to the amounts they earn.

Your example given is nonsense and the follow up sentence does nothing to clear it up.

I can only conclude it's yet more trolling... as is this;

But I'm glad you agree with the remainder of my posts

Now, it's clear you have multitudes of get-out-of-jail-free cards. Why the mods allow you to continue is beyond me. I could see it if you were at least mildly entertaining.

 

[D-Queued]

really interesting approach which caught my eye and made me think... the correct (investment analysis) approach is to address the choice pre deal and think 'risk adjusted rate of return'. BUT I know ambitious young athletes say 'give my life for a medal' (I paraphrase) - they have arguably nothing to lose; I think, in general, no one is really playing a money game at that point (or they are: everything or nothing).


Once you have the money (your analysis) it is a different game - how to stay ahead of damages, legals, taxman (and try saying to taxman err.. that income I overpaid you on....I need some back now...don't ask me why...). Money on deposit rates would not do it for LA since the mid 2000s. Equity indices would struggle . An expensive (dealing/ mgt costs) and well chosen hedge fund type vehicle would have done it. If LA was in the friends & fam group of every Wiesel IPO since those days (and exited cutely into cash) I think he could be WAY ahead - can anyone collect data on west coast IPos?

Oddly. LA did (perhaps) have the unusual option at comeback 2.0. Came back and heightened the risk of losing it all when he had a good stash off the table. That's a separate discussion, though.

Pre-deal risk analysis may have been something like this:

' I am a sure thing. I am paying off all of the choads, have Ferrari on my side, and Hein in my pocket.

These goofballs at SCA don't have a clue. This is in the bag.

...'



IPO's?

Anecdotally, 2006-present has not been good for IPOs. The housing crisis and global recession were a b*tch. The US economy is only finally starting to get going again and the Euro is barely off life support. Cleantech was a darling up until 2006, but most VCs have dropped their practices or downscaled their interest considerably. VC returns generally were pretty poor over this period - reflecting generally poor IPO opportunities / returns.

Now Wiesel did IPO themselves, and initial returns were pretty good.

Which was odd given that just before the IPO, this happened:

Thomas Weisel Restates Earnings

And they did have a bit of an issue just before the original arbitration:

Thomas Weisel Partners to Pay $1.75 Million to Settle NASD Charges of IPO, E-Mail Retention Violations

Then there was this:

San Francisco brokerage accused of sticking unsuspecting customers with $16 million in securities

Ultimately, TWP was acquired in 2010 after suffering an 80% drop in share price over the period. While there was a premium paid over market, you were probably lucky to make your money back had you stayed in the stock since the IPO.

Thus, it is possible that whatever sweetheart deals Lance might have had access to ended up being more sour than sweet.

Dave.

 

[D-Queued]

That's a really good analysis, well done. Thanks for putting the thought and time into it.

A few points though on a cursory look through;

The $2.5m award for legal fees and costs would not be taxable. Only the $5m settlement fee would be. If you are being restored costs to your previous position prior to the litigation those costs are restored in full and you're not taxed. It's a little more complex than this but some of the reasons the award and the "costs" are separated is because they will be treated differently by the IRS.

Interest income whilst taxed at Federal income rates can be deferred and invested to avoid income tax due to the amounts they earn. Although using a federal rate for the example given is fairly normal.

Management fees/commissions are tax deductible but these would have been a regular expense regardless of a SCA paying out or not. Nevertheless the "costs" award by SCA would have covered these off, they would not be due a second time around. You really shouldn't be subtracting those from the SCA credit as SCA paid "costs".

I'm unconvinced on the Ferrari fee. I don't disagree that it most likely wasn't declared but I don't see it that it would be paid in the manner which is was suggested. The article itself says it wasn't "confirmed". If it was made the fact that it was shoveled through Swiss bank accounts gives rise that it was pre-tax income that never saw the light of day in the US.

Whilst the analysis is good the numbers are off.

1. "The $2.5m award for legal fees and costs would not be taxable. ... they will be treated differently by the IRS"

I am not an expert, The IRS is kind of funny in the way that they like to have everything reported.

Perhaps you know differently, but they don't seem to agree with you on their website and do want this reported as regular income:

Court awards and damages. To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. The character of the income as ordinary income or capital gain depends on the nature of the underlying claim. Include the following as ordinary income.

