Let’s just cut to the chase on Gov. Mike Easley’s $550,000 ocean-front lot. Several of his political cronies put together a multi-million dollar development and sell Mike Easley a lot for 3 percent over the assessed tax value. When Easley re-sells that lot, it should fetch several hundred thousand more on the open market. Mike Easley then pockets the difference.
His cronies have given Easley quite the windfall. Business as usual in North Carolina.
Except that anyone interested in clean government, oh, say a U.S. Attorney of some sort — does N.C. still have U.S. Attorneys, or are they all on Sudafed patrol? — might look at that deal and wonder about its tax implications. A gift of below-market real estate might trigger a gift tax liability for the deal. Here’s what the IRS says:
Q: What is the gift tax?
The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether the donor intends the transfer to be a gift or not.
The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.
Q: Who pays the gift tax?The donor is generally responsible for paying the gift tax. Under special arrangements the donee may agree to pay the tax instead.
So a couple of factual questions immediately arise: Did anyone pay gift tax on the Easley deal, and if so, who? And if not, why not? Does 3 percent over tax-book value really equal “full value?”
These issues are what kept tripping up the Clintons in their Whitewater dealings in Arkansas — below-market sales and, in the Clintons’ case, loan cancellations are taxable events. There is a reason all those bank records went missing.
Here in North Carolina we do things in a much simpler fashion. In plain view, without any of the fuss about “ethics” or “conflicts of interest.”