A Taxpayer, Cliff Claven, and the Tax Court

A man lost a case in Tax Court today (Wednesday) involving a debt allegedly owed to the taxpayer by actor John Ratzenberger (Cliff Claven in “Cheers”).  The man, a Mr. Alioto, was in the transportation industry.  In 2000, Mr. Alioto asked Ratzenberger to speak at a convention.  From the Court ruling:

While Mr. Alioto was having dinner with Mr. Ratzenberger and his agent, they discussed a new business venture. The business concept was to use celebrities, such as Mr. Ratzenberger, and create media which would then be sold to corporations to advertise on the Internet.  Mr. Alioto testified that a business plan named Big Rent Tent (BRT) was developed, which included multiple celebrities.

Mr. Alioto became CEO of “BRT” in 2000.  Things apparently didn’t go well for BRT, as Mr. Alioto testified that he paid for many corporate expenses out of his own pocket and was not reimbursed for $103,150 of those expenses.  He left BRT in mid-2001.  Mr Alioto tried deducting the unreimbursed expenses on a Schedule C attached to his personal tax returns in 2005, 2006 and 2007.  He told the Court that he waited until 2005 to try deducting the expenses because that is when he received an e-mail from Ratzenberger’s agent, telling him that he would not be paid back.  However, Mr. Alioto could not produce that e-mail for the Court.  The Court ruled that Mr. Alioto knew prior to 2005 that he would not be paid back, and thus disallowed the business loss.

The Court also ruled against the other avenue that may have been available to Mr. Alioto, and that is claiming a theft loss for the unreimbursed expenses.  The Court denied a theft loss on the grounds that no theft had taken place under the definitions of Massachusetts law (BRT was formed in Massachusetts):

Massachusetts law … requires Mr. Alioto to show proof that Mr. Ratzenberger committed acts of larceny or fraud specifically intended to steal from Mr. Alioto or to defraud him by false pretenses when BRT was established in 2000 and 2001.  There is nothing in the record that would prove that Mr. Ratzenberger committed any wrongdoing.  Mr. Alioto did not present any evidence demonstrating that Mr. Ratzenberger or his agents did anything illegal and failed to show any specific promises or agreements made by Mr. Ratzenberger and his agents.  Mr. Alioto never contacted the police, the Securities and Exchange Commission, or any State licensing division, never filed suit against Mr. Ratzenberger, and never had any written contract between himself and Mr. Ratzenberger.  At trial Mr. Alioto claimed that a formal agreement did exist between himself and Mr. Ratzenberger but that he had left it at home and did not want to share it with anyone.

 You can view the entire Court ruling here.