7. Attorney fees and costs

Presumably they do let you subtract your actual Attorney fees and costs from any award that an Arbitration Board might assign.

Anyhow, even if the $2.5 were clear of the IRS then we would be looking at something like the Case #2 example above. Still comes out to about a 20% return that is required.

2. "Interest income whilst taxed at Federal income rates can be deferred and invested to avoid income tax"

i don't want to sound inflammatory, but that will be the day.

Interest income and dividend income must be reported. This cannot be sheltered. Period.

3. "Management fees/commissions are tax deductible but these would have been a regular expense regardless of a SCA paying ..."

I am trying to apply a form of 'cash accounting', or direct accounting, here. I was not intending to include whatever Management fees Lance might have otherwise paid at the time, or even prior to the Arbitration decision. Nor was I looking to include whatever he paid as a 'fixed fee' to his agents to negotiate with SCA. Rather, what costs would he have incurred as a result of the $5m payment itself once it was made. in other words, what variable cost was directly associated with this?

He almost certainly would have had to pay some sort of 'success fee' or commission to his agent(s). Though he is said to be of lower intelligence, it would be a really strange thing to have paid variable commission on the bonus payment ahead of receiving it from SCA.

PLEASE NOTE: I also did NOT include the cost of obtaining the policy itself for similar reasons. This had already been paid to SCA prior to the Arbitration decision. Thus, it is a 'sunk cost' with respect to the return and "pot of gold" Lance might have generated with the SCA payment.

4. "I'm unconvinced on the Ferrari fee. I don't disagree that it most likely wasn't declared but I don't see it that it would be paid in the manner which is was suggested. ..."

You could be right, and it could be that the Ferrari fee was totally unrelated or that it didn't really happen.

Given what we know, however, it is logical that a fee was paid Ferrari. We know from other sources that Ferrari's contract was a percentage of Lance's 'winnings'. Moreover, the amount of this apparent payment appears to correlate well with the SCA payment in terms of amount and timing.

Occam's Razor.

Ultimately, though, even if you take Ferrari's fee out of the calculations, Lance still would need a return of around 20% in order to have a large enough "pot of gold" to pay the $10m.

Please feel free to check the calculations yourself to confirm this.

Dave.

 

[spetsa]

Please explain how: /interest income/ can be deferred and invested to avoid income tax due to the amounts they earn.

Your example given is nonsense and the follow up sentence does nothing to clear it up.

I can only conclude it's yet more trolling... as is this;



Now, it's clear you have multitudes of get-out-of-jail-free cards. Why the mods allow you to continue is beyond me. I could see it if you were at least mildly entertaining.

No sh*t. There is a reason that this is what it the forum has turned into. Why, who knows. The reason that there are so few active posters is obvious.

 

[RobbieCanuck]

No sh*t. There is a reason that this is what it the forum has turned into. Why, who knows. The reason that there are so few active posters is obvious.

I am one of those former posters who has just given up trying to have a reasonable discussion about doping. This forum is the same old, same old, with the moderators making the same old admonitions ad infinitum. Trolling, abuse and BS. I once suggested to Afrank the Clinic be shut down. I only read it occasionally for the laughs and the good posts of Race Radio and Merck Index.

The Hog, Chewie, Mark W, and D-Queued debacle is just another sign of the ongoing dysfunction, which drew the predictable moderator comment,

" Everyone please stop with the insults and off topic posts, thank you.
Today 08:05"

Ho Hum!

 

[thehog]

Please explain how: /interest income/ can be deferred and invested to avoid income tax due to the amounts they earn.

Your example given is nonsense and the follow up sentence does nothing to clear it up.

I can only conclude it's yet more trolling... as is this;

Now, it's clear you have multitudes of get-out-of-jail-free cards. Why the mods allow you to continue is beyond me. I could see it if you were at least mildly entertaining.

The discussion is excellent. D-Queued contributions are extremely good. Why you're trying to make this personal is beyond me. It's only he Armstrong thread this occurs in.

Is this topic so important to you that you need to lobby for bans because you & I see differently? Interpretations or tax law are always complex. Often there is no wrong or right.

A good tax auditor doesn't hold bias. Your judgement is clouded. You're trying to hold worst case scenario for Armstrong and you get angry if someone posts that the reality might not fit that situation.

Don't get angry with me. Its law. If SCA didn't make the bet in the first, the situation wouldn't exist. My sense is you're making excuses for them.

