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May 12, 2004

The prolific TaxProf Blog notes that Teresa Heinz Kerry, wife of presidential candidate Senator John Kerry, plans to release the first two pages of her tax return. The TaxProf says this partial release won't satisfy many who are pushing for full disclosure.

While it will be fun to see Mrs. Kerry's separate return, the first two pages won't satisfy an important* question on her husband's 2003 1040: did he report the correct amount of income from the sale of an interest in a painting?

If a recent Boston Globe story is correct, Mrs. Kerry was "reimbursed" her purchase price for her 1/2 interest in the painting, half of which she in turn gave to Senator Kerry. Their basis in their interests in the painting should have been reduced by any such "reimbursements," but the Senator's return reported the gain without any basis reduction. If there is no basis reduction reflected on Mrs. Kerry's Schedule D, something is wrong. If only the first two pages of the return are released, we won't be able to tell whether she made a basis reduction.

The question may remain open for awhile; Mrs. Kerry has extended her return, and she may re-extend until October.

*"Important" in terms of whether the tax returns are correct. The political and cosmic significance of any errors in the return are beyond our ken.

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