If you’ve ever seen the cleverly produced “Whatever, Martha” – a show featuring Martha Stewart’s daughter, Alexis, and her friend, Jennifer Koppelman Hutt – reviewing old episodes of the Martha Stewart show, you know that Alexis does not want to become her mother. Unfortunately for Alexis, she, like her mother has had trouble with the feds. Fortunately for Alexis, her run-ins with the Internal Revenue Service (IRS) have been limited to audits and not criminal complaints.
Alexis is fighting back. After shelling out $737,047 in taxes, $143,683 in interest, and $294,818 in penalties due to a 2006 audit, Alexis is taking aim at her accountant. She’s accusing Michael Mirras of negligence and malpractice, claiming that she would not have been investigated had he properly advised her. At issue is the amount of her capital gains tax on the 2002 sale of Martha Stewart Omnimedia stock (the same year her mother was under investigation for insider trading involving ImClone. In her lawsuit against Mr. Mirras, Alexis claims:
Mirras knew, or in the exercise of due care, should have known the accurate basis so that Ms. Stewart’s gain would not have been significantly understated.
The suit goes on to state that Alexis would never have submitted the return if she knew that the basis calculations were so off base.
It’s an interesting argument and clearly, I don’t know all of the facts here. I will say, as someone who has prepared a few returns in my lifetime (*ahem*) that, as a tax preparer, you are limited to the information that has been made available by the taxpayer. Mirras was not, according to the press, Alexis’ longtime accountant and was hired at that time to specifically to handle the sale of the stock. It’s possible that he didn’t have access to information that Alexis did. Not saying that happened, just saying it’s possible.
This is, by the way, one of the reasons that I recommend having a go-to tax professional, if possible. If you see someone regularly, then he or she is aware of your finances on a continuing basis and not just for one hour (or two) in one particular year. It’s easier to connect the dots that way.
All of that said, this is a pretty gutsy lawsuit and I’ll be interested to see what comes of it. I also wonder if Alexis’ friend, Jennifer, will chime in on this one – I understand that she’s currently licensed to practice law in the state of New York. A little color commentary perhaps?
(Hat Tip: Tax Prof Blog)
