Friday, March 3

It's a wonderful night for Oscar, and the IRS.

There was an interesting article in the New York Times a few weeks ago on Hollywood indulgence at award shows, which is as good a topic as any for an Oscar weekend post. So, hop aboard the award show gravy train and prepare to be surprised and amazed.

The article begins with a short profile of Lash Fary (you can't make this kind of stuff up), who is credited with first inveigling companies to give rich celebrities free luxury items--and to pay him a hefty fee for the privilege of doing so. The White House should hire this man pronto; he'll have the media making donations to the RNC for the privilege of doing puff pieces on Cheney's huggable side by St. Paddy's Day.

The companies pay Mr. Fary $20,000 to give away their wares in back stage "interactive gifting suites" or a mere $6,000 to have them included in the gift baskets given to presenters and performers. So, let's assume the Grammy's had a dozen bling-hawkers in its "interactive gifting suite" and another dozen products in its "thank you basket." In one night, Mr. Fary pocketed an easy $312,000. And it's not like he had to pound the pavement or endure the humiliation of cold-calling Donatella Versace to procure the goods--according to the article, "companies vie for the opportunity to be included." So, for a few days of "Sorry Mr. Lauren, but we're going with Brioni ties this year," Mr. Fary makes more than the leader of the free world.

And don't let the clinical term "interactive gifting suite" fool you, these rooms are Aladdin's caves with a velvet rope. What sort of freebies can Oscar presenters and performers expect? At the Grammys, Gibson Guitars gave away, well, Gibson Guitars ($3,000 value), and gift baskets at the Golden Globes included cruises to Antarctica and Tasmania ($22,000 value). And at the Screen Actors Guild awards, Don Cheadle is described as stopping by the gifting suite "to collect a pearl, multistranded bracelet from an exclusive Los Angeles boutique and a trip for five nights to a Bora Bora resort." Thank you very much.

This year's Grammy gift baskets were worth $54,000 each, an amount topped by the Golden Globes, who doled out baskets worth $62,000. This year's Oscars will not have a gifting suite, but the gift baskets will include "a three-night stay at the Mirage Hotel in Las Vegas, a coupon for Lasik eye surgery and a set of high-thread-count bed linens." And best-actress nominees are reportedly receiving $20,000 diamond-encrusted cameras. Attending an awards show in Hollywood is more lucrative than being in the audience on Oprah, and possibly even less work.

But all these gifts come with a catch. The article quotes Lee Sheppard, a contributing editor to the tax journal Tax Notes thus: "Queen Latifah is not getting a gift; Queen Latifah is getting income . . . [t]ax law does not recognize this as a gift." I remember this lesson from the income tax class I took at law school and to this day I can't watch a housewife from Scottsdale win a . . . BRAND . . . NEW . . . Winnebago on The Price is Right without wondering if she has the cash to pay for the extra income tax she'll owe this year. I certainly don't.

When Hollywood stars accept a $62,000 gift basket for presenting an award, the hidden surprise is a $21,700 tax liability. With the proliferation of awards shows between New Years and March, this liability could add up quickly for a popular presenter or performer. $21,700 here and $21,700 there, and, as Everett Dirksen said, pretty soon you're talking real money.*

Tax issues aside, the question I kept asking myself as I read the article was: why? Why would an exclusive L.A. boutique give away pearl bracelets? What kind of advertising do the companies think they are getting? I am not unaware of what goes on in Hollywood, but I've never seen detailed descriptions of what Don Cheadle's wife is wearing on her wrist. The article quotes another luxury goods panderer saying "Celebrities are very discerning. If they like a product, it translates to the public as trendsetting. Buzz starts building around that type of interaction." Maybe. I could see stars being photographed at the Mirage in Vegas giving the hotel a tourism boost, or an actor wearing distinctive sun glasses giving those glasses popular cachet, but a $22,000 Antarctic cruise? Or a pearl, multistrand bracelet? Even assuming they hear about the bracelet, millions of Americans aren't going to run to Rodeo Drive to pick one up for themselves. And I doubt that most of these gifts ever become public knowledge in the first place; I'd wager that the stars' sciurine instincts take over and that they all have closets of loot that never sees the light of a flashbulb.

Maybe for the high-end products, the companies are interested in advertising within the celebrity world, one celebrity to another; Mrs. Cheadle to Mrs. Andy Garcia. Who knows? I suppose that they wouldn't play Mr. Fary's game if they didn't think it was worthwhile, though one can never underestimate the distorting effects of the herd mentality.


* Actually, there is some dispute over whether Dirksen ever said this, but I've never seen it plausibly attributed to anyone else.

UPDATE: A tax lawyer friend who read this post just forwarded me the following IRS press release. Apparently they are on the case, though I could have done without the puns (at least they didn't attempt to make a Brokeback Mountain joke, though I'm sure most taxpayers at this time of year know how Jack Twist felt after Ennis Del Mar had his way with him):

IRS Statement on Oscar Goodie Bags

WASHINGTON - The Commissioner of the Internal Revenue Service today wished the Academy Award nominees the best of luck at Sunday's presentation, but he reminded celebrity recipients of the six-figure goodie bags that they qualify as taxable income and must be reported on tax returns."

As the world watches the glamour and glitz of the Academy Awards, it's important to keep in mind that movie stars face the same tax obligations asordinary Americans," said IRS Commissioner Mark W. Everson. "We want to make sure the stars 'walk the line' when it comes to these goodie bags.

"Handing out of celebrity gift bags and goodie bags has become increasingly commonplace. News reports about the "official" Oscar gifts that will be given to stars place the value at more than $100,000.

"This has become big business for companies promoting their products. These things aren't given without pride and prejudice. There is a tax implication for them. We just want to make sure no one crashes into the tax code," Everson said.

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