Nicolas Cage Settles with IRS

Sept. 5, 2008— -- LOS ANGELES -- Nicolas Cage, who plays a jaded hit man in his new movie opening Friday, Bangkok Dangerous, has agreed to pay substantial back taxes and penalties to the U.S. Internal Revenue Service, which said that for years he improperly deducted personal expenses.

In papers filed in U.S. Tax Court, Cage and his Los Angeles-headquartered Saturn Productions said they would pay $666,000, plus unspecified interest. Nearly one-fifth of the base amount, or $99,000, is an "accuracy-related" penalty for "negligence or disregard of the rules."

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Forbes was the first to report in February that Cage, under his legal name of Nicolas Coppola, and his company filed parallel U.S. Tax Court cases contesting IRS determinations that he wrongly wrote off $3.3 million in personal expenses from 2002 to 2004, including limos, meals, gifts, travel and his Gulfstream 1159A turbojet. The IRS was seeking a total of $1.8 million in back taxes and penalties, plus interest. However, because of double counting, the amount actually at issue, exclusive of interest, was likely closer to $1 million.

At the time, Cage's business manager, Samuel J. Levin, defended the deductions as "customary in the entertainment industry" and based in part on the actor's "security needs."

Cage's representatives did not respond immediately on Friday to requests for comment on the settlements. The 20% penalty in the settlements, which a Tax Court judge approved in early August, makes clear that the IRS considered the matter a case of noncriminal negligence rather than something more grave.

By Tax Court standards, the Cage complaints made for colorful reading, especially about his opulent lifestyle. He listed $185,000 in employment taxes for household help while the IRS disputed upward of $500,000 spent on his oft-photographed jet. In 2004, the year he starred in National Treasure, Cage listed his 2004 taxable income as $17 million. (The IRS thought it was $18.5 million.)

After a seven-year absence, Cage returned this summer to the Forbes Celebrity 100 list, which measures money and fame. He was ranked No. 49, with estimated 12-month pay of $38 million.

In addition to his starring role in Bangkok Dangerous, a remake of a 1999 thriller, Cage is its co-producer.