Heads-up! That bottle of chardonnay you plan on sending to your top client could land you in hot water with the Federal Government.
The CEO of any company—large or small—needs to be conscious of business decisions that, however innocent, may result in the commission of a crime. I am not referring to an extreme felony murder rule, but to more innocuous situations that can sneak up on the boss and his company without warning. Let’s examine the following common pitfalls a CEO may encounter.
Exchanging high ticket items, resulting in tax evasion
Legal income or not, the IRS taxes it all. For instance, the World Cup recently brought ticket scalping into the spotlight. Is there a difference between trading tickets with a friend for a stay at their vacation home and scalping tickets for a big game? One you might see as a legal trade and the other as obviously illegal. To the IRS there is no difference; both are taxable. If you are casually swapping tickets you might not even think of taxes for such a small, one off trade. But scalping tickets for a huge profit - clearly the IRS is going to want its cut of that, right?
The IRS has great history in utilizing tax crimes to bring down illegal operations. Al Capone was arrested for income tax evasion and not for the alleged murders he committed or commissioned. Similarly, scalpers and drug dealers are all generating income, albeit through illegal means. The IRS taxes all income, so if a CEO wants to treat his client to a pricey concert in return for free goods from the client, both sides should be sure to keep proper documentation and report it with the tax return. You might even decide you'd rather attend the concert yourself than pay the IRS a chunk of your profits, but at least you won't have the same fate as the scalpers and Al Capone.
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