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PERSUADER NOT PERSUASIVE TO TAX COURT

May 25, 2005

It's normal for songwriters to complain that they aren't receiving full royalties; there is even a small industry of "royalty auditors" who pore over record company ledgers to make sure artists get what's theirs.

Robert Poindexter achieved success as an R&B songwriter; one of his hits, "It's a Thin Line Between Love and Hate," topped the R&B charts in 1971 -- the version by his own group "The Persuaders" (you can hear it by clicking the Persuaders link).

Mr. Poindexter tried a novel approach to perceived royalty underpayments: he didn't pay taxes on the royalties he did receive. He apparently argued that the IRS should shake more royalties out of the record company before he paid taxes on the royalties he actually got.

The Tax Court wasn't, um, persuaded:

Petitioner’s position in this case is based upon the erroneous impression that he should not have to pay income tax on his 2000 royalty income until respondent forces Warner Chappell to admit petitioner is owed additional royalties for that year or at least until respondent investigates Warner Chappell. Petitioner is misinformed as to respondent’s obligation and as to the authority of this Court. As the Court attempted to explain to petitioner at trial, this case is solely about determining his correct tax liability for the year 2000 since the additions to tax have been resolved. Petitioner’s claim for increased royalties from Warner Chappell has no bearing on the matters before this Court.

The moral: "The sweetest woman in the world
Could be the meanest woman in the world
If you make her that way..."

...but the IRS still wants its taxes even when you are shorted on your royalties.

Cite: Robert Eugene Poindexter v. Commissioner, T.C. Memo. 2005-122

PS: That picture makes me wonder what Star Trek episode they were on.

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