Let's hope they eventually get their money back but don't hold it against me.

 

[thehog]

1. "The $2.5m award for legal fees and costs would not be taxable. ... they will be treated differently by the IRS"

I am not an expert, The IRS is kind of funny in the way that they like to have everything reported.

Perhaps you know differently, but they don't seem to agree with you on their website and do want this reported as regular income:



Presumably they do let you subtract your actual Attorney fees and costs from any award that an Arbitration Board might assign.

Anyhow, even if the $2.5 were clear of the IRS then we would be looking at something like the Case #2 example above. Still comes out to about a 20% return that is required.

2. "Interest income whilst taxed at Federal income rates can be deferred and invested to avoid income tax"

i don't want to sound inflammatory, but that will be the day.

Interest income and dividend income must be reported. This cannot be sheltered. Period.

3. "Management fees/commissions are tax deductible but these would have been a regular expense regardless of a SCA paying ..."

I am trying to apply a form of 'cash accounting', or direct accounting, here. I was not intending to include whatever Management fees Lance might have otherwise paid at the time, or even prior to the Arbitration decision. Nor was I looking to include whatever he paid as a 'fixed fee' to his agents to negotiate with SCA. Rather, what costs would he have incurred as a result of the $5m payment itself once it was made. in other words, what variable cost was directly associated with this?

He almost certainly would have had to pay some sort of 'success fee' or commission to his agent(s). Though he is said to be of lower intelligence, it would be a really strange thing to have paid variable commission on the bonus payment ahead of receiving it from SCA.

PLEASE NOTE: I also did NOT include the cost of obtaining the policy itself for similar reasons. This had already been paid to SCA prior to the Arbitration decision. Thus, it is a 'sunk cost' with respect to the return and "pot of gold" Lance might have generated with the SCA payment.

4. "I'm unconvinced on the Ferrari fee. I don't disagree that it most likely wasn't declared but I don't see it that it would be paid in the manner which is was suggested. ..."

You could be right, and it could be that the Ferrari fee was totally unrelated or that it didn't really happen.

Given what we know, however, it is logical that a fee was paid Ferrari. We know from other sources that Ferrari's contract was a percentage of Lance's 'winnings'. Moreover, the amount of this apparent payment appears to correlate well with the SCA payment in terms of amount and timing.

Occam's Razor.

Ultimately, though, even if you take Ferrari's fee out of the calculations, Lance still would need a return of around 20% in order to have a large enough "pot of gold" to pay the $10m.

Please feel free to check the calculations yourself to confirm this.

Dave.

That's a really good post, thank-you.

Will read it some more and add to it once digested.

To the last part, bolded. If Lance never came back it would have been a winning albeit fraudulent bet. Lance finds himself where he is today by heading back to the table for one more gamble. Made one enemy too many then they all came rushing back to claim. Question is; can he hold on and not give back or a portion thereof? I don't like his chances and it must be extremely stressful.

 

[ChewbaccaD]

Please explain how: /interest income/ can be deferred and invested to avoid income tax due to the amounts they earn.

Your example given is nonsense and the follow up sentence does nothing to clear it up.

I can only conclude it's yet more trolling... as is this;



Now, it's clear you have multitudes of get-out-of-jail-free cards. Why the mods allow you to continue is beyond me. I could see it if you were at least mildly entertaining.

As much as we don't get along in the other thread, I freaking love you here.

 

[thehog]

1. "The $2.5m award for legal fees and costs would not be taxable. ... they will be treated differently by the IRS"

I am not an expert, The IRS is kind of funny in the way that they like to have everything reported.

Perhaps you know differently, but they don't seem to agree with you on their website and do want this reported as regular income:

Presumably they do let you subtract your actual Attorney fees and costs from any award that an Arbitration Board might assign.

Please feel free to check the calculations yourself to confirm this.

Dave.

The IRS expects you to declare all income, whether taxable or not. They will make the determination on the deductibility. So in this case the $2.5m for costs would be declared but not taxed.

For example in 2006 if Armstrong spent $1m in legal fees to take SCA to arbitration in the given year; he would declare the gain as income and he would also ask for the deduction of the $1m legal fees paid. The IRS would allow the $1m income not to be taxed as its restores the costs he shouldn't have had to pay to make SCA provide the monies owed by their contract (doping and fraud aside for the moment).

