Robert Redford Battling New York Over Massive Tax Bill From 2005 TV Sale

Robert Redford Battling New York Over Massive Tax Bill From 2005 TV Sale

One of the most irritating things the IRS can do is seek back taxes for taxes you already paid. That is essentially what Robert Redford claimed happened when he sold a 20 percent stake in the Sundance Channel back in 2005. Mr. Redford was recently assessed a $1.6 million tax bill by the state of New York for the sale. Mr. Redford already paid taxes on the 2005 sale to the state of Utah.

Mr. Redford argues in his lawsuit against the tax bill that Sundance Channel had no property, payroll, or receipts in New York and therefore owed no taxes to New York for the sale. Though, the Sundance Channel is a limited liability company registered in New York. Nevertheless, Mr. Redford’s stake in the channel was through an “S corporation,” which only requires shareholders to claim losses or gains on their income-tax returns, according to Forbes.com

Mr. Redford is arguing on a fundamental principle – he should not be subject to double taxation. He already paid taxes on the sale; it appears New York just wants to get a slice of the proverbial pie. Mr. Redford’s argument does not seem to be unreasonable.

Mr. Redford isn’t the only celebrity facing gigantic tax bills. Professional Golfer Phil Mickelson won the British Open in 2013 and was subject to a whopping 60% in taxes. How so? Well, Mr. Mickelson had to pay 44.02% to the United Kingdom for his $2.1 million in winnings. The U.K. also got to tax a portion of Mr. Mickelson’s endorsement income for the two weeks he was in Scotland playing in the tournament,according to Forbes.com

Though, Mr. Mickelson was able to take advantage of a foreign tax credit on his tax return so he is not double-taxed at the federal level on his winnings. Nevertheless, he will still have to pay a 13% state tax and a 2.9% self-employment tax.

So what does all this mean? Well, if you have high earnings, or are involved, in a large financial transaction, consult with an attorney or firm to review your exposure to potential state, federal, and even international taxation.