Tax Court Rejected Wesley Snipes' Offer of $842K to Settle His $23.5M Tax Debt

The star of the "Blade" trilogy and "White Men Can't Jump," who served three years in prison for unpaid taxes until his release into a months long house arrest in 2013, had told the Internal Revenue Service that his financial adviser had taken out loans and disposed of his assets and income without his knowledge.

 

However, Tax Court Judge Kathleen Kerrigan said Snipes did not produce “bona fide documentation” beyond affidavits of misconduct from his financial adviser, showing that his income or assets had been dissipated.

“The [IRS] settlement officer did not abuse her discretion in determining that acceptance of [Snipe’s offer-in-compromise] was not in the best interest of the United States,” Judge Kerrigan said, effectively holding up the IRS’ filing of a tax lien.

Snipes had argued that an IRS settlement officer, who was unnamed in the court’s decision, had abused her discretion by excluding his allegedly dissipated assets and by not investigating his adviser, W. Johnson.

However, Judge Kerrigan disagreed, finding the settlement officer had followed the revenue agency’s published guidance, “spent considerable time and effort” to determine Snipes’ income, equity, assets and transfers of real property, and ultimately lowered the IRS’ estimate of what it thought it could reasonably collect from Snipes from nearly $17.5 million to about $9.6 million.

According to court records, Snipes had multiple assets and real estate holdings, and his debt arises from not filing tax returns from 2001 to 2006. Snipes had asked the IRS to accept his offer on the condition of proving his financial adviser’s own liability as a transferee, but Judge Kerrigan said the IRS was not in the position of accepting an offer with conditions imposed upon it.

In addition, taxpayers in “collection due process” hearings do not have the authority to compel the IRS to conducted expedited investigations into third parties, and Snipes had failed to prove that he would suffer economic hardship as a result of having to fork over what the IRS thought he could reasonably pay, the judge said.

 

Snipes made more than $37 million from 1999 to 2004, according to court documents. During that time, he became involved with American Rights Litigators, which believes that income taxes are largely unconstitutional, and he expressed that opinion in a letter he wrote to the IRS

In February 2008, Snipes was convicted on three counts of tax fraud. He was acquitted on three other counts of willful failure to file returns for the years 2002 to 2004, and on counts of conspiracy to defraud the IRS and submitting a false claim.