Tax Expert: Palin Has to Declare Clothes

By Natalie Gewargis

Oct 22, 2008 3:38pm

I just got off the phone with a well-respected and well-known tax attorney who doesn’t want to be identified.

I asked him earlier in the day whether Alaska Gov. Sarah Palin can avoid paying taxes on the $150,000 worth of clothes the RNC bought her, as she and the RNC maintain. (They said the RNC now owns the clothes; she’s just borrowing them.)

He said that, after consulting with a number of experts at his prominent firm, he thinks the RNC and Gov. Palin are wrong.

"It’s probably not a ‘gift,’" he said. "The issue is whether it counts as ‘income.’"

Palin’s claim that the pricey duds belong to the RNC and she’s just "borrowing" them and will return them later, reminds him, he says, of some of the issues going on in the prosecution of Sen. Ted Stevens, R-Alaska. (Some of the issues, he specified, not the allegations of criminality.)

"This is exactly the issue with the Stevens case," he said. "When you loan something to someone can you call it a ‘loan’ if, upon its return, it has no practical value?

"The consensus view is she would have to count the wardrobe as income at least in the amount of the fair value of the rental of the wardrobe," he said.

He added that the law is clear that uniforms — "big brown suits with your name on them" — don’t qualify as income, but it would be hard to make the argument that fancy dress suits from Saks Fifth Avenue and Nieman Marcus are a uniform.

"Especially since Palin is employed by the state of Alaska and not the RNC," he said.

- jpt

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