The IRS however would not then provide the deduction as the income wasn't actually received in terms of a gain.

The next interesting part is if Armstrong has to pay $10m in the recent hearing as a sanction and has already paid tax on the $5m, he doesn't get a credit for what ha been paid, then does SCA have to pay tax? You would say no because they gave up the $5m years ago, but $10m would be a gain from the $7.5 and its a sanction rather than an award. I'll have to have a think about this one...

 

[Scott SoCal]

As much as we don't get along in the other thread, I freaking love you here.

Thanks. I'm very lovable.

 

[sittingbison]

the enema of meine enemy is my freunde?

I think not gents. Please resist the urge to attack other members, even if you know they are trolling or baiting. Report offending posts instead, and use the ignore feature.

cheers
bison

 

[Scott SoCal]

The IRS expects you to declare all income, whether taxable or not. They will make the determination on the deductibility. So in this case the $2.5m for costs would be declared but not taxed.

For example in 2006 if Armstrong spent $1m in legal fees to take SCA to arbitration in the given year; he would declare the gain as income and he would also ask for the deduction of the $1m legal fees paid. The IRS would allow the $1m income not to be taxed as its restores the costs he shouldn't have had to pay to make SCA provide the monies owed by their contract (doping and fraud aside for the moment).

The IRS however would not then provide the deduction as the income wasn't actually received in terms of a gain.

The next interesting part is if Armstrong has to pay $10m in the recent hearing as a sanction and has already paid tax on the $5m, he doesn't get a credit for what ha been paid, then does SCA have to pay tax? You would say no because they gave up the $5m years ago, but $10m would be a gain from the $7.5 and its a sanction rather than an award. I'll have to have a think about this one...

Don't think. You're killing everybody.

The first two sentences are asinine. All income is declared as such and expenses are deducted. Expenses either pass audit scrutiny or they don't.

I can declare and deduct anything I want as an expense. Whether it passes audit is another thing altogether. If it's out of line and unsupportable then I risk going to the pokey for evasion.

So in this case the 2.5 million was expensed and I doubt if LA was ever challenged by IRS audit.

Again, if you insist on au bloc trolling please make a greater attempt at being entertaining.

 

[Scott SoCal]

I think not gents. Please resist the urge to attack other members, even if you know they are trolling or baiting. Report offending posts instead, and use the ignore feature.

cheers
bison

Just saw this.

 

[D-Queued]

...

The next interesting part is if Armstrong has to pay $10m in the recent hearing as a sanction and has already paid tax on the $5m, he doesn't get a credit for what ha been paid, then does SCA have to pay tax? You would say no because they gave up the $5m years ago, but $10m would be a gain from the $7.5 and its a sanction rather than an award. I'll have to have a think about this one...

I would not say no.

I would say yes.

Ok?

Consistent with the IRS policy in the same link already provided above, only this time as specified under #3 Punitive damages.

Punitive damages are not excludable from gross income under IRC ? 104(a)(2).
With the enactment of SBJPA, Public Law 104 -188, Section 1605(a) in 1996, Congress made it clear in IRC ? 104(a)(2) that punitive damages are taxable, regardless of the nature of the underlying claim.

The more interesting question is whether Lance will have enough income to be apply the full amount of the tax deduction he may qualify for under as a result of the $10m sanction.

Dave.

 

[skippythepinhead]

Note: the following post is not about cycling, news, Lance Armstrong, or doping, the ostensible reason for this thread. Feel free to ignore for that reason alone.

The IRS expects you to declare all income, whether taxable or not.

^Example of non-fact based assertion in opening sentence.

(See: IRS publication 4345)

The absolute declarative nature and prominence of the assertion lacking a basis in fact or understanding of the "expectations" of "the IRS," might lead someone to investigate some of the other claims and analysis in that post more in-depth. But, as an indication of the potential value of such an exegesis and of the information and opinion contained in the balance of the post, res ipsa loquitur.

I don't know that the "report" or "ignore" functions truly work in the manner the mods/admins are suggesting. If anyone has followed the Wikipedia arbcom on the Gamergate entry, you can see the problems arising out of creating a false equivalency based on the notion of "balance," or "fairness."

