Is the tax premise to Happy Gilmore plausible?

Is the tax premise to Happy Gilmore plausible?

Happy Gilmore is a delightful coming-of-age story of a young aspiring hockey player, who possesses a great slap shot, but not much else, aside from his uncontrollable rage, as he struggles with a forced career change due to his grandmother’s impending seizure of her home and belongings due to $270,000 in unpaid taxes to IRS. As a tax attorney, the question I’m always asked is “is the tax premise to Happy Gilmore at all plausible?” I am happy to report that the answer is yes. My joy comes from the fact that most Hollywood writers get tax issues all wrong. In this video, I will explain why this premise works, get into some technical nitpicking, but also, show how it is possible for grandma to keep her house and get the IRS to leave her alone through a little known strategy. Happy Gilmore was released in 1996. And the way the IRS worked back then was much MORE aggressive. So aggressive that a couple years later The Reform and Restructuring Act of 1998 was passed to reign in the IRS’s abusive collections practices. How bad did the IRS get? IRS revenue officers would seize someone’s home not for $270,000 but sometimes when the taxpayers owed less than $5000! So here’s some things we know or will assume Grandma owes $270,000 She owns her house outright. The home is worth $450,000 Grandma only gets social security and not much else. Grandma is 80 years old. So with these facts, could you make the IRS go away? Yes. The key is the old part. Grandma is old.  Remember that? That means whatever she has is all she will have. She’s not getting a lucrative job tomorrow.  While a $450,000 house is nice, it represents the entirety of grandma’s wealth. So one solution would be a hardship status with the IRS. Submit financials proving a limited ability to pay. The IRS will simply not do anything, aside from intercept refunds, if any. Now what will happen is the IRS will file a lien on the property. Meaning that once grandma dies, the lien attaches and the IRS will come in between Happy and his grandma’s estate. Happy is only entitled to proceeds after the IRS is satisfied in full. Which is why I don’t like this solution as much. I want an Offer in Compromise. And this is this the entire key to the case: how to legally eliminate grandma’s equity in her house -- as the IRS will want to start offer in compromise negotiations as-is with 80% of Fair market value of her house. Other things we must avoid is a fraudulent conveyance or something that would deemed dissipated asset, which would happen if she signed the house over to Happy without a resolution in place. There are two ways to do get rid of her equity in her house that I can think of.  One is through a reverse mortgage, the other is to sell the house for fair market value, take back a life estate along with an annuity. With either the reverse mortgage or annuity, Grandma would have more income each month (remember she got into tax trouble because she ran out of money.) But these additional proceeds aren’t enough to make her rich, or increase her tax burden in any substantial way. Her increased income would still likely be below the threshold in which the IRS finds any collection potential, thus the IRS would be very interested in accepting less than the full amount owed with a carefully constructed offer in compromise. Now some of you might wonder, how did Grandma get her house back after Happy's chief rival, Shooter McGavin bought the house at the auction? The answer is that in most circumstances there exists a right to redemption, where the foreclosed party just needs to match the highest price to keep the house. I would imagine that Grandma would have 30 days after the auction in which to redeem. The writers got this part right too. So before you abandon your fledgling minor league hockey career to help your grandmother out of a financial tight spot by utilizing your bizarrely awesome golf ball driving skills to become a golf champion, get an opinion from a tax attorney to see if such a bold move is necessary. While drama makes for compelling entertainment, don’t you think that drama in the real world is just a bunch of work that someone else should really be doing? Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://ift.tt/1RfwK1f https://youtu.be/oQtF0W4NCUY IRS Medic