By John Halterman
In China, it's a curse to say "may you live in interesting times." If that's so, 2020 is surely cursed. It all started with coronavirus in January or thereabouts. April brought the murder hornets to Washington State. (They might still be only in Washington, but they're murder hornets.) And last week brought news that yet another unarmed African-American man died in police custody, sparking unrest across the country. You can't be faulted for thinking the two smartest men in the universe right now are the Space-X astronauts who literally left the planet on Saturday afternoon.
With all of that grim fare getting grimmer, it's good to know there's some lighter news to put a smile on our faces. Last week we saw one we knew we had to cover: a singer selling a piece of her soul for the bargain price of $10 million (or best offer) as part of a sale of her artwork at a gallery in Los Angeles.
Claire Elise Boucher - better known as Grimes - isn't afraid to march to the beat of a different drummer. She and her boyfriend, tech entrepreneur Elon
Musk, just changed the spelling of their newborn baby boy's name to X Æ A-Xii (pronounced "Ex-Eye Eye," of course) because the state of California churlishly wouldn't let them go with first-choice X Æ A-12. (It seems they don't allow numerals). But her offer to sell her soul raises so many tax questions we don't even know where to start.
For starters, what exactly is a soul, and how should that sale be taxed? It's certainly not a tangible asset like a business, real estate, or a Picasso. Tax professionals are mainly looking for guidance from Section 197, which governs self-created intangibles like goodwill. Her soul might also resemble intellectual property, like patents, trademarks, and logos. Sadly for Grimes, she can't have any basis in the asset, which means she'll owe tax on her entire $10 million.
How will Grimes' buyer treat her soul? Surely they'll want to depreciate their investment. But how long do you depreciate something like a soul with no useful life? Would that make it nondepreciable like land? (Don't get caught up in the technicalities here. We're just riffing.)
Grimes may be the first celebrity to offer her soul for sale, especially at such a high price. But soul-selling has a long, distinguished history. In Christopher Marlowe's tragic play Doctor Faustus, the title character strikes a deal (in blood, no less) with the devil: 24 years of life to command the demon Mephistopheles as his servant and use magic, in exchange for his soul and eternal damnation at the end. That transaction, of course, is covered by Section 83, which governs property transferred in connection with services.
Tax treatment changes again if you gamble your soul. In Charlie Daniels classic
barn-burner, "The Devil Went Down to Georgia," the Devil tells Johnny:
"I'll bet a fiddle of gold against your soul, 'cause I think I'm better than you." Hell breaks loose in Georgia and Johnny wins, or it wouldn't be much of a song. Gambling wins are taxable, of course. But odds are poor that the Devil issued a W-2G, which is required for bets that pay $600 if the winnings are more than 300 times the original wager. And we can assume the unsophisticated Johnny neglected to report his win on his own.
Here's hoping Grimes is getting smart tax-planning advice before she sells. You should do the same any time you sell a business, real estate, or any other big-ticket item. You don't want to turn 2020 from the biggest payday of your life into the biggest tax bill of your life. (Did we mention the murder hornets?)
John Halterman, best-selling author and nationally published blogger, has been featured as a financial guest expert on the shows of self-help gurus Brian Tracy and Jack Canfield, author of Chicken Soup for the Soul, and has appeared on ABC, FOX, BRAVO, NBC, CBS, and A&E. John is the expert host of the weekly WDTV News 5 segment “Solutions 4 Financial Independence.”
As an authority on wealth management, he has been invited by hundreds of institutions such as universities, federal agencies, professional associations, and large energy and utility corporations to be a guest speaker and educational event host. Event topics include retiring ready, managing down market investment risk, how to reduce your tax burden, and transferring your family wealth in the most tax advantageous way.
John is the founder and owner of Beacon Wealth Management, specializing in helping entrepreneurs, professional practitioners, and retirees overcome the 5 major challenges facing successful families. He is a warm communicator with a passion for helping people transform their financial futures. John understands the multifaceted set of financial worries people face as they become more successful and enter the Retirement Red Zone. He empathizes personally with each client and delivers a collaborative client experience that empowers people to reach their life goals.
With more than two decades of experience, John’s professional credentials include Certified Wealth Strategist, Accredited Investment Fiduciary, Certified Estate Planner, Chartered Federal Employee Benefits Consultant, Professional Plan Consultant, and Registered Financial Consultant. He is also a past member of Ed Slott’s Master Elite IRA Study Group.
A native of Weston, West Virginia, John served in the United States Air Force prior to becoming a wealth advisor. Today, he resides with his family in Clarksburg, West Virginia. He and his wife, Lisa, have been married since 2005 and have three amazing children. A family-oriented man, he enjoys giving back to his community, coaching youth sports, landscaping, architectural design, and playing racquetball.