I tend to agree with those posters critical of the "you play nice now, kids, or we'll come back in 5 minutes and tell you to play nice again" approach. Since I have never been able to embody the level of maturity and judgment required to participate in moderating or administering a discussion forum, I can only imagine the difficulties such situations pose--and I am being serious. Speech and fairness are serious issues to me.

My first instinct is always for open dialogue. I can also see the point made about toothless adminitions. Since my opinion on action has not been solicited, I will not provide it, but there are a host of issues at work that do go to overall effectiveness of The Clinic as an attractive and welcoming place to discuss the important issues raised here--well, in the thread titles anyway.

Have a good day.

 

[blackcat]

But, as an indication of the potential value of such an exegesis and of the information and opinion contained in the balance of the post, res ipsa loquitur.

I don't know that the "report" or "ignore" functions truly work in the manner the mods/admins are suggesting. If anyone has followed the Wikipedia arbcom on the Gamergate entry, you can see the problems arising out of creating a false equivalency based on the notion of "balance," or "fairness."...

...
snipped, resection...

serious. Speech and fairness are serious issues to me.

^^^Rocket Roger Ailes disputes skippy and skippy's post.

I dont even think skippy is a genuine Australian kangaroo with a smallhead, oh the shock horror and heights of hypocrisy.

edgar allan poe's law
#erythropoietin
hashtags

when one thinks of Roger Ailes
one thinks of Henry Kissinger
when one thinks of,.... no scrap that. I mean, when one thinks Roger Ailes of Richard Nixon.
When one thinks of Richard Nixon, they think of Tricky Dicky and they think of Hollywood memes of bank robberies and plastic masks, this must be some screenwriter inside joke on MArk Felt or whatever he was called and WaterGate. And the masks Patrick Swayze wore of TRicky Dicky in Point Break and the really sh1tty simulcra of Bells Beach near Cuddles house on on the Great Cuddles Granfondo Tour Classic..

Roger Ailes, might just be the best political advisor and organiser since Karl Rove.

 

[blackcat]

I think not gents. Please resist the urge to attack other members, even if you know they are trolling or baiting. Report offending posts instead, and use the ignore feature.

the enema of meine enemy is my freunde?

cheers
bison

SB, tell me when suppositories were enemas? seriusly.

 

[blackcat]

^^^Rocket Roger Ailes disputes skippy and skippy's post.

I dont even think skippy is a genuine Australian kangaroo with a smallhead, oh the shock horror and heights of hypocrisy.

edgar allan poe's law
#erythropoietin
hashtags

when one thinks of Roger Ailes
one thinks of Henry Kissinger
when one thinks of,.... no scrap that. I mean, when one thinks Roger Ailes of Richard Nixon.
When one thinks of Richard Nixon, they think of Tricky Dicky and they think of Hollywood memes of bank robberies and plastic masks, this must be some screenwriter inside joke on MArk Felt or whatever he was called and WaterGate. And the masks Patrick Swayze wore of TRicky Dicky in Point Break and the really sh1tty simulcra of Bells Beach near Cuddles house on on the Great Cuddles Granfondo Tour Classic..

Roger Ailes, might just be the best political advisor and organiser since Karl Rove.

they also might think of Rupert Murdoch and Wendi Deng and nighttime rendevous (is that the plural?) with Tony Blair. he has a nice @rse so I was made aware

 

[skippythepinhead]

^^^Rocket Roger Ailes disputes skippy and skippy's post.

I dont even think skippy is a genuine Australian kangaroo with a smallhead, oh the shock horror and heights of hypocrisy.

edgar allan poe's law
#erythropoietin
hashtags

when one thinks of Roger Ailes
one thinks of Henry Kissinger
when one thinks of,.... no scrap that. I mean, when one thinks Roger Ailes of Richard Nixon.
When one thinks of Richard Nixon, they think of Tricky Dicky and they think of Hollywood memes of bank robberies and plastic masks, this must be some screenwriter inside joke on MArk Felt or whatever he was called and WaterGate. And the masks Patrick Swayze wore of TRicky Dicky in Point Break and the really sh1tty simulcra of Bells Beach near Cuddles house on on the Great Cuddles Granfondo Tour Classic..

Roger Ailes, might just be the best political advisor and organiser since Karl Rove.

Impressive, plus you don't sweat that much for a fat chick.

 

[D-Queued]

Note: the following post is not about cycling, news, Lance Armstrong, or doping, the ostensible reason for this thread. Feel free to ignore for that reason alone.

The IRS expects you to declare all income, whether taxable or not. ...

^Example of non-fact based assertion in opening sentence.

(See: IRS publication 4345)

The absolute declarative nature and prominence of the assertion lacking a basis in fact or understanding of the "expectations" of "the IRS," might lead someone to investigate some of the other claims and analysis in that post more in-depth. But, as an indication of the potential value of such an exegesis and of the information and opinion contained in the balance of the post, res ipsa loquitur.

I don't know that the "report" or "ignore" functions truly work in the manner the mods/admins are suggesting. If anyone has followed the Wikipedia arbcom on the Gamergate entry, you can see the problems arising out of creating a false equivalency based on the notion of "balance," or "fairness."

I tend to agree with those posters critical of the "you play nice now, kids, or we'll come back in 5 minutes and tell you to play nice again" approach. Since I have never been able to embody the level of maturity and judgment required to participate in moderating or administering a discussion forum, I can only imagine the difficulties such situations pose--and I am being serious. Speech and fairness are serious issues to me.

My first instinct is always for open dialogue. I can also see the point made about toothless adminitions. Since my opinion on action has not been solicited, I will not provide it, but there are a host of issues at work that do go to overall effectiveness of The Clinic as an attractive and welcoming place to discuss the important issues raised here--well, in the thread titles anyway.

Have a good day.

Very well stated. And, in general, I agree with you.

The point being debated is whether or not Lance has a pot of gold from the original settlement.

According to the forum rules, or at least their application, the poster making the assertion is allowed to defend that statement. And, to defend it no matter how truthful, knowledgeable, or even well thought out or well constructed their arguments may be.

It is quite possible, of course, that the original hypothesis is itself a troll and the defense is being laughably promoted at our collective expense.

But, Lance's self-worth, it having been built on the massive fraud that he perpetrated, and the actual disposition of that very large cash award are deserving, and even begging, for dialog.

Unfortunately, that translates such that even if the defense is poor and the assertions wild, we still have to put up with it.

NOTE: You did not provide a link or a quote for the IRS' actual position on reporting of non-taxable income. Nor did I respond to the post that your extract is from. However, it may be worth going through that post, point-by-point. Even if it is only to underscore the headline in this morning's USA Today:

Bad Advice costs billions.

Just because someone states something here doesn't mean that it is true or that the poster has the faintest inkling of what they are talking about.

Dave.

 

[thehog]

Bad Advice costs billions.

The issue really boils down to what M.Index had posted. He introduced the topic to the Clinic. From there it's fair game and open for discussion.

The issue isn't really that I'm attempting to suggest Armstrong has made millions, its more that many are trying to downplay the significance of receiving the money and having it for some time.

At this point he has not had to give the money back. He still has it and that position could remain. Whether its $7.5m or $2.5m or $5m he still has the money. That is unquestionable. He may have spent it, he may have invested it or may have not touched it. But he still has the money or had the benefit of the money, spent or invested.

In layman terms if you win $5m in the lottery you'll be taxed. But you still have a sizeable amount left over. No one here would deny themselves of $5m lottery windfall.

The argument portrayed here is the gratuitous attempt to make the number as small as possible because people can't stand the fact that Armstrong gained mostly from SCAs bad bet in the first place. Similar to the claims made that Armstrong never donated to his own charity, people want to believe that to be the case and they state it as "FACT". But its not actually true know matter how much we hate him.

Armstrong committed fraud to gain the money. He certainly doesn't deserve to hold on to it and most likely will pay a bigger price if he has to give it back but we can never get away from the fact that he has had a sum in the millions now for 9 years for doing next to nothing.

I think we all enjoy the speculation and the number crunching is fun. And it might boil down to, If you were offered you $5m lump sum in taxed income in 2006 to pay back $10m ten years later, would you take it??

The fact that everyone is trying so hard to make me wrong just shows that I'm actually right. Its not support of Armstrong. I've kicked him around plenty but we should at least acknowledge SCA part in putting the cash on the line to a doping fraud in a sport which has had significant doping problems for most of its history. Armstrong is fraud, a cheat and liar and SCA should have known better.

 

[D-Queued]

In deference to Skippy, because he/she took the time to form an incredibly well thought out post, it may be worth reviewing Skippy's cited example in a point-by-point form:

(Note to reader: Numbers (1,2,3...) have been inserted for the purposes of the discussion that follows)

The IRS expects you to declare all income, whether taxable or not. They will make the determination on the deductibility. (1) So in this case the $2.5m for costs would be declared but not taxed. (2)

For example in 2006 if Armstrong spent $1m in legal fees to take SCA to arbitration in the given year; he would declare the gain as income and he would also ask for the deduction of the $1m legal fees paid. (3) The IRS would allow the $1m income not to be taxed as its restores the costs (4) he shouldn't have had to pay (5) to make SCA provide the monies owed by their contract (doping and fraud aside for the moment).

The IRS however would not then provide the deduction as the income wasn't actually received in terms of a gain. (6)

The next interesting part is if Armstrong has to pay $10m in the recent hearing as a sanction and has already paid tax on the $5m, he doesn't get a credit for what ha been paid (7), then does SCA have to pay tax? You would say no (8) because they gave up the $5m years ago (9), but $10m would be a gain from the $7.5 (10) and its a sanction rather than an award (11). I'll have to have a think about this one...

Please note that all of the Numbered items in the above quoted post are wholly or partially incorrect. Thus, readers of this post can simply stop here and do not need to consider the explanations and clarifications on these items that are provided below.


---



1. "The IRS expects you to declare all income, whether taxable or not."

Incorrect, as highlighted by Skippy above.

From IRS Publication 525:

"Income that is taxable must be reported on your return and is subject to tax. Income that is nontaxable may have to be shown on your tax return but is not taxable..."

In other words, depending on the nature of the income and the tax status of the person, certain income may not have to be declared. There are many types of such income, and Publication 525 can be referenced to understand these in greater detail.

2. "So in this case the $2.5m for costs would be declared but not taxed."

As noted in a previous post above, the $2.5m must be declared as income.

Whether and how much tax is applied on that $2.5m depends on the amount and nature of "allowable" expenses that may offset that income in whole or in part as well as the tax status of the individual reporting the income and how and when the costs were incurred and reported as well as to what extent the IRS allows year-over-year restatements of income, etc.

It is possible that allowable costs actually exceeded the $2.5m award, for example. In which case the net impact on the individual would be a tax benefit that could be applied to other income.

3. "he would declare the gain as income and he would also ask for the deduction of the $1m legal fees paid."

Yes, he would declare the $1m in the example as income in the year it was received, even if he had not yet deposited it.

With respect to the legal fees, he would need to provide the appropriate tax schedule to accompany his Return that would list the various expenses along with accompanying receipts. The IRS would review that schedule, and the receipts, to determine if they were eligible expenses. If eligible, they would be applied 'above the line' to the pre-tax income which may or may not include the $1m in the example.

4. "The IRS would allow the $1m income not to be taxed as its restores the costs"

The IRS does not do this kind of matching and really doesn't care about whether anyone restores their costs. The amount of the eligible expenses may exactly offset the income, or not. Eligibility of the declared expenses will be determined by the IRS.

5. "he shouldn't have had to pay"

The IRS does not make moral judgments nor do they make legal judgments, and really doesn't care about whether he should have received a settlement or not. They only care about net taxable income.

6. "The IRS however would not then provide the deduction as the income wasn't actually received in terms of a gain"

Ok, trying to avoid anything inflammatory as this statement does appear very confusing.

As discussed in previous posts, and again here taxable income must be reported. The net income upon which tax is due can be reduced through the application of allowable expenses.

7. "if Armstrong has to pay $10m in the recent hearing as a sanction and has already paid tax on the $5m, he doesn't get a credit for what ha been paid"

Armstrong should already have been 'credited' for the $5m in income (less any allowable expenses), assuming that he reported this correctly. The $10m sanction will be treated as a separate matter. Please refer to previous posts above from a variety of different Forum members for insightful discussions about the $10m.

8. "then does SCA have to pay tax? You would say no"

No, as noted above, I would say yes. Yes, the SCA would have to report this as taxable income. Only if their allowable expenses on this matter matched or exceeded the $10m would they not have any tax liability.

9. "because they gave up the $5m years ago"

These are separate matters, reported in separate tax years.

10. "but $10m would be a gain from the $7.5"

Separate matters, reported in separate tax years.

11. "and its a sanction rather than an award"

The IRS does not make moral judgments nor do they make legal judgments.

